Final

 

LATHAM ACQUISITION CORP.

BROCKWAY MORAN & PARTNERS fund ii, l.p.,

brockway moran & partners ii co-invest fund, l.p.,

AND

FORT WAYNE POOLS, INC.

SUBSCRIPTION AND STOCKHOLDERS’ AGREEMENT

 

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table of contents

Page

1.            Interpretation of this
Agreement                                          
                                          
                                         1

2.            Purchase of Restricted
Securities                                          
                                          
                                     5

3.            Information and Inspection Rights; Non-Competition; Other Company
Covenants                               8

4.            Voting and Corporate
Governance                                          
                                                                            11

5.            Protective Covenants                                          
                                          
                                                           12

6.            Restrictions on Transfer                                          
                                          
                                                      13

7.            Additional Restrictions on
Transfer                                          
                                                                            14

8.            Tag-Along Rights                                          
                                          
                                                                   15

9.            Preemptive Rights                                          
                                          
                                                                 16

10.         Registration Rights                                          
                                          
                                                               17

11.         Redemption Rights                                          
                                          
                                                               20

12.                Expenses                                          
                                          
                                          
                                      21

13.                Notices                                          
                                          
                                          
                                            21

14.                Severability                                          
                                          
                                                                              22

15.         Complete Agreement                                          
                                          
                                                           22

16.                Counterparts                                          
                                          
                                                                           22

17.         Successors and Assigns                                          
                                          
                                                     22

18.         Choice of Law;
Jurisdiction                                          
                                          
                                                22

19.         Waiver of Jury Trial                                          
                                          
                                                               23

20.                Remedies                                          
                                          
                                          
                                      23

21.         Amendments and Waivers                                          
                                          
                                                 23

22.         Business Days                                          
                                          
                                                                        23

23.         Failure to Deliver
Securities                                          
                                          
                                               23

24.         No Third Party Beneficiary                                          
                                          
                                                 23

25.         Transfers in Violation of
Agreement                                          
                                                                          23

26.         Attorneys’ Fees                                          
                                          
                                                                      23

TOC28

 

 

 

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-i-

 

 

 

LATHAM ACQUISITION CORP.

BROCKWAY MORAN & PARTNERS fund ii, l.p.,

brockway moran & partners ii c0-invest fund, l.p.,

AND

FORT WAYNE POOLS, INC.

SUBSCRIPTION AND STOCKHOLDERS’ AGREEMENT

THIS SUBSCRIPTION AND STOCKHOLDERS’ AGREEMENT is made as of this 12th day of
November, 2004, by and among Latham Acquisition Corp., a Delaware corporation
(the “Company”), Brockway Moran & Partners Fund II, L.P., a Delaware limited
partnership (“BMP II”), Brockway Moran & Partners II Co-Invest Fund, L.P., a
Delaware limited partnership (“Co-Invest” and collectively with BMP II, the “BMP
Investors”) and Fort Wayne Pools, Inc. (“SCP”), an Indiana corporation and a
wholly owned subsidiary of SCP Pool Corporation, a Delaware corporation
(“Parent”). Each of the BMP Investors and SCP is referred to as a “Stockholder,”
and collectively as the “Stockholders.”

Recitals

A.   Each of the BMP Investors and SCP desire to purchase from the Company
shares of the Company’s Common Stock.

B.   The BMP Investors and SCP believe that it would be in the best interest of
the Company to place certain restrictions upon the right of transfer of the
Restricted Securities (as defined below).

C.   The directors of the Company, having considered the provisions of this
Agreement, have resolved that, in their opinion, the restrictions upon the
transfer of the Restricted Securities and the establishment of rights and
obligations upon the occurrence of certain events, all as hereinafter set forth,
are in the best interest of the Company and its stockholders.

Agreement

NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties hereto agree as follows:

1.

Interpretation of this Agreement.

(a)     Terms Defined. As used in this Agreement, the following terms when used
in this Agreement have the meanings set forth below:

“Acquisition” shall have the meaning given to it in Section 2(c)(vii) of this
Agreement.

“Add-On Acquisition Fee” shall have the meaning given to it in Section 2(c)(vii)
of this Agreement.

“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.

“Agreement” means this Subscription and Stockholders’ Agreement and all exhibits
and schedules hereto, as amended, modified or supplemented from time to time.

“Applicable Percentage” shall mean the fraction (expressed as a percentage), the
numerator of which is the aggregate number of shares of Common Stock to be
transferred by the Tag-Along Stockholder and the denominator of which is the
aggregate number of shares of Common Stock owned by the BMP Investors, SCP, and
all other Persons subject to a Stockholders’ Agreement that provides such
Persons with “tag along” rights

 

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comparable to those set forth in Section 8 hereof. All such calculations shall
be carried out to one hundred thousandth of a share and then rounded to the
nearest share.

“Authorization Period” shall have the meaning given to it in Section 6(b) of
this Agreement.

“BMP Directors” shall have the meaning given to it in Section 4(a)(ii) of this
Agreement.

“BMP Investors” shall have the meaning given to it in the first sentence of this
Agreement.

“BMP Shares” shall have the meaning given to it in Section 2(a)(i) of this
Agreement.

“Board” means the Board of Directors of the Company.

“Business” means the Company’s business of manufacturing pool products,
including, steel and polymer walls, steps, liners, and/or related products.

“Common Stock” means the Company’s common stock, par value $.01 per share.

“Company” shall have the meaning given to it in the first sentence of this
Agreement.

“Company Information” means Confidential Information and Trade Secrets.

“Confidential Information” means confidential data and confidential information
relating to the business of the Company or any of its Subsidiaries (which does
not rise to the status of a Trade Secret under applicable law) which is or has
been disclosed to a Stockholder or of which a Stockholder became aware in
connection with or as a consequence of investment in the Company and which has
value to the Company. Confidential Information shall not include any data or
information that (i) has been voluntarily disclosed to the general public by the
Company, (ii) has been independently developed and disclosed to the general
public by others, (iii) otherwise enters the public domain through lawful means,
(iv) was or becomes known to the Stockholders prior to disclosure to a
Stockholder in connection with or as a consequence of investment in the Company,
(v) is independently developed or derived by a Stockholder, or (vi) was
heretofore or is hereafter obtained by a Stockholder from another Person who, to
the knowledge of the Stockholder, is lawfully in possession of such information
and not in violation of any confidentiality agreement with the Company or any of
its Affiliates in disclosing such information to the Stockholder.

“Exempt Issuance” means an issuance of New Stock or New Securities by the
Company:

(i)     as a pro rata stock dividend or other distribution in respect of, or
upon any subdivision or combination of, the Company’s capital stock as a result
of which there is no change in the relative ownership interest or rights of the
holders of the Company’s capital stock;

(ii)    to any employee of the Company pursuant to the Company’s Key Employee
Equity Plan;

(iii)   in connection with any transfer to the public pursuant to a registration
effected in accordance with the Securities Act;

(iv)   in connection with the acquisition by the Company or any of its
Subsidiaries of any unaffiliated Person or business on an arms’-length basis;
and

(v)    in connection with equipment or debt financing or leases (including
securities issued in consideration of guarantees of such financing or such
leases) provided by an unaffiliated Person on an arms’-length basis.

“Exempt Transfers” shall have the meaning given to it in Section 6(a) of this
Agreement.

“Fair Market Value” means the fair market value determined by mutual agreement
of SCP and the BMP Investors. In the event of a disagreement, Fair Market Value
shall be determined by a professional appraiser chosen by mutual agreement of
SCP and the BMP Investors, whose fees shall be paid for by the Company. Fair
Market Value shall be determined without any discount for minority interest or
lack of marketability.

 

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“Family Group” means with respect to any individual, such an individual’s spouse
and lineal descendants, parents, grandparents and any family limited
partnership, family limited liability company or trust or other fiduciary
relationship solely for the benefit of such individual and/or such individual’s
spouse, parents, grandparents and/or lineal descendants.

“Fort Wayne Contribution Agreement” means that certain Asset Contribution
Agreement, dated as of the date hereof, among SCP Pool Corporation, Fort Wayne
Pools, Inc., an Indiana corporation, and the Company.

“Independent Third Party” means any Person who, prior to the occurrence of a
Liquidity Event, does not own in excess of 5% of the Company’s Common Stock on a
fully diluted basis, who is not controlling, controlled by or under common
control with any such 5% owner of the Company’s Common Stock and who is not the
spouse, ancestor or descendant (by birth or adoption) of any such 5% owner of
the Company’s Common Stock.

“Key Employee Equity Plan” means a non-qualified stock option plan covering 7.0%
of the Company’s fully diluted common equity value to be adopted at the
Subscription Closing.

“Liquidity Event” means any one or more of the following events: (a) the sale of
all, or substantially all, of the Company’s consolidated assets in any single
transaction or series of related transactions; (b) the sale or issuance, or
series of related sales or issuances, of Common Stock possessing the ordinary
voting power (on a fully diluted basis) to elect a majority of the Board to an
Independent Third Party or a group of affiliated Independent Third Parties; (c)
the consummation of a Qualified Public Offering; or (d) any merger or
consolidation of the Company with or into another corporation or other business
entity (regardless of which entity is the surviving corporation) if, after
giving effect to such merger or consolidation the holders of the Company’s
voting securities (on a fully diluted basis) immediately prior to the merger or
consolidation own voting securities of the surviving or resulting corporation or
other business entity representing less than a majority of the ordinary voting
power to elect directors of the surviving or resulting corporation (on a fully
diluted basis).

