Exhibit 10.1

 

TAX EQUALIZATION AGREEMENT

 

THIS TAX EQUALIZATION AGREEMENT (the “Agreement”) is made and entered into this
28th day of July, 2004, by and among (1) the Louisiana Board of Commerce and
Industry (“Board”), and the State of Louisiana, represented herein by the
Honorable Kathleen Babineaux Blanco, the duly elected Governor of the State of
Louisiana, (“State”) (the Board and the State collectively referred to herein as
“Louisiana”), and (2) Alliance Trading, Inc. and its successors, (“Alliance”),
Superior Commerce, LLC, and its successors (“Commerce”), Cypress, Inc., and its
successors (Alliance, Commerce and Cypress collectively referred to herein as
the “Nevada Entities”), and SCP Pool Corporation, its affiliated domestic
entities owned directly or indirectly fifty percent or more by SCP Pool
Corporation, and the successors to SCP Pool Corporation and the aforementioned
affiliated entities (collectively referred to herein as “POOL”).

 

RECITALS

 

WHEREAS, Alliance is primarily engaged in the management of intellectual
property and other intangibles, including without limitation registration,
maintenance, licensing and oversight of EPA registrations, trademarks,
servicemarks, and patents;

 

WHEREAS, Commerce is primarily engaged in the business of acquiring certain
trade receivables for fair market value and securing third party financing;

 

WHEREAS, Cypress is primarily engaged in the procurement of internationally
sourced swimming pool supplies, equipment, related pool parts and supplies and
other leisure related products and merchandise for POOL and certain
non-affiliated businesses;

 

WHEREAS, bringing these Nevada entities to this State will result in the
employment of new employees in this State and also bring about the potential for
growth through the best efforts of those companies in the future;

 

WHEREAS, POOL is primarily engaged in the wholesale distribution of swimming
pool supplies, equipment, related pool parts and supplies and other leisure
related products and merchandise to retailers, dealers, service contractors and
pool builders;

 

WHEREAS, each of the Nevada Entities are presently headquartered in Las Vegas,
Nevada;

 

WHEREAS, the state of Nevada has a greater tax advantage to the Nevada Entities
than the taxing structure of the State;

 

WHEREAS, Louisiana recognizes that the encouragement of new headquarters to
locate in the State is essential to the continued growth and development of the
State and to the continued prosperity and welfare of the people of the State;

 

WHEREAS, Louisiana recognizes that new headquarters, which might otherwise
locate in the State, locate in other states because of lower taxes imposed by
such other states;

 

WHEREAS, Louisiana desires to encourage the Nevada Entities to locate in the
State by equalizing taxes imposed upon the Nevada Entities to the levels imposed
by Nevada;

 

WHEREAS, POOL is contemplating locating in another state, Florida, which has a
greater tax advantage than the taxing structure of Louisiana;

 

1

--------------------------------------------------------------------------------

WHEREAS, Louisiana acknowledges that the continued operation and maintenance of
POOL’s chief corporate headquarters in St. Tammany Parish will provide
significant economic benefit to Louisiana;

 

WHEREAS, POOL acknowledges that while this Agreement is effective it will add
new jobs to its Covington, Louisiana headquarters absent a compelling business
reason to locate the jobs elsewhere; and will locate other of its subsidiary
headquarters in Louisiana when appropriate for its business;

 

WHEREAS, the Nevada Entities acknowledge that while this Agreement is effective
they will add new jobs to the Covington, Louisiana headquarters absent a
compelling business reason to locate the jobs elsewhere;

 

WHEREAS, POOL intends to assess the feasibility of locating additional
distribution and/or warehouses in the State, including the feasibility of
utilizing the State’s ports when appropriate for its business;

 

WHEREAS, in connection with the relocation of the Nevada Entities, Louisiana
desires to encourage POOL to maintain its headquarters in Louisiana by
equalizing taxes imposed upon POOL to the levels imposed by other states;

 

WHEREAS, the Nevada Entities and POOL agree to exercise a good faith effort to
contract with or to do business with businesses domiciled in the State while
this Agreement is effective;

 

WHEREAS, the secretary of the Department of Economic Development has made a
recommendation to the Governor to extend an invitation to the Nevada Entities
and POOL to apply for tax equalization;

