10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: September 29, 2007

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             .

Commission file number: 0-18741

LESLIE’S POOLMART, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-4620298
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3925 E. Broadway Road, Suite 100

Phoenix, Arizona 85040

(Address of principal executive offices)

Registrant’s telephone number, including area code: (602) 366-3999

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to section 13 or Section 15(d).    Yes  x    No  ¨

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  ¨ Accelerated Filer ¨ Non-Accelerated Filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  ¨    No  x

APPLICABLE ONLY TO CORPORATE REGISTRANTS:

The Number of Shares of Common Stock outstanding as of December 17, 2007 was 100.

TABLE OF CONTENTS

For the Fiscal Year Ended September 29, 2007

		Page
	PART I
Item 1.	Business	2
Item 1A.	Risk Factors	5
Item 1B.	Unresolved Staff Comments	7
Item 2.	Properties	7
Item 3.	Legal Proceedings	8
Item 4.	Submission of Matters to a Vote of Security Holders	8
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	9
Item 6.	Selected Financial Data	10
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	20
Item 8.	Financial Statements and Supplementary Data	21
Item 9.	Changes in and Disagreements with Accountants On Accounting and Financial Disclosure	39
Item 9A.	Controls and Procedures	39
Item 9B.	Other Information	39
	PART III
Item 10.	Directors and Executive Officers of the Registrant	39
Item 11.	Executive Compensation	42
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	53
Item 13.	Certain Relationships and Related Transactions	54
Item 14.	Principal Accountant Fees and Services	55
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	56

1

PART I

ITEM 1. BUSINESS

Leslie’s Poolmart, Inc. (“Leslie’s” or the “Company”) is the leading national specialty retailer of swimming pool supplies and related products. These products primarily consist of regularly purchased, non-discretionary pool maintenance items such as chemicals, equipment, cleaning accessories and parts, and also include fun, safety and fitness-oriented recreational items. The Company currently markets its products under the trade name Leslie’s Swimming Pool Supplies through 577 company-owned retail stores in 35 states, mail order catalogs sent to selected pool owners nationwide, and an internet web store.

The Company provides its customers a comprehensive selection of high quality products, competitive every day low prices and superior customer service through knowledgeable and responsive sales personnel who offer a high level of technical assistance at convenient store locations. The typical Leslie’s store is located in an area with high concentrations of swimming pools and approximates 3,800 square feet of space. The typical store is located either in a strip center or on a freestanding site in an area of heavy retail activity, and draws its customers primarily from an approximately five-mile trade area. The Company maintains a proprietary mailing list of approximately 7.1 million addresses, including approximately 90% of the residential in-ground pools in the U.S. This highly focused list of target customers is central to the Company’s direct mail marketing efforts, which supports its retail stores, mail order operations and web store.

The Company is a wholly-owned subsidiary of Leslie’s Holdings, Inc. (“Holdings”) and was incorporated as a Delaware corporation in 1997. The Company’s principal executive offices are located at 3925 E. Broadway Road, Suite 100, Phoenix, Arizona 85040, and the telephone number at that address is (602) 366-3999. Leslie’s corporate website address is www.lesliespool.com.

See Item 8, Financial Statements and Supplementary Data, for financial information.

Swimming Pool Supply Industry

We market our products and services in the estimated $5.0 billion U.S. swimming pool and spa supply industry, which can be divided into four major segments: residential in-ground swimming pools, residential above-ground pools (usually 12 to 24 feet in diameter), commercial swimming pools and spas or hot tubs. According to market research firm P.K. Data, the installed base of residential in-ground pools, above-ground pools and spas and hot tubs in the United States has grown from just under 9 million in 1993 to over 14.2 million in 2006, and is projected to grow to over 18.2 million by 2011. Both historic and new pool unit growth is highly correlated to macroeconomic housing trends, as approximately 60% of all in-ground swimming pools are built as part of new home construction.

Regardless of the type or size of a swimming pool, there are numerous ongoing maintenance and repair requirements associated with pool ownership. In order to keep a pool safe and sanitized, chemical treatment is required to maintain proper chemical balance, particularly in response to variables such as pool usage, precipitation and temperature. A swimming pool is chemically balanced when the disinfectant, pH, alkalinity, hardness and dissolved solids are at the desired levels. The majority of swimming pool owners use chlorine to disinfect their pools. When the pool is chemically balanced, problems such as algae, mineral and salt saturation, corrosive water, staining, eye irritation and strong chlorine smell are less likely to occur. A regular testing and maintenance routine will result in a stable and more easily maintained pool. However, regardless of how well appropriate levels of chlorine are maintained, “shocking” is periodically required to break up the contaminants which invariably build up in the pool water. To accomplish this, the pool owner can either superchlorinate the pool or use a nonchlorinated oxidizing compound. The maintenance of proper chemical balance and the related upkeep and repair of swimming pool equipment, such as pumps, heaters, and filters, as well as safety equipment, create a non-discretionary demand for pool chemicals and other swimming pool supplies and services. Further, non-usage considerations such as a pool’s appearance and the overall look of a household and yard create an ongoing demand for these maintenance related supplies. In addition, pool usage creates demand for discretionary items such as floats, games and accessories.

