Pool 2007 Proxy
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
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1934
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Material Pursuant to § 240.14a-11(c) or § 240.14a-12
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Corporation
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POOL
CORPORATION
_____________________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Stockholders of Pool Corporation:
The
annual meeting of stockholders of Pool Corporation (the “Company” or “our” or
“we” or “us”) will be held at the office of Jones, Walker, Waechter, Poitevent,
Carrere & Denegre L.L.P., at 201 St. Charles Avenue, New Orleans, Louisiana
70170-5100, on Tuesday, May 8, 2007, at 9:00 a.m., Central Time,
for the following purposes:
1. |
To
elect eight persons to serve as directors on our
Board of Directors for a one-year term or until their successors
have been elected and qualified;
|
2. |
To
approve our 2007 Long-Term Incentive Plan;
|
3. |
To
ratify the retention of Ernst & Young LLP, certified public
accountants, as our independent auditors for the 2007 fiscal year;
and
|
4. |
To
act upon such other matters as may properly come before the meeting
or any
reconvened meeting following any adjournment
thereof.
|
The
foregoing items are more fully described in the Proxy Statement accompanying
this Notice.
The
Board
of Directors has set March 16, 2007, as the record date for the meeting. This
means that only record owners of the Company’s Common Stock at the close of
business on that date are entitled to notice of, and to vote at, the annual
meeting and at any adjournment or postponement thereof.
By
Order of the Board
of Directors,
/s/ Jennifer
M. Neil
Jennifer
M. Neil,
Secretary
Covington,
Louisiana
March
30,
2007
WE
URGE EACH STOCKHOLDER TO PROMPTLY SIGN AND RETURN THE ENCLOSED PROXY CARD
OR IF
APPLICABLE, TO USE TELEPHONE OR INTERNET VOTING. SEE “VOTING PROCEDURES” FOR
INFORMATION ABOUT VOTING BY TELEPHONE OR INTERNET.
POOL
CORPORATION
109
Northpark Boulevard
Covington,
Louisiana 70433
PROXY
STATEMENT
We
are
furnishing this Proxy Statement to our stockholders in connection with the
solicitation of proxies by and on behalf of the Board of Directors
(the “Board of Directors” or the “Board”) of Pool Corporation
(the “Company” or “our” or “we” or “us”) for use at the 2007 annual meeting of
our stockholders to be held on May 8, 2007, at 9:00 a.m., Central
Time, or at any adjournment or postponement thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting (the “Meeting”). The
Meeting will be held at the office of Jones, Walker, Waechter, Poitevent,
Carrere & Denegre L.L.P., 201 St. Charles Avenue, New Orleans, Louisiana
70170-5100. This Proxy Statement is first being mailed to stockholders on or
about March 30, 2007.
Voting
Procedures
Only
holders of record of our common stock, $0.001 par value per share (“Common
Stock”), at the close of business on March 16, 2007, are entitled to
notice of and to vote at the Meeting. On March 16, 2007, we had 49,637,515
outstanding shares of Common Stock, each of which is entitled to one
vote.
The
holders of a majority of the shares of Common Stock issued and outstanding,
present in person or represented by proxy, will constitute a quorum at the
Meeting. If a quorum is present, directors will be elected by a plurality vote;
and the approval of our 2007 Long-Term Incentive Plan (the “2007 LTIP”) and the
ratification of the retention of the independent auditors will require the
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy at the Meeting.
Management
does not know of any items, other than those referred to in the accompanying
Notice of Annual Meeting of Stockholders, which may properly come before the
Meeting or other matters incident to the conduct of the Meeting. If, however,
any other matters properly come before the Meeting, the persons named as proxies
in the enclosed form of proxy intend to vote in accordance with their judgment
on the matters presented.
Abstentions
will be treated as present both for purposes of determining a quorum and with
respect to each proposal other than the election of directors. Accordingly,
abstentions will have no effect on the election of directors, but will have
the
effect of a vote against the approval of the 2007 LTIP and the ratification
of
the independent auditors.
A
“broker
non-vote” occurs when a nominee (such as a broker or bank) holding shares in
“street name” as the registered holder for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting
power
with respect to the matter and has not received voting instructions from the
beneficial owner. Broker non-votes will be treated as not present and not cast
for purposes of determining a quorum and with respect to all matters brought
before the Meeting. Accordingly, broker non-votes will have no effect on the
election of directors, the approval of the 2007 LTIP, or the ratification of
the
independent auditors.
If
you
come to the Meeting, you can, of course, vote in person. Please note, however,
that if your shares are held of record by a broker, bank or other nominee and
you wish to vote at the Meeting, you must obtain from the record holder a proxy
issued in your name. If you do not come to the Meeting, your shares can be
voted
only if you have returned a properly executed proxy. If you hold your shares
through a record holder, such as a bank, broker or other nominee, you must
provide voting instructions to the record holder; obtain a proxy issued in
your
name from such record holder; or if your record holder makes telephone or
internet voting available, follow the telephone or internet voting instructions
the record holder will enclose with the proxy statement.
If
you
execute and return your proxy, but do not give voting instructions, the shares
represented by that proxy will be voted as recommended by the Board of
Directors. You can revoke your authorization at any time before the shares
are
voted at the Meeting by filing with the Secretary of the Company a written
revocation or duly executed proxy bearing a later date. The proxy will also
be
deemed revoked with respect to any matter on which you vote in person at the
Meeting. Attendance at the Meeting will not in and of itself constitute a
revocation of a proxy. Unless otherwise marked, properly executed proxies in
the
form of the accompanying proxy card will be voted in favor of the election
of
each of the director nominees, approval of the 2007 LTIP, and the ratification
of the independent auditors.
Solicitation
We
will
bear the entire cost of soliciting proxies, including preparation, assembly,
printing and mailing of this proxy statement, the proxy card and any additional
information furnished to stockholders. Banks, brokerage houses and other
nominees or fiduciaries will be requested to forward the soliciting materials
to
their principals and to obtain authorization for the execution of proxies.
We
will, upon request, reimburse them for their expenses in so acting. Some of
our
employees, who will receive no additional compensation for their services,
may
also solicit proxies by telephone, facsimile or electronic mail.
ELECTION
OF DIRECTORS
(Proposal
1)
General
Our
By-laws, as amended, provide that the size of the Board shall be fixed from
time
to time by resolution of the Board and vacancies on the Board may be filled
by a
majority of the directors then in office. At the Meeting, eight directors are
to
be elected to one-year terms, each to hold office until his successor is elected
and qualified. Unless authority to vote for the election of directors is
withheld by appropriate designation on the proxy, the proxies solicited hereby
will be voted FOR the election of each nominee. If any nominee should decline
or
be unable to serve for any reason, votes will instead be cast for a substitute
nominee designated by the Board. The Board has no reason to believe that any
nominee will decline to be a candidate or, if elected, will be unable or
unwilling to serve. Under the Company’s By-laws, as amended, directors are
elected by plurality vote.
Information
about Our Directors and Nominees
The
following information sets forth, as of February 14, 2007, certain
information about our directors, all of whom have been nominated for election
to
the Board. Unless otherwise indicated, each person has been engaged in the
principal occupation shown for the past five years.
WILSON
B.
SEXTON
Director
since 1993
Age
70
Mr.
Sexton has been the Chairman of the Board and one of our directors since 1993.
From May 2001 to the present, Mr. Sexton has remained employed by us
primarily in the area of investor relations. From January 1999 to May 2001,
Mr.
Sexton served as our Chief Executive Officer. Presently, Mr. Sexton also serves
as a director of Beacon Roofing Supply, Inc. and Houston Wire and Cable
Company.
ANDREW
W.
CODE
Director
since 1993
Age
48
Mr.
Code
has been a partner of Code, Hennessy & Simmons LLC, a Chicago-based, private
equity firm, for more than five years. Mr. Code also presently serves as a
director of The Hillman Companies, Inc.
Member
of
our Compensation Committee of the Board of Directors.
JAMES
J.
GAFFNEY
Director
since 1998
Age
66
Mr. Gaffney
presently serves as a member of various public and private boards of directors,
including service as Chairman of the Board of Directors of Imperial
Sugar Company and as a director of Beacon Roofing Supply, Inc., Armstrong
World Industries, and Safelite Group, Inc. From 1997 through 2003, Mr. Gaffney
served as Vice Chairman of the Board of Viking Pacific Holdings, Ltd. and
Chairman of the Board of Vermont Investments, Ltd., a New Zealand-based
conglomerate, and provided consulting services to GS Partners II, L.P. (a
private investment fund affiliated with Water Street Corporate Recovery Fund
I,
L.P. and Goldman, Sachs & Co.) and other affiliated investment
funds.
Chairman
of our Nominating and Corporate Governance Committee and member of our Audit
Committee of the Board of Directors.
GEORGE T.
HAYMAKER, JR Director
since 2004
Age
69
Mr.
Haymaker presently serves as a member of various public and private boards
of
directors, including service as a director of Flowserve Corporation and Hayes
Lemmerz International, Inc. Since 2000, Mr. Haymaker has served as the
non-executive Chairman of Safelite Group, Inc., an auto glass and claims
management service organization. From October 2001 through July 2006, Mr.
Haymaker served as Chairman of the Board of Kaiser Aluminum
Corporation.
Chairman
of our Compensation Committee of the Board of Directors.
MANUEL
J.
PEREZ
DE LA MESA
Director
since 2001
Age
49
Mr.
Perez
de la Mesa has been our Chief Executive Officer since May 2001 and has also
been
our President since February 1999. Mr. Perez de la Mesa
served as our Chief Operating Officer from February 1999 to May 2001.
Mr. Perez de la Mesa is also a director of American Reprographics
Company.
HARLAN
F.
SEYMOUR
Director
since 2003
Age
57
Mr.
Seymour has conducted personal investments and business advisory services
through HFS LLC, of which he serves as sole executive officer, since March 2001.
Mr. Seymour also presently serves as Chairman of the Board of Transaction
Systems Architects, Inc.
Member
of
our Audit Committee, the Nominating and Corporate Governance Committee and
the
Strategic Planning Committee of the Board of Directors.
ROBERT
C.
SLEDD Director
since 1996
Age
54
Mr.
Sledd
has served as Chairman of the Board of Directors of Performance Food Group
Company (“PFG”) since February 1995 and as a director since 1987. Mr. Sledd
served as Chief Executive Officer of PFG from 1987 to 2001 and from
2004 to 2006.
Member
of
our Audit Committee and the Compensation Committee of the Board of
Directors.
JOHN
E.
STOKELY
Director
since 2000
Age
54
Mr.
Stokely presently serves as a member of various public and private boards,
including services as a director of PFG, O’Charleys, Inc. and Transaction
Systems Architects, Inc. He has also served as President of JES, Inc., an
investment and consulting firm, since August 1999.
Mr.
Stokely is our Lead Independent Director, Chairman of the Audit Committee and
member of the Nominating and Corporate Governance Committee of the Board of
Directors.
The
Board of Directors unanimously recommends that the stockholders vote “FOR” the
election of the nominees.
Information
about Our Executive Officers
The
following information sets forth, as of February 14, 2007, certain information
about our Company’s 2006 executive officers (other than Mr. Perez de la Mesa who
appears in the preceding table), all of whom are expected to remain in their
current positions following the Meeting.
A.
DAVID
COOK
Age
51
Mr.
Cook
has served as a Vice President since February 1997 and effective January 2007,
was promoted to Group Vice President. From December 1993 until February 1997,
he
served as Director of National Sales Development for our principal operating
subsidiary.
MARK
W.
JOSLIN
Age
47
Mr.
Joslin has served as our Vice President, Chief Financial Officer since August
2004. From December 2002 until August 2004, he served as Vice President of
Corporate Development for Eastman Chemical Company (“Eastman”). From October
1999 to December 2002, he held the position Vice President and Corporate
Controller for Eastman.
JOHN
M.
MURPHY
Age
46
Mr.
Murphy has served as a Vice President since February 1997 and from December
1993 until February 1997, he served as Director of Marketing for our principal
operating subsidiary.
STEPHEN
C. NELSON
Age
60
Mr.
Nelson has served as a Vice President since May 2002 and from June 1998 until
December 2006, he also served as a General Manager.
RICHARD
P. POLIZZOTTO
Age
65
Mr.
Polizzotto has served as a Vice President since May 1995. He has also
served as Vice President of our principal operating subsidiary since December
1993.
CHRISTOPHER
W. WILSON Age
52
Mr.
Wilson has served as a Vice President since May 2002 and from March 1998 until
December 2006, he also served as a General Manager. Effective January 2007,
Mr.
Wilson was promoted to Group Vice President.
Other
Information about the Board of Directors and its
Committees
Board
Meetings and Director Independence. The
Board
of Directors met eight times during 2006. During the last full fiscal year
each
director attended 75% or more of the total number of meetings of the Board,
and
75% or more of the total number of meetings held by all committees of the Board
on which he served, with the exception of Mr. Seymour, who attended two of
the
three Nominating and Corporate Governance Committee meetings. The Board has
determined that each member of the Board, other than Messrs. Perez de la Mesa
and Sexton, meets the definition of “independent director” as defined by Rule
4200(a)(15) of the NASDAQ Marketplace Rules (“NASDAQ”). Mr. Stokely has been
designated by the Board as its lead independent director and as such, Mr.
Stokely will preside at any meetings of the Board’s independent directors and
perform such other functions as the Board may direct, including recommending
agenda items for Board meetings. The Board’s independent directors regularly
meet in executive session at each Board and committee meeting. We encourage
each
member of our Board of Directors to attend the Annual Meeting of our
Stockholders. All of our directors, with the exception of Mr. Haymaker,
attended the 2006 Annual Meeting.
Communications
with the Board. Stockholders
may communicate with the members of our Board by mail addressed to the full
Board, a specific member of the Board or to a particular committee of the Board
at 109 Northpark Boulevard, Covington, Louisiana 70433. Communications are
distributed to the Board, or to a specific member of the Board, as appropriate,
depending on the facts and circumstances outlined in the communication. In
that
regard the Board has requested that certain items that are unrelated to the
duties and responsibilities of the Board be excluded, such as junk mail, mass
mailings, resumes and other forms of job inquiries and business solicitations
or
advertisements. In addition, material that is unduly hostile, threatening,
illegal or similarly unsuitable may be excluded.
Code
of Ethics.
We have
adopted a Code of Business Conduct and Ethics that applies to our employees,
officers (including our principal executive officer and principal financial
officer) and directors. Our Code of Business Conduct and Ethics is posted on
our
website at www.poolcorp.com and can also be obtained free of charge by sending
a
request to our Corporate Secretary at 109 Northpark Boulevard, Covington,
Louisiana 70433.
The
Board
presently has an Audit Committee, a Nominating and Corporate Governance
Committee, a Strategic Planning Committee and a Compensation Committee described
as follows:
Audit
Committee.
The
Audit Committee assists the Board in monitoring:
•
management’s
process for ensuring
the
integrity of our financial statements;
•
the
independent auditor’s qualifications and independence;
•
the
performance of our internal audit function and independent auditors;
and
•
management’s
process for ensuring our compliance with legal and regulatory requirements.
The
Audit
Committee’s specific responsibilities are set forth in its written charter, a
copy of which is posted on our website at www.poolcorp.com. The Board of
Directors has determined that each member of the Audit Committee meets the
definition of an “independent director” as defined by the Securities and
Exchange Commission (“SEC”) and NASDAQ Rules 4200(a)(15) and 4350(d)(2)(A), and
that Messrs. Stokely, Gaffney and Sledd qualify as “financial experts” as
defined by the SEC rulemaking and NASDAQ Rule 4350(d)(2)(A). During 2006, the
Audit Committee held 11 meetings.
Nominating
and Corporate Governance Committee.
The
Nominating and Corporate Governance Committee’s primary purpose is to provide
oversight on a broad range of issues surrounding the composition of the Board,
including:
•
identifying
individuals qualified to become Board members;
•
recommending
to the Board director nominees for the next annual meeting of stockholders;
•
assisting
the Board in the areas of committee member selection;
•
evaluation
of the overall effectiveness of the Board and committees of the Board; and
•
review
and consideration of corporate governance practices.