 

WHEREAS, the Nevada Entities and POOL have received an invitation from the
Governor to apply for tax equalization and have each submitted the requisite
documents to the Louisiana Department of Economic Development;

 

WHEREAS, the Louisiana Department of Economic Development, with the assistance
of the Louisiana Department of Revenue, has reviewed the applications of the
Nevada Entities and POOL and has determined that the requirements for an
exemption contract have been satisfied;

 

WHEREAS, the Louisiana Department of Economic Development has recommended to the
Board that this Agreement be entered into;

 

WHEREAS, the Board has reviewed the Louisiana Department of Economic
Development’s recommendations for exemptions and concurs in the recommendation
of the Louisiana Department of Economic Development;

 

WHEREAS, the Louisiana Department of Revenue has notified the Board that it has
no objection to this Agreement and the exemptions and/or credits provided for
herein;

 

WHEREAS, the Board has notified the Governor that no objection was filed by the
Louisiana Department of Revenue and recommends to the Governor that this
Agreement be entered into;

 

WHEREAS, in exchange for the agreements specified herein, Louisiana, the Nevada
Entities and POOL have agreed to execute and deliver this Agreement, according
to the terms of this Agreement.

 

2

--------------------------------------------------------------------------------

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

 

AGREEMENT

 

1. TERM OF EQUALIZATION

 

Unless otherwise terminated in accordance herewith, this Agreement shall be in
effect for and apply to each of the Nevada Entities’ and POOL’s taxable years
beginning after December 31, 2003 and ending before January 1, 2009 for income
tax and beginning after December 31, 2004 and ending before January 1, 2010 for
franchise tax and at the option of the Nevada Entities’ and/or POOL upon sixty
days written notice, is subject to renewal for an additional five years
thereafter.

 

2. SCOPE OF EQUALIZATION

 

2.1 Nevada Franchise and Income Tax. Louisiana and the Nevada Entities hereby
agree for each taxable period during which this Agreement is in effect, that the
Nevada Entities shall be subject to Louisiana corporation income and franchise
taxes in an amount not to exceed the corporation income and franchise taxes each
of the Nevada Entities would be subject to if they were domiciled in the State
of Nevada. This Agreement assumes the total tax liabilities of the Nevada
Entities for all other state and local taxes imposed by Louisiana and Nevada to
be presently, and for the term of this agreement, comparable.

 

2.2 Florida Franchise and Income Tax. Louisiana and POOL hereby agree that for
each taxable period during which this Agreement is in effect, POOL shall be
subject to Louisiana corporation income and franchise taxes in an amount not to
exceed the corporation income and franchise taxes POOL would be subject to if it
was domiciled in the State of Florida. This Agreement assumes the total tax
liabilities of POOL for all other state and local taxes imposed by Louisiana and
Florida to be presently, and, for the term of this Agreement, comparable.

 

2.3 Tax Equalization Credit. For each taxable period during which this Agreement
is in effect, the aggregate excess of the amount of Louisiana corporation income
and franchise taxes that are due for any taxable period covered by this
Agreement by the Nevada Entities and POOL to Louisiana over the amount of
corporation income and franchise taxes that would be due or paid to Nevada and
Florida, as applicable, shall be referred to as the “Louisiana Tax Equalization
Credit”. For each such taxable period, the Louisiana Tax Equalization Credit
shall be used by the Nevada Entities and/or POOL to reduce the aggregate amount
of Louisiana corporation income or franchise taxes due by the Nevada Entities
and POOL for each such taxable period. POOL shall be entitled to a credit in the
first year of this Agreement for the Qualified Target Industry Tax Refund
offered by the State of Florida based on 160 jobs; provided however, this credit
shall be limited to the 80% that would be paid by the State of Florida. In the
event the Louisiana Tax Equalization Credit for any one taxable year results in
the Nevada Entities and POOL’s aggregate overpayment of Louisiana corporation
income and/or franchise tax, such amount shall be carried forward to the
following tax years until exhausted.