The Company’s historical strategy has been to focus primarily on the residential in-ground pool owner. In recent years, the Company has expanded its activities to more aggressively address the commercial, above-ground and spa markets as well. In the residential categories, the Company markets its products primarily to the “do-it-yourself” market as opposed to those pool owners who hire pool servicers. Through its commercial business, products and services are offered to commercial property managers, non-residential pool installers, as well as to pool service companies which maintain either residential or commercial pools.

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Seasonality

The Company’s business exhibits substantial seasonality, which the Company believes is typical of the swimming pool supply industry. In general, sales and net income are highest during the quarters ended June and September that represent the peak months of swimming pool use. Sales are substantially lower during the quarters ended December and March when the Company typically incurs net losses. The principal external factor affecting the Company’s business is weather. Hot weather and the higher frequency of pool usage in such weather create a need for more pool chemicals and supplies. Unseasonably early or late warming trends can increase or decrease the length of the pool season. In addition, unseasonably cool weather and/or extraordinary amounts of rainfall in the peak season will tend to decrease swimming pool use. The likelihood that unusual weather patterns will severely impact the Company’s results is lessened by the geographical diversification of the Company’s store locations.

The Company also expects that its quarterly results of operations will fluctuate depending on the timing and amount of revenue contributed by new stores and, to a lesser degree, the timing of costs associated with the opening of new stores. The Company attempts to open its new stores primarily in the quarter ending March in order to position itself for the following peak season.

Products

Leslie’s offers its customers a comprehensive selection of products necessary to satisfy their swimming pool supply needs. During 2007, the Company stocked approximately 1,400 items in each store, with more than 30,000 additional items available through its other channels of distribution and special order processes. In 2007, approximately 725 items were displayed in the Company’s residential mail order catalogs, approximately 2,300 items were offered through the Company’s web store and 1,200 items were in the commercial catalog, although special order procedures make nearly all Leslie’s products available to these customers as well. In fiscal year 2007, Leslie’s brand name products accounted for 37% of the Company’s total sales.

The Company’s major product categories are pool chemicals; major equipment; cleaning and testing equipment; safety equipment; pool covers, reels and liners; above-ground pools in a limited number of stores; and recreational items (which include swimming pool floats, games, lounges, masks, fins, snorkels and other “impulse purchase” items).

Non-discretionary and regularly consumed products such as pool chemicals, major equipment and parts represented 84% of total sales in fiscal year 2007. The Company’s non-discretionary products typically have long shelf lives and are generally not prone to either obsolescence or shrinkage which could occur from changing technology or consumer buying patterns.

Channels of Distribution

Retail Store Operations. At the end of fiscal year 2007, Leslie’s marketed its products through 577 retail stores in 35 states under the trade name Leslie’s Swimming Pool Supplies. California represents its single largest concentration of stores with 128 stores, while 105 stores are located in Texas, and over 100 stores are in the northeast/mid-Atlantic states. Leslie’s retail stores are located in areas with high concentrations of swimming pools and typically are approximately 3,800 square feet in size. In addition to the store manager, the typical Leslie’s store employs one assistant manager, who is generally a full-time employee. Additionally, Leslie’s makes frequent use of part-time and temporary employees to support its full-time employees during peak seasons. During 2007, the Company had 6 regional vice presidents and 37 district managers. Each district manager was responsible for approximately 15 stores.

Mail Order Catalog and Internet Web Store. Leslie’s mail order catalogs provide an extension of its service philosophies and products to those areas not currently served by a retail store and allow the scope of the Company’s business to be truly nationwide. The Company also operates a web store (www.lesliespool.com) providing online customers with thousands of products available for ordering and important information on pool cleaning, equipment, sanitation, and safety advice. The virtual store allows customers an opportunity to shop online and the ability to retrieve relevant information, 24 hours a day, seven days a week. The Company believes that its mail order catalogs and Web Store build awareness of the Leslie’s name, provide it with buying and direct marketing efficiencies and, when coupled with information from its retail stores, are instrumental in determining site selection for new stores.