The
Nominating and Corporate Governance Committee has the authority to recommend
to
the Board candidates for Board membership. Stockholders may also make
recommendations for director nominations by sending a letter to the Nominating
and Corporate Governance Committee in care of our Corporate Secretary at
109 Northpark Boulevard, Covington, Louisiana 70433, or may make a
nomination by complying with the notice procedures set forth in our By-laws,
as
amended. The specific responsibilities of the Nominating and Corporate
Governance Committee are set forth in its written charter, a copy of which
is
posted on our website at www.poolcorp.com. The Board of Directors has determined
that each member of the Nominating and Corporate Governance Committee meets
the
definition of an “independent director” as defined in the NASDAQ rules. The
Nominating and Corporate Governance Committee met three times during 2006.
When
identifying, evaluating and considering potential candidates for membership
on
our Board, including those recommended or nominated by stockholders, the
Nominating and Corporate Governance Committee considers such things as the
following:
• relevant
educational, business and industry experience;
• demonstrated
character and judgment;
•
whether
the nominee is independent for NASDAQ purposes; and
•
for
incumbent directors whose terms are set to expire, the director’s overall
service to us during his term, including the number of meetings attended,
level
of participation and quality of performance.
Strategic
Planning Committee.
The
Strategic Planning Committee performs the duties delegated by the Board of
Directors concerning our strategic planning activities, including assisting
senior management in the analysis and preparation of our strategic plan, and
reporting and making recommendations to the Board of Directors concerning same.
During 2006, the Strategic Planning Committee held five meetings.
Compensation
Committee.
The
Compensation Committee makes recommendations to the Board regarding the
compensation of our officers and our compensation policies and practices. The
Compensation Committee’s specific responsibilities are set forth in its written
charter, a copy of which is posted on our website at www.poolcorp.com. The
Board
of Directors has determined that each member of the Compensation Committee
meets
the definition of an “independent director” as defined by NASDAQ Rule
4200(a)(15). The Compensation Committee met four times during 2006. From time
to
time, the Compensation Committee engages an outside compensation consultant
to
provide an independent analysis of our executive and director compensation
programs. In 2006, the Compensation Committee retained Lyons, Benenson &
Company, Inc. to review and comment upon our Strategic Plan Incentive Plan
and
non-employee director compensation. Except for those consulting services from
time to time requested by the Compensation Committee, this consulting firm
does
not provide us with other consulting services.
Compensation
Committee Interlocks and Insider Participation
During
the last fiscal year, none of the members of the Compensation Committee were
officers or employees of the Company or any of its subsidiaries. None of our
executive officers served in the last fiscal year as a director or member of
the
board of directors or compensation committee of any entity whose executive
offices served as a member of our Board or Compensation
Committee.
PRINCIPAL
STOCKHOLDERS
In
accordance with Rule 13d-3 under the Securities Exchange Act of 1934 (the
“Exchange Act”), the below table sets forth, as of February 14, 2007, certain
information regarding beneficial ownership of Common Stock by (i) each of the
Named Executive Officers (as defined below in “Executive
Compensation”),
(ii)
each of our directors, (iii) all of our directors and executive officers as
a
group and (iv) each stockholder known by us to be the beneficial owner of more
than 5% of our outstanding Common Stock. Based on information furnished to
us by
such stockholders, unless otherwise indicated, all shares indicated as
beneficially owned are held with sole voting and investment power.
|
Number
of Shares Beneficially Owned
|
|
Percentage
of Outstanding
Common
Stock
|
Wilson
B. Sexton
|
1,140,346
|
(1)
|
2.2%
|
Andrew
W. Code
|
211,228
|
(2)
|
*
|
James
J. Gaffney
|
99,500
|
(3)
|
*
|
George
T. Haymaker, Jr.
|
29,750
|
(4)
|
*
|
Manuel
J. Perez de la Mesa
|
1,261,946
|
(5)
|
2.5%
|
Robert
C. Sledd
|
413,188
|
(6)
|
*
|
John
E. Stokely
|
100,063
|
(7)
|
*
|
Harlan
F. Seymour
|
48,875
|
(8)
|
*
|
A.
David Cook
|
236,478
|
(9)
|
*
|
Mark
W. Joslin
|
12,510
|
|
*
|
John
M. Murphy
|
282,703
|
(10)
|
*
|
Stephen
C. Nelson
|
75,970
|
(11)
|
*
|
Baillie
Gifford & Co.
|
4,629,534
|
(12)
|
9.1%
|
Baron
Capital Group, Inc.
|
2,782,840
|
(13)
|
5.5%
|
Columbia
Wanger Asset Management, L.P.
|
2,814,000
|
(14)
|
5.6%
|
T.
Rowe Price Associates
|
2,653,996
|
(15)
|
5.2%
|
TimesSquare
Capital Management, LLC
|
5,907,168
|
(16)
|
11.6%
|
Wasatch
Advisors, Inc.
|
3,417,930
|
(17)
|
6.7%
|
All
executive officers and directors as a group (17 persons)
|
4,636,250
|
(18)
|
9.2%
|
_______________
* Less
than
one percent.
1. |
Includes
(i) 621,656 shares that may be acquired upon the exercise of presently
exercisable options or the exercise of options which will become
exercisable on or before April 15, 2007 all of which are held by
a trust
for which Mr. Sexton serves as trustee for the benefit of his children;
(ii) 28,000 shares held directly by a charitable foundation over
which Mr.
Sexton has voting and investment power with respect to such shares;
and
(iii) 490,328 shares held by a trust for which Mr. Sexton serves
as
trustee for the benefit of his
children.
|
2. |
Includes
(i) 14,167 shares that Mr. Code has the right to acquire upon the
exercise
of presently exercisable options or the exercise of options which
will
become exercisable on or before April 15, 2007; (ii) 70,231 shares
held
directly by a charitable foundation of which Mr. Code is a director,
President and the sole member (although neither Mr. Code nor any
members
of his immediate family have a pecuniary interest in such shares);
and
(iii) 6,830 shares held by Mr. Code as custodian for his
children.
|
3. |
Includes
48,875 shares that Mr. Gaffney has the right to acquire upon the
exercise
of presently exercisable options or the exercise of options which
will
become exercisable on or before April 15,
2007.
|
4. |
Includes
29,750 shares that Mr. Haymaker has the right to acquire upon the
exercise
of presently exercisable options or the exercise of options which
will
become exercisable on or before April 15,
2007.
|
5. |
Includes
849,375 shares that Mr. Perez de la Mesa has the right to acquire
upon the
exercise of presently exercisable options or the exercise of options
which
will become exercisable on or before April 15, 2007. Also
includes 13,445 shares beneficially owned by Mr. Perez de la Mesa’s wife
and children and 359,475 shares held by an irrevocable trust for
which Mr.
Perez de la Mesa is the beneficiary and has voting power.
|
6. |
Includes
210,598 shares that Mr. Sledd has the right to acquire upon the exercise
of presently exercisable options or the exercise of options which
will
become exercisable on or before April 15, 2007. Also includes 102,937
shares that are held in three trusts for the benefit of Mr. Sledd’s
children, for which Mr. Sledd serves as the
trustee.
|
7. |
Includes
96,688 shares that Mr. Stokely has the right to acquire upon the
exercise
of presently exercisable options or the exercise of options which
will
become exercisable on or before April 15,
2007.
|
8. |
Includes
48,875 shares that Mr. Seymour has the right to acquire upon the
exercise
of presently exercisable options or the exercise of options which
will
become exercisable on or before April 15, 2007.
|
9. |
Includes
134,062 shares that Mr. Cook has the right to acquire upon the exercise
of
presently exercisable options or the exercise of options which will
become
exercisable on or before April 15, 2007. Also includes 1,701 shares
beneficially owned by Mr. Cook’s
wife.
|
10. |
Includes
98,625 shares that Mr. Murphy has the right to acquire upon the exercise
of presently exercisable options or the exercise of options which
will
become exercisable on or before April 15,
2007.
|
11. |
Includes
(i) 59,531 shares that Mr. Nelson has the right to acquire upon exercise
of presently exercisable options or the exercise of options which
will
become exercisable on or before April 15, 2007; (ii) 427 shares held
by
Mr. Nelson’s daughter; (iii) 84 shares held by Mr. Nelson’s grandson; (iv)
500 shares which are held by a family trust over which Mr. Nelson
serves
as co-trustee; and (v) 9,437 shares held by a family trust, over
which Mr.
Nelson serves as a co-trustee and of which his wife is a
beneficiary.
|
12. |
Based
upon such holder’s Schedule 13G filed with the SEC on February 9, 2007. As
investment advisor, Baillie Gifford & Co., (“Baillie”) has sole voting
power over 3,734,894 of the shares and sole dispositive power with
respect
to all shares. The business address of Baillie is Calton Square,
1
Greenside Row, Edinburgh EH1 3AN, Scotland,
UK.
|
13. |
Based
upon a joint Schedule 13G filed with the SEC on February 14, 2007
by Baron
Capital Group, Inc. (“BCG”), BAMCO, Inc. (“BAMCO”), Baron Capital
Management, Inc. (“BCM”) and Ronald Baron. BCG and Ronald Baron have
beneficial ownership of 2,782,840 shares (5.5%) with shared voting
power
over 2,700,340 of such shares and shared dispositive power over all
of
such shares. BAMCO has beneficial ownership of 2,752,900 shares (5.4%)
with shared voting power over 2,670,400 of such shares and shared
dispositive power over all of such shares. BCM has beneficial ownership
of
29,940 shares (0.1%) over which it has shared voting and dispositive
power. The advisory clients of BAMCO and BCM have the right to receive
or
the power to direct the receipt of dividends from or the proceeds
from the
sale of, our Common Stock in their accounts. To the best of BAMCO’s,
BCM’s, BCG’s and Mr. Baron’s knowledge, no such person has such interest
relating to more than 5% of our outstanding Common Stock. BCG and
Ronald
Baron disclaim beneficial ownership of shares held by their controlled
entities (or the investment advisory clients thereof) to the extent
such
shares are held by persons other than BCG and Ronald Baron. BAMCO
and BCM
disclaim beneficial ownership of shares held by their investment
advisory
clients to the extent such shares are held by persons other than
BAMCO,
BCM and their affiliates. BAMCO and BCM are subsidiaries of BCG.
Mr.
Ronald Baron owns a controlling interest in BCG. The business address
of
such persons is 767 Fifth Avenue, New York, New York
10153.
|
14. |
Based
upon such holder’s Schedule 13G filed with the SEC on January 12, 2007. As
investment advisor, Columbia Wanger Asset Management, L.P. (“Columbia”)
has sole voting power over 2,614,000 shares and sole dispositive
power
with respect to all shares. The shares reported herein include the
shares
held by Columbia Acorn Trust (“CAT”), a Massachusetts business trust that
is advised by Columbia. CAT holds 5.0% of our outstanding Common
Stock.
The business address of Columbia is 227 West Monroe Street, Suite
3000,
Chicago, Illinois 60606.
|
15. |
Based
upon such holder’s Schedule 13G filed with the SEC on February 14, 2007.
These securities are owned by various individual and institutional
investors for which T. Rowe Price Associates, Inc. (“Price Associates”)
serves as investment adviser with power to director investments and/or
sole power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates
is
deemed to be the beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, the beneficial
owner
of such securities. The business address of Price Associates is 100
East
Pratt Street, Baltimore, Maryland
21202.
|
16. |
Based
upon such holder’s Schedule 13G filed with the SEC on February 9, 2007.
All of the shares reported are owned by investment advisory clients
of
TimesSquare Capital Management, LLC (“TimesSquare”) and such clients have
the right to receive dividends from and proceeds from the sale of
such
shares. To TimesSquare’s knowledge, the interest of no one of the clients
relates to more than 5% of the class. In its role as investment adviser,
TimesSquare has voting and dispositive power with respect to all
shares.
The business address of TimesSquare is 1177 Avenue of the Americas,
39th
Floor, New York,
New York 10036.
|
17. |
Based
upon such holder’s Schedule 13G filed with the SEC on February 14, 2007.
As investment advisor, Wasatch Advisors, Inc. (“Wasatch”) has voting and
dispositive power with respect to all shares. The business address
of
Wasatch is 150 Social Hall Avenue, Salt Lake City, Utah
84111.
|
18. |
Includes
2,686,833 shares that such persons have the right to receive upon
the
exercise of presently exercisable options or the exercise of options
which
will become exercisable on or before April 15, 2007. Also
includes 962,677 shares held in a family trust, 98,231 shares held
in a
charitable foundation and 59,114 shares held by family members of
such
persons.
|
COMPENSATION
DISCUSSION AND ANALYSIS
Our
Compensation Committee (the “Committee”), which is comprised solely of
independent directors, sets the Company’s compensation philosophy and reviews
and determines, or recommends to the Board, compensation and benefits for our
executive officers and certain other key Company employees. After consideration
of the Committee’s recommendations, the entire Board reviews and approves the
salaries and bonuses and benefit programs for our executive officers and certain
other key employees.
The
Committee has two regularly scheduled meetings each year and meets at other
times as necessary. At its Fall meeting, the Committee’s agenda may generally
include, among other things, review and discussion of the following: (i) our
policies and programs for the development of senior management and senior
management succession; (ii) the Committee’s Charter; (iii) interim stock option
grants awarded by the Chief Executive Officer (“CEO”) pursuant to the
Committee’s delegation; (iv) an initial draft of our compensation discussion and
analysis; (v) new compensation related rules and pronouncements; (vi) the
Committee’s self-evaluation process; and (vii) other items and organizational
duties that may arise. At its Winter meeting, typically held in February, the
Committee’s agenda may generally include, among other things, review and
discussion of the following: (i) compensation, benefits, performance and
corporate goals and objectives of executive officers and key employees; (ii)
our
compensation discussion and analysis; (iii) the Committee’s Compensation Report;
(iv) the Committee’s composition, independence and self-evaluation results; (v)
non-employee director compensation; (vi) our incentive compensation plans and
equity-based plans; (vii) interim stock option grants awarded by the CEO
pursuant to the Committee’s delegation; (viii) new compensation related rules
and pronouncements; and (ix) other items and organizational duties that may
arise. In 2007, the Committee intends to add a third regularly scheduled meeting
in August to review organizational planning and development of senior
management.
The
Committee has the authority to engage the services of outside advisers, experts
and others to aid it. Specifically, compensation consultants are retained
periodically to review the overall structure and design of our compensation
programs and their suitability in meeting our compensation objectives. In
addition, when changes to specific compensation programs are considered, like
the addition of the Strategic Plan Incentive Plan (“SPIP”) adopted in 2006 and
as described in the “Long-Term
Non-Equity Incentive”
section
below, the Committee may use an outside consultant to review the design and
suitability of that specific program. Additionally, the Committee relies upon
data, analysis and recommendations from the CEO.
Compensation
Philosophy
Our
senior management compensation philosophy is that total compensation should
be
targeted to be “at market” overall, should vary with our performance in
achieving financial and non-financial objectives, should be tied to individual
and group performance, and that any long-term incentive compensation should
be
closely aligned with shareholders’ interests. We believe that compensation at
risk should rise as an employee’s responsibility increases. Our strategic
compensation design priorities emphasize our philosophy: pay-for-performance,
employee retention, cost management, internal equity among employees, alignment
with shareholders’ interests and continued focus on effective corporate
governance.
The
Committee determines “market” compensation through a process that includes a
review of our executive compensation programs and practices and an analysis
of
all executive compensation elements. The Committee compares these compensation
components individually and in the aggregate to the compensation of the top
five
most highly compensated executive officers of companies it uses as its senior
management “peer group” (the peer group is sometimes referred to as the
“market”) as published in their proxy statements. The peer group consists of a
cross-industry subset of National Association of Wholesale Distributors, all
of
which are publicly traded companies considered to be in a size range (based
on
revenue, market capitalization and EBITDA) that individually and in the
aggregate are comparable to us.
Our
peer
groups in 2006 and 2007 are listed below. The change between 2006 and 2007
in
the composition of our peer group is attributable to an acquisition of one
of
our 2006 peer group companies.