“Loan Agreements” means the senior and subordinated loan agreements that the
Company will enter into in connection with the Acquisition.

“New Securities” shall have the meaning given to it in Section 9(a) of this
Agreement.

“New Stock” shall have the meaning given to it in Section 9(a) of this
Agreement.

“Notice of Transfer” shall have the meaning given to it in Section 8(b) of this
Agreement.

“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.

“Preemptive Rights Notice” shall have the meaning given to it in Section 9(a) of
this Agreement.

“Qualified Public Offering” means the public sale of Common Stock pursuant to a
registration statement that has become effective under the Securities Act, the
net proceeds of which sale to the Company are at least $25 million.

“Redemption Notice” shall have the meaning given to it in Section 11(a) of this
Agreement.

“Redemption Price” shall have the meaning given to it in Section 11(b) of this
Agreement.

“Registration Expenses” shall have the meaning given to it in Section 10(e) of
this Agreement.

“Required Payment Date” shall have the meaning given to it in Section 11(b) of
this Agreement.

“Restricted Securities” means: (a) all shares of Common Stock (including the
Shares) now owned (beneficially or of record) or hereafter acquired
(beneficially or of record) by a Stockholder (including all Common Stock issued
by way of stock dividend or stock split or in connection with any combination of
shares, merger, consolidation, recapitalization or other reorganization); and
(b) all securities exercisable for, convertible into or exchangeable for Common
Stock now owned (beneficially or of record) or hereafter acquired (beneficially
or of record) by a Stockholder. For purposes of this Agreement: (i) a
Stockholder shall be deemed to own or control that number of shares of Common
Stock then directly owned or controlled by the Stockholder, plus that number of

 

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shares of Common Stock into or for which any securities then directly or
indirectly owned or controlled by the Stockholder are then, directly or
indirectly, convertible, exercisable or exchangeable; and (ii) references in
this Agreement to “shares” of Restricted Securities other than Common Stock
shall be deemed to refer to the number of shares of Common Stock into or for
which any securities then directly or indirectly owned or controlled by a
Stockholder are then, directly or indirectly, convertible, exercisable or
exchangeable. Except as otherwise provided herein, all Restricted Securities
will continue to be Restricted Securities in the hands of any transferee of a
Stockholder, other than (x) the Company, and (y) purchasers pursuant to an
offering registered with the Securities and Exchange Commission pursuant to the
Securities Act or purchasers pursuant to a public sale through a market-maker,
broker or dealer under Rule 144 (or any successor rule) promulgated under the
Securities Act.

“Sale Notice” shall have the meaning given to it in Section 6(b) of this
Agreement.

“SCP” shall have the meaning given to it in the first sentence of this
Agreement.

“SCP Directors” shall have the meaning given to it in Section 4(a)(iii) of this
Agreement.

“SCP Shares” shall have the meaning given to it in Section 2(a)(i) of this
Agreement.

“SEC” shall have the meaning given to it in Section 10(b) of this Agreement.

“Securities Act” means the Securities Act of 1933, as amended.

“Selling Stockholder” shall have the meaning given to it in Section 8(a) of this
Agreement.

“Shares” shall have the meaning given to it in Section 2(a)(i) of this
Agreement.

“Stockholder” shall have the meaning given to it in the first sentence of this
Agreement.

“Stock Purchase Agreement” shall have the meaning given to it in Section
2(c)(vii) of this Agreement.

“Subscription Closing” shall have the meaning given to it in Section 2(a)(i) of
this Agreement.

“Subsidiary” when used with respect to any Person means any other Person,
whether incorporated or unincorporated, of which (a) more than 50% of the
securities or other ownership interests or (b) securities or other interests
having by their terms ordinary voting power to elect more than 50% of the board
of directors or others performing similar functions with respect to such
corporation or other organization, is directly owned or controlled by such
Person or by any one or more of its Subsidiaries.

“Tag-Along Stockholder” shall have the meaning given to it in Section 8(a) of
this Agreement.

“Territory” shall have the meaning given to it in Section 3(c)(i)(A) of this
Agreement.

“Trade Secrets” means information of the Company and its Subsidiaries including,
but not limited to, technical or nontechnical data, formulae, methods, programs,
financial data, financial plans, product or service plans or lists of actual or
potential customers or suppliers which (i) derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other Persons who can obtain economic value
from its disclosure or use, and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.

(b)    Interpretation. Wherever from the context it appears appropriate, each
term stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in masculine, feminine or neuter gender shall
include the masculine, feminine and the neuter.

2.

Purchase of Restricted Securities.

 

 

(a)

Purchase and Sale of Restricted Securities and Note.

(i)     Each Stockholder hereby subscribes for and agrees to purchase, and the
Company hereby agrees to issue and sell to such Stockholder, the number of
shares of Common Stock set forth opposite the Stockholder’s name on Schedule 1
hereto. The purchase and sale of the Common Stock will be consummated
simultaneous with the “Closing” under the Fort Wayne Contribution Agreement and
immediately

 

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prior to consummation of the Acquisition (the “Subscription Closing”). At the
Subscription Closing, SCP shall acquire 198,000 shares of Common Stock (the “SCP
Shares”) in exchange for (x) the contribution of assets contemplated by the Fort
Wayne Contribution Agreement, and (y) SCP’s payment to the Company of $2,327,568
in immediately available funds. At the Subscription Closing, the BMP Investors
shall acquire an aggregate of 198,000 shares of Common Stock (the “BMP Shares”)
in exchange for the BMP Investors’ payment to the Company of an aggregate of
$19,800,000 in immediately available funds. The SCP Shares and the BMP Shares
are collectively referred to herein as the “Shares.”

(ii)    Upon receipt of the consideration set forth in Section 2(a)(i), the
Company shall deliver to each Stockholder a certificate representing the
applicable Shares, registered in the name of the applicable Stockholder.

(iii)   At the Subscription Closing, SCP shall pay to a wholly owned Canadian
subsidiary of the Company (the “Canadian Sub”) $1,193,432 in immediately
available funds, and in exchange the Company shall cause the Canadian Sub to
issue and deliver to SCP the Promissory Note in the form attached hereto as
Exhibit A (the “Note”). SCP acknowledges and agrees that, subsequent to the
Acquisition, Pool Technology Distributors, Inc. shall assume all of the Canadian
Sub’s obligations under the Note.

(b)    Representations and Warranties of the Company. The Company hereby
represents and warrants to each Stockholder as follows:

(i)     Organization; Power and Authority. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of state of
Delaware. The Company has full corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned and used
by it. Except for its right to acquire capital stock pursuant to the
Acquisition, the Company does not have any Subsidiary, and does not own,
directly or indirectly, any capital stock or other equity interests in any other
Person.

(ii)    Authorization of Transaction; Agreement Binding. The Company has full
corporate power and authority to execute and deliver, and to perform its
obligations under, this Agreement. This Agreement constitutes the valid and
legally binding obligation of the Company, enforceable in accordance with its
terms, except as such enforcement may be limited by general equitable principles
or by applicable bankruptcy, insolvency or similar laws which affect creditors’
rights generally.

(iii)   Capitalization. The Company’s authorized capital stock consists of
100,000,000 shares of Common Stock, none of which are currently issued and
outstanding. The Shares acquired by the Stockholders pursuant to the provisions
of this Agreement will be duly authorized, validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership thereof.
Except as set forth on Schedule 1, (A) no Person owns of record any share of the
Company’s capital stock, (B) no subscription, warrant, option, convertible
security or other right to purchase or otherwise acquire from the Company (or to
the knowledge of the Company, from any other Person) any Company capital stock
is authorized or outstanding, and (C) there are no additional commitments by the
Company to issue shares of capital stock or warrants, options, convertible
securities or other rights to purchase Company capital stock. The Company has
made available to each Stockholder true and correct copies of the Company’s
Certificate of Incorporation and bylaws.

(iv)   No Conflict. The execution, delivery and performance of this Agreement by
the Company do not and will not violate, conflict with, or result in a breach of
or default under (A) the Company’s Certificate of Incorporation or bylaws; (B)
any applicable law, order, judgment or decrees; or (C) any agreement, contract,
understanding, mortgage, indenture or other obligation to which the Company is a
party or by which any of its assets or properties are bound.

(c)     Representations and Warranties of the Stockholders. Each Stockholder
hereby represents and warrants to the Company severally and not jointly as
follows:

(i)     Authorization of Transaction; Agreement Binding. The Stockholder has
full power and authority to execute and deliver, and to perform its obligations
under, this Agreement. This Agreement constitutes the valid and legally binding
obligation of the Stockholder, enforceable in accordance with its terms, except
as such enforcement may be limited by general equitable principles or by
applicable bankruptcy, insolvency or similar laws which affect creditors’ rights
generally.