Customer Service

Due to the complicated nature of pool chemistry and equipment maintenance and consistent with its philosophy of being a full service swimming pool supply retailer, Leslie’s offers a high level of technical assistance to support its customers. The Company considers its training of store personnel to be an integral part of its service philosophy. Leslie’s extensive training program for all full-time and part-time store employees includes courses in water chemistry, water testing, trouble shooting on equipment, equipment sizing and parts replacement.

3

A significant number of Leslie’s stores are supported by the Leslie’s Service Department, which offers poolside equipment installation and repair, leak detection and repair, and seasonal opening and closing services. The Service Department utilizes both Company employees and subcontractors to perform these services.

Marketing

The majority of the Company’s marketing is done on a direct mail basis through its proprietary mailing list of approximately 7.1 million addresses at which, primarily, residential pools are located. Leslie’s has found that its ability to mail directly to this highly focused group is an effective and efficient way to conduct its marketing activities to both retail store and mail order customers. The Company constantly updates its address list through proprietary research techniques and in-store customer sign-ups.

Addresses on the Company’s proprietary list that are located within a specified service area of a retail store receive circulars once or twice per month from late March or early April through September or, selectively, through October. As a regular part of Leslie’s promotional activities, each mailer highlights specific items which are intended to increase store traffic, and reinforces to the customer the advantages of shopping at Leslie’s, which include everyday low pricing, knowledgeable employees, a high level of customer service, and a broad selection of high quality products. Addresses outside the Company’s store service areas, and recently active mail order customers within those service areas, receive the Company’s mail order catalogs. The Company also markets through online channels using its proprietary database, search engines and other online media. The Company utilizes local print media when it enters a new market, and does so regularly in connection with its above-ground pool sales markets. New store openings typically involve additional advertising in the first two to three months of operation.

Purchasing

Leslie’s management believes that because it is one of the largest purchasers of swimming pool supplies for retail sales in the United States, the Company is able to obtain very favorable pricing on its purchases from outside suppliers. Most raw materials and those products not repackaged by the Company are purchased directly from manufacturers. It is common in the swimming pool supply industry for certain manufacturers to offer extended dating terms on certain products to quantity purchasers such as Leslie’s. These dating terms are typically available to the Company for pre-season or early season purchases.

The Company’s principal chemical raw materials and granular chlorine compounds are purchased primarily from three suppliers. At the end of fiscal year 2006, the Company extended a multi-year product purchase agreement with a major producer of one of the principal chlorine compounds, the chlorinated isocyanurates. The Company believes there are several other reliable suppliers of chlorine products in the marketplace today. Although the Company has one sole source supplier for a nonchlorine shocking compound, the Company believes that termination of supply would not pose any significant problems because substitute chemicals and alternate shocking techniques are available. The Company believes that reliable alternative sources of supply are available for all of its raw materials and finished products.

Vertical Integration

Leslie’s operates a plant in Ontario, California where it converts dry granular chlorine into tablet form and repackages a variety of bulk chemicals into various sized containers suitable for retail sales. Leslie’s also formulates a variety of specialty liquids, including water clarifiers, tile cleaners, algaecides and stain preventives. The chemicals the Company processes have a relatively long shelf life. Leslie’s believes that supplying its stores with chemicals from its own repackaging plant provides it with cost savings, as well as greater control over product availability and quality, as compared to non-integrated pool supply retailers. It also offers the Company greater flexibility of product sourcing and vital information when negotiating with third-party repackagers and chemical providers. The Leslie’s branded product names appear on all products processed at its repackaging plant, and on the majority of its chemical products. The Company believes it is among the largest processors of chlorine products for the swimming pool supply industry.

In connection with the operation of its four distribution centers outside of California, the Company has expanded its use of third-party chemical repackagers and its purchase of products already in end-use configurations. These products are also generally packaged under the Leslie’s brand name. The Company continually evaluates the cost effectiveness of third-party sourcing versus internal manufacturing in order to minimize its cost of goods. The Company also operates a packaging operation of specialty items at its Hebron, Kentucky distribution facility. In addition to chemicals, a variety of the Company’s other products are packaged under the Leslie’s brand name.

4

Distribution

In 2007, the Company distributed its products to its retail stores and to its catalog customers through its leased distribution facilities in Ontario, California; Dallas, Texas; Swedesboro, New Jersey; Hebron, Kentucky; and Orlando, Florida.

The Company purchases the majority of the chemicals to be distributed from the Dallas, Swedesboro and Hebron distribution centers from outside manufacturers rather than obtaining them through its repackaging facility in Southern California. During the height of its seasonal activities, each of the Company’s retail store’s inventory is generally replenished every 5 to 7 days.

The Company utilizes a variety of leased and owned equipment, supplemented by additional equipment leased during the busy season, to transport its goods to stores.