2006
|
2007
|
Airgas,
Inc
|
Airgas,
Inc.
|
Beacon
Roofing Supply, Inc.
|
Beacon
Roofing Supply, Inc.
|
Central
Garden and Pet Co.
|
Central
Garden and Pet Co.
|
Fastenal
Company
|
Fastenal
Company
|
Hughes
Supply, Inc.
|
Interline
Brands, Inc.
|
Interline
Brands, Inc.
|
MSC
Industrial Direct Co. Inc.
|
MSC
Industrial Direct Co. Inc.
|
Patterson
Companies
|
Patterson
Companies, Inc.
|
Performance
Food Group, Inc.
|
Performance
Food Group Company
|
PSS
World Med. Inc.
|
PSS
World Med. Inc.
|
Uap
Hldg Corp.
|
Uap
Hldg Corp.
|
Watsco,
Inc.
|
Watsco,
Inc.
|
|
Based
upon its review of the market data, the Committee believes that individually
and
as a group, senior management compensation is currently below market levels,
due
in part to our rapid growth over the last several years compared to our peers.
To address this issue as well as to fill a gap in senior management compensation
plans focused on improving our intermediate-term performance, we added the
SPIP
in 2006 as discussed in the “Long-Term
Non-Equity Incentive”
section
below. While performance under the SPIP did not result in additional
compensation payments to senior management for the 2006 plan period, the
Committee believes the additional compensation opportunity to executives under
the SPIP should in time fill this gap in market pay.
Objectives
Our
compensation objective is to link compensation to continuous improvements in
corporate performance and increases in shareholder value. This objective applies
to all employees, with a more significant level of compensation at risk as
an
employee’s responsibility increases. Our executive compensation program goals
are as follows:
|
•
|
Set
pay levels that are necessary to attract, retain and motivate highly
qualified executives considering the overall market competitiveness
for
executive talent while balancing the relationship between total
shareholder return and direct
compensation;
|
|
•
|
Align
executive pay with shareholders’
interests;
|
|
•
|
Recognize
superior individual and group
performance;
|
|
•
|
Balance
short-term and long-term compensation to complement our annual and
long-term business objectives and strategies and encourage the fulfillment
of our objectives and strategies through executive
performance;
|
|
•
|
Offer
compensation opportunities based on our performance;
and
|
|
•
|
Encourage
equity participation by executives.
|
Implications
We
use a
variety of equity and non-equity and short-term and long-term compensation
components to achieve our objectives. In determining the proper mix among these
components, we try to balance our short-term objectives with our long-term
strategic growth objectives while enabling us to recruit and retain talent
and
create long-term value for both executives and shareholders.
Compensation
Components
The
Committee regularly reviews our executive compensation program, using
independent experts as needed to provide advice and validation and to ensure
that pay levels and compensation opportunities are competitive with similar
positions in the market and reflect the Company’s performance. Each compensation
component’s weight is determined considering the peer group at a total delivered
compensation, total cash compensation and the amount “at-risk” and “fixed”.
We
rely
on various standard compensation components to deliver pay to our executives.
The compensation program includes:
•
base
salary;
•
annual
cash incentive (bonus);
• long-term
equity incentive (stock options or time lapsed restricted shares);
•
long-term
non-equity incentive (SPIP); and
•
benefits.
As
discussed in “Compensation
Philosophy” above,
we
believe that employees at senior levels should have a larger proportion of
total
compensation delivered through pay-for-performance cash incentives and long-term
equity compensation; as a result, their compensation will be more significantly
correlated, both upward and downward, to the Company’s financial and stock price
performance. Because of this correlation, the Committee believes its executives
have more “compensation risk” than its peer group’s executives. Additionally,
for perspective, the Committee will review previous years’ compensation value
for executives and the relationship to other employees at the Company. Discussed
below is each compensation component.
Base
Salary
(Summary
Compensation Table, Column 3)
Although
we target executive total compensation and total cash compensation at the
adjusted peer group’s median compensation for similar positions, our base salary
is more conservative and consistent with our overall philosophy of at-risk
or
pay-for-performance. We offer base salary at a level necessary to advance both
short- and long-term shareholders’ interests while also ensuring that we are
able to attract and retain executive management talent.
We
compare executive base salary with other employees’ compensation for internal
pay equity purposes. In determining an executive’s base salary, the Committee
reviews Company and individual performance information and peer group executive
compensation information derived from compensation surveys. The Committee also
reviews the total pay that each executive could potentially receive in the
next
10 years under continuing employment scenarios with us. For this review, total
pay includes all executive total cash compensation from continuing employment,
the future equity incentives value under varying stock price growth assumptions
and, as applicable, the impact from accelerated vesting upon a change in
control.
Annual
Cash Incentive
(Summary
Compensation Table, Column 6)
We
use an
annual cash incentive (“annual bonus”) to focus corporate behavior on short-term
goals for growth, financial performance and other specific financial and
business improvement metrics. Based on the target bonus concept, we offer
executives the opportunity to earn goal-oriented awards that are responsive
to
changing internal and external business conditions from year to year. Each
year,
objectives are set for the Company, our business units and individual executives
against which actual performance is later measured. At the year’s first
Committee meeting—generally in February, the Committee approves annual bonus
payments for the prior year’s performance and reviews and approves goals for
each Named Executive Officer for the current year. These goals are based
primarily on objective performance criteria. Annual bonus payments, if any,
are
normally made in February after the end of the performance period in which
the
bonuses were earned.
In
2006,
the annual bonus calculation for Mr. Perez de la Mesa and the other Named
Executive Officers contained two objective performance criteria
categories—specific Company financial measures and specific business objectives.
The following table details various compensation opportunities available to
each
of our Named Executive Officers under various performance scenarios. The extent
to which objectives are achieved determines the incentive earned. In 2006,
the
potential annual bonus was limited to 100% of base salary.
Annual
Cash Incentive (Expressed as a percentage of base salary)
|
Diluted
Earning per Share (1)
|
Operational
Cash Flow (2)
|
Return
on Total Assets (3)
|
Other
Specific Business Objectives(4)
|
Maximum
Opportunity
|
$1.70
|
$1.75
|
$1.80
|
$1.85
|
$80M
|
$100M
|
21%
|
22%
|
23%
|
Mr.
Perez de la Mesa
|
15%
|
30%
|
45%
|
60%
|
0%
|
10%
|
3.5%
|
7%
|
10%
|
20%
|
100%
|
Mr.
Joslin
|
10
|
20
|
30
|
40
|
0
|
10
|
3.5
|
7
|
10
|
40
|
100
|
Mr.
Cook
|
12.5
|
25
|
37.5
|
50
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
50
|
100
|
Mr.
Murphy
|
12.5
|
25
|
37.5
|
50
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
50
|
100
|
Mr.
Nelson
|
12.5
|
25
|
37.5
|
50
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
50
|
100
|
1.
|
Based
on our diluted earnings per share for the year ended December 31,
2006,
with pro forma adjustments deemed appropriate by the Compensation
Committee.
|
2.
|
Based
on our net cash provided by operating activities for the year ended
December 31, 2006, with pro forma adjustments deemed appropriate
by the
Compensation Committee.
|
3.
|
Based
on our return on total assets for the year ended December 31, 2006,
which
is calculated by dividing 2006 pre-tax income by average total assets,
with pro forma adjustments as necessary to account for non-operating
activities that affect return on assets. We calculate average total
assets
by dividing the sum of total assets at each month end by
twelve.
|
4.
|
Each
executive’s specific business objectives reflect operational improvements
related to their specific responsibilities.
|
Mr.
Perez
de la Mesa’s other specific business objectives relate to organization planning
and development (10%) and strategic plan development (10%). Mr. Joslin’s other
specific business objectives relate to treasury and investor relations (8%),
financial, audit and tax management (8%), human resources (8%), business support
(8%) and expense management (8%). Mr. Cook’s other specific business objectives
relate to gross margin improvement (10%), increases in net sales (15%) and
sales
and marketing initiatives (25%). Mr. Murphy’s other specific business objectives
relate to gross margin improvement (10%), increases in net sales (10%), global
sourcing initiatives (20%) and complementary products sales (10%). Mr. Nelson’s
other specific business objectives relate to inventory (20%), budget objectives
(20%), specific operations objectives (5%) and real estate/leasing objectives
(5%). For each of the executive officers, their other specific business
objectives reflect our focus on continued growth and improvement in execution
over our past performance. We believe that in each case, the objectives set
are
attainable, but represent stretch goals that each executive may or may not
be
able to achieve.
In
setting annual cash incentive measures, significant weight was given to our
overall performance as measured by diluted earnings per share. We believe that
diluted earnings per share is the best annual bonus measure because it is the
best short-term shareholder value indicator, it is performance-based and it
is
an effective annual measurement. We also set individual measures that give
the
greatest impact and correlation to overall performance-based on the respective
executive’s duties, as each executive’s role and responsibility toward achieving
our performance and increased value differs. The Committee may allow
discretionary adjustments based on an individual executive’s exceptional
performance in one or more categories; but total payouts cannot exceed the
overall cap equal to base salary. The Committee believes this discretionary
aspect enables a more comprehensive performance review without relying solely
on
a formula based approach.
Long-Term
Equity Incentive
(Summary
Compensation Table, Columns 4-5)
(Grants
of Plan-Based Awards, Columns 5-8)
(Outstanding
Equity Awards at Fiscal Year-End)
Our
approach to long-term incentives in 2006 consists of an equity-based incentive
that focuses executives on stock price improvements and provides reward only
upon improvement in stock price. Additionally, we closely align employee
interests with the longer-term shareholders’ interests by encouraging equity
participation in the Company. All management-level employees are eligible to
receive stock options. Each respective employee’s responsibility and performance
and relevant market data determined the individual option grant levels in 2006.
We believe that long-term equity incentives in stock options aligns executive
performance with shareholder interest because employees have a vested interest
in our stock performance and the value only appreciates from stock price
improvement after the grant date. We have reviewed other long-term equity
compensation forms. Considering the impact from alignment with shareholder
interests, accounting costs, perceived value and cash cost, we believe that
long-term equity incentive based primarily in the form of stock options is
the
best alternative. We have in the past, however, granted shares of restricted
stock. Most recently, in 2004 we granted up to one-third of certain executives’
stock option grants as restricted shares upon meeting certain performance
milestones to reward extraordinary, consistent, long-term Company
growth.
Stock
options generally vest on either a 5-year cliff basis or a split 3/5-year cliff
basis based on employee service with the Company. We use vesting schedules
to
encourage employee equity holding and employment retention. Although we
encourage executive stock ownership, we have no established requirements on
Company stock ownership.
Our
current practice is to grant stock options and determine their exercise price
at
the year’s first Committee meeting, normally held in February. This annual basis
aligns with the annual performance-review and compensation-adjustment cycle.
In
2007 and subject to shareholder approval of Proposal 2 below, executive officers
and certain other senior managers will receive their equity grants at the annual
stockholder meeting scheduled in May because of the limited number of shares
remaining available for grants. Stock options are granted at an exercise price
equal to our stock’s closing price on the grant date. Employees hired during the
year may also be awarded stock options by the Committee or by the CEO pursuant
to discretion granted to him by the Committee.
As
an
employee’s responsibility increases, stock options will become a greater
percentage of his or her total compensation, equating to more at-risk
compensation to higher-level employees. Equity grants are a key element to
our
market-competitive total compensation packages.
Long-Term
Non-Equity Incentive
(Summary
Compensation Table, Column 6)
(Grants
of Plan-Based Awards, Columns 3-4)
In
2006,
our shareholders approved the SPIP for our senior officers and general managers.
The SPIP’s purpose is to promote the Company and our shareholders’ interests by
providing senior management with an additional incentive to execute strategic
initiatives and achieve substantial organic growth in operating profit and
earnings per share over a three-year period. At the same time, the SPIP provides
an opportunity to bring senior management’s cash and total compensation to
market levels.
We
use
this long-term non-equity incentive method to integrate the strategic plan
process into management’s compensation, contribute to our continuing accelerated
growth and compensate our executives commensurate with our peers. The SPIP
also
affords us the opportunity to focus our executives’ efforts on performance
measures other than stock price and offer long-term reward possibilities that
are not exclusively dependent on stock price improvement.
Under
the
SPIP, each of our Named Executive Officers is eligible to earn an incentive
in
an amount up to two times base salary based on our organic growth in earnings
per share over a three-year period. This incentive will be fully effective
in
the 2008 period with our 2005 earnings objective serving as the initial
baseline. As the SPIP is phased in, participants are eligible to earn up to
one-third of the total plan incentive for 2006 performance and two-thirds of
the
total plan incentive for 2006 through 2007 performance. Our Named Executive
Officers’ opportunity to earn an award under the SPIP is based on our internal
earnings per share growth at a compounded annual growth rate greater than 20%
during a performance period. No award will be earned unless the compounded
earnings per share growth exceeds 20%. A 20% earnings per share growth will
result in no award, a 25% earnings per share growth will result in an award
equal to base salary and a 30% earnings per share growth will result in an
award
of two times annual base salary. Growth rates between these benchmarks will
result in prorated awards.
Savings
Plans
(Summary
Compensation Table, Column 7)
(Nonqualified
Deferred Compensation)
Our
401(k) Plan permits eligible employees to defer up to the Internal Revenue
Code
limit. For 2006, the limit was $15,000 or $20,000 for participants who attained
the age of 50 during the plan year. We provide a discretionary Company matching
contribution of 50% of a participant’s deferrals up to 8% of the lesser of the
participant’s eligible cash compensation or the Internal Revenue Code’s
applicable year dollar limit. Effective January 1, 2007, the 401(k) Plan was
amended in order to provide us with the advantages of certain administrative
benefits offered by IRS guidance. In effect, we will contribute a 100% match
on
the first 3% of compensation deferred, a 50% match on deferrals between 3%
and
5% and no match on deferrals over 5%.
The
PoolCorp Deferred Compensation Plan, which allows certain employees who occupy
key management positions (including all of the Named Executive Officers) to
defer eligible cash compensation, provides matching contributions like those
offered under the 401(k) Plan. Our total Company matching contributions given
to
a participant under the 401(k) Plan and the PoolCorp Deferred Compensation
Plan
during any one year may not exceed 4% of a participant’s eligible cash
compensation.
Perquisites
(Summary
Compensation Table, Column 7)
Our
philosophy is that perquisites should be limited. In line with our philosophy,
our executives are offered few benefits that are not otherwise available to
all
of our employees. We provide certain employees, including the Named Executive
Officers, either a Company vehicle (including maintenance, insurance and fuel)
or an auto allowance. We allow these employees to use their vehicles for
personal and business reasons. Officers are also permitted to purchase their
Company vehicle at book value. Additionally, we waive medical and dental monthly
premiums for officers, including each of the Named Executive Officers.
Employee
Stock Purchase Plan
We
offer
all eligible employees the opportunity to buy Company stock through a
tax-qualified employee stock purchase plan. Under this plan, employees may
choose to buy up to the greater of $25,000 or 1,000 shares of Company stock
per
year at a 15% discount to the market price (subject to certain limitations).
The
objective is to encourage employees to participate in the ownership of the
Company and to allow employees to share in the value of our stock increases
over
time.
Post-Employment
Matters
Pursuant
to Mr. Perez de la Mesa’s employment agreement, Mr. Perez de la Mesa is entitled
to receive his base salary for a period of six months upon any termination
of
his employment by the Company other than for cause (as defined in the
agreement). The agreement also provides that Mr. Perez de la Mesa shall not
compete with the Company for two years following the termination of his
employment. Pursuant to the employment agreements of the other Named Executive
Officers, such Named Executive Officers are entitled to receive their respective
base salary for a period of up to three months and are subject to a one-year
non-compete. The Committee believes this is an amount necessary to recruit
highly talented executives and is very conservative considering current market
conditions and competing businesses. Further, the Committee believes that these
levels are below the general practice among comparable companies.
We
do not provide any defined benefit pension arrangements nor do we provide any
other compensation arrangements to our Named Executive Officers other than
those
discussed herein or otherwise available to all Company
employees.
Certain
Tax Considerations
Section
162(m) of the Internal Revenue Code (“Section 162(m)”) generally disallows a tax
deduction to public companies for compensation in excess of $1 million paid
to a
company’s chief executive officer or any of the four other most highly
compensated officers. Our policy with respect to Section 162(m) is to make
reasonable efforts to ensure that compensation is deductible without limiting
our ability to attract and retain qualified executives. We have not adopted
a
policy that all compensation must be deductible.