 

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(ii)    No Conflict. The execution, delivery and performance of this Agreement
by the Stockholder do not and will not violate, conflict with, or result in a
breach of or default under (A) the Stockholder’s charter or other governing
instruments, (B) any applicable law, order, judgment or decree, or (C) any
agreement, contract or other obligation to which the Stockholder is a party, in
each case except to the extent that such violation, conflict, default or breach
could not reasonably be expected to impair the Stockholder’s ability to perform
its obligations hereunder.

(iii)   Acquisition for Investment. The Stockholder is acquiring the Shares for
investment solely for the Stockholder’s account and not with a view to or for
sale in connection with any distribution thereof in violation of the federal
securities laws, applicable state securities laws or this Agreement.

(iv)   Restrictions on Transfer. The Stockholder understands that the
Stockholder must bear the economic risk of the purchase of the Shares for an
indefinite period of time because, except as provided in this Agreement, (A) the
Company’s sale of the Shares to the Stockholder will not be registered under the
Securities Act and applicable state securities laws in reliance on the
Stockholder’s representations, (B) the Shares may not be sold, transferred,
pledged, or otherwise disposed of without an opinion of counsel, if requested,
for or satisfactory to the Company that registration under the Securities Act or
any applicable state securities laws is not required, and (C) the Company does
not have an obligation to register a sale of the Shares (or perfect any
exemption) nor has it agreed to do so in the future.

(v)    Restrictive Legends. The Stockholder understands that the certificate(s)
evidencing the Shares will bear a restrictive legend prohibiting the transfer
thereof except in compliance with (A) applicable state and federal securities
laws (and may not be transferred of record except in compliance therewith), and
(B) the terms of this Agreement.

(vi)   Opportunity to Ask Questions. The Stockholder has had an opportunity to
ask questions and receive answers concerning the capitalization of the Company,
the terms of this Agreement and the financial condition and operations of the
Company, and has had full access to such other information concerning the
Company as the Stockholder has requested.

(vii)  Certain Risk Factors. The Stockholder has reviewed, or has had an
opportunity to review, copies of all documents entered into in connection with
the acquisition of stock (the “Acquisition”) effected pursuant to that certain
Stock Purchase Agreement, dated as of November 12, 2004 (including the exhibits
and schedules thereto (the “Stock Purchase Agreement”), between the Company and
Latham International, L.P., a Delaware limited partnership (“Seller”). The
Stockholder has also reviewed, or has had an opportunity to review, such other
documents and information requested by the Stockholder to the Stockholder’s
satisfaction. The Stockholder understands the speculative nature of and risks
involved in the proposed investment in the Company, and all matters relating to
the structure and the operations of the Company have been discussed and
explained to such Stockholder’s satisfaction. The Stockholder specifically
acknowledges such Stockholder’s understanding that:

(A)   the Company intends to incur substantial debt to finance the Acquisition
and the presence of substantial amounts of debt creates significant risks,
including that (1) although equity investments in highly leveraged companies
such as the Company offer the opportunity for significant capital appreciation,
such investments involve the highest degree of risks and can result in the loss
of the Stockholder’s entire investment, (2) other general business risks,
including the effects of a recession, may have a more pronounced effect, and (3)
lending institutions may have certain limited rights to participate in certain
decisions relating to the management of the Company;

(B)    the amount contributed by such Stockholder for its Shares may not be
indicative of the fair market value of the Shares;

(C)    the Stockholder, as a minority stockholder in the Company, will have no
control over the management of the Company;

(D)

the Loan Agreements are not presently available for inspection;

(E)    each of (x) the BMP Investors or their Affiliates, and (y) SCP (1) will
receive from the Company an annual management fee of $175,000, subject to
increase, (2) will receive a cash transaction fee in the amount of 0.5% of the
Acquisition purchase price upon the consummation of the Acquisition, and (3)
each will receive an Add-On Acquisition Fee for future Company acquisitions. The
“Add-On Acquisition

 

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Fee” for each of (A) the BMP Investors or their Affiliates, and (B) SCP shall
equal 1.5% of the first $10 million of the purchase price and 0.5% of the
portion of the purchase price that exceeds $10 million; and

(F)    Section 13.7 of the Stock Purchase Agreement provides that, if the
Acquisition is not consummated on or before December 31, 2004, and certain other
conditions exist, Seller shall be a third party beneficiary of this Agreement
and be entitled to enforce the obligations of the BMP Investors and SCP pursuant
to Section 2(a) hereof.

(viii) Representations Relied Upon by Stockholder. The Stockholder is acquiring
the Shares without having been furnished any representations or warranties of
any kind whatsoever with respect to the business and financial condition of the
Company, other than the representations and warranties contained in this
Agreement.

(d)    Tax Certifications and Acknowledgments. The Stockholder certifies under
penalty of perjury that (i) the Taxpayer Identification Number for the
Stockholder provided under the Stockholder’s name on the signature pages to this
Agreement is correct, (ii) the Stockholder is not subject to backup withholding
either because the Stockholder has not been notified that such Stockholder is
subject to backup withholding as a result of a failure to report all interest or
dividends or because the Internal Revenue Service has notified the Stockholder
that such Stockholder is no longer subject to backup withholding and (iii) the
Stockholder is not a nonresident alien, foreign partnership, foreign trust or
foreign estate.

3.

Information and Inspection Rights; Non-Competition; Other Company Covenants.

(a)     Information and Inspection Rights. As long as a Stockholder and its
Affiliates continue to own at least 10% of the Company’s fully diluted equity,
(x) the Company shall permit such Stockholder (and such persons as it may
designate subject to the Company’s reasonable approval and the execution of a
confidentiality agreement acceptable to the Company), at Stockholder’s expense,
to visit and inspect, during normal business hours and without disruption to the
Company’s business, the properties of the Company, examine its books, discuss
the affairs, finances and accounts of the Company with its officers and
employees, and consult with and advise the management of the Company as to its
affairs, finances and accounts, all at reasonable times and upon reasonable
notice, and (y) such Stockholder shall be entitled to receive, and the Company
shall mail to such Stockholder, at the times specified, the following reports:

(i)     as soon as available, and in any event within thirty (30) days after the
end of each month, a consolidated balance sheet for the Company as of the end of
such month and the related consolidated statements of income for the year to
date;

(ii)    as soon as practicable, but in any event within sixty (60) days after
the end of each of the first three (3) quarters of each fiscal year of the
Company, an unaudited consolidated profit or loss statement for such fiscal
quarter, a consolidated unaudited balance sheet as of the end of such fiscal
quarter, and an unaudited statement of consolidated cash flows for such quarter;

(iii)   as soon as available and in any event within one hundred twenty (120)
days after the end of each fiscal year of the Company, a balance sheet of the
Company as of the end of such fiscal year and the related statements of income,
stockholders’ equity and cash flows for the fiscal year then ended, prepared in
accordance with U.S. generally accepted accounting principles and audited by a
firm of independent public accountants of national recognition selected by the
Board of Directors of the Company;

(iv)   promptly following receipt by the Company, each audit response letter,
accountants’ management letter and other written report submitted to the Company
by its independent public accountants in connection with an annual or interim
audit of the books of the Company or any of its Subsidiaries;

(v)    promptly after the commencement thereof, notice of all actions, suits,
claims, proceedings, investigations and inquiries that are likely to materially
adversely affect the Company or any of its Subsidiaries;

(vi)   promptly upon sending, making available or mailing the same, all press
releases, reports and financial statements that the Company sends or makes
available generally to its stockholders;

 

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(vii)  promptly after receipt thereof, notice of all claims of material default
(whether or not constituting an “Event of Default”) under the Loan Agreements or
any material financial obligation to which the Company or any Subsidiary is a
party or obligor; and

(viii) promptly, from time to time, such other material information regarding
the business, prospects, financial condition, operations, property or affairs of
the Company and its Subsidiaries as the Stockholder reasonably may request.

(b)    Confidentiality. Except as required by applicable law (including
regulations promulgated thereunder) or court order, each Stockholder (i) will
maintain the confidentiality of all Company Information, and (ii) will not,
directly or indirectly, use, disseminate or otherwise disclose any Company
Information to any third party without the prior written consent of the Company,
which may be withheld in the Company’s absolute discretion; provided, however,
each Stockholder may disclose such information (i) to its attorneys, accountants
and other professionals and representatives to the extent necessary or
appropriate in connection with its investment in the Company, (ii) to any
prospective permitted transferee of the Shares, so long as the prospective
transferee agrees to be bound by the provisions of this Section 3(b), (iii) to
any partner or Affiliate of the Stockholder, so long as such partner or
Affiliate agrees to be bound by the provisions of this Section 3(b), and (iv) to
any other Company stockholder. The provisions of this Section 3(b) shall survive
the termination of this Agreement (i) for a period of two years with respect to
Confidential Information, and (ii) with respect to Trade Secrets, for so long as
any such information qualifies as a Trade Secret under applicable law.

(c)

Non-Competition, Non-Solicitation and Non-Disclosure.