Competition

Competition within the pool supply industry is highly fragmented and largely populated by local “mom and pop” stores and regional chains. Based on the number of stores, the Company estimates that the next largest specialty pool supply retailer is less than one-third of its size. Mass merchant and home improvement chains participate in the category on a seasonal basis. While the ability of these merchants to accept low margins on the limited number of items they offer makes them aggressive price competitors of the Company, they are not generally priced significantly below Leslie’s and do not offer the level of customer service or wide selection of swimming pool supplies available at Leslie’s.

Employees

As of September 29, 2007, Leslie’s employed approximately 2,200 persons. During the height of the Company’s seasonal activities in 2007, it employed approximately 3,300 persons, including seasonal and part-time store employees who generally are not employed during the off season. The Company is not subject to any collective bargaining agreements and believes its overall relationship with its employees is good.

Trademarks

In the course of its business, Leslie’s employs various trademarks, trade names and service marks as well as its logo in packaging and advertising its products. The Company has registered trademarks and trade names for several of its major products on the Principal Register of the United States Patent and Trademark Office. The Company distinguishes the products produced in its chemical repackaging operation or by third party repackagers at its direction through the use of the Leslie’s brand name and logo and the trademarks and trade names of the individual items, none of which is patented, licensed, or otherwise restricted to or by the Company. The Company believes the strength of its trademarks and trade names has been beneficial to its business and intends to continue to protect and promote its trademarks in appropriate circumstances.

ITEM 1A. RISK FACTORS

Certain factors that may affect our business and could cause actual results to differ materially from those expressed in any forward-looking statements include the following:

A small group of stockholders in the holding company are able to exercise control over our business.

The Company is a wholly-owned subsidiary of Leslie’s Holdings, Inc. (“Holdings”). The principle stockholders of Holdings are GCP California Fund, L.P. and additional affiliates of Leonard Green & Partners, L.P. Through their ownership or control of over 75% of the outstanding shares of the Company’s common stock, these stockholders have the power to elect a majority of the Leslie’s Board of Directors. Accordingly, those stockholders have the power to approve all amendments to the Company’s certificate of incorporation and bylaws and to effect fundamental corporate transactions such as mergers, asset sales and public offerings.

Our continued success depends on our successful expansion in new and existing markets.

The Company’s continued growth depends to a significant degree on its ability to open new stores in existing and new markets and to operate these stores on a profitable basis. To a lesser extent, the Company’s continued growth depends on increasing comparable store sales. The Company opened 40 net new stores in 2005, 27 net new stores in 2006 and 36 net new stores in 2007. We cannot assure that we will be able to open new stores in a timely manner; hire, train and integrate

5

employees; continue locating and obtaining favorable store sites; and adapt distribution, management information and other operating systems to the extent necessary to grow in a successful and profitable manner. Further, we cannot assure that the Company’s new stores will achieve historical levels of sales or profitability. Because the Company’s new stores generally have lower operating margins following their opening than mature stores, the opening of a large number of stores could have an adverse effect on total operating margins. Additionally, the Company’s expansion plans could be adversely affected by a significant downturn in the economy and resulting decrease in new home and swimming pool construction. We expect that the Company’s quarterly results of operations will fluctuate depending on the timing and the amount of revenue contributed by new stores and, to a lesser degree, the timing of costs associated with the opening of new stores.

Our business is highly seasonal and results of operations fluctuate as a result of weather conditions.

Our business exhibits substantial seasonality which we believe is typical of the swimming pool supply industry. In general, sales and earnings are highest during the quarters ending in June and September, which represent the peak months of swimming pool use. Typically, all of the Company’s operating income is generated in these two quarters which offsets the operating losses incurred in each of the other two quarters. Our business is significantly affected by weather patterns. For example, unseasonably late warming trends can decrease the length of the pool season, and unseasonably cool weather and/or extraordinary amounts of rainfall in the peak season may decrease swimming pool use, resulting in lower maintenance needs and decreased sales.

We may not be able to successfully compete with large volume mass merchants.

Most of the Company’s competition comes from local stores or regional chains which do not typically repackage products and which generally buy products in smaller quantities. The chain store competitors include a large franchise operator of approximately 170 retail outlets in the Florida market and a limited number of other retail chains of approximately 15 to 30 stores. We compete on selected principal products with large-volume mass merchants and home centers which offer a limited selection of pool supplies as compared to us. Should mass merchants increase the breadth of their pool related product offerings, it would likely have an adverse effect on our business. There are no proprietary technologies or other significant barriers to prevent other firms from entering the swimming pool supply retail market in the future. Competition could adversely impact the Company’s sales and operating margins.

Our business may be adversely affected by an economic downturn.