If
compensation qualifies as “performance-based” under Section 162(m), it does not
count against the $1 million deduction limit. Management believes the stock
option awards under our 1998 Stock Option Plan (the “1998 Plan”) and 2002
Long-Term Incentive Pan (the “2002 LTIP”) presently meet the performance-based
compensation requirements under Section 162(m). We expect that 2006 compensation
paid to executive officers is fully deductible.
Summary
After
review of all existing programs, consideration of current market and competitive
conditions, and alignment with our overall compensation objectives and
philosophy, we believe that the total compensation program for our executives
is
appropriately focused on increasing value for shareholders and enhancing
corporate performance. We believe that a significant part of executive pay
is
properly tied to stock appreciation or shareholder value through stock options,
restricted stock grants and incentive performance measures. We further believe
that our executive compensation levels, while currently below market, have
the
potential to be competitive with the compensation programs offered by other
corporations with which we compete for executive talent.
EXECUTIVE
COMPENSATION
The
following Summary Compensation Table summarizes the total compensation of our
Named Executive Officers in 2006. Based on the totals of the amounts included
in
the Summary Compensation Table, base salary accounted for approximately 32%
of
the total compensation for the Named Executive Officers while non-equity
incentive compensation accounted for approximately 20% of the total compensation
for the Named Executive Officers.
SUMMARY
COMPENSATION TABLE
Name
and Principal Position
|
Year
|
Salary
($)
|
Stock
Awards(1)
($)
|
Option
Awards(2)
($)
|
Non-Equity
Incentive
Plan Compensation(3)
($)
|
All
Other Compensation
($)
|
Total
($)
|
Manuel
J. Perez de la Mesa
|
2006
|
367,500
|
—
|
751,975
|
238,875
|
48,305
(4)
|
1,406,655
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
W. Joslin
|
2006
|
210,000
|
41,464
|
152,717
|
128,100
|
35,719
(5)
|
568,000
|
|
Chief
Financial Officer and
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A.
David Cook
|
2006
|
210,000
|
32,501
|
198,097
|
131,250
|
36,113
(6)
|
607,961
|
|
Vice
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
M. Murphy
|
2006
|
210,000
|
32,501
|
195,465
|
126,000
|
33,328
(7)
|
597,294
|
|
Vice
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
C. Nelson
|
2006
|
180,000
|
13,000
|
133,589
|
111,600
|
27,846
(8)
|
466,035
|
|
Vice
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
Amounts
shown do not reflect compensation actually received by the officers.
Instead, these amounts reflect the dollar amount recognized for financial
statement reporting purposes in accordance with Statement of Financial
Accounting Standards (“SFAS”) 123(R), Share-Based
Payments,
for the fiscal year ended December 31, 2006. All amounts are related
to
awards granted prior to 2006. The share-based compensation expense
for
stock awards was calculated based on the fair value of the awards
as of
the respective grant dates.
|
2.
|
Amounts
shown do not reflect compensation actually received by the officers.
Instead, these amounts reflect the dollar amount recognized for financial
statement reporting purposes in accordance with SFAS 123(R) for the
fiscal year ended December 31, 2006. These amounts include share-based
compensation expense for awards granted in and prior to 2006. Assumptions
used in the calculation of the estimated fair value of option awards
granted in 2004, 2005 and 2006 are included in footnote 7 to the
Company’s
audited financial statements included in Item 8 of the Company’s Annual
Report on Form 10-K filed with the Securities and Exchange Commission
on
March 1, 2007.
|
3.
|
Consists
of amounts earned under our annual bonus program. Future payouts
under our
SPIP, if any, will be included in this column. There were no payouts
under
the SPIP for 2006 performance.
|
4.
|
Includes
$21,000 in matching contributions under our PoolCorp Deferred Compensation
Plan and $17,991 for lease and maintenance expense for a vehicle
used for
both business and personal
purposes.
|
5.
|
Includes
$18,153 for lease and maintenance expense for a vehicle used for
both
business and personal purposes.
|
6.
|
Includes
$20,285 for lease and maintenance expense for a vehicle used for
both
business and personal purposes.
|
7.
|
Includes
$21,414 for lease and maintenance expense for a vehicle used for
both
business and personal purposes.
|
8.
|
Includes
$14,400 for an auto allowance for a vehicle used for both business
and
personal purposes.
|
The
following Grants of Plan-Based Awards Table summarizes the non-equity incentive
plan and equity incentive plan awards to our Named Executive Officers in 2006.
GRANTS
OF PLAN-BASED AWARDS
Name
|
Grant
Date
|
Estimated
Future
Payouts
Under
Non-Equity
Incentive
Plan
Awards
|
All
Other Stock Awards: Number of Shares
of
Stock
or
Units (#)
|
All
Other Option Awards: Number of Securities Underlying Options
(#)
|
Exercise
or Base Price of Option Awards ($/Sh)
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
($)
|
Target*
($)
|
Max
($)
|
Manuel
J. Perez de la Mesa
|
2/8/2006
(1)
2/8/2006
(2)
2/8/2006
(3)
2/8/2006
(3)
2/8/2006
(3)
|
N/A
238,875
0(4)
0(5)
0(5)
|
N/A
367,500
245,000
520,000
780,000
|
N/A
N/A
N/A
N/A
N/A
|
60,000
(6)
N/A
N/A
N/A
N/A
|
38.79
N/A
N/A
N/A
N/A
|
798,300
N/A
N/A
N/A
N/A
|
Mark
W. Joslin
|
2/8/2006
(1)
2/8/2006
(2)
2/8/2006
(3)
2/8/2006
(3)
2/8/2006
(3)
|
N/A
128,100
0(4)
0(5)
0(5)
|
N/A
210,000
140,000
300,000
450,000
|
N/A
N/A
N/A
N/A
N/A
|
20,000
(7)
N/A
N/A
N/A
N/A
|
38.79
N/A
N/A
N/A
N/A
|
298,800
N/A
N/A
N/A
N/A
|
A.
David Cook
|
2/8/2006
(1)
2/8/2006
(2)
2/8/2006
(3)
2/8/2006
(3)
2/8/2006
(3)
|
N/A
131,250
0(4)
0(5)
0(5)
|
N/A
210,000
140,000
320,000
480,000
|
N/A
N/A
N/A
N/A
N/A
|
18,000
(6)
N/A
N/A
N/A
N/A
|
38.79
N/A
N/A
N/A
N/A
|
239,490
N/A
N/A
N/A
N/A
|
John
M. Murphy
|
2/8/2006
(1)
2/8/2006
(2)
2/8/2006
(3)
2/8/2006
(3)
2/8/2006
(3)
|
N/A
126,000
0(4)
0(5)
0(5)
|
N/A
210,000
140,000
293,333
440,000
|
N/A
N/A
N/A
N/A
N/A
|
18,000
(6)
N/A
N/A
N/A
N/A
|
38.79
N/A
N/A
N/A
N/A
|
239,490
N/A
N/A
N/A
N/A
|
Stephen
C. Nelson
|
2/8/2006
(1)
2/8/2006
(2)
2/8/2006
(3)
2/8/2006
(3)
2/8/2006
(3)
|
N/A
111,600
0(4)
0(5)
0(5)
|
N/A
180,000
120,000
266,667
400,000
|
N/A
N/A
N/A
N/A
N/A
|
12,000
(6)
N/A
N/A
N/A
N/A
|
38.79
N/A
N/A
N/A
N/A
|
159,660
N/A
N/A
N/A
N/A
|
* The
amounts reflected in this column reflect actual payout amounts for 2006
performance.
1.
|
Granted
under our 2002 Long-Term Incentive
Plan.
|
2.
|
Annual
Bonus Program. See Compensation, Discussion and Analysis, “Annual
Cash Incentive”.
The target annual bonus payout amounts included in this table reflect
the
actual payout amounts for 2006 performance, which are also disclosed
in
the “Non-Equity Incentive Plan Compensation” column in the Summary
Compensation Table. The maximum annual bonus payout amounts included
in
this table reflect 100% of the 2006 base salary amounts for each
of the
Named Executive Officers.
|
3.
|
In
2006, we established our SPIP which rewards organic earnings per
share
growth over a three-year period. Payouts will be earned for compounded
annual growth of organic earnings per share in excess of 20%. These
grants
represent the three separate performance periods for the initial
phase-in
of the SPIP between 2006 and 2008. The Company’s 2005 earnings objective
serves as the baseline for each of these performance periods. While
this
plan remains in effect, we intend to make one new grant each year
with
grants based on a three-year performance period. For each performance
period, the total plan incentive for each Named Executive Officer
is
calculated based on the compounded annual growth of organic earnings
per
share and up to a maximum of two times their base salary. The participants
are eligible to earn a maximum of one-third of the total plan incentive
for the one-year 2006 performance period, two-thirds of the total
plan
incentive for the two-year 2007 performance period and the full amount
of
the total plan incentive for the three-year 2008 performance period.
The
maximum SPIP payout amounts included in this table reflect a 30%
compounded annual growth of organic earnings per share and the maximum
allowable payouts for each phase-in performance period. The maximum
SPIP
payouts for the 2006 performance period reflect the 2006 base salaries
and
the maximum SPIP payouts for the 2007 and 2008 performance periods
reflect
the 2007 base salaries.
|
4.
|
This
target SPIP payout amount reflects the actual payout amount for 2006
performance, which is also disclosed in the “Non-Equity Incentive Plan
Compensation” column in the Summary Compensation Table.
|
5.
|
The
target SPIP payout amounts of zero for the 2006-2007 and the 2006-2008
SPIP performance periods are reported as a representative amount
based on
the actual payout amount for the last completed performance period
(2006),
which was zero.
|
6.
|
These
options vest 50% after three years and 50% after five years. Vesting
is
accelerated upon a change in
control.
|
7.
|
These
options vest after five years. Vesting is accelerated upon a change
of
control.
|
The
following table summarizes the outstanding equity awards for each Named
Executive Officer as of December 31, 2006.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
Option
Awards
|
Stock
Awards
|
Name
|
Grant
Date
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Option
Exercise Price ($/Sh)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock that Have Not Vested
(#)
|
Market
Value of Shares or Units that Have Not Vested
($)
|
Manuel
J. Perez de la Mesa
|
02/25/1999
02/16/2000
02/21/2001
02/13/2002
02/11/2003
02/09/2004
02/14/2005
02/08/2006
|
253,125
253,125
253,125
—
—
—
—
—
|
—
—
—
90,000(1)
90,000(2)
75,000(3)
60,000(4)
60,000(5)
|
2.64
4.84
9.83
12.96
11.98
21.67
31.51
38.79
|
02/25/2009
02/16/2010
02/21/2011
02/13/2012
02/11/2013
02/09/2014
02/14/2015
02/08/2016
|
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
|
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
|
Mark
W. Joslin
|
08/09/2004
02/14/2005
02/08/2006
|
—
—
—
|
22,500(6)
22,500(7)
20,000(8)
|
26.65
31.51
38.79
|
08/09/2014
02/14/2015
02/08/2016
|
2,500(11)
N/A
N/A
|
97,925
(13)
N/A
N/A
|
|
|
Option
Awards
|
Stock
Awards
|
Name
|
Grant
Date
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Option
Exercise Price ($/Sh)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock that Have Not Vested
(#)
|
Market
Value of Shares or Units that Have Not Vested
($)
|
A.
David Cook
|
08/16/1999
02/21/2001
02/21/2001
02/13/2002
02/11/2003
02/09/2004
02/14/2005
02/08/2006
|
25,312
40,500
10,125
16,875
16,875
—
—
—
|
—
—
—
16,875(1)
16,875(2)
15,000(9)
18,000(4)
18,000(5)
|
0.00(10)
9.83
0.00(10)
12.96
11.98
21.67
31.51
38.79
|
08/16/2009
02/21/2011
02/21/2011
02/13/2012
02/11/2013
02/09/2014
02/14/2015
02/08/2016
|
N/A
N/A
N/A
N/A
N/A
7,500(12)
N/A
N/A
|
N/A
N/A
N/A
N/A
N/A
293,775
(13)
N/A
N/A
|
John
M. Murphy
|
02/21/2001
02/13/2002
02/11/2003
02/09/2004
02/14/2005
02/08/2006
|
40,500
16,875
16,875
—
—
—
|
—
16,875(1)
16,875(2)
15,000(9)
18,000(4)
18,000(5)
|
9.83
12.96
11.98
21.67
31.51
38.79
|
02/21/2011
02/13/2012
02/11/2013
02/09/2014
02/14/2015
02/08/2016
|
N/A
N/A
N/A
7,500(12)
N/A
N/A
|
N/A
N/A
N/A
293,775
(13)
N/A
N/A
|
Stephen
C. Nelson
|
02/16/2000
02/21/2001
02/21/2001
02/13/2002
02/11/2003
02/09/2004
02/14/2005
02/08/2006
|
22,781
16,200
4,050
—
—
—
—
—
|
—
—
—
13,500(1)
13,500(2)
6,000(9)
9,000(4)
12,000(5)
|
4.84
9.83
0.00(10)
12.96
11.98
21.67
31.51
38.79
|
02/16/2010
02/21/2011
02/21/2011
02/13/2012
02/11/2013
02/09/2014
02/14/2015
02/08/2016
|
N/A
N/A
N/A
N/A
N/A
3,000(12)
N/A
N/A
|
N/A
N/A
N/A
N/A
N/A
117,510
(13)
N/A
N/A
|
1. These
options will vest 100% on February 13, 2007.
2. These
options will vest 100% on February 11, 2008.
3. These
options will vest 100% on February 9, 2009.
4. These
options will vest 50% on February 14, 2008 with the remaining 50% vesting on
February 14, 2010.
5. These
options will vest 50% on February 8, 2009 with the remaining 50% vesting on
February 8, 2011.
6. These
options will vest 100% on August 9, 2009.
7. These
options will vest 100% on February 14, 2010.
8. These
options will vest 100% on February 8, 2011.
9. These
options will vest 50% on February 9, 2007 with the remaining 50% vesting on
February 9, 2009.
10.
The
original grant date exercise price was $0.01 for these penny option awards.
The
$0.00 exercise price reflects the impact of stock splits and
rounding.
11. These
shares will vest 100% on August 9, 2007.
12. These
shares will vest 100% on February 9, 2009.
13.
Market
value at end of fiscal year.
The
following Option Exercises and Stock Vested Table summarizes the number of
shares acquired and the dollar amounts realized by Named Executive Officers
in
2006 on the exercise of stock options and on the vesting of restricted
stock.
OPTION
EXERCISES AND STOCK VESTED
|
Option
Awards
|
Stock
Awards
|
Name
|
Number
of Shares Acquired Upon Exercise (#)
|
Value
Realized Upon Exercise ($)
|
Number
of Shares Acquired
Upon
Vesting (#)
|
Value
Realized on Vesting ($)
|
Manuel
J. Perez de la Mesa
|
N/A
|
N/A
|
N/A
|
N/A
|
Mark
W. Joslin
|
N/A
|
N/A
|
2,500(1)
|
94,650(2)
|
A.
David Cook
|
N/A
|
N/A
|
N/A
|
N/A
|
John
M. Murphy
|
43,406
|
1,667,584
|
N/A
|
N/A
|
Stephen
C. Nelson
|
N/A
|
N/A
|
N/A
|
N/A
|
1. |
Grant
of 7,500 restricted shares (split-adjusted) in 2004 that vest one-third
per year over a three-year period.
|
2. |
The
value realized was calculated by multiplying the number of shares
by the
closing price of our Common Stock on the vest
date.
|
NONQUALIFIED
DEFERRED COMPENSATION
Pursuant
to our PoolCorp Deferred Compensation Plan, certain executives, including our
Named Executive Officers, may defer all or a portion of their base salary and
annual non-equity incentive compensation. Deferral elections are made by
eligible executives no later than December 31 of each year for amounts to be
earned in the following year; however, a deferral election for a
performance-based bonus can be made as late as June 30 of the year in which
services are being rendered for the bonus. A deferral election may be made
within 30 days after an executive first becomes eligible to participate, for
amounts payable for services rendered after the date of the election. A
participant may choose to have deferrals deemed to be invested in one or more
specified investment funds. Each participant may change his or her fund
selection at any time, subject to certain limitations. The table below shows
the
funds available and their annual rate of return for the calendar year ended
December 31, 2006 as reported by T. Rowe Price. Earnings are determined by
the
results of the individual investments.