(i)     General. Each of the Stockholders hereby severally covenants and agrees
as follows:

(A)   Without the prior written consent of the Company and the other
Stockholders, neither such Stockholder nor any of its Affiliates (other than the
Company) shall, for so long as such Stockholder owns any Common Stock, (1)
directly or indirectly acquire or own in any manner any interest in any person,
firm, partnership, corporation, association or other entity which competes or
plans to compete in any way with the Business of the Company or any of its
Subsidiaries or Affiliates, anywhere in North America (the “Territory”), (2)
serve as a consultant to any person, firm, partnership, corporation, association
or other entity which competes or plans to compete in any way with the Business
of the Company or any of its Subsidiaries or Affiliates within the Territory, or
(3) market, sell or distribute, within the Territory, any pool products
(including steel and polymer walls, steps, liners, and/or related products) that
are manufactured by any Affiliate (other than the Company) of the type that are
currently manufactured by the Company or the Subsidiaries to be acquired in the
Acquisition. Such Stockholder acknowledges and agrees that the covenants
provided for in this Section 3(c) are reasonable and necessary in terms of time,
area and line of business to protect the Company’s Trade Secrets. Such
Stockholder further acknowledges and agrees that such covenants are reasonable
and necessary in terms of time, area and line of business to protect the
Company’s legitimate business interests, which include its interests in
protecting the Company’s (i) valuable confidential business information, (ii)
substantial relationships with customers throughout the United States, and (iii)
customer goodwill associated with the Company. Each Stockholder expressly
authorizes the enforcement of the covenants provided for in this Section 3(c) by
(A) the Company and its Subsidiaries, (B) the Company’s permitted assigns, and
(C) any successors to the Company’s business. To the extent that the covenants
provided for in this Section 3(c) may later be deemed by a court to be too broad
to be enforced with respect to its duration or with respect to any particular
activity or geographic area, the court making such determination shall have the
power to reduce the duration or scope of the provision, and to add or delete
specific words or phrases to or from the provision. The provision as modified
shall then be enforced.

(B)    Without the prior consent of the Company and the other Stockholder, such
Stockholder shall not, for so long as such Stockholder owns any Common Stock,
directly or indirectly, for itself or for any other person, firm, corporation,
partnership, association or other entity (including the Company), attempt to
employ or enter into any contractual arrangement with any employee or former
employee of the Company, unless such employee or former employee has not been
employed by the Company for a period in excess of 18 months.

(C)    Such Stockholder shall not at any time divulge, communicate, use to the
detriment of the Company or for the benefit of any other person or persons, or
misuse in any way, any Confidential Information pertaining to the Company. Any
Confidential Information now known or hereafter

 

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acquired by such Stockholder with respect to the Company shall be deemed a
valuable, special and unique asset of the Company that is received by such
Stockholder in confidence and as a fiduciary, and such Stockholder shall remain
a fiduciary to the Company with respect to all of such information.

(ii)    Exception for SCP. Notwithstanding Section 3(c)(i), SCP and its
Affiliates shall not be prohibited from engaging in the distribution of pool spa
equipment, pool parts and supplies, and other related leisure products so long
as neither SCP nor any of its Affiliates distributes in North America any such
products that are manufactured by any SCP Affiliate other than the Company.

(iii)   Injunction. It is recognized and hereby acknowledged by the parties
hereto that a breach or violation by a Stockholder of any or all of the
covenants and agreements contained in this Section 3(c) may cause irreparable
harm and damage to the Company in a monetary amount which may be virtually
impossible to ascertain. As a result, each Stockholder recognizes and hereby
acknowledges that the Company shall be entitled to an injunction from any court
of competent jurisdiction enjoining and restraining any breach or violation of
any or all of the covenants and agreements contained in this Section 3(c) by
such Stockholder and/or its associates, Affiliates, partners or agents, either
directly or indirectly, and that such right to injunction shall be cumulative
and in addition to whatever other rights or remedies the Company may possess
hereunder, at law or in equity. Nothing contained in this Section 3(c) shall be
construed to prevent the Company from seeking and recovering from a Stockholder
damages sustained by it as a result of any breach or violation by such
Stockholder of any of the covenants or agreements contained herein.

(d)    Termination of Information and Inspection Rights. The obligations of the
Company to furnish information to the Stockholders pursuant to Section 3(a)
shall terminate upon the earlier to occur of (i) the completion of a Qualified
Public Offering, or (ii) such time as the Company otherwise becomes subject to
the reporting requirements of the Exchange Act.

(e)     Transactions with Affiliates. Without the prior written consent of SCP
and the BMP Investors, the Company shall not enter into, renew, extend or be a
party to, any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease, transfer or exchange of property or
assets of any kind or the rendering of services of any kind) with any Affiliate,
except (i) in the ordinary course of business in a manner and to an extent
consistent with past practice and necessary or desirable for the prudent
operation of its business, for fair consideration and on terms no less favorable
to it or its Subsidiaries than would be obtainable in a comparable arm’s length
transaction with a Person that is not an Affiliate thereof, (ii) customary
payments for services as employees, officers and directors, and (iii) pursuant
to the terms of the Management Services Agreements to be entered into between
the Company and the Stockholders or their Affiliates.

4.

Voting and Corporate Governance.

(a)     Voting for Directors. The parties agree to vote their Shares or consent
in writing in the manner necessary to produce the following effect:

(i)     the Board of Directors of the Company shall initially consist of seven
(7) members (with the approval of SCP and the BMP Investors necessary to
increase or decrease the number of directors constituting the Board of
Directors);

(ii)    for so long as the BMP Investors hold any Shares, the Stockholders shall
vote their Shares in such a manner as to elect to the Board of Directors of the
Company three (3) individuals designated by the BMP Investors (such individuals
being the “BMP Directors”);

(iii)   for so long as SCP holds any Shares, the Stockholders shall vote their
Shares in such a manner as to elect to the Board of Directors of the Company two
(2) individuals designated by SCP (such individuals being the “SCP Directors”);

(iv)   the Stockholders shall vote their shares in such a manner as to elect to
the Board of Directors of the Company two (2) individual(s) designated by the
mutual agreement of the Stockholders (it being agreed that each of Mark Laven
and Doug Laver shall be designated pursuant to this clause (iv) for so long as
he serves as an executive officer of the Company); and

(v)    the Stockholders shall vote their shares in such a manner as to enable
Stockholders entitled to designate members of the Company’s Board of Directors
pursuant to any of subsections

 

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4(a)(ii), (iii) and (iv), in their sole discretion, to remove and replace,
whether upon the occurrence of a vacancy for any reason, or otherwise, their
respective designees.

(b)    Approval of the Board of Directors. The Board of Directors shall be
consulted on the Company’s entry into or amendment of significant manufacturing,
distribution, licensing or other material agreements or contracts. The approval
of a majority of the Board of Directors of the Company then in office shall be
required for the Company to: (i) incur additional indebtedness other than bank
borrowings in the ordinary course of business or refinancing of existing
indebtedness; (ii) enter into or amend agreements, whether oral or written,
relating to executive compensation; (iii) approve the Company’s annual budget
and capital budget; (iv) make any capital expenditures in excess of those
reflected in the Company’s capital budget previously approved by the Board of
Directors; and (v) approve the Company’s sale of any Company security.

(b)    Meetings of the Board of Directors. The Board of Directors shall meet at
least quarterly. The Company shall reimburse members of the Board of Directors
for the customary and reasonable expenses of attending the meetings of the Board
of Directors.

(c)     Formation of Compensation Committee. As soon as practicable after
execution of this Agreement, the Board of Directors shall establish a
Compensation Committee consisting of two BMP Directors and one SCP Director. The
Compensation Committee shall be responsible for making recommendations to the
full Board of Directors for approving all management compensation, employee
benefit plans and stock option grants. The Board of Directors shall have the
power to accept or reject any recommendation of the Compensation Committee, but
shall not approve an employee’s compensation in amounts that differ from the
amounts recommended by the Compensation Committee.

(e)     Formation of Audit Committee. As soon as practicable after the execution
of this Agreement, the Board of Directors shall establish an Audit Committee
consisting of two BMP Directors and one SCP Director. The Audit Committee shall
be responsible for (i) selecting and engaging the Company’s independent
auditors, (ii) meeting with the Company’s independent auditors and principal
financial personnel to review the scope of audit and non-audit services
performed by the independent public accountants, (iii) reviewing the
independence of the independent public accountants, and (iv) reviewing the
adequacy of internal accounting controls.

(d)    Formation of Management Committee. As soon as practicable after execution
of this Agreement, the Board of Directors shall establish a Management Committee
consisting of the three BMP Directors. The Management Committee shall be
responsible for appointing, removing, and replacing key members of the Company’s
management.

(e)     Indemnification. The Company shall not amend the indemnification
provisions of the Company’s Certificate of Incorporation or bylaws to eliminate
or reduce the indemnification provided for all directors and such provisions as
so written shall be deemed to be a contract with each director regarding his or
her indemnification by the Company. The Company shall also enter into separate
indemnification agreements with each director.

(f)     D&O Insurance. The Company shall at all times maintain directors and
officers liability insurance coverage in amounts and subject to such limits as
shall be reasonably acceptable to the BMP Directors and SCP Directors.

5.

Protective Covenants.