 

2.4 Offset. Neither the Nevada Entities nor POOL shall be required to offset or
reduce the Louisiana Tax Equalization Credit for any taxable period for any
reason, including, without limitation, any offsets or reductions for additional
costs that may have been incurred if the Nevada Entities or POOL’s headquarters
were located in Florida or Nevada, as applicable.

 

3. CONDITIONS AND COVENANTS

 

So long as this Agreement is in effect, the following conditions and covenants
shall apply:

 

  1. Upon the filing of each of the Nevada Entities’ and POOL’s annual Louisiana
corporation income and franchise tax returns, the Nevada Entities and POOL shall
provide the Louisiana Department of Revenue (the “DOR”) with a compilation of
their corresponding income and franchise taxes paid or incurred in Louisiana for
the applicable taxable period as compared to Florida or Nevada, as applicable.
Such compilation shall be made a part of such annual Louisiana corporation
income and franchise tax returns.

 

3

--------------------------------------------------------------------------------

  2. Louisiana agrees that it shall not require that a third party certify
and/or prepare the Nevada Entities’ or POOL’s respective compilations of their
corresponding income and franchise taxes in Louisiana as compared to Florida or
Nevada, as applicable, provided that upon the Nevada Entities’ and/or POOL’s
filing of such annual Louisiana corporation and income and franchise tax
returns, each of the Nevada Entities and POOL, as applicable, represents to the
Department of Revenue that the information and data furnished is true and
correct and that it is not aware of any material changes to the tax laws of the
corresponding Florida and Nevada jurisdictions. The Department of Revenue shall
have the right to examine, audit or investigate the returns and information in
accordance with the Investigation and Hearings provisions of R.S. 47:1541 et
seq.

 

  3. The Nevada Entities and SCP POOL Corporation agree to maintain their
headquarters in the State and the Nevada Entities shall initially have at least
four employees and POOL shall continue to maintain its corporate headquarters in
Louisiana and to employ at least 160 employees at that headquarters. Any new
employees conducting administrative/headquarters functions added to either the
Nevada Entities or SCP Pool Corporation shall be added to a Louisiana location
unless the companies have a compelling business reason to have the employees
located elsewhere. The Nevada Entities and SCP Pool Corporation shall make an
annual report of all new domestic administrative/headquarters hires according to
the function of the position, salary range, and location of the employee to the
Louisiana Department of Economic Development. This annual report shall be due on
or before thirty days after the fiscal year end of the Nevada Entities and SCP
Pool Corporation. The first report shall be filed within thirty days of the date
this Agreement is executed and shall be the basis for all subsequent annual
reports.

 

  4. The Nevada Entities and POOL agree to an annual review and inspection by
the Department of Economic Development and upon reasonable notice and during
normal business hours, shall make all books and records of the Nevada entities
and POOL related to and covered by this Agreement available for inspection. The
Nevada Entities and POOL agree to have an officer of authority in attendance at
the annual review. Included in this annual review shall be a review of
employment data on the average number of jobs by month for the Nevada Entities
and POOL.

 

  5. The Nevada Entities and POOL agree to provide a right of first refusal to
businesses domiciled in the State for goods and/or services provided to the
Nevada Entities and/or POOL in the State, provided that such businesses can
perform such contract or business activity under similar terms and conditions,
including without limitation quality and cost, that are comparable to or better
than the Nevada Entities’ and/or POOL’s alternatives and at no additional cost
or burden to the Nevada Entities and/or POOL.

 

  6. The Nevada Entities and POOL agree that to the extent economically
disadvantaged contractors are available, they will designate and set a goal for
awarding contracts to certified economically disadvantaged businesses, as
defined by the Louisiana Department of Economic Development; provided that it is
without added expense or burden to the Nevada Entities or POOL and provided
further that such certified economically disadvantaged businesses (i) are
majority owned and operated by residents of the State; (ii) are competent to
deliver and/or perform the required products and services in a timely manner;
and (iii) can perform such services or provide such goods under similar terms
and conditions, including without limitation quality and cost, that are
comparable to or better than the Nevada Entities’ and/or POOL’s alternatives.