Name
of Fund
|
Rate
of Return
|
Name of Fund
|
Rate
of Return
|
American
Fund Investment Company of America
|
8.62%
|
TRP Retirement 2010 Fund
|
12.84%
|
Artisan
International Fund
|
25.56%
|
TRP Retirement 2015 Fund
|
13.73%
|
TRP
Equity Income Fund
|
19.14%
|
TRP Retirement 2020 Fund
|
14.66%
|
TRP
Growth Stock Fund
|
14.05%
|
TRP Retirement 2025 Fund
|
15.44%
|
TRP
Mid-Cap Growth Fund
|
6.79%
|
TRP Retirement 2030 Fund
|
16.14%
|
TRP
New Income Fund
|
4.13%
|
TRP Retirement 2035 Fund
|
16.18%
|
TRP
Prime Reserve Fund
|
4.56%
|
TRP Retirement 2040 Fund
|
16.24%
|
TRP
Retirement Income Fund
|
9.98%
|
TRP Small-Cap Stock Fund
|
12.78%
|
TRP
Retirement 2005 Fund
|
11.50%
|
TRP Value Fund
|
19.75%
|
TRP
Equity Index 500
|
15.61%
|
|
|
Benefits
under our PoolCorp Deferred Compensation Plan will be paid to our Named
Executive Officers as each executive elects, but no earlier than one full year
after the end of the plan year for which compensation is deferred or six months
after termination of employment. However, upon a showing of financial hardship
and certain other requirements, a Named Executive Officer may be allowed to
access funds in his deferred compensation account earlier than the beginning
of
the year following the executive’s retirement or termination. In
the
event of a change in control, all vested accrued benefits will automatically
be
accelerated and payable in full. The time and schedule of payments may also
be
accelerated if the participant becomes disabled, to fulfill a qualified domestic
relations order, if the amount is less than $10,000 or to pay employment taxes.
Benefits can be received either as a lump sum payment or installments. The
following table summarizes the non-qualified deferred compensation earned by
our
Named Executive Officers in 2006. All amounts relate to our PoolCorp Deferred
Compensation Plan.
Name
|
Executive
Contributions in Last FY ($)
|
Registrant
Contributions in
Last
FY ($)
|
Aggregate
Earnings in Last FY ($)
|
Aggregate
Withdrawals/ Distributions ($)
|
Aggregate
Balance at Last FYE ($)
|
Manuel
J. Perez de la Mesa
|
42,000
|
21,000(1)
|
10,172
|
—
|
104,471(6)
|
Mark
W. Joslin
|
165,018
|
4,740(2)
|
3,037
|
—
|
180,092(7)
|
A.
David Cook
|
29,500
|
6,485(3)
|
3,628
|
—
|
46,743(8)
|
John
M. Murphy
|
4,200
|
2,100(4)
|
657
|
—
|
14,747(9)
|
Stephen
C. Nelson
|
47,880
|
4,438(5)
|
6,219
|
—
|
82,195
|
1.
|
Includes
$21,000 previously referenced in the Summary Compensation Table (Salary
and/or Non-Equity Incentive Plan
Compensation).
|
2.
|
Includes
$4,740 previously referenced in the Summary Compensation Table (Salary
and/or Non-Equity Incentive Plan
Compensation).
|
3.
|
Includes
$6,485 previously referenced in the Summary Compensation Table (Salary
and/or Non-Equity Incentive Plan
Compensation).
|
4.
|
Includes
$2,100 previously referenced in the Summary Compensation Table (Salary
and/or Non-Equity Incentive Plan
Compensation).
|
5.
|
Includes
$4,438 previously referenced in the Summary Compensation Table (Salary
and/or Non-Equity Incentive Plan
Compensation).
|
6.
|
Includes
$9,804 of registrant contributions disclosed in previous year’s Summary
Compensation Table.
|
7.
|
Includes
$2,308 of registrant contributions disclosed in previous year’s Summary
Compensation Table.
|
8.
|
Includes
$2,723 of registrant contributions disclosed in previous year’s Summary
Compensation Table.
|
9.
|
Includes
$2,308 of registrant contributions disclosed in previous year’s Summary
Compensation Table.
|
Termination
of Employment and Change-in-Control Arrangements
Stock
options granted to Named Executive Officers, subject to certain limitations,
-
immediately
vest and become
fully exercisable upon a change of control, death or disability;
-
remain
exercisable and continue to vest in accordance with their original schedule
upon retirement (which is defined as attainment of the age of 55 years
or more
and continuous service to us for a period of at least ten years);
-
are
immediately forfeited,
whether or not then exercisable, upon termination for cause; and
-
remain
exercisable and, subject to our discretion, continue to vest in accordance
with their original schedule upon termination without cause.
Shares
of
restricted stock granted to executive officers, subject to certain
limitations,
-
fully
vest upon a change of
control, death or disability;
-
continue to vest in accordance with the original vesting schedule upon
retirement; and
-
are
immediately forfeited upon
termination for any other reason, whether voluntary or involuntary.
As
of
December 31, 2006, the Named Executive Officers hold the following unvested
stock options and shares of restricted stock that would become vested upon
a
change in control.
Name
|
No.
of Shares Underlying
Unvested
Awards (#)
|
Unrealized
Value of
Unvested
Options ($)
|
Option
Awards
|
Stock
Awards
|
Option
Awards(1)
|
Stock
Awards(2)
|
Manuel
J. Perez de la Mesa
|
375,000
|
—
|
6,601,260
|
—
|
Mark
W. Joslin
|
65,000
|
2,500
|
461,718
|
97,925
|
A.
David Cook
|
84,750
|
7,500
|
1,308,413
|
293,775
|
John
M. Murphy
|
84,750
|
7,500
|
1,308,413
|
293,775
|
Stephen
C. Nelson
|
54,000
|
3,000
|
899,454
|
117,510
|
|
1.
|
The
unrealized value of unvested options was calculated by multiplying
the
number of shares underlying unvested options by the closing price
of our
Common Stock as of December 29, 2006 and then deducting the
aggregate exercise price for these
options.
|
|
2.
|
The
unrealized value of unvested restricted stock was calculated by
multiplying the number of shares of unvested restricted stock by
the
closing price of our Common Stock as of
December 29, 2006.
|
Upon
termination other than for cause, Mr. Perez de la Mesa is entitled to receive
his base salary for a period of six months thereafter and the other executive
officers are entitled to receive their respective base salaries for a period
of
up to three months. The amounts we would pay under this provision for a
termination without cause as of December 31, 2006, would be $183,750
for Mr. Perez de la Mesa, $52,500 for Mr. Joslin, $52,500 for Mr. Cook,
$52,500 for Mr. Murphy and $45,000 for Mr. Nelson. Executive officers are not
entitled to any additional compensation, perquisites or other personal benefits
upon a change in control, retirement or termination, except for future payments
under our 401(k) Plan and Deferred Compensation Plan.
DIRECTOR
COMPENSATION
The
table
below summarizes the compensation paid by us to our non-employee directors
and
our Chairman during the year ended December 31, 2006.
Name
|
Fees
Earned or Paid
in
Cash
($)
|
Option
Awards (1) (2)
($)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)
|
All
Other Compensation
($)
|
Total
($)
|
Andrew
W. Code
|
36,000
|
85,792
|
—
|
—
|
121,792
|
James
J. Gaffney
|
55,000
|
85,792
|
—
|
—
|
140,792
|
George
T. Haymaker, Jr.
|
34,000
|
85,792
|
—
|
—
|
119,792
|
Harlan
F. Seymour
|
53,000
|
85,792
|
—
|
—
|
138,792
|
Robert
C. Sledd
|
48,000
|
85,792
|
—
|
—
|
133,792
|
John
E. Stokely
|
64,000
|
85,792
|
—
|
—
|
149,792
|
Wilson
B. Sexton(3)
|
75,000
|
133,743
|
1,161
|
8,002
|
217,906
|
1.
|
Amounts
shown do not reflect compensation actually received by the directors.
Instead, these amounts reflect the dollar amount recognized for financial
statement reporting purposes in accordance with SFAS 123(R) for the
fiscal year ended December 31, 2006. These amounts include share-based
compensation expense for awards granted in and prior to 2006. Assumptions
used in the calculation of the share-based compensation expense for
the
option awards granted in 2006 include a four year expected term,
expected
volatility of 26.6%, expected dividend yield of 1% and a risk free
rate of
4.33%.
|
2.
|
As
of December 31, 2006, options outstanding and options exercisable
for each
director included the following:
|
Director |
Options
Outstanding
|
Options
Exercisable
|
Mr. Code |
14,167
|
5,667
|
Mr. Gaffney |
48,875
|
40,375
|
Mr. Haymaker |
29,750
|
21,250
|
Mr. Seymour |
48,875
|
40,375
|
Mr. Sledd |
210,598
|
202,098
|
Mr. Stokely
|
96,688
|
88,188
|
Mr. Sexton |
621,656
|
609,656
|
3.
|
In
2006, our Chairman, Mr. Sexton, who is employed by us primarily in
the
area of investor relations, received $75,000 cash compensation and
an
award of 12,000 stock options for both his service as Chairman and
for his
work in investor relations. He also received $6,891,443 attributable
to
the exercise of stock options previously awarded. Mr. Sexton participates
in our 401(k) Plan, Deferred Compensation Plan and medical, dental
and
long-term disability programs on the same basis as our officers.
|
In
2006,
each non-employee director was paid an annual retainer of $8,000. Each
non-employee director also received an attendance fee of $4,000 for each Board
meeting attended, $2,000 for each committee meeting attended, except that the
chair of each committee received an attendance fee of $4,000 for each committee
meeting attended, and $1,000 for each scheduled telephone meeting attended.
In
2006, the annual retainer for the Board’s lead independent director was
increased to $15,000. All directors are reimbursed for reasonable out-of-pocket
expenses incurred in attending Board and committee meetings.
Under
the
SCP Pool Corporation 1996 Non-Employee Directors Equity Incentive Plan, as
amended and restated (the “Director’s Plan”), each non-employee director was
granted an option to purchase 8,500 shares of Common Stock in 2006. Except
under
certain limited circumstances, no options granted pursuant to the Director’s
Plan become exercisable earlier than one year after the date of the grant.
The
option price per share of Common Stock under the Director’s Plan is equal to
100% of the fair market value of the Common Stock at the date of grant. Each
option granted under the Director’s Plan is exercisable for up to ten years
after the date of the grant. Non-employee directors may elect to receive
additional shares of Common Stock under the Director’s Plan in lieu of the cash
compensation otherwise due them.
Neither
the Compensation Committee Report nor the Audit Committee Report set forth
below
shall be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act
of
1933 or under the Exchange Act, except to the extent that we specifically
incorporate this information by reference, and neither shall be deemed filed
under such acts.
REPORT
OF THE COMPENSATION COMMITTEE OF
THE
BOARD OF DIRECTORS OF POOL CORPORATION
The
Compensation Committee of the Board of Directors has reviewed and discussed
the
Company’s Compensation Discussion and Analysis set forth above with management
and based on that review and discussion has recommended to the Board of
Directors that such Compensation Discussion and Analysis be incorporated by
reference in the Company’s annual report on Form 10-K and included in this proxy
statement.
COMPENSATION
COMMITTEE
George
T.
Haymaker, Jr., Chairman
Andrew
W.
Code
Robert
C.
Sledd
REPORT
OF THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS OF POOL CORPORATION
The
Audit
Committee reviews the Company’s financial reporting process on behalf of the
Board. Management has the primary responsibility for the financial statements
and the reporting process, including the system of internal controls over
financial reporting.
In
this
context, the Audit Committee has met and held discussions with management and
the Company’s internal and independent auditors. Management represented to the
Audit Committee that the Company’s audited financial statements were prepared in
accordance with generally accepted accounting principles. The Audit Committee
has reviewed and discussed the audited financial statements with management
and
the independent auditors. The Audit Committee discussed with the independent
auditors matters required to be discussed by Statement on Auditing Standards
No.
61, Communication
with Audit Committees,
as
amended.
In
addition, the Audit Committee has discussed with the independent auditors the
auditor’s independence from the Company and management, including matters in the
written disclosures provided by the independent auditors to the Audit Committee
as required by the Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees.
The
Audit
Committee has discussed with the Company’s internal and independent auditors the
overall scope and plans for their respective audits. The Audit Committee has
met
with the internal and independent auditors, with and without management present,
to discuss the results of their examinations, their evaluations of the Company’s
internal controls and the overall quality of the Company’s financial reporting.
The Audit Committee has determined that the rendering of all non-audit services
by the Company’s independent auditors during the years ended December 31, 2006
and 2005 did not impair the auditor’s independence.
In
reliance on the reviews and discussions referred to above, the Audit Committee
recommended to the Board, and the Board has approved, that the audited financial
statements be included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2006, for filing with the SEC. The Committee has also
approved, subject to stockholder ratification, the selection of the Company’s
independent auditors.
AUDIT
COMMITTEE
John
E.
Stokely, Chairman
James
J.
Gaffney
Harlan
F.
Seymour
Robert
C.
Sledd
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
In
October 1999, we entered into a lease agreement with S&C Development,
L.L.C., for a service center in Mandeville, Louisiana. The sole member of
S&C Development, L.L.C., is A. David Cook, a Company executive
officer. The seven-year lease term commenced on January 1, 2000,
and provides for rental payments of $6,510 per month. In January 2002, we
entered into a lease agreement with S&C Development, L.L.C., for additional
warehouse space adjacent to the Mandeville service center. The five-year
lease term commenced on February 4, 2002, and provides for rental
payments of $4,123 per month. The total $10,633 monthly lease payment is
for both facilities consisting of 21,100 square feet. In August 2006, we
exercised our right to renew the above referenced leases for a total $11,871
monthly lease payment commencing on January 1, 2007 and expiring on December
31,
2013.
In
January 2001, we entered into a lease agreement with S&C Development,
L.L.C., for a service center in Oklahoma City, Oklahoma. The ten year
lease term commenced on November 10, 2001, and provides for rental
payments of approximately $12,745 per month for the 25,000 square foot facility.
We
believe the leases discussed above reflect fair market rates and terms that
are
as favorable to us as could be obtained with unrelated third parties. In
February 2002, the Board determined that we will no longer enter into additional
leases or material transactions with related parties. Our Audit Committee
Charter also requires that the Audit Committee review and approve all related
person transactions. The lease renewal described above was approved in advance
by the Board and the Audit Committee.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our directors and executive officers and
persons owning more than 10% of a registered class of our equity securities
to
file with the SEC reports of ownership and changes in ownership of our Common
Stock. Directors, executive officers and greater than 10% stockholders are
required by SEC regulations to furnish us with copies of all Section 16(a)
forms
they file. Based solely on a review of the copies of these reports
furnished, management believes that the directors, executive officers and
greater than 10% stockholders timely complied with these requirements with
the
exception of the following: one late filing for Mr. Code reporting an
option exercise and distribution of shares; one late filing for Mr. Cook
reporting a change in expiration date of a previously reported option grant;
one
late filing for Mr. Hubbard reporting a change in expiration date of certain
previously reported option grants; one late filing for Mr. Nelson reporting
a
sale and a purchase; one late filing for Mr. Polizzotto reporting a change
in
expiration date of certain previously reported option grants; one late filing
for Mr. Sexton reporting a change in expiration date of a previously reported
option grant; and one amended filing for Mr. Murphy reporting a sale
untimely. In addition, the following amendments arose from our previously
disclosed review of annual stock option grants and generally reflect corrections
to the terms of equity awards previously granted to the reporting persons:
five
amended filings for Mr. Code; two amended filings for Mr. Cook; four amended
filings for Mr. Gaffney; two amended filings for Mr. Hubbard; one amended filing
for Mr. Joslin; two amended filings for Mr. Meyer; two amended filings for
Mr.
Murphy; one amended filing for Mr. Nelson; two amended filings for Mr. Perez
de
La Mesa; two amended filings for Mr. Polizzotto; four amended filings for Mr.
Sexton; two amended filings for Mr. Sledd; one amended filing for Mr. Stokely;
and one amended filing for Mr. Wilson.