(a)     As long as the BMP Investors collectively hold at least 10% of the
outstanding stock of the Company, the Company shall not, without the approval of
the BMP Investors:

(i)     except as expressly contemplated by this Agreement and for redemptions
on agreed terms from employees following termination of employment, directly or
indirectly redeem, purchase or otherwise acquire, or permit any Subsidiary to
redeem, purchase or otherwise acquire, any of the Company’s equity securities
(including, without limitation, warrants, options and other rights to acquire
equity securities);

(ii)    except as expressly contemplated by this Agreement, authorize, issue or
enter into any agreement providing for the issuance (contingent or otherwise)
of, any equity or debt securities (or any derivative securities convertible into
or exercisable or exchangeable for any equity or debt securities);

 

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(iii)   merge or consolidate with any entity or permit any Subsidiary of the
Company to merge or consolidate with any entity (other than a wholly owned
Subsidiary);

(iv)   sell, lease or otherwise dispose of, or permit any Subsidiary of the
Company to sell, lease or otherwise dispose of assets with an aggregate fair
market value in excess of $2 million in any one year (other than sales in the
ordinary course of business);

(v)    liquidate, dissolve or effect a recapitalization or reorganization in any
form of transaction (including, without limitation, any reorganization into
partnership form);

(vi)   acquire, or permit any Subsidiary to acquire, any interest in any
business (whether by a purchase of assets, purchase of stock, merger or
otherwise), or enter into any joint venture;

(vii)  enter into, or permit any Subsidiary to enter into, the ownership, active
management or operation of any business other than a business engaged in the
manufacture of swimming pool products and accessories;

(viii) except as expressly contemplated by this Agreement, make any amendment to
the Company’s certificate of incorporation or bylaws which would impair the
rights or relative priority of the holders of the Shares under this Agreement;

(ix)   create, incur, assume or suffer to exist, or permit any Subsidiary to
create, incur, assume or suffer to exist, any indebtedness which aggregates in
excess of $2 million (other than (a) the Loan Agreements, and (b) intercompany
indebtedness);

(x)    amend or modify the Key Employee Equity Plan, adopt any new stock option
plan or employee stock ownership plan or issue any shares of stock to its or its
Subsidiaries’ employees other than pursuant to the Key Employee Equity Plan;

(xi)   issue or sell any shares of the capital stock, or rights to acquire
shares of the capital stock, of any Subsidiary to any entity other than the
Company or another Subsidiary; or

(xii)

initiate an initial public offering of the Company’s Stock.

(b)    As long as SCP holds at least 10% of the outstanding Common Stock of the
Company, the Company shall not, without the approval of SCP:

(i)     except as expressly contemplated by this Agreement, authorize, issue or
enter into any agreement providing for the issuance (contingent or otherwise)
of, any equity or debt securities (or any derivative securities convertible into
or exercisable or exchangeable for any equity or debt securities) in excess of
$10 million in any single transaction or series of related transactions;

(ii)    liquidate, dissolve or effect a recapitalization or reorganization in
any form of transaction (including, without limitation, any reorganization into
partnership form);

(iii)   sell, lease or otherwise dispose of, or permit any Subsidiary of the
Company to sell, lease or otherwise dispose of, assets with an aggregate fair
market value in excess of $10 million in any single transaction or series of
related transactions (other than sales in the ordinary course of business);

(iv)   except as expressly contemplated by this Agreement, make any amendment to
the Company’s certificate of incorporation or bylaws which would impair the
rights or relative priority of the holders of the Shares under this Agreement;

(v)    acquire, or permit any Subsidiary to acquire, any interest in any
business (whether by a purchase of assets, purchase of stock, merger or
otherwise) with an acquisition price in excess of $10 million; or

(vi)   create, incur, assume or suffer to exist, or permit any Subsidiary to
create, incur, assume or suffer to exist, any indebtedness which aggregates in
excess of $10 million (other than (a) the Loan Agreements, (b) intercompany
indebtedness, and (c) indebtedness incurred to acquire any interest in any
business (whether by a purchase of assets, purchase of stock, merger or
otherwise) with an acquisition price less than or equal to $10 million ).

 

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6.

Restrictions on Transfer.

(a)     Transfer of Restricted Securities. The Stockholders will not sell,
pledge or otherwise directly or indirectly transfer (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law or
otherwise) any interest in or any beneficial interest in any Restricted
Securities except pursuant to the provisions of Section 6(c) or Section 11 of
this Agreement (“Exempt Transfers”) and pursuant to the provisions of Section
6(b) hereof.

(b)    First Refusal Rights. At least 30 days prior to making any transfer other
than an Exempt Transfer, the transferring Stockholder will deliver a written
notice (the “Sale Notice”) to the Company and the other Stockholder (in the case
of a proposed transfer by SCP, the BMP Investors shall collectively be deemed
the other Stockholder and in the case of a proposed transfer by the BMP
Investors, SCP shall be deemed the other Stockholder). The Sale Notice will
disclose in reasonable detail the identity of the prospective transferee(s) and
the terms and conditions of the proposed transfer. The Company may elect to
purchase all or any portion of the Restricted Securities to be transferred upon
the same terms and conditions as those set forth in the Sale Notice by
delivering a written notice of such election to the transferring Stockholder
within 20 days after the receipt of the Sale Notice by the Company. To the
extent that the Company has not elected to purchase all of the Restricted
Securities to be transferred, the other Stockholder may elect to purchase all
(but not less than all) of the Restricted Securities to be transferred which the
Company has not elected to purchase, upon the same terms and conditions as those
set forth in the Sale Notice, by delivering a written notice of such election to
the Stockholder within 30 days after the receipt of the Sale Notice by the other
Stockholder. Any Person who has the right to acquire Restricted Securities
pursuant to this Section 6(b) will be given up to 20 days (after it has been
determined that such Person has such right) to consummate the purchase and sale
of Restricted Securities (the “Authorization Period”). If the Company and the
other Stockholder have not elected to purchase, in the aggregate, all of the
Restricted Securities specified in the Sale Notice, the transferring Stockholder
may transfer the Restricted Securities specified in the Sale Notice to the
transferee (and not to any assignee) identified, at a price and on terms no more
favorable to the transferee(s) thereof than specified in the Sale Notice, during
the 20-day period immediately following the Authorization Period (or, if there
is no Authorization Period, during the 50-day period immediately following the
date of the Sale Notice); provided, that the transferee(s) thereof agree in
writing to be bound by the provisions of this Agreement relating to Restricted
Securities. Any Restricted Securities not transferred within such 20-day period
will be subject to the provisions of this Section 6(b) upon subsequent transfer.

(c)     Certain Permitted Transfers. The restrictions contained in Section 6(b)
will not apply with respect to transfers of Restricted Securities to or among
the Stockholder’s partners or Affiliates, or any individual partner’s Family
Group; provided that with respect to transfers contemplated by this Section
6(c), the restrictions contained in this Section 6 will continue to be
applicable to Restricted Securities after any such transfer; and provided
further that the transferees of such Restricted Securities have agreed in
writing to be bound by the provisions of this Agreement relating to Restricted
Securities.

(d)    Termination of Restrictions. The restrictions on the transfer of
Restricted Securities set forth in Section 6(a) and Section 6(b) will continue
with respect to all Restricted Securities until consummation of a Liquidity
Event or the completion of any offering of the Company’s equity securities
registered pursuant to the Securities Act.

7.

Additional Restrictions on Transfer.

(a)     Legend. Until a Liquidity Event has occurred or the restrictions set
forth herein otherwise lapse, the certificates representing the Common Stock
held by the holders of Restricted Securities will bear the following legend:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SUBSCRIPTION AND
STOCKHOLDERS’ AGREEMENT AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS, DATED
AS OF NOVEMBER [__], 2004, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF
AT THE COMPANY’S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.

 

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(b)    Opinion of Counsel. No holder of Restricted Securities may sell, pledge
or otherwise directly or indirectly transfer (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law)
any Restricted Securities (except pursuant to an effective registration
statement under the Securities Act) without first delivering to the Company, if
requested, an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection therewith.

8.

Tag-Along Rights.

(a)     If a Stockholder proposes to transfer any Company equity securities at
that time owned by such Stockholder (the “Selling Stockholder”) to any
Independent Third Party or the Company, then, as a condition precedent thereto,
such Stockholder shall afford the other Stockholders (the “Tag-Along
Stockholder”) the right to participate in such transfer in accordance with this
Section 8.

(b)    The Selling Stockholder shall give written notice to the Tag-Along
Stockholder (a “Notice of Transfer”) not less than 20 nor more than 60 days
prior to any proposed transfer of any such Common Stock or other Company equity
securities. Each such Notice of Transfer shall:

(i)     specify in reasonable detail (A) the number of shares of Common Stock or
other equity securities the Selling Stockholder proposes to transfer, (B) the
identity of the proposed transferee or transferees of such shares of Common
Stock or other equity securities, (C) the time within which, the price per share
at which and all other terms and conditions upon which the Selling Stockholder
proposes to transfer such shares (including a description of all consideration
payable in connection with the transfer), and (D) the percentage of the shares
of Common Stock (and other Company equity securities, if any) then owned by the
Selling Stockholder which the Selling Stockholder proposes to transfer to such
proposed transferee or transferees; and

(ii)    make explicit reference to this Section 8 and state that the right of
the Tag-Along Stockholder to participate in such transfer under this Section 8
shall expire unless exercised within 20 days after receipt of such Notice of
Transfer; and

(iii)   contain an irrevocable offer by the Selling Stockholder to the Tag-Along
Stockholder to participate in the proposed transfer to the extent provided in
Section 8(c) below.