 

  7. The Board agrees to provide the Nevada Entities and POOL with its rules and
regulations pertaining to the identification and certification of economically
disadvantaged businesses and further to provide the Nevada Entities and POOL
with a list of certified economically disadvantaged businesses on a no less than
annual basis. If there are no certified economically disadvantaged businesses
available or if the Board fails to provide the Nevada Entities or POOL with a
list of certified economically disadvantaged businesses, the Nevada Entities and
POOL shall be deemed to be in compliance with this Agreement.

 

4

--------------------------------------------------------------------------------

  8. Louisiana agrees that the Nevada Entities and POOL shall be deemed to be in
compliance with this Agreement until they receive written notice of
noncompliance from the Board in accordance with Section 5.1 below.

 

4. REPRESENTATIONS AND WARRANTIES

 

Louisiana hereby represents and warrants to POOL as follows:

 

  1. The Board, the State and Governor Blanco, on behalf of State, have all
necessary power and authority to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Board and the State and constitutes, and each
other agreement, instrument or document executed or to be executed by on behalf
of the Board and the State in connection with this Agreement has been, or when
executed will be, duly executed and delivered by the Board and the State and
constitutes, or when executed and delivered will constitute, a valid and legally
binding obligation of the Board and the State, enforceable against the Board and
the State in accordance with its respective terms.

 

  2. Neither the execution, delivery or performance of this Agreement by the
Board, the State or Governor Blanco, on behalf of the State does or will violate
any order, writ, injunction, decree, judgment, ruling, law, rule or regulation
of any kind of any governmental entity or will require any consent, approval or
authorization of, or notice to, or declaration, filing or registration with, any
governmental entity not otherwise provided and attached hereto. Moreover, all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any governmental entity
necessary for the consummation of this Agreement shall have been obtained or
filed or shall have occurred.

 

5. DEFAULT AND EARLY TERMINATION

 

5.1 Default; Notice. This Agreement may be terminated upon the breach of any
provision contained herein provided that the nonbreaching party provides the
breaching party with written notice thereof and within 120 days of such written
notice the breach is neither (i) cured, nor (ii) the subject of a mutually
agreed plan to cure. Such notice shall state with reasonable particularity the
nature of the breach or other reasons justifying termination, and the steps
required to cure if such breach is by its nature curable,

 

5.2 Effect of Termination. The termination of this Agreement shall not prejudice
any credits, benefits or rights under this Agreement which may have accrued up
to the date the breaching party receives written notice of the breach. In the
event either the Nevada Entities or POOL is found to be in breach, all credits
accruing after the date the breaching party receives written notice of such
breach shall be waived.

 

6. MISCELLANEOUS

 

6.1 Assignment; Binding Effect. This Agreement and the transactions and other
instruments provided for herein shall be binding upon and inure to the benefit
of the parties, their legal representatives, successors, and assignees.

 

6.2 Limitation on Rights of Others. Except as specifically provided in section
6.1 above, nothing in this Agreement, whether express or implied, shall be
construed to give any person or entity, other than the parties hereto, any legal
or equitable right, remedy or claim under or in respect of this Agreement.

 

6.3 Limitation on Liability. The Nevada Entities and/or POOL shall not have any
liability for the performance of this Agreement except as expressly set forth
herein.

 

5

--------------------------------------------------------------------------------

6.4 Notice. Any notice, request, demand, waiver, consent, approval or other
communication which is required or permitted hereunder shall be in writing and
shall be deemed given only upon of delivery by: (a) personal delivery to the
designated individual; (b) certified or registered mail, postage prepaid, return
receipt requested; (c) a nationally recognized overnight courier service with
confirmation of receipt; or (d) facsimile transmission with confirmation of
receipt. All such notices must be addressed as follows or such other address as
to which any party hereto may have notified the other in writing:

 

If to any of the Nevada Entities, to:

    

Alliance Trading, Inc., Superior Commerce, LLC, or Cypress, Inc.