PROPOSAL
TO APPROVE THE 2007 LONG-TERM INCENTIVE PLAN
(Proposal
2)
The
affirmative vote of the holders of a majority of the shares present in person
or
represented by proxy and entitled to vote at the Meeting will be required to
approve the 2007 LTIP.
The
Board
believes that adoption of the 2007 LTIP is necessary to provide the Company
with
the continued ability to attract, retain and motivate key personnel in a manner
that is tied to the interests of the stockholders.
Administration
of the 2007 LTIP. The
Compensation Committee of the Board administers the 2007 LTIP and has authority
to make awards under the 2007 LTIP, to set the terms of the awards, to interpret
the 2007 LTIP, to establish any rules or regulations relating to the 2007 LTIP
that it determines to be appropriate and to make any other determination that
it
believes necessary or advisable for the proper administration of the 2007 LTIP.
Subject to the limitations specified in the 2007 LTIP, the Compensation
Committee may delegate its authority to appropriate personnel of the Company.
Eligibility.
Our
officers, directors, key employees, consultants and advisors are eligible to
receive awards (“Incentives”) under the 2007 LTIP when designated as plan
participants. We currently have eight directors,
nine officers and approximately 400 key
employees eligible to receive Incentives under the 2007 LTIP. Over the past
several years, we have granted awards to all of our officers and directors
and
substantially all of our key employees under our predecessor plans. The 2007
LTIP also permits consultants and advisers to receive Incentives, although
neither the Company nor the Compensation Committee has awarded, nor currently
has the intention to award, Incentives to consultants or advisers. Awards under
the 2007 LTIP may only be granted in the form of non-qualified stock options
and
restricted stock.
Incentives
relating to no more than 200,000
shares of Common Stock may be granted to a single participant in one calendar
year. No more than 100,000 shares may be issued as restricted
stock.
Shares
Issuable through the 2007 LTIP. Because
of the limited number of shares remaining available for grant under the 2002
LTIP and the expiration of the 1996 Non-Employee Directors Equity Incentive
Plan, the Board of Directors has adopted the 2007 LTIP, subject to stockholder
approval, and recommends its approval by the stockholders. The Board believes
that our growth depends upon the efforts of our officers, key employees,
consultants, advisors and directors and that the 2007 LTIP will continue to
provide an effective means of attracting and retaining such personnel while
enhancing their long-term focus on maximizing stockholder value. The primary
features of the 2007 LTIP are summarized below. The text of the 2007 LTIP is
attached hereto as Appendix A and is incorporated by reference.
A
total
of 1,515,000 shares of Common Stock are authorized to be issued under the 2007
LTIP, representing approximately 3.2% of the shares of outstanding Common Stock.
If the 2007 LTIP is approved by the stockholders, no additional grants will
be
made under our predecessor stock option plans. On March 16, 2007, the closing
sale price of a share of Common Stock, as reported on the Nasdaq Global Select
Market, was $34.10.
For
purposes of determining the number of shares of Common Stock available for
delivery under the 2007 LTIP, shares that are not delivered because an option
is
forfeited or canceled, shares of restricted stock that are forfeited or
reacquired by us according to their terms, or shares that are not delivered
because an Incentive is paid or settled in cash will not be deemed to have
been
delivered under the 2007 LTIP. If the exercise price of any stock option granted
under the 2007 LTIP or any tax withholding obligation is satisfied by tendering
shares of Common Stock or in the event of a “net share exercise” as described
below, all shares to which the option relates will be deemed delivered for
purposes of determining the maximum number of shares of Common Stock available
for delivery under the 2007 LTIP.
Proportionate
adjustments will be made to all of the share limitations provided in the 2007
LTIP and to the number of shares then subject to the 2007 LTIP, including shares
subject to outstanding Incentives, in the event of any recapitalization,
reclassification, stock dividend, stock split, combination of shares or other
change in the Common Stock, and the terms of any Incentive will be adjusted
to
the extent appropriate to provide participants with the same relative rights
before and after the occurrence of any such event.
Amendments
to and Termination of the 2007 LTIP.
The
Board may amend or discontinue the 2007 LTIP at any time. However, the
stockholders must approve any amendment that would:
·
materially
increase the benefits accruing to participants under the 2007 LTIP;
· increase
the number of shares of Common Stock that may be issued under the 2007 LTIP;
· materially
expand the classes of persons eligible to participate in the 2007 LTIP;
· expansion
of the types of awards that may be granted; or
· authorize
us to re-price outstanding options.
No
amendment or discontinuance of the 2007 LTIP may materially impair any
previously granted Incentive without the consent of the recipient.
Non-Qualified
Stock Options.
The 2007
LTIP permits the grant of non-qualified stock options to purchase shares of
Common Stock. Incentive stock options as described in Section 422 of the
Internal Revenue Code may not be granted through the 2007 LTIP. The Compensation
Committee will determine the number and exercise price of the options, provided
that the option exercise price may not be less than the fair market value of
a
share of Common Stock on the date of grant. The term of an option will also
be
determined by the Compensation Committee, but may not exceed 10 years. The
Compensation Committee may also approve the purchase by us of an unexercised
stock option from the optionee by mutual agreement for the difference between
the exercise price and the fair market value of the shares covered by the
option.
Except
for adjustments permitted in the 2007 LTIP to protect against dilution, without
approval of the stockholders, the exercise price of an outstanding option may
not be decreased after grant, nor may an option that has an exercise price
that
is greater than the then current fair market value of a share of Common Stock
be
surrendered to us as consideration for the grant of a new option with a lower
price or other substitute award.
The
option exercise price may be paid:
-
in cash;
-
in Common Stock, subject to certain limitations;
-
in a combination of cash and Common Stock;
-
through a "cashless" exercise arrangement;
-
through a “net share exercise” in which the participant instructs us to
withhold from issuance upon exercise that number of shares equal in value
to
the aggregate exercise price; or
-
in
any
other manner authorized by the Compensation Committee.
Restricted
Stock.
Shares
of Common Stock may be granted by the Compensation Committee to an eligible
participant and made subject to restrictions on sale, pledge or other transfer
by the participant for a certain period (the “Restricted Period”). Except for
shares of restricted stock that vest based on the attainment of performance
goals and except for shares of restricted stock granted to directors, the
Restricted Period must be a minimum of three years with incremental vesting
of
portions of the award over the three-year period permitted. If vesting of
the
shares is subject to the attainment of specified performance goals or if
shares
of restricted stock are granted to directors, a minimum Restricted Period
of one
year with incremental vesting is allowed. All shares of restricted stock
are
subject to such restrictions as the Compensation Committee may provide in
an
agreement with the participant, including provisions obligating the participant
to forfeit or resell the shares to us in the event of termination of employment
or if specified performance goals or targets are not met. Subject to the
restrictions provided in the agreement and the 2007 LTIP, a participant
receiving restricted stock will have all of the rights of a stockholder as
to
such shares.
Performance-Based
Compensation under Section 162(m). Stock
options granted in accordance with the terms of the 2007 LTIP qualify as
performance-based compensation under Section 162(m) and as a result are not
subject to the deduction limitations of Section 162(m). Grants of restricted
stock that we intend to qualify as performance-based compensation under Section
162(m) must be made subject to the achievement of pre-established performance
goals. The pre-established performance goals are to be based upon any or a
combination of the following business criteria: earnings per share, return
on
assets, an economic value added measure, stockholder return, earnings, stock
price, return on equity, return on capital, reduction of expenses, or increase
in revenues, increase in cash flow or customer growth of the Company, or one
or
more operating divisions or subsidiaries. For any performance period, the
performance goals may be measured on an absolute basis or relative to a group
of
peer companies selected by the Compensation Committee, relative to internal
goals, or relative to levels attained in prior years.
The
Compensation Committee has authority to use different targets from time to
time
under the performance goals provided in the 2007 LTIP. As a result, the
regulations under Section 162(m) require that the material terms of the
performance goals be reapproved by the stockholders every five years. To qualify
as performance-based compensation, grants of restricted stock are required
to
satisfy the other applicable requirements of Section 162(m).
Termination
of Employment. If
a
participant ceases to be our employee or to provide us with services for any
reason, including death, the participant’s outstanding Incentives may be
exercised or will expire at such time or times as may be determined by the
Compensation Committee.
Change
of Control. In
the
event of a change of control of the Company, as defined in the 2007 LTIP, all
Incentives will become fully vested and exercisable, all restrictions or
limitations on any Incentives will generally lapse and, unless otherwise
provided in the incentive agreement, all performance criteria and other
conditions relating to the payment of Incentives will generally be deemed to
be
achieved or waived. In addition to the foregoing, upon a change of control
the
Compensation Committee will have the authority to take a variety of actions
regarding outstanding Incentives. Within certain time periods, the Compensation
Committee may (i) require that all outstanding Incentives remain exercisable
only for a limited time, after which time all such Incentives will terminate,
(ii) require the surrender to us of some or all outstanding Incentives in
exchange for a stock or cash payment for each Incentive equal in value to the
change of control value of a share of Common Stock, calculated as described
in
the 2007 LTIP, over the exercise price, (iii) make any equitable adjustments
to
outstanding Incentives as the Compensation Committee deems necessary to reflect
the corporate change or (iv) provide that an Incentive will become an option
to
purchase the number and class of securities or other property to which the
participant would have been entitled in connection with the change of control
if
the participant had been a stockholder.
Transferability
of Incentives.
Under
the 2007 LTIP, participants may not transfer, pledge, assign or otherwise
encumber their Incentives except:
-
by will;
-
by the laws of descent and distribution;
-
pursuant to a domestic relations order; or
-
in the case of stock options only, to a charitable organization, to family
members or to a partnership, limited liability company or trust of which
the
sole owners, members or beneficiaries are the participant or family members,
if permitted by the Compensation Committee.
Payment
of Withholding Taxes. We
may
withhold from any payments or stock issuances under the 2007 LTIP, or collect
as
a condition of payment, any taxes required by law to be withheld. Any
participant may, but is not required to, satisfy his or her withholding tax
obligation by electing to deliver currently owned shares of Common Stock or
have
us withhold, from the shares the participant would otherwise receive, shares
of
Common Stock having a value equal to the minimum amount required to be withheld.
This election must be made prior to the date on which the amount of tax to
be
withheld is determined.
Awards
to be Granted.
Grants
of awards under the 2007 LTIP will be made in the future discretion of the
Compensation Committee, as necessary to attract and retain key personnel. No
decisions have yet been made as to any awards to be granted out of the shares
that may be authorized by this Proposal 2.
Federal
Income Tax Consequences. Under
existing federal income tax provisions, a participant who is granted a stock
option or restricted stock normally will not realize any income, nor will we
normally receive any deduction for federal income tax purposes, in the year
the
option or restricted stock is granted.
When
a
non-qualified stock option granted pursuant to the 2007 LTIP is exercised,
the
participant will realize ordinary income measured by the difference between
the
aggregate purchase price of the Common Stock acquired and the aggregate fair
market value of the Common Stock acquired on the exercise date and, subject
to
the limitations of Section 162(m), we will be entitled to a deduction in the
year the option is exercised equal to the amount the participant is required
to
treat as ordinary income.
If
the
exercise price of a non-qualified option is paid by the surrender of previously
owned shares, the basis and the holding period of the previously owned shares
carry over to the same number of shares received in exchange for the previously
owned shares. The compensation income recognized on exercise of these options
is
added to the basis of the shares received.
When
an
award of restricted stock vests, the participant will realize ordinary income
measured by the fair market value of the shares of Common Stock on the vesting
date. A participant may elect, however, to include in his or her income in
the
year of grant the fair market value of the shares of Common Stock (without
regard to any restrictions) on the date of grant by filing a Section 83(b)
election with the IRS within 30 days of the grant of the restricted stock.
Withholding taxes must be paid at the time a Section 83(b) election is made.
If
a Section 83(b) election is made, but the restricted stock is forfeited or
the
restricted stock declines in value, the participant will not be able to recover
any tax paid with respect to the grant of the forfeited or depreciated stock.
Unless a Section 83(b) election is filed, upon the vesting of any shares of
restricted stock, the participant must deliver to us the amount of taxes
required by law to be withheld. Subject to Section 162(m), we will be entitled
to a deduction for compensation paid in the same year and in the same amount
as
income is realized by the participant. Any dividends paid to the participant
on
the restricted stock will be taxable compensation income to the participant
and
deductible by us.
If,
upon
a change in control of the Company, the exercisability or vesting of an
Incentive is accelerated, the value of the acceleration, if any, may be
characterized as a “parachute payment” (within the meaning of Section 280G
of the Internal Revenue Code) if the sum of such amounts and any other such
contingent payments received by the employee that were contingent upon a change
in control exceeds an amount equal to three times the “base amount” for such
employee. The base amount generally is the average of the annual compensation
of
such employee for the five years preceding the change in ownership or control.
An “excess parachute payment”, with respect to any employee, is the excess of
the parachute payments to such person, in the aggregate, over and above such
person’s base amount. If the amounts received by an employee upon a change in
control are characterized as parachute payments, such employee will be subject
to a 20% excise tax on the excess parachute payment and we will be denied any
deduction with respect to such excess parachute payment.
This
summary of federal income tax consequences of non-qualified stock options and
restricted stock does not purport to be complete. Reference should be made
to
the applicable provisions of the Internal Revenue Code. There also may be state
and local income tax consequences applicable to transactions involving options
and restricted stock.
Equity
Compensation Plan Information
The
following table provides information about shares of Common Stock that could
be
issued upon the exercise of options, warrants and rights under all of the
Company’s existing equity compensation plans as of
December 31, 2006.
Plan
category
|
Number
of shares of Common Stock to be issued upon exercise of outstanding
options, warrants and rights
|
Weighted-average
exercise price of outstanding options, warrants and rights
($)
|
Number
of shares of Common Stock remaining available for future issuance
under
equity compensation plans
|
Equity
compensation plans approved by stockholders
|
|
|
|
|
2002
LTIP
|
2,350,094
|
24.35
|
262,528(1)
|
|
1998
Stock Option Plan
|
3,199,682
|
7.44
|
—
|
|
1995
Stock Option Plan
|
254,105
|
2.60
|
—
|
|
Employee
Stock Purchase Plan
|
— |
—
|
505,752
|
|
Non-Employee
Directors Equity Incentive Plan
|
468,078
|
16.63
|
—
|
Equity
compensation plans not approved by stockholders
|
— |
—
|
—
|
|
|
TOTAL
|
6,271,959
|
14.27
|
768,280
|
1.
|
Includes
57,600 shares that may be issued as restricted stock. If the 2007
LTIP is
approved at the Meeting, any remaining shares available for issuance
under
the 2002 LTIP Plan will no longer be available for issuance.
|
As
of
December 31, 2006, the weighted average remaining contractual term of
outstanding stock options is approximately 5.13 years. Of the outstanding
options, 3,702,377 are vested and exercisable and these shares have a weighted
average exercise price of approximately $7.61 per share. The 2,569,582 unvested
options have a weighted average exercise price of approximately $23.84 per
share.
The
Board of Directors unanimously recommends that our stockholders vote “FOR” the
approval of the 2007 Long-Term Incentive Plan.
PROPOSAL
TO RATIFY THE RETENTION OF INDEPENDENT AUDITORS
(Proposal
3)
The
Audit
Committee has approved the retention of Ernst & Young LLP
(“E&Y”) as the Company’s independent auditors for the fiscal year ending
December 31, 2007, and recommends the ratification of such retention
by the stockholders. If the stockholders do not ratify the selection of E&Y,
the Audit Committee will reconsider the selection.
Representatives
of E&Y are expected to be present at the Meeting, with the opportunity to
make any statement they desire at that time, and will be available to respond
to
appropriate questions.
The
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy at the Meeting and entitled to vote is required
for ratification of the retention of E&Y as the Company’s independent
auditors.
The
following table presents fees for professional audit services rendered by
E&Y for the audit of the Company’s annual financial statements for the years
ended December 31, 2006 and 2005, and fees billed for other services rendered
by
E&Y.
|
|
2006
|
|
|
2005
|
Audit
Fees(1)
|
$
|
743,350
|
|
$
|
593,879
|
Audit
Related Fees(2)
|
|
20,580
|
|
|
25,100
|
Tax
Fees(3)
|
|
67,460
|
|
|
42,992
|
All
Other Fees(4)
|
|
1,500
|
|
|
1,500
|
Total
|
$
|
832,890
|
|
$
|
663,471
|
1.
|
Audit
Fees consisted of the audit of the financial statements included
in our
Annual Report on Form 10-K, the audit of management’s assessment of our
internal control over financial reporting and review of the financial
statements included in the our Quarterly Reports on Form 10-Q.