(c)     The Tag-Along Stockholder shall have the right to transfer to the
proposed transferee or transferees that number of Restricted Securities which is
equal to the Applicable Percentage (or, if the Tag-Along Stockholder shall
elect, any lesser percentage) of the Restricted Securities owned by the
Tag-Along Stockholder, for the same terms and conditions and amount of
consideration as is applicable to the proposed transfer by the Selling
Stockholder (and, if and to the extent the Tag-Along Stockholder shall exercise
such right, then the securities to be transferred by the Selling Stockholder
shall be correspondingly reduced); provided, that, notwithstanding anything to
the contrary herein, the Tag-Along Stockholder shall be obligated to indemnify
the proposed transferee or transferees upon the same terms and conditions as are
applicable to the indemnification given by the Selling Stockholder in connection
with such proposed transfer so long as (i) all indemnification obligations are
several, and not joint and several, among all transferors in proportion to the
consideration paid to each transferor, and (ii) the maximum obligation of the
Tag-Along Stockholder shall not exceed the net cash proceeds actually received
by it as a result of such transfer.

(d)    The Tag-Along Stockholder must notify the Selling Stockholder of any
acceptances under this Section 8(d) within 20 days after receipt of the Notice
of Transfer, if the Tag-Along Stockholder desires to accept such offer and to
transfer any of its Restricted Securities in accordance with this Section 8. The
failure of the Tag-Along Stockholder to provide such notice within such 20 day
period shall, for the purposes of this Section 8, be deemed to constitute an
irrevocable waiver by the Tag-Along Stockholder of its right to transfer any of
its Restricted Securities in connection with the proposed transfer described in
such Notice of Transfer. The Selling Stockholder shall use all commercially
reasonable efforts to obtain the agreement of the prospective transferee or
transferees to the participation of the Tag-Along Stockholder, if the Tag-Along
Stockholder properly elects to participate in such proposed transfer, and shall
not consummate any such proposed transfer unless the Tag-Along Stockholder is
permitted to participate in accordance with the provisions of this Section 8.
The Tag-Along Stockholder shall not be obligated to transfer any Restricted
Securities pursuant to this Section 8, except to the extent that the Tag-Along
Stockholder has notified the Selling Stockholder of the Tag-Along Stockholder’s
acceptance of the offer contained in the Notice of Transfer. Any and all
transfers of Restricted Securities by the Tag-

 

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Along Stockholder pursuant to this Section 8 shall be subject to, made
concurrently with, the actual transfer of equity securities by the Selling
Stockholder.

(e)     Subject to the consummation of the transfer contemplated by the Notice
of Transfer, the Tag-Along Stockholder shall take such actions and shall execute
such documents and instruments as shall be reasonably necessary (and not adverse
in any material respect to its interests) to consummate the proposed sale as
expeditiously as is reasonably prudent.

(f)     At the closing of any such transfer, the Tag-Along Stockholder shall
deliver a certificate or certificates, registered in the Tag-Along Stockholder’s
name, properly endorsed and with all required transfer stamps, if any,
representing the securities being sold by the Tag-Along Stockholder against
delivery of the applicable consideration by the proposed transferee.

(g)    Notwithstanding anything to the contrary contained in this Section 8, no
Stockholder shall have any rights pursuant to this Section 8 to participate in
any transfer by a Selling Stockholder to any of its direct or indirect partners,
any other private investment company affiliated with the Selling Stockholder,
and/or any employees or directors of the Selling Stockholder so long as the
purpose of such transfer is not to avoid the Tag-Along Stockholder’s rights
pursuant to this Section 8.

(h)    The Notice of Transfer contemplated by this Section 8 and the Sale Notice
contemplated by Section 6(b) may be combined in a single notice.

(i)     The provisions of this Section 8 will terminate upon the completion of a
Qualified Public Offering.

9.

Preemptive Rights.

(a)     If at any time the Company proposes to issue, sell or grant (other than
pursuant to an Exempt Issuance) any shares of Common Stock, preferred stock or
other equity securities, whether now or hereafter authorized (“New Stock”), or
proposes to issue, sell or grant (other than pursuant to an Exempt Issuance) any
securities or instruments convertible into, exchangeable or exercisable for New
Stock or any options or rights to purchase any such securities or instruments
(“New Securities”), then not less than 30 days nor more than 60 days prior to
consummating such transaction, the Company shall give notice thereof to each
Stockholder (a “Preemptive Rights Notice”). Each such Preemptive Rights Notice
shall:

(i)     specify in reasonable detail (A) the number and type of New Stock and/or
New Securities which the Company proposes to issue or sell, and (B) the time
within which, the price per share at which and all other material terms and
conditions upon which the Company proposes to issue or sell such securities; and

(ii)    make explicit reference to this Section 9 and state that the right of
each Stockholder to purchase any of such securities pursuant to this Section 9
shall expire unless exercised within 20 days after receipt of such Preemptive
Rights Notice.

(b)    Each Stockholder shall have the right, in the nature of a preemptive
right, to purchase that amount of such New Stock or New Securities, on the same
terms and conditions as shall be applicable to the issue or sale of such New
Stock or New Securities, as will enable the Stockholder to maintain its fully
diluted percentage ownership of securities of the Company following such
issuance or sale at the level held by it immediately prior to such issuance or
sale. Each Stockholder may purchase the total amount of New Stock or New
Securities to which it is entitled or any lesser amount as such Stockholder may
elect. To the extent that a Stockholder elects to purchase less than the total
amount of New Stock or New Securities to which it is entitled, the other
Stockholders may purchase the amount not so elected.

(c)     A Stockholder must notify the Company within 20 days after receipt of
the Preemptive Rights Notice if the Stockholder desires to exercise its purchase
rights under this Section 9. The failure of a Stockholder to provide such notice
within such 20-day period shall, for purposes of this Section 9, be deemed to
constitute an irrevocable waiver by such Stockholder of its right to purchase
any portion of the New Stock and/or New Securities specified in such Preemptive
Rights Notice. The Company will not consummate any such proposed issue or sale
unless any Stockholder electing to exercise its purchase rights under this
Section 9 is permitted to purchase the securities it is entitled to pursuant to
this Section 9. A Stockholder shall not be obligated to purchase

 

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any securities pursuant to this Section 9, except to the extent that such
Stockholder has notified the Company of the Stockholder’s exercise of the
preemptive rights granted in this Section 9.

(d)    The provisions of this Section 9 will terminate upon the completion of a
Qualified Public Offering.

10.

Registration Rights.

 

 

(a)

Demand Registration.

(i)     Following the date which is six (6) months following the date of a
Qualified Public Offering, a Stockholder may request the Company to register
under the Securities Act all or any portion of the shares of Common Stock held
by such Stockholder for sale in the manner specified in such notice; provided,
however, that the Company may, by notice to the requesting holders, delay such
requested registration if the Company’s Board of Directors determines in good
faith that such registration at the time requested would have a material adverse
effect upon the Company; provided, further, however, that the Company’s ability
to delay such registration shall be limited to durations of no longer than
ninety (90) days and the Company shall not delay more than once during any
twelve (12) month period.

The Company shall not be obligated pursuant to this Section 10(a)(i) to
effectuate more than one (1) registration after a Qualified Public Offering. In
addition, the aggregate offering price of the Common Stock to be sold pursuant
to each such registration shall be at least $5,000,000. Notwithstanding anything
to the contrary contained herein, no request may be made under this Section 10:

(A)   within ninety (90) days after the effective date of a registration
statement filed by the Company covering a firm commitment underwritten public
offering of securities of the Company under the Securities Act, or

(B)    during the period starting with the date sixty (60) days prior to the
Company’s estimated date of filing of, and ending on the date six (6) months
immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan), provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective and that the Company’s
estimate of the date of filing such registration statement is made in good
faith.

(ii)    Following receipt of any notice pursuant to Section 10(a)(i), the
Company shall promptly notify the Stockholder from whom such notice has not been
received and, as soon thereafter as practicable, shall use its reasonable
efforts to register under the Securities Act, for public sale in accordance with
the method of disposition specified in such notice from requesting holders, the
number of shares of Common Stock specified in such notice (and in all notices
received by the Company from other holders within twenty (20) days after the
giving of such notice by the Company). If such method of disposition shall be an
underwritten public offering, the Company shall designate the managing
underwriter of such offering, following consultation and subject to the approval
of the Stockholders from whom notice has been received, which approval shall not
be unreasonably withheld or delayed. All sellers must participate in the
underwriting. The Company’s registration obligation hereunder shall be deemed
satisfied only when a registration statement or statements covering all shares
of Common Stock specified in notices received as aforesaid, for sale in
accordance with the method of disposition specified by the requesting holders,
shall have become effective and, if such method of disposition is a firm
commitment underwritten public offering, all such shares shall have been sold
pursuant thereto.