    

c/o SCP Pool Corporation

    

109 Northpark Boulevard, 4th Floor

    

Covington, Louisiana 70433-5001

    

Attention: President

    

Facsimile: 985-801-8269

If to POOL, to:

    

SCP POOL CORPORATION

    

109 Northpark Boulevard, 4th Floor

    

Covington, Louisiana 70433-5001

    

Attention: Mr. Manuel J. Perez de la Mesa

    

Facsimile: 985-801-8269

If to the Board, to:

    

Louisiana Board of Commerce and Industry

    

Post Office Box 94185

    

Baton Rouge, Louisiana 70804-9185

    

Attention: Mr. Mike Williams

    

Facsimile: 225-342-0142

If to the State, to:

    

Louisiana Department of Economic Development

    

Post Office Box 94185

    

Baton Rouge, Louisiana 70804-9185

    

Attention: Secretary

    

Facsimile: 225-342-9095

 

Any of the above addresses may be changed at any time by notice delivered to the
other party as provided above; provided, however, that any such notice with
respect to change of address shall be effective only upon receipt.

 

6.5 Entire Agreement; Amendment. This Agreement sets forth the entire
understanding of the parties hereto with respect to the transactions
contemplated hereby. Any and all previous agreements and understandings between
or among the parties regarding the subject matter hereof, whether written or
oral, are superseded by this Agreement. This Agreement shall not be amended or
modified except by written instrument duly executed by each of the parties
hereto.

 

6.6 Schedules. All Schedules referred to herein are intended to be and hereby
are specifically made a part of this Agreement.

 

6

--------------------------------------------------------------------------------

6.7 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by reason of any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any adverse manner to
either party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible,
and in any case such term or provision shall be deemed amended to the extent
necessary to make it no longer invalid, illegal or unenforceable.

 

6.8 Counterparts. This Agreement may be executed in any number of counterparts,
each of which when executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument.

 

6.9 Governing Law and Legal Actions. This Agreement shall be governed by and
construed under the laws of the State of Louisiana without regard to conflicts
of law provisions thereof. The parties agree that process may be served in the
manner provided herein for giving of notices or otherwise as allowed by
Louisiana or federal law. Any disputes arising under this Agreement shall be
resolved using Alternative Dispute Resolution including mediation and
arbitration.

 

6.10 Effect of Title and Headings. The title of this Agreement and the headings
of its sections and subsections are included solely for convenience and shall
not govern, limit or aid in the interpretation of any terms or provision of this
Agreement.

 

6.11 Construction. The Parties acknowledge and agree that both Parties have
participated in the drafting and negotiation of all provisions of this
Agreement, and each party hereby waives and agrees not to assert that any
ambiguity should be construed for or against either party. Except as otherwise
specified, references in this Agreement to sections, subsections, paragraphs and
Schedules are to sections, subsections, and paragraphs of, and Schedules
attached to, this Agreement. Except where the context clearly requires to the
contrary, “including” shall mean “including, without limitation”.

 

6.12 Further Action. Each of the Parties hereto shall use its best efforts to
take such actions as may be necessary or reasonably requested by the other party
hereto to carry out and consummate the transactions contemplated by this
Agreement.

 

************************ALL        SIGNATURES        ON        SUBSEQUENT       
 PAGE**************************

 

7

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
date first written above.

 

CYPRESS, INC.

 

ALLIANCE TRADING, INC.

By:

 

/s/ Alex Bandak

--------------------------------------------------------------------------------

 

By:

 

/s/ David Chess

--------------------------------------------------------------------------------

Name:

 

Alex Bandak

 

Name:

 

David Chess

Title:

 

President

 

Title:

 

President

SUPERIOR COMMERCE, LLC

 

SCP POOL CORPORATION

By:

 

/s/ Steven Cassanova

--------------------------------------------------------------------------------

 

By:

 

/s/ Manuel J. Perez de la Mesa

--------------------------------------------------------------------------------

Name:

 

Steven Cassanova

 

Name:

 

Manuel J. Perez de la Mesa

Title:

 

President

 

Title:

 

President and Chief Executive Officer

STATE OF LOUISIANA

 

LOUISIANA BOARD OF COMMERCE AND INDUSTRY

By:

 

/s/ Kathleen Babineaux Blanco

--------------------------------------------------------------------------------

 

By:

 

/s/ Noel Murano

--------------------------------------------------------------------------------

Name:

 

Kathleen Babineaux Blanco

 

Name:

 

Noel Murano

Title:

 

Governor

 

Title:

 

Chairman

 

8