The 2005
audit fees have been revised to include $63,879 of audit services
that
were invoiced and paid subsequent to the date of our 2006 Definitive
Proxy
Statement.
|
2. |
Audit
Related Fees included accounting consultations and fees for employee
benefit plan audits.
|
3.
|
Tax
Fees consisted of assistance with tax compliance and the review
of tax
returns, tax consultation and planning services, and assistance
in
connection with tax audits.
|
4. |
All
Other Fees were for access to a research
database.
|
The
Audit
Committee preapproves all audit and permissible non-audit services prior to
commencement of such services. Mr. Stokely, Audit Committee Chairman, has the
delegated authority to preapprove such services and these preapproval decisions
are presented to the full Audit Committee at the next scheduled meeting. During
fiscal years 2006 and 2005, the Audit Committee and/or the Audit Committee
Chairman preapproved 100% of the services performed by E&Y. A copy of our
Procedure for Pre-approval of Services by our Independent Audit Firm is posted
on our website at www.poolcorp.com.
The
Audit
Committee has determined that the rendering of all non-audit services by E&Y
during the years ended December 31, 2006 and 2005 did not impair the auditor’s
independence.
The
Board of Directors unanimously recommends that our stockholders vote “FOR” the
ratification of the retention of E&Y as our independent auditors for fiscal
year 2007.
STOCKHOLDER
PROPOSALS AND BOARD NOMINATIONS
In
order
to be considered for inclusion in the proxy materials related to our 2008 annual
meeting of stockholders, we must receive stockholder proposals no later than
November 30, 2007. If such proposal is timely received and in compliance with
all of the requirements of Rule 14a-8 under the Exchange Act, it will be
included in the proxy statement and set forth on the form of proxy issued for
such annual meeting of stockholders.
Our
By-laws, as amended, also require that any stockholder who desires to nominate
a
director or present a proposal before the 2008 annual meeting must notify the
Secretary of the Company no earlier than July 5, 2007 and no later than November
30, 2007.
By
Order
of the Board of Directors,
/s/ Jennifer
M. Neil
Jennifer
M. Neil, Secretary
Covington,
Louisiana
March
30,
2007
APPENDIX
A
2007
LONG-TERM INCENTIVE PLAN
1. |
Establishment
of the Plan.
|
1.1 |
Plan
Name. As of the Effective Date, the name of this plan shall be the
2007
Long-Term Incentive Plan (the
“Plan”).
|
1.2 |
Effective
Date. This plan document shall become effective on May 8, 2007, subject
to
its approval by the holders of a majority of the voting power of
the
shares deemed present and entitled to vote at the Pool Corporation
(“POOL”) Annual Meeting of Shareholders to be held on that date and any
necessary approval from any department, board or agency of the United
States or states having
jurisdiction.
|
1.3 |
Purpose.
The purpose of the Plan is to increase shareholder value and to advance
the interests of POOL and its subsidiaries (collectively, the “Company”)
by furnishing stock-based economic incentives (the “Incentives”) designed
to attract, retain, reward and motivate key employees, officers,
directors, consultants and advisors to the Company and to strengthen
the
mutuality of interests between such persons and POOL’s shareholders.
Incentives consist of opportunities to purchase or receive shares
of
common stock, $.001 par value per share, of POOL (the “Common
Stock”), on terms determined under the Plan. As used in the Plan, the term
“subsidiary” means any corporation, limited liability company or other
entity, of which POOL owns (directly or indirectly) within the meaning
of
Section 424(f) of the Internal Revenue Code of 1986, as amended,
and the
rules and regulations thereunder, as now in force or as hereafter
amended
(the “Code”), 50% or more of the total combined voting power of all
classes of stock, membership interests or other equity interests
issued
thereby.
|
2.1. |
Composition.
The Plan shall be administered by the Compensation Committee of the
Board
of Directors of POOL or by a subcommittee thereof (the “Committee”). The
Committee shall consist of not fewer than two members of the Board
of
Directors, each of whom shall (a) qualify as a “non-employee director”
under Rule 16b-3 under the Securities Exchange Act of 1934 (the “1934
Act”) or any successor rule, and (b) qualify as an “outside director”
under Section 162(m) of the Code (“Section
162(m)”).
|
2.2. |
Authority.
The Committee shall have plenary authority to award Incentives under
the
Plan, to interpret the Plan, to establish any rules or regulations
relating to the Plan that it determines to be appropriate, to enter
into
agreements with or provide notices to participants as to the terms
of the
Incentives (the “Incentive Agreements”) and to make any other
determination that it believes necessary or advisable for the proper
administration of the Plan. Its decisions in matters relating to
the Plan
shall be final and conclusive on the Company and participants. The
Committee may delegate its authority hereunder to the extent provided
in
Section 3 hereof.
|
3. |
Eligible
Participants. Key employees, officers, directors and persons providing
services as consultants or advisors to the Company shall become eligible
to receive Incentives under the Plan when designated by the Committee.
Employees may be designated individually or by groups or categories,
as
the Committee deems appropriate. In accordance with applicable law,
the
Committee may delegate to appropriate officers of the Company its
authority to designate participants, to determine the size and type
of
Incentives to be received by those participants and to set and modify
the
terms of the Incentives.
|
4. |
Types
of Incentives. Incentives may be granted under the Plan to eligible
participants in the forms of (a) non-qualified stock options; and
(b)
restricted stock.
|
5. |
Shares
Subject to the Plan.
|
5.1. |
Number of Shares.
Subject to adjustment as provided in Sections 5.2 and 9.5, the maximum
number of shares of Common Stock that may be delivered to participants
and
their permitted transferees under the Plan shall be 1,515,000. No
additional awards will be made under the Company’s predecessor stock
option plans (The SCP Pool Corporation 1995 Stock Option Plan, The
SCP
Pool Corporation 1998 Stock Option Plan, The SCP Pool Corporation
2002
Long-Term Incentive Plan, and The SCP Pool Corporation Non-Employee
Directors Equity Incentive Plan).
|
5.2. |
Share
Counting. To the extent any shares of Common Stock covered by a stock
option are not delivered to a participant or permitted transferee
because
the Option is forfeited or canceled or shares of Common Stock are
not
delivered because an Incentive is paid or settled in cash, such shares
shall not be deemed to have been delivered for purposes of determining
the
maximum number of shares of Common Stock available for delivery under
this
Plan. In the event that shares of Common Stock are issued as an Incentive
and thereafter are forfeited or reacquired by the Company pursuant
to
rights reserved upon issuance thereof, such forfeited and reacquired
Shares may again be issued under the Plan. With respect to the Net
Share
Exercise of Options, as defined in Section 6.5 hereof, all shares
to which
the Option relates are counted against the plan limits, rather than
the
net number of shares delivered upon
exercise.
|
5.3. |
Limitations
on Awards. Subject to Sections 5.2 and 9.5, the following additional
limitations are imposed under the
Plan:
|
A. |
The
maximum number of shares of Common Stock that may be covered by Incentives
granted under the Plan to any one individual during any one calendar-year
period shall be 200,000.
|
B. |
The
maximum number of shares of Common Stock that may be issued as restricted
stock shall be 100,000 shares.
|
5.4. |
Type
of Common Stock. Common Stock issued under the Plan may be authorized
and
unissued shares or issued shares held as treasury
shares.
|
6. |
Stock
Options. A stock option is a right to purchase shares of Common Stock
from
POOL. Each stock option granted by the Committee under this Plan
shall be
subject to the following terms and
conditions:
|
6.1. |
Price.
The exercise price per share shall be determined by the Committee,
subject
to adjustment under Section 9.5; provided that in no event shall
the
exercise price be less than the Fair Market Value of a share of Common
Stock on the date of grant.
|
6.2. |
Number.
The number of shares of Common Stock subject to the option shall
be
determined by the Committee, subject to Section 5 and subject to
adjustment as provided in Section
9.5.
|
6.3. |
Duration
and Time for Exercise. The term of each stock option shall be determined
by the Committee but shall not exceed 10 years from date of grant.
Each
stock option shall become exercisable at such time or times during
its
term as shall be determined by the
Committee.
|
6.4. |
Repurchase.
Upon approval of the Committee, the Company may repurchase a previously
granted stock option from a participant by mutual agreement before
such
option has been exercised by payment to the participant of the amount
per
share by which: (i) the Fair Market Value (as defined in Section
9.11) of
the Common Stock subject to the option on the business day immediately
preceding the date of purchase exceeds (ii) the exercise
price.
|
6.5. |
Manner
of Exercise. A stock option may be exercised, in whole or in part,
by
giving written notice to the Company, specifying the number of shares
of
Common Stock to be purchased. The exercise notice shall be accompanied
by
the full purchase price for such shares. The option price shall be
payable
in United States dollars and may be paid (a) in cash; (b) by check;
(c) by
delivery or attestation of ownership of shares of Common Stock which,
unless otherwise determined by the Committee, shall have been held
by the
optionee for at least six months, and which shares shall be valued
for
this purpose at the Fair Market Value on the business day of the
date such
option is exercised; (d) by delivery of irrevocable written instructions
to a broker approved by the Company (with a copy to the Company)
to
immediately sell a portion of the shares issuable under the option
and to
deliver promptly to the Company the amount of sale proceeds (or loan
proceeds if the broker lends funds to the participant for delivery
to the
Company) to pay the exercise price; (e) by authorizing the Company
to
withhold from the exercise that number of shares of Common Stock
which,
when multiplied by the Fair Market Value of a share of Common Stock
on the
date of exercise, is equal to the aggregate exercise price payable
with
respect to the options being exercised (a “Net Share Exercise”) or (f) in
such other manner as may be authorized from time to time by the
Committee.
|
6.6. |
Repricing.
Except for adjustments pursuant to Section 9.5 or actions permitted
to be
taken by the Committee under Section 9.10C. in the event of a Change
of
Control, unless approved by the stockholders of the Company, (a)
the
exercise price for any outstanding option granted under this Plan
may not
be decreased after the date of grant; and (b) an outstanding option
that
has been granted under this Plan may not, as of any date that such
option
has a per share exercise price that is greater than the then current
Fair
Market Value of a share of Common Stock, be surrendered to the Company
as
consideration for the grant of a new option with a lower exercise
price,
shares of Common Stock or a cash
payment.
|
7.1. |
Grant
of Restricted Stock. The Committee may award shares of restricted
stock to
such eligible participants as the Committee determines pursuant to
the
terms of Section 3. An award of restricted stock shall be subject
to such
restrictions on transfer and forfeitability provisions and such other
terms and conditions, including the attainment of specified performance
goals, as the Committee may determine, subject to the provisions
of the
Plan. To the extent restricted stock is intended to qualify as
“performance-based compensation” under Section 162(m), it must be granted
subject to the attainment of performance goals as described in Section
8
below and meet the additional requirements imposed by Section
162(m).
|
7.2. |
The
Restricted Period. At the time an award of restricted stock is made,
the
Committee shall establish a period of time during which the transfer
of
the shares of restricted stock shall be restricted and after which
the
shares of restricted stock shall be vested (the “Restricted Period”).
Except for shares of restricted stock that vest based on the attainment
of
performance goals and except for shares of restricted stock granted
to
directors, the Restricted Period shall be a minimum of three years,
with
incremental vesting of portions of the award over the three-year
period
permitted. If the vesting of the shares of restricted stock is based upon
the attainment of performance goals or if shares of restricted stock
are
granted to directors, a minimum Restricted Period of one year is
allowed,
with incremental vesting of portions of the award over the one-year
period
permitted. Each award of restricted stock may have a different Restricted
Period. The expiration of the Restricted Period shall also occur
as
provided under Section 9.3 and under the conditions described in
Section
9.10 hereof.
|
7.3. |
Incentive
Agreement and Registration of Shares. The participant receiving restricted
stock shall enter into an Incentive Agreement with the Company setting
forth the conditions of the grant. The shares of restricted stock
awarded
shall be registered in the name of the participant in book entry
form
reflecting the restrictions on transfer.
|
7.4. |
Dividends
on Restricted Stock. Any and all cash and stock dividends paid with
respect to the shares of restricted stock shall be subject to any
restrictions on transfer, forfeitability provisions or reinvestment
requirements as the Committee may, in its discretion, prescribe in
the
Incentive Agreement.
|
7.5. |
Forfeiture.
In the event of the forfeiture of any shares of restricted stock
under the
terms provided in the Incentive Agreement (including any additional
shares
of restricted stock that may result from the reinvestment of cash
and
stock dividends, if so provided in the Incentive Agreement), such
forfeited shares shall be cancelled. The participants shall have
the same
rights and privileges, and be subject to the same forfeiture provisions,
with respect to any additional shares received pursuant to Section
9.5 due
to a recapitalization, merger or other change in
capitalization.
|
7.6. |
Expiration
of Restricted Period. Upon the expiration or termination of the Restricted
Period and the satisfaction of any other conditions prescribed by
the
Committee, the restrictions applicable to the restricted stock shall
lapse
and a stock certificate for the number of shares of restricted stock
with
respect to which the restrictions have lapsed shall be delivered,
free of
all such restrictions and legends, except any that may be imposed
by law,
to the participant or the participant’s estate, as the case may
be.
|
7.7. |
Rights
as a Shareholder. Subject to the terms and conditions of the Plan
and
subject to any restrictions on the receipt of dividends that may
be
imposed in the Incentive Agreement, each participant receiving restricted
stock shall have all the rights of a shareholder with respect to
shares of
stock during the Restricted Period, including without limitation,
the
right to vote any shares of Common Stock and the right to receive
any
dividends.
|
8. |
Performance
Goals for Section 162(m) Awards. To the extent that shares of restricted
stock granted under the Plan are intended to qualify as “performance-based
compensation” under Section 162(m), the vesting or grant of such awards
shall be conditioned on the achievement of one or more performance
goals
and must satisfy the other requirements of Section 162(m). The performance
goals pursuant to which such shares of restricted stock shall vest
or be
granted shall be any or a combination of the following performance
measures applied to the Company, POOL, a division or a subsidiary:
earnings per share, return on assets, an economic value added measure,
shareholder return, earnings, stock price, return on equity, return
on
total capital, reduction of expenses, increase in cash flow, increase
in
revenues or customer growth. The performance goals may be subject
to such
adjustments as are specified in advance by the Committee. For any
performance period, such performance objectives may be measured on
an
absolute basis or relative to a group of peer companies selected
by the
Committee, relative to internal goals or relative to levels attained
in
prior years. For grants intended to qualify as performance-based
compensation under Section 162(m), the Committee may not waive any
of the
pre-established performance goal objectives, except for an automatic
waiver under Section 9.10 hereof, or as may be provided by the Committee
in the event of death or
disability.
|
9.1. |
Duration.
Subject to Section 9.9, the Plan shall remain in effect until all
Incentives granted under the Plan have either been satisfied by the
issuance of shares of Common Stock or otherwise been terminated under
the
terms of the Plan and all restrictions imposed on shares of Common
Stock
in connection with their issuance under the Plan have
lapsed.
|
9.2. |
Transferability.