(iii)   The Company shall be entitled to include in any registration statement
referred to in this Section 10(a), for sale in accordance with the method of
disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account and for the account of other selling
stockholders, except as and to the extent that, in the reasonable opinion of the
managing underwriter (if such method of disposition shall be an underwritten
public offering), such inclusion would materially adversely affect the marketing
of the Common Stock to be sold. Except for registration statements on Form S-4,
S-8 or any successor thereto, the Company will not file with the SEC any other
registration statement with respect to its Common Stock, whether for its own
account or that of other stockholders, from the date of receipt of a notice from
requesting holders pursuant to this Section 10(a) until the completion of the
lesser of (i) the period of distribution of the shares of Common Stock
registered thereby or (ii) ninety (90) days from the effective date of the
registration statement,

 

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unless the Common stock owned by the Stockholders shall be entitled to be
included therein in accordance with Section 10(b) below.

(iv)   The Company will use commercially reasonable efforts to maintain the
effectiveness of any form used to register the shares pursuant to this Section
10(a) for up to one hundred eighty (180) days or such earlier time as all of the
Common Stock have been sold.

(b)    Piggyback Rights. If at any time after the Company has completed a public
offering of equity securities registered pursuant to the Securities Act, the
Company proposes to file a registration statement under the Securities Act for
any underwritten sale of shares of any of the Company’s equity securities,
whether for a secondary offering or for a primary offering of equity securities
by the Company, the Company shall give written notice of such registration to
each Stockholder no later than 15 days before its filing with the Securities and
Exchange Commission (the “SEC”). If a Stockholder so requests in writing within
15 days, the Company shall include in any registration the Common Stock of the
Stockholder requested to be included in such registration.

(c)     Pro Rata Reduction. The Company shall not be obligated pursuant to
Section 10(b) to so include the Common Stock of a Stockholder to the extent the
underwriter or underwriters of such securities being otherwise registered by the
Company shall determine in good faith that the inclusion of the Stockholder’s
Common Stock would jeopardize the successful sale at the desired price of such
other securities proposed to be sold by such underwriter or underwriters, in
which case the Stockholder shall be entitled to participate in any such reduced
number of shares of Common Stock (if any) which may be included in such
registration along with any stockholders of the Company exercising rights with
respect to such registration on a pro rata basis in proportion to their relative
holdings of shares of Common Stock (including shares of Common Stock issuable
upon exercise of any vested and immediately exercisable options held by such
Stockholder), in the aggregate (subject to any right of priority of financial
institutions who have provided financing to the Company from time to time). This
Section 10 shall be interpreted to permit a Stockholder to participate in public
offerings on at least a pro rata basis with other stockholders and their
Affiliates.

(d)    Registration Procedures. Whenever a Stockholder has requested that any
Common Stock be registered in accordance with this Section 10, the Company shall
use its best efforts to effect the registration and the sale of such Common
Stock in accordance with the intended method of disposition thereof and pursuant
thereto the Company shall as expeditiously as possible:

(i)     prepare and file with the SEC a registration statement with respect to
such Common Stock and use its best efforts to cause such registration statement
to become and remain effective until completion of the contemplated distribution
(provided that nothing herein shall limit the Company’s right to delay and/or
terminate any proposed offering of securities);

(ii)    prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective during the applicable
distribution period;

(iii)   furnish to each Stockholder such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus) and such
other documents as the Stockholders may reasonably request in order to
facilitate the disposition of the Common Stock owned by the Stockholders;

(iv)   use its best efforts to register or qualify such Common Stock under such
other securities or blue sky laws of such jurisdictions as a Stockholder may
reasonably request and do any and all other acts and things which may be
reasonably necessary or advisable to enable the Stockholders to consummate the
disposition in such jurisdictions of the Common Stock owned by the Stockholders
(provided that the Company shall not be required to (a) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this clause (iv), (b) subject itself to taxation in any such
jurisdiction or (c) consent to general service of process in any such
jurisdiction);

(v)    notify each Stockholder, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading;

 

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(vi)   use its best efforts to cause all such Common Stock to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;

(vii)  enter into such customary agreements (including underwriting agreements
in customary form) and take all such other actions as the holders of a majority
of the Common Stock being sold reasonably request in order to expedite or
facilitate the disposition of such Common Stock (provided, however, that (x) a
Stockholder shall be required only to make representations, warranties,
covenants and indemnities as to itself and as to its title to the Common Stock
being offered by such Stockholder, and (y) in no event shall the liability of a
Stockholder for indemnification exceed the lesser of (a) that proportion of the
total of such losses, claims, damages or liabilities indemnified against equal
to the proportion of the total securities sold pursuant to such registration
statement which is being sold by such Stockholder, or (b) the net proceeds
received by such Stockholder from its sale of Common Stock pursuant to such
registration statement); and

(viii) permit any holder of Common Stock which is reasonably likely to be deemed
to be an underwriter or a controlling person of the Company to participate in
the preparation of such registration statement and to require the insertion
therein of material, furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel should be included.

(e)     Registration Expenses. All expenses incident to the Company’s
performance of or compliance with this Section 10, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding discounts and commissions)
and other persons or entities retained by the Company (all such expenses being
herein called “Registration Expenses”), shall be borne by the Company, and the
Company shall, in any event, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance and the expenses and fees for
listing the securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed or on the NASD
automated quotation system. The Company shall not, however, pay (i) underwriting
discounts or commissions to the extent related to the sale of a Stockholder’s
Common Stock sold in any registration and qualification, or (ii) fees and
expenses of counsel to a Stockholder relating to such registration and
qualification.

(f)     Indemnification. The Company shall indemnify and hold harmless each
Stockholder and any underwriter (as defined in the Securities Act) for the
Stockholders and each person, if any, who controls a Stockholder or underwriter
within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, and expenses (including reasonable attorneys’
fees and expenses and reasonable costs of investigation) to which a Stockholder
or underwriter or such controlling person may be subject, under the Securities
Act or otherwise, insofar as any thereof arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in (A)
any registration statement under which a Stockholder’s Common Stock was
registered under the Securities Act pursuant to this Section 10, any prospectus
or preliminary prospectus contained therein, or any amendment or supplement
thereto or (B) any other document incident to the registration of the Common
Stock under the Securities Act or the qualification of the Common Stock under
any state securities laws applicable to the Company, (ii) the omission or
alleged omission to state in any item referred to in the preceding clause (i) a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Securities Exchange Act of 1934 or any other
federal or state securities law, rule or regulation applicable to the Company
and relating to action or inaction by the Company in connection with any such
registration or qualification, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement of
material fact or alleged untrue statement of material fact or omission to state
a material fact or alleged omission to state a material fact in information
furnished to the Company in writing by a Stockholder expressly for use therein
(with respect to which information such Stockholder shall so indemnify and hold
harmless the Company and each person, if any, who controls the Company within
the meaning of the Securities Act, provided that in no event shall the liability
of such Stockholder exceed the net proceeds received by such Stockholder from
its sales pursuant to such registration statement).

(g)    Lock-Up. Each holder of Restricted Securities agrees not to effect any
public sale or other distribution of any Common Stock or other equity securities
of the Company, or any securities convertible into or exchangeable or
exercisable for any of the Company’s equity securities, during the seven days
prior to and the 90

 

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days after the effectiveness of any underwritten public offering (180 days in
the case of the Company’s initial public offering), except as part of such
underwritten public offering or if otherwise permitted by the Company; provided,
however, that in no event shall a Stockholder be subject to “lock-up”
restrictions more extensive than those applicable to the other Stockholders.

11.    Redemption Rights. At any time on or after the fifth (5th) anniversary of
the Subscription Closing, and from time to time thereafter, the BMP Investors
shall have the right to require the Company to redeem all of the Shares held by
the BMP Investors and their Affiliates, in accordance with this Section 11, at
the Redemption Price hereinafter specified.

(a)     The BMP Investors may exercise their right to require redemption
pursuant to this Section 11 by providing written notice to the Company (a
“Redemption Notice”) of the BMP Investors’ desire to exercise the right. Upon
its receipt of a Redemption Notice, the Company shall provide written notice to
SCP stating that the BMP Investors have elected to exercise redemption rights
pursuant to this Section 11. SCP, at its option, shall have the right, by
binding notice to the Company and the BMP Investors within twenty (20) business
days of its receipt of the Redemption Notice, to assume the Company’s redemption
obligations under this Section 11 or exercise its rights in accordance with
Section 8 of this Agreement and require the Company to redeem all of its Shares
along with the Shares of the BMP Investors and their Affiliates.

(b)    Upon surrender of the Shares held by the BMP Investors or an Affiliate
thereof and, if applicable, SCP, the Company shall pay to the BMP Investors and,
if applicable, SCP, an amount (the “Redemption Price”) in cash or other
immediately available funds equal to the Fair Market Value of such Shares. The
Company shall be required to pay the Redemption Price on the 31st day following
its receipt of the Redemption Notice (or any appraisal described in the
definition of Fair Market Value) (the “Required Payment Date”), subject to
obtaining any required consents under the loan agreements of the Company and its
Subsidiaries to the redemption. If the Company is prohibited from effecting such
redemption due to the provisions of such loan agreements for more than 45 days,
then, if requested by the BMP Investors, any appraisal shall be updated to a
date which is no more than 30 days prior to the date on which such redemption is
to be effected and the Redemption Price paid.