Consumer demand for swimming pool related products may decline if discretionary spending declines as a result of a downturn in the economy. While spending for maintenance, repairs and replacement by existing pool owners must occur to maintain existing swimming pools, a portion of the Company’s growth depends on the continued expansion of the installed swimming pool base, which may be considered a discretionary expenditure and could be negatively affected by a difficult economy.

Our business includes the packaging and storage of chemicals and an accident related to those chemicals could subject us to liability and increased costs.

We operate chemical repackaging facilities in Ontario, California and Hebron, Kentucky and we store chemicals in our retail stores and in distribution facilities in Ontario, California; Dallas, Texas; Swedesboro, New Jersey; Orlando, Florida; and Hebron, Kentucky. Because some of the chemicals we repackage and store are flammable or combustible compounds, we must comply with various fire and safety ordinances. However, a release at a retail store or a fire at one of the Company’s facilities could give rise to liability claims against us. In addition, if an incident involves a repackaging or distribution facility, we might be required temporarily to use alternate sources of supply that could increase the Company’s cost of sales. We believe that we maintain adequate insurance coverage. However, due to changes in the insurance industry that have led to higher costs, we can not guarantee that we will be able to maintain adequate insurance at reasonable rates or that the Company’s insurance coverage will be adequate to cover future claims that may arise.

Our business is subject to compliance with environmental, health, transportation and safety regulations.

We are subject to various regulations under federal, state and local environmental, health, transportation and safety requirements. These regulations govern the storage and sale of pool chemicals, as well as packaging, labeling, handling, and transportation of those products. Failure to comply with these laws may result in the assessment of civil and criminal penalties. Compliance with such laws in the future may be costly, as the trend in such regulations has been increasingly restrictive on activities that impact the environment.

6

We are dependent on key personnel and the loss of their services could adversely affect us.

We believe that the Company’s success is largely dependent upon the abilities and experience of its senior management team. The loss of services of one or more of these senior executives could adversely affect the Company’s results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

As of September 29, 2007, the Company operated 577 stores in 35 states. The following table sets forth information concerning the Company’s stores:

State	Number of Stores
Alabama	5
Arizona	61
Arkansas	1
California	128
Connecticut	9
Delaware	2
Florida	66
Georgia	22
Illinois	5
Indiana	7
Iowa	1
Kansas	2
Kentucky	4
Louisiana	8
Maryland	6
Massachusetts	7
Michigan	7
Mississippi	1
Missouri	8
Nebraska	1
Nevada	17
New Hampshire	2
New Jersey	21
New Mexico	2
New York	22
North Carolina	4
Ohio	10
Oklahoma	7
Pennsylvania	18
Rhode Island	1
South Carolina	3
Tennessee	6
Texas	105
Utah	1
Virginia	7
Total Stores	577

Except for 25 owned stores, the Company has leases on the remaining retail stores with lease terms expiring between 2007 and 2017. The Company’s typical lease term is five years, and in many instances, the Company has renewal options at increased rents. Five leases provide for rent contingent on sales exceeding specific amounts. No other leases require payment based on a percentage rent.

7

The Company’s corporate office is located in Phoenix, Arizona. The 52,000 square foot office space is leased until June 2009, and has one five-year renewal option.

The Company’s Southern California distribution center is located in a 183,000 square foot facility in Ontario, California. The Ontario facility is leased, expiring in 2014 and the lease has one five-year renewal option.

The Company’s distribution facility in Dallas, Texas contains 126,000 square feet of space. The lease of this facility was renewed in 2005 and is scheduled to expire in 2015, with one five-year option thereafter. The 130,500 square foot distribution facility in Swedesboro, New Jersey is leased for a 10-year term, expiring in 2008. The lease includes options to renew for two five-year periods. The 146,000 square foot distribution center in Hebron, Kentucky is leased for a 12-year term, expiring in 2010 and provides for three five-year renewal options. The 20,500 square foot distribution center in Orlando, Florida is leased for a 5-year term, expiring in 2009 and provides for two five-year renewal options.

ITEM 3. LEGAL PROCEEDINGS

The Company is routinely involved in legal proceedings involving claims related to the ordinary course of its business. The Company is currently not party to any material legal proceedings. While the outcome of any litigation is inherently unpredictable, the Company does not believe that the ultimate resolution of any of these matters will have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

8

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company became a subsidiary of Leslie’s Holdings, Inc (“Holdings”) during February 2007, pursuant to a tax-free reorganization in which the Company’s shareholders became shareholders of Holdings in the same proportions (the “2007 Reorganization”). As a result of the 2007 Reorganization, each share of outstanding common stock of the Company was converted into one share of common stock of Holdings, and each share of outstanding 10% senior redeemable exchangeable cumulative preferred stock of the Company was converted into one share of 10% senior redeemable exchangeable cumulative preferred stock of Holdings with the same rights, privileges, and preferences, including as to liquidation.