No Incentives granted hereunder may be transferred, pledged, assigned
or
otherwise encumbered by a participant except: (a) by will; (b) by
the laws
of descent and distribution; (c) pursuant to a domestic relations
order,
as defined in the Code; or (d) as to options, (i) to Family Members,
(ii)
to a partnership in which the participant and/or Family Members,
or
entities in which the participant and/or Family Members are the sole
owners, members or beneficiaries, as appropriate, are the sole partners,
(iii) to a limited liability company in which the participant and/or
Family Members, or entities in which the participant and/or Family
Members
are the sole owners, members or beneficiaries, as appropriate, are
the
sole members, (iv) to a trust for the sole benefit of the participant
and/or Family Members or (v) to a charitable organization. “Family
Members” shall be defined as the participant’s child, stepchild,
grandchild, parent, step-parent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, and any person sharing the employee’s household (other than
a tenant or employee). Any attempted assignment, transfer, pledge,
hypothecation or other disposition of Incentives, or levy of attachment
or
similar process upon Incentives not specifically permitted herein,
shall
be null and void and without
effect.
|
9.3. |
Effect
of Termination of Employment or Death. In the event that a participant
ceases to be an employee of the Company or to provide services to
the
Company for any reason, including death, disability, early retirement
or
normal retirement, any Incentives may be exercised, shall vest or
shall
expire at such times as may be determined by the Committee and provided
in
the Incentive Agreement.
|
9.4. |
Additional
Conditions. Anything in this Plan to the contrary notwithstanding:
(a) the
Company may, if it shall determine it necessary or desirable for
any
reason, at the time of award of any Incentive or the issuance of
any
shares of Common Stock pursuant to any Incentive, require the recipient
of
the Incentive, as a condition to the receipt thereof or to the receipt
of
shares of Common Stock issued pursuant thereto, to deliver to the
Company
a written representation of present intention to acquire the Incentive
or
the shares of Common Stock issued pursuant thereto for his own account
for
investment and not for distribution; and (b) if at any time the Company
further determines, in its sole discretion, that the listing, registration
or qualification (or any updating of any such document) of any Incentive
or the shares of Common Stock issuable pursuant thereto is necessary
on
any securities exchange or under any federal or state securities
or blue
sky law, or that the consent or approval of any governmental regulatory
body is necessary or desirable as a condition of, or in connection
with
the award of any Incentive, the issuance of shares of Common Stock
pursuant thereto, or the removal of any restrictions imposed on such
shares, such Incentive shall not be awarded or such shares of Common
Stock
shall not be issued or such restrictions shall not be removed, as
the case
may be, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the
Company.
|
9.5. |
Adjustment.
In the event of any recapitalization, stock dividend, stock split,
combination of shares or other similar change in the Common Stock,
the
number of shares of Common Stock then subject to the Plan, including
shares subject to outstanding Incentives, and all limitations on
the
number of shares that may be issued hereunder shall be adjusted in
proportion to the change in outstanding shares of Common Stock. In
the
event of any such adjustments, the purchase price of any option and
the
performance objectives of any Incentive, shall also be adjusted as
and to
the extent appropriate, in the reasonable discretion of the Committee,
to
provide participants with the same relative rights before and after
such
adjustment. No substitution or adjustment shall require the Company
to
issue a fractional share under the Plan and the substitution or adjustment
shall be limited by deleting any fractional
share.
|
A. |
The
Company shall have the right to withhold from any stock issued under
the
Plan or to collect as a condition of issuance or vesting, any taxes
required by law to be withheld. At any time that a participant is
required
to pay to the Company an amount required to be withheld under applicable
income tax laws in connection with the lapse of restrictions on Common
Stock or the exercise of an option, the participant has the right
to
satisfy this obligation in whole or in part by electing (the “Election”)
to deliver currently owned shares of Common Stock or to have the
Company
withhold shares of Common Stock, in each case having a value equal
to the
minimum statutory amount required to be withheld under federal, state
and
local law. The value of the shares to be delivered or withheld shall
be
based on the Fair Market Value of the Common Stock on the date as
of which
the amount of tax to be withheld shall be determined (“Tax
Date”).
|
B. |
Each
Election must be made prior to the Tax Date. If a participant makes
an
election under Section 83(b) of the Code with respect to shares of
restricted stock, an Election to have shares withheld to satisfy
withholding taxes is not permitted to be
made.
|
9.7. |
No
Continued Employment. No participant under the Plan shall have any
right,
because of his or her participation, to continue in the employ of
the
Company for any period of time or to any right to continue his or
her
present or any other rate of
compensation.
|
9.8. |
Deferral
Permitted. Payment of an Incentive may be deferred at the option
of the
participant if permitted in the Incentive
Agreement.
|
9.9. |
Amendments
to or Termination of the Plan. The Board may amend or discontinue
this
Plan at any time; provided, however, that no such amendment
may:
|
A. |
without
the approval of the shareholders, (i) except for adjustments permitted
herein, increase the maximum number of shares of Common Stock that
may be
issued through the Plan, (ii) amend Section 6.6 to permit repricing
of
options. or (iii) make any other change for which shareholder approval
is
required by law or under the applicable rules of the NASDAQ;
or
|
B. |
materially
impair, without the consent of the recipient, an Incentive previously
granted.
|
A. |
A
Change of Control shall mean:
|
i. |
the
acquisition by any person of beneficial ownership of 50% or more
of the
outstanding shares of the Common Stock or 50% or more of the combined
voting power of POOL’s then outstanding securities entitled to vote
generally in the election of directors; provided, however, that for
purposes of this subsection (i), the following acquisitions shall
not
constitute a Change of Control:
|
a. |
any
acquisition (other than a Business Combination (as defined below)
which
constitutes a Change of Control under Section 9.10(A)(iii) hereof)
of
Common Stock directly from the
Company,
|
b. |
any
acquisition of Common Stock by the
Company,
|
c. |
any
acquisition of Common Stock by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or
|
d. |
any
acquisition of Common Stock by any corporation pursuant to a Business
Combination that does not constitute a Change of Control under Section
9.10(A)(iii) hereof; or
|
ii. |
a
majority of the directors of the Company shall be persons other than
persons
|
a. |
for
whose election proxies shall have been solicited by the Board,
or
|
b. |
who
are then serving as directors appointed by the Board to fill vacancies
on
the Board caused by death or resignation (but not by removal) or
to fill
newly-created directorships; or
|
iii. |
consummation
of a reorganization, share exchange, merger or consolidation (including
any such transaction involving any direct or indirect subsidiary
of POOL)
or sale or other disposition of all or substantially all of the assets
of
the Company (a “Business Combination”); provided, however, that in no such
case shall any such transaction constitute a Change of Control if
immediately following such Business
Combination:
|
a. |
the
individuals and entities who were the beneficial owners of POOL’s
outstanding Common Stock and POOL’s voting securities entitled to vote
generally in the election of directors immediately prior to such
Business
Combination have direct or indirect beneficial ownership, respectively,
of
more than 50% of the then outstanding shares of common stock, and
more
than 50% of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors
of the
surviving or successor corporation, or, if applicable, the ultimate
parent
company thereof (the “Post-Transaction Corporation”),
and
|
b. |
except
to the extent that such ownership existed prior to the Business
Combination, no person (excluding the Post-Transaction Corporation
and any
employee benefit plan or related trust of either POOL, the
Post-Transaction Corporation or any subsidiary of either corporation)
beneficially owns, directly or indirectly, 50% or more of the then
outstanding shares of common stock of the corporation resulting from
such
Business Combination or 50% or more of the combined voting power
of the
then outstanding voting securities of such corporation,
and
|
c. |
at
least a majority of the members of the board of directors of the
Post-Transaction Corporation were members of the Board at the time
of the
execution of the initial agreement, or of the action of the Board
of
Directors, providing for such Business Combination;
or
|
iv. |
approval
by the shareholders of POOL of a complete liquidation or dissolution
of
POOL.
|
For
purposes of this Section 9.10, the term “person” shall mean a natural person or
entity, and shall also mean the group or syndicate created when two or more
persons act as a syndicate or other group (including, without limitation, a
partnership or limited partnership) for the purpose of acquiring, holding,
or
disposing of a security, except that “person” shall not include an underwriter
temporarily holding a security pursuant to an offering of the security.
B. |
Upon
a Change of Control of the type described in clause (A)(i) or (A)(ii)
of
this Section 9.10 or immediately prior to any Change of Control of
the
type described in clause (A)(iii) or (A)(iv) of this Section 9.10,
all
outstanding Incentives granted pursuant to this Plan shall automatically
become fully vested and exercisable, all restrictions or limitations
on
any Incentives shall automatically lapse and, unless otherwise provided
in
the applicable Incentive Agreement, all performance criteria and
other
conditions relating to the payment of Incentives shall be deemed
to be
achieved or waived by POOL without the necessity of action by any
person.
As used in the immediately preceding sentence, ‘immediately prior’ to the
Change of Control shall mean sufficiently in advance of the Change
of
Control to permit the grantee to take all steps reasonably necessary
(i)
if an optionee, to exercise any such option fully and (ii) to deal
with
the shares purchased or acquired under any such option and any formerly
restricted shares on which restrictions have lapsed so that all types
of
shares may be treated in the same manner in connection with the Change
of
Control as the shares of Common Stock of other
shareholders.
|
C. |
No
later than 30 days after a Change of Control of the type described
in
subsections (A)(i) or (A)(ii) of this Section 9.10 and no later than
30
days after the approval by the Board of a Change of Control of the
type
described in subsections (A)(iii) or (A)(iv) of this Section 9.10,
the
Committee, acting in its sole discretion without the consent or approval
of any participant (and notwithstanding any removal or attempted
removal
of some or all of the members thereof as directors or Committee members),
may act to effect one or more of the alternatives listed below, which
may
vary among individual participants and which may vary among Incentives
held by any individual participant:
|
i. |
require
that all outstanding options be exercised on or before a specified
date
(before or after such Change of Control) fixed by the Committee,
after
which specified date all unexercised options and all rights of
participants thereunder shall
terminate,
|
ii. |
make
such equitable adjustments to Incentives then outstanding as the
Committee
deems appropriate to reflect such Change of Control (provided, however,
that the Committee may determine in its sole discretion that no adjustment
is necessary),
|
iii. |
provide
for mandatory conversion of some or all of the outstanding options
held by
some or all participants as of a date, before or after such Change
of
Control, specified by the Committee, in which event such options
shall be
deemed automatically cancelled and the Company shall pay, or cause
to be
paid, to each such participant an amount of cash per share equal
to the
excess, if any, of the Change of Control Value of the shares subject
to
such option, as defined and calculated below, over the exercise price
of
such options or, in lieu of such cash payment, the issuance of Common
Stock or securities of an acquiring entity having a Fair Market Value
equal to such excess, or
|
iv. |
provide
that thereafter, upon any exercise of an option, the holder shall
be
entitled to purchase or receive under such option, in lieu of the
number
of shares of Common Stock then covered by such option, the number
and
class of shares of stock or other securities or property (including,
without limitation, cash) to which the holder would have been entitled
pursuant to the terms of the agreement providing for the reorganization,
share exchange, merger, consolidation or asset sale, if, immediately
prior
to such Change of Control, the holder had been the record owner of
the
number of shares of Common Stock then covered by such
option.
|
D. |
For
the purposes of paragraph (iii) of Section 9.10(C), the "Change of
Control
Value" shall equal the amount determined by whichever of the following
items is applicable:
|
i. |
the
per share price to be paid to holders of Common Stock in any such
merger,
consolidation or other
reorganization,
|
ii. |
the
price per share offered to holders of Common Stock in any tender
offer or
exchange offer whereby a Change of Control takes
place,
|
iii. |
in
all other events, the fair market value per share of Common Stock
into
which such options being converted are exercisable, as determined
by the
Committee as of the date determined by the Committee to be the date
of
conversion of such options, or
|
iv. |
in
the event that the consideration offered to holders of Common Stock
in any
transaction described in this Section 9.10 consists of anything other
than
cash, the Committee shall determine the fair cash equivalent of the
portion of the consideration offered that is other than
cash.
|
9.11. |
Definition
of Fair Market Value. Whenever “Fair Market Value” of Common Stock shall
be determined for purposes of this Plan, it shall be determined as
follows: (i) if the Common Stock is listed on an established stock
exchange or any automated quotation system that provides sale quotations,
the closing sale price for a share of the Common Stock on such exchange
or
quotation system on the applicable date, or if no sale of the Common
Stock
shall have been made on that day, on the next preceding day on which
there
was a sale of the Common Stock; (ii) if the Common Stock is not listed
on
any exchange or quotation system, but bid and asked prices are quoted
and
published, the mean between the quoted bid and asked prices on the
applicable date, and if bid and asked prices are not available on
such
day, on the next preceding day on which such prices were available;
and
(iii) if the Common Stock is not regularly quoted, the fair market
value
of a share of Common Stock on the applicable date as established
by the
Committee in good faith.
|
9.12. |
Incentive
Agreements. Each award of an Incentive hereunder shall be evidenced
by an
agreement or notice delivered to the participant, by paper copy or
electronic copy, that shall specify the terms and conditions thereof
and
any rules applicable thereto, including but not limited to the effect
on
such Incentive of the participant’s ceasing to be employed by or to
provide services to the Company. The Incentive Agreement may also
provide
for the forfeiture of an Incentive in the event that the participant
competes with the Company or engages in other activities that are
harmful
to or against the interests of the
Company.
|
109
NORTHPARK BLVD.
COVINGTON,
LA 70433
VOTE
BY INTERNET - www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day
before
the cut-off date or meeting date. Have your proxy card in hand
when you
access the web site and follow the instructions to obtain your
records and
to create an electronic voting instruction form.
|
ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER
COMMUNICATIONS
If
you would like to reduce the costs incurred by Pool Corporation
in mailing
proxy materials, you can consent to receiving all future proxy
statements,
proxy cards and annual reports electronically via e-mail or the
Internet.
To sign up for electronic delivery, please follow the instructions
above
to vote using the Internet and, when prompted, indicate that you
agree to
receive or access shareholder communications electronically in
future
years.
|
VOTE
BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions up
until
11:59 P.M. Eastern Time the day before the cut-off date or meeting
date.
Have your proxy card in hand when you call and then follow the
instructions.
|
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid
envelope
we have provided or return it to Pool Corporation, c/o ADP, 51
Mercedes
Way, Edgewood, NY 11717.
|
TO
VOTE,
MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
-------------------------------------------------------------------------------------------------------------------------------------------------------------------
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
POOL
CORPORATION
|
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE NOMINEES LISTED BELOW AND FOR
PROPOSALS 2 AND 3.
|
|
|
|
For
All
|
Withhold
All
|
For
All
Except
|
To
withhold authority to vote for any individual nominee(s), mark “For All
Except” and write the number(s) of the nominee(s) on the line
below.
|
|
|
|
|
|
|
1.
|
Election
of Directors
|
o
|
o
|
o
|
|
01)
Wilson
B. Sexton
|
05) Manuel
J. Perez de la Mesa
|
|
|
|
|
02)
Andrew
W. Code
|
06) Robert
C. Sledd
|
|
|
|
|
03) James
J.Gaffney
|
07) Harlan
F. Seymour
|
|
|
|
|
04) George
T. Haymaker, Jr.
|
08) John
E. Stokely
|
|
|
|
|
|
|
|
|
|
|
|
|
For
|
Against
|
Abstain
|
2.
|
Approval
of the Company’s 2007 Long-Term Incentive Plan.
|
o
|
o
|
o
|
|
|
|
|
|
3.
|
Ratification
of the retention of Ernst & Young LLP as the Company’s independent
auditors.
|
o
|
o
|
o
|
|
|
|
|
|
4.
|
In
their discretion, to transact such other business as may properly
come
before the meeting and any adjournments thereof.
|
|
|
PLEASE
SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
IF A
CORPORATION, PLEASE SIGN FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP
NAME BY
AUTHORIZED PERSON.
PLEASE
MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
|
|
|
|
|
|
Signature
[PLEASE SIGN WITHIN BOX]
|
Date
|
|
Signature
(Joint Owners)
|
Date
|
POOL
CORPORATION
109
NORTHPARK BOULEVARD
COVINGTON,
LOUISIANA 70433
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
POOL
CORPORATION
The
undersigned hereby appoints Craig K. Hubbard and A. David Cook, or either of
them, as proxies, each with full power of substitution, and hereby authorizes
each of them to represent and to vote, as designated on the reverse side, all
shares of Common Stock of Pool Corporation (the “Company”) held of record by the
undersigned on March 16, 2007, at the annual meeting of stockholders to be
held
at the office of Jones, Walker, Waechter, Poitevent, Carrere & Denegre
L.L.P., at 201 St. Charles Avenue, New Orleans, Louisiana 70170-5100, on May
8,
2007, or any adjournment or postponement thereof.
THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTIONS ARE GIVEN, THIS PROXY WILL BE
VOTED FOR ALL OF THE DIRECTOR NOMINEES NAMED ON THE REVERSE SIDE AND FOR
PROPOSALS 2 AND 3. THE PROXY HOLDERS NAMED ABOVE WILL VOTE IN THEIR DISCRETION
ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE
MEETING.
(Please
See Reverse Side)