(c)     On or before the date of such redemption, the BMP Investors and, if
applicable, SCP shall execute such instruments as the Company may reasonably
require to ensure that such Shares are duly and validly transferred to the
Company (or SCP, if applicable), free of all liens, claims and encumbrances and
on such date the Redemption Price for such Shares shall be paid to the order of
the BMP Investors or as directed by the BMP Investors and, if applicable, SCP.

(d)    In the event that the Redemption Price is not paid in full within one
year after the date of the Redemption Notice (including, without limitation,
because the Company is prohibited from doing so pursuant to the terms of any
loan agreement binding upon the Company and/or any of its Subsidiaries), then,
subject to Section 8 of this Agreement, the BMP Investors and, if applicable,
SCP may, or shall have the right to cause the Company to, commence a process to
sell (and to consummate the sale of) the Company, either through a sale of all
or substantially all of the Company’s assets or shares, or by merger,
consolidation, or otherwise, to any third party that is not an Affiliate of the
BMP Investors, on such terms as the BMP Investors and SCP deem appropriate,
including executing all documents required in connection therewith as
attorney-in-fact for the Company or any Subsidiary (as may be necessary or
appropriate), and SCP shall cooperate with the BMP Investors and the Company in
effecting such transaction and execute all customary documents necessary to
accomplish the same.

12.    Expenses. The Company will reimburse documented reasonable out-of-pocket
expenses incurred by the Stockholders including, but not limited to, travel,
consulting fees, third party diligence fees and reasonable attorneys’ fees
relating to due diligence and documentation for the Acquisition. If the
Acquisition is not consummated, (i) the Stockholders will be responsible for
their own out-of-pocket travel related expenses and (ii) all other expenses
incurred relating to the transaction, including, but not limited to, third party
diligence fees and expenses such as accounting, tax, environmental, insurance
and legal, shall be shared equally by each of (A) the BMP Investors as a group,
and (B) SCP.

13.    Notices. All notices, requests, demands, claims and other communications
hereunder will be in writing. Any notice, request, demand, claim or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:

 

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(a)

If to the Company:

Latham Acquisition Corp.

787 Watervliet–Shaker Road

Latham, NY 12110

Attention: Mark Laven

Facsimile: (518) 785-1592

with copies to:

Greenberg Traurig, LLP

2375 East Camelback Road

Suite 700

Phoenix, AZ 85016

Attention: Bruce E. Macdonough

Facsimile: (602) 445-8618

and to the BMP Investors and SCP (at the addresses set forth below).

(b)

If to either or both of the BMP Investors:

c/o Brockway Moran & Partners, Inc.

225 N.E. Mizner Boulevard

7th Floor

Boca Raton, FL 33432

Attention: Peter Klein

Facsimile: (561) 750-2001

(c)

If to SCP:

SCP Pool Corporation

109 Northpark Boulevard

Covington, LA 70433

Attention: Jennifer M. Neil

Facsimile: (985) 801-8269

Any party hereto may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party hereto may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.

14.    Severability. Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed,

 

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construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained in this Agreement.

15.    Complete Agreement. This Agreement embodies the complete agreement and
understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter of this Agreement in any
way.

16.    Counterparts. This Agreement may be executed on separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement. Any telecopied signature shall be deemed
a manually executed and delivered original.

17.    Successors and Assigns. This Agreement is intended to bind and inure to
the benefit of and be enforceable by the BMP Investors, SCP, the Company, and
their respective successors and assigns (including subsequent holders of the
Shares) and, where applicable, heirs and personal representatives.

18.    Choice of Law; Jurisdiction. This Agreement shall be governed and
construed in accordance with the laws of the state of Delaware without regard to
conflicts of laws principles thereof and all questions concerning the validity
and construction of this Agreement shall be determined in accordance with the
laws of such state. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION LOCATED IN
THE STATE OF DELAWARE IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND HEREBY IRREVOCABLY AGREES, ON BEHALF OF ITSELF AND ON BEHALF
OF SUCH PARTY’S SUCCESSOR’S AND ASSIGNS, THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION SUCH PERSON MAY NOW OR HEREAFTER HAVE AS TO THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH
COURT IS AN INCONVENIENT FORUM.

19.    Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE RELATIONSHIP
ESTABLISHED UNDER THIS AGREEMENT.

20.    Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement. Without limiting the generality of the foregoing,
the BMP Investors (on the one hand) and SCP (on the other hand) shall be able to
enforce, individually and on behalf of the Company, the performance of the other
party’s(ies’) obligations under Section 2(a) hereof. In addition, Seller shall
be a third party beneficiary of this Agreement as contemplated by Section
2(c)(vii)(F) hereof.

21.    Amendments and Waivers. No provision of this Agreement may be amended or
waived without the prior written consent or agreement of the Company, the BMP
Investors and SCP.

22.    Business Days. Whenever the terms of this Agreement call for the
performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.

23.    Failure to Deliver Securities. If a Stockholder or other holder of
Restricted Securities (or a Stockholder’s or such other holder’s estate or any
other representative of such Stockholder or holder of Restricted Securities) who
has become obligated to sell Restricted Securities under this Agreement shall
fail to deliver such Restricted Securities on the terms and in accordance with
this Agreement, the Company, in addition to all other remedies it may have, may
send to such obligated party by registered mail, return receipt requested, the
purchase price for such Restricted Securities on the terms provided for in this
Agreement. Thereupon, the Company, upon written notice to such holder, shall
cancel on its books the Restricted Securities to be sold; and thereupon, all of
such obligated holder’s rights in and to such Restricted Securities shall
terminate.

 

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24.    No Third Party Beneficiary. Except for the parties to this Agreement and
their respective successors and assigns, nothing expressed or implied in this
Agreement is intended, or will be construed, to confer upon or give any person
other than the parties hereto and their respective successors and assigns any
rights or remedies under or by reason of this Agreement.

25.    Transfers in Violation of Agreement. Any transfer or attempted transfer
of any Restricted Securities or other securities in violation of any provision
of this Agreement shall be void, and the Company shall not record such transfer
on its books or treat any purported transferee of such Restricted Securities as
the owner of such stock for any purpose.

26.    Attorneys’ Fees. In the event any suit or other legal proceeding is
brought for the enforcement of any of the provisions of this Agreement, the
parties hereto agree that the prevailing party or parties shall be entitled to
recover from the other party or parties upon final judgment on the merits
reasonable attorneys’ fees (and sales taxes thereon, if any), including
attorneys’ fees for any appeal, and costs incurred in bringing such suit or
proceeding.

[SIGNATURES BEGIN ON THE FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, intending to be legally bound hereby, each of the
undersigned has duly executed and delivered this Subscription and Stockholders’
Agreement as of the day and year first above written.

LATHAM ACQUISITION CORP.

By: /s/ Mark A Eidemueller

Name: / Mark A Eidemueller

Title: Vice President

BROCKWAY MORAN & PARTNERS FUND II, L.P.

By:

Brockway Moran & Partners Management II, L.P., its General Partner

 

By:

Brockway Moran & Partners, Inc., its General Partner

By: /s/ Peter C. Brockway

Name: Peter C. Brockway

Title: Chairman

Taxpayer Identification Number: 65-1133310

BROCKWAY MORAN & PARTNERS II CO-INVEST FUND, L.P.

By:

Brockway Moran & Partners Management II, L.P., its General Partner

 

By:

Brockway Moran & Partners, Inc., its General Partner

By: /s/ Peter C. Brockway

Name: :Peter C. Brockway

Title: Chairman

Taxpayer Identification Number:

SCP POOL CORPORATION, on behalf of itself and its wholly owned subsidiary, Fort
Wayne Pools, Inc.

By: /s/ Manuel J Perez de la Mesa

Name: Manuel J Perez de la Mesa

Title: President

Taxpayer Identification Number:

 

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SCHEDULE 1

Capitalization

Name

Number of Shares

Consideration

Brockway Moran & Partners Fund II, L.P.

198,000

$19,800,000 (1)(2)

Brockway Moran & Partners II Co-Invest Fund, L.P.

(1)

(1)

Fort Wayne Pools, Inc. (3)

198,000

(2)(3)

Apollo Investment Corporation (4)

30,000

$3,000,000

Mark Laven

40,000

(5)

Doug Laver

10,000

$1,000,000 (6)

Charles Trego, Jr.

6,000

(5)

Scott Hollander

1,600

(5)

Gary Whitcher

1,300

(5)

Other (7)

 

 

 

(1)    Brockway Moran fund investments and shares will be allocated 97.9689% to
Fund II and 2.0311% to Co-Invest Fund.

(2)    Additional cash equity may be required because of lender leverage
requirements, working capital at closing, and the extent of participation by
Apollo. Any additional equity will be acquired at $100 per share equally by the
BMP Investors (taken as a whole) and SCP.

(3)    Will contribute to the Company (i) substantially all of its assets,
which, after taking into account specified assumed liabilities, are valued at
$17,472,432; and (ii) $2,327,568 in cash.

(4)    There is no formal commitment from Apollo at the date hereof. Amount
could range from $2.5-4.0 million. See footnote 2.

(5)

Stock of Latham Investments, Inc.

 

(6)

Paid $800,000 in cash and $200,000 through the delivery of a 3% promissory note.

(7)    The Company anticipates that it will adopt a stock option or other equity
incentive plan that could dilute investors’ ownership interest by approximately
7%.

 

 

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