There is no public trading market for the Company’s common stock. As of December 17, 2007, all common stock was owned by Holdings.

We did not pay or declare dividends on our common stock during the 2006 or 2005 fiscal years. On July 16, 2007, the Company’s board of directors declared a cash dividend of $15.0 million on the Company’s common stock, par value $0.001 per share, to Holdings as its sole common stockholder of record on that date, in an aggregate amount. The cash dividend was paid on August 1, 2007. The payment of dividends is restricted, but not prohibited, by the agreements and instruments governing the Company’s indebtedness. The Company contemplates that dividends may be declared in future periods based upon the liquidity position of the Company.

Equity Compensation Plan Information:

In August 2005, Leslie’s board of directors adopted its 2005 Incentive Stock Option Plan (the “2005 Plan”), and reserved 1,300,000 shares of nonvoting common stock for issuance thereunder. As of the 2007 Reorganization, the 2005 Plan and related outstanding agreements were assumed by Holdings. Any future grants for options under the 2005 Plan will be for equity of Holdings and not the Company.

During the second quarter of 2007, pursuant to the 2005 Plan, Holdings’ board of directors approved the acceleration of the vesting of all outstanding stock options to purchase shares of common stock in Holdings. All of the options were exercised in February of 2007 after the 2007 Reorganization, and as of September 29, 2007 the Company had no outstanding equity awards to its employees or non-employees either directly or through grants by Holdings that would be attributable to the Company’s employees or non-employees.

9

ITEM 6. SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents selected consolidated financial data of the Company as of and for the fiscal years ended September 29, 2007, September 30, 2006, October 1, 2005, October 2, 2004, and September 27, 2003. The fiscal year ended October 2, 2004 consists of 53 weeks, and all other fiscal years presented consist of 52 weeks. This financial data was derived from the audited historical consolidated financial statements of the Company and should be read in conjunction with the consolidated financial statements of the Company and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

	Fiscal Years Ended
(Dollar Amounts in Thousands)	September 29, 2007			September 30, 2006			October 1, 2005			October 2, 2004			September 27, 2003
Operating Results:
Sales	$	468,882		$	440,565		$	388,506		$	356,041		$	327,165
Gross Profit		236,133			218,183			188,497			172,113			155,946
Gross Margin		50.4	%		49.5	%		48.5	%		48.3	%		47.7	%
Loss on Disposition of Fixed Assets		186			600			703			440			497
Depreciation and Amortization		12,619			11,789			11,881			11,281			10,186
Operating Income (1)		69,673			56,800			23,905			33,792			27,159
Interest Expense, net		14,712			19,397			18,834			7,172			9,566
Net Income/(Loss) (1)		32,226			20,505			(4,422	)		16,246			10,343
Balance Sheet Data:
Working Capital		66,657			43,213			23,657			33,354			15,410
Total Assets		199,639			178,727			142,405			141,169			121,472
Long-term Debt (2)		169,080			168,946			175,954			59,495			59,495
Redeemable Preferred Stock (2)		—			41,000			41,000			46,316			45,915
Stockholders’ Deficit (2)		(52,611	)		(122,224	)		(142,557	)		(39,091	)		(48,177	)
Selected Operating Data:
Capital Expenditures		13,122			11,180			12,305			10,899			8,616
Recapitalization and Restructuring Charges(1,3)		—			—			26,869			—			—
Adjusted EBITDA(1,3)		82,788			69,189			54,477			45,513			37,842
Adjusted EBITDA Margin(1,2,4)		17.7	%		15.7	%		14.0	%		12.8	%		11.6	%
Cash flow from Operating Activities		46,321			55,058			26,747			26,518			26,743
Cash flow used in Investing Activities		(12,626	)		(10,950	)		(12,168	)		(10,281	)		(8,607	)
Cash flow used in Financing Activities (1)		(12,918	)		(7,276	)		(29,174	)		(260	)		(32,112	)
Number of Employees		2,235			2,201			2,026			1,892			2,006
Number of Stores		577			541			514			474			437
Comparable Store Sales Growth(5)		3.1	%		9.2	%		6.4	%		3.3	%		2.3	%

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⁽¹⁾ During 2005 and as part of the 2005 Recapitalization described in Note 1 to the consolidated financial statements, the Company recognized $26.9 million in unusual charges for the following costs associated with the transaction:

(in thousands)	2005
Unusual operating charges:
Stock and other compensation expense	$	17,988
Other unusual operating charges:
Bond tender consideration and premium		3,246
Preferred stock premium		470
Miscellaneous, legal and advisory fees		2,904
Unamortized discount on preferred stock		571
Write-off debt issuance costs		1,690
Total		8,881
Total unusual charges	$	26,869

⁽²⁾ In the first quarter of 2005 and as part of the 2005 Recapitalization, the Company issued an aggregate of $170.0 million principal amount of its 7.75% Senior Notes due 2013. Further, $41.0 million of a new series of 10% senior redeemable exchangeable cumulative preferred stock was issued as part of the 2005 Recapitalization.

⁽³⁾ Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, loss/(gain) on disposition of fixed assets, stock compensation expense, write-off of debt issuance costs and unusual charges. Adjusted EBITDA is not a measure of financial performance under U.S. generally accepted accounting principles (“GAAP”), but is used by some investors to determine a Company’s ability to service or incur indebtedness. Adjusted EBITDA is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. Adjusted EBITDA should not be construed as an indicator of a Company’s operating performance or liquidity, and should not be considered in isolation from or as a substitute for net income (loss), cash flows from operations or cash flow data which are all prepared in accordance with GAAP. We have presented Adjusted EBITDA solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations. Adjusted EBITDA is not intended to represent and should not be considered more meaningful than, or as an alternative to, measures of operating performance as determined in accordance with GAAP.

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The calculation of Adjusted EBITDA is shown as follows:

	Fiscal Years Ended
(Amounts in Thousands)	September 9, 2007		September 30, 2006		October 1, 2005			October 2, 2004		September 27, 2003
Net income/(loss)	$	32,226	$	20,505	$	(4,422	)	$	16,246	$	10,343
Depreciation and amortization		12,619		11,789		11,881			11,281		10,186
Stock compensation expense		139		—		17,988			—		—
Recapitalization expenses		171		—		7,191			—		—
Interest expense, net		14,712		19,397		18,834			7,172		9,566
Write-off of debt issuance costs		—		—		1,690			—		420
Loss on disposition of assets		186		600		703			440		497
Income tax expense		22,735		16,898		612			10,374		6,830
Adjusted EBITDA	$	82,788	$	69,189	$	54,477		$	45,513	$	37,842

⁽⁴⁾ Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of sales.

⁽⁵⁾ The Company considers a store to be comparable in the first full month after it has completed 52 weeks of sales. Closed stores become non-comparable during their last partial month of operation. Stores that are relocated are considered comparable stores at the time the relocation is completed. Comparable store sales is not a measure of financial performance under GAAP. Comparable store sales is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information included in this document (as well as information included in oral statements or other written statements made or to be made by the Company) contains statements that are forward-looking, such as statements relating to plans for future activities. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, those relating to the Company’s capital structure, weather conditions, domestic economic conditions, activities of competitors, seasonality, changes in federal or state tax laws and the administration of such laws.

EXECUTIVE SUMMARY

Leslie’s is the leading national specialty retailer of swimming pool supplies and related products. The Company offers a broad range of products that consist of regularly purchased, non-discretionary pool maintenance items such as chemicals, equipment, cleaning accessories and parts, and also include fun, safety and fitness-oriented recreational items. The Company markets its products through 577 company-owned retail stores in 35 states and through catalogs and other offerings made available to select residential and commercial pool owners nationwide via mail order and Internet channels.

The typical Leslie’s store approximates 3,800 square feet of space, is located either in a strip center or on a freestanding site in an area of heavy retail activity, and draws its customers primarily from an approximately five-mile trade area. Of the 577 stores, the Company operates 16 commercial service center formats that average approximately 11,000 square feet of space and are located primarily in industrial type real estate space. These centers are designed to cater to the Company’s existing non-residential commercial and service customers and provide more customized service than is typically available at the other retail locations.

Results of Operations

The following table sets forth certain statements of income data expressed as a percentage of sales for the periods indicated.

	Fiscal Years Ended
	September 29, 2007		September 30, 2006		October 1, 2005
Sales	100.0	%	100.0	%	100.0	%
Cost of sales	49.6		50.5		51.5
Gross margin	50.4		49.5		48.5
Selling, general and administrative expense	35.5		36.5		42.2
Loss on disposal of fixed assets	0.0		0.1		0.2
Operating income	14.9		12.9		6.1
Other expense	3.2		4.4		7.1
Income tax expense	4.8		3.8		0.2
Net income/(loss)	6.9	%	4.7	%	(1.2	)%

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Fiscal year 2007 compared to fiscal year 2006:

For the 52 weeks ended September 29, 2007, sales increased 6.4% to $468.9 million from $440.6 million in the 52 weeks of 2006. Of the 6.4% increase in sales, approximately 47% was attributable to an increase in comparable store sales and approximately 53% was due to the addition of 38 new store locations.

Comparable store sales increased 3.1% on a 52 week basis, as compared to the prior year. The comparable store sales increase was primarily attributable to favorable weather conditions in many of the Company’s markets. For definition purposes, a store is considered a comparable store in the first full month after it has completed 52 weeks of sales. Closed stores become non-comparable during their last partial month of operation. Stores that are relocated are considered comparable stores at the time the relocation is completed.

Gross profit for the fiscal year ended September 29, 2007 improved to $236.1 million or 50.4% of sales, as compared to $218.2 million or 49.5% in 2006. Gross profit represents sales less the cost of services and purchased goods, chemical repackaging costs and related distribution costs. Gross profit dollars improved primarily due to the increase in sales and expanded margins on inventory that had been purchased earlier in the year in anticipation of market increases.

In 2007, total operating expenses were $166.5 million, versus $161.4 million during the 52 weeks of 2006, an increase of 3.1%. Operating expenses as a percentage of sales were 35.5% for the 52 weeks of fiscal year 2007 compared to 36.6% for the 52 weeks of fiscal year 2006. The increase in operating expense dollars during fiscal year 2007 was due primarily to increased expenses associated with the increase in store count, as compared to the prior year.

For the fiscal year ended September 29, 2007, the Company recognized losses on the disposition of fixed assets totaling approximately $0.2 million as compared to $0.6 million in the prior year. These losses were primarily associated with the Company’s decision to close or relocate stores that were unproductive or not meeting expectations. In fiscal year 2007 a $0.3 million charge was recognized for impaired assets compared to $0.4 million in fiscal year 2006.

Adjusted EBITDA in 2007 increased 19.7% to $82.8 million from $69.2 million in fiscal year 2006. Approximately $4.4 million of the increase was the result of increased sales and expanded gross profit, with the remaining increase due to improved expense control and continued leveraging of fixed expenses during the year.

Operating income for 2007 increased 22.7% to $69.7 million from $56.8 million in 2006 as a result of previously noted sales and gross profit improvements.

Interest expense was $14.7 million in 2007, as compared to $19.4 million in 2006. The decrease was primarily due to the decrease in average debt balances throughout the year and the elimination of interest on the Company’s preferred stock, which was assumed by Holdings.

The Company recorded income tax expense of $22.7 million in 2007, or an effective tax rate of 41.4%, versus $16.9 million in the prior year, or an effective tax rate of 45.2%. The effective rate decrease in 2007 was primarily due to nondeductibility of certain elements of the Company’s interest expense that were present during fiscal 2006 but were eliminated during February 2007.

Fiscal year 2006 compared to fiscal year 2005:

For the 52 weeks ended September 30, 2006, sales increased 13.4% to $440.6 million from $388.5 million in the 52 weeks of 2005. Of the 13.4% increase in sales, approximately 10.0% was attributable to an increase in comparable store sales and approximately 3.9% was due to the addition of 33 new store locations. These gains were offset by approximately 0.5% of a decrease due to the closing of six stores during the 52 weeks of 2006.

Comparable store sales increased 9.2% on a 52 week basis, as compared to the prior year. The comparable store sales increase was primarily attributable to very favorable weather conditions in most of the Company’s markets and price increases that were passed through the supply chain. For definition purposes, a store is considered a comparable store in the first full month after it has completed 52 weeks of sales. Closed stores become non-comparable during their last partial month of operation. Stores that are relocated are considered comparable stores at the time the relocation is completed.

Gross profit for the fiscal year ended September 30, 2006 improved to $218.2 million or 49.5% of sales, as compared to $188.5 million or 48.5% in 2005. Gross profit represents sales less the cost of services and purchased goods, chemical repackaging costs and related distribution costs. Gross profit dollars improved primarily due to the increase in sales and expanded margins on inventory that had been purchased earlier in the year in anticipation of market increases.

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In 2006, total operating expenses were $161.4 million, versus $164.6 million during the 52 weeks of 2005, a decrease of 1.9%. Operating expenses as a percentage of sales were 36.6% for the 52 weeks of fiscal year 2006 compared to 42.4% for the 52 weeks of fiscal year 2005. The decrease in operating expenses during fiscal year 2006 was due primarily to a $26.9 million charge for expenses related to the 2005 Recapitalization in fiscal year 2005 offset by $4.1 million for increased expenses associated with the increase in store count, as compared to the prior year.

In 2005, the Company incurred $26.9 million in stock compensation and 2005 Recapitalization expenses related to the January merger. Of the $26.9 million, $16.9 million was paid out in connection with the stock options that were exercised as part of the 2005 Recapitalization. During 2005, the Company also recorded a charge of $10.0 million for other expenses related to the 2005 Recapitalization.

For the fiscal year ended September 30, 2006, the Company recognized losses on the disposition of fixed assets totaling approximately $0.6 million as compared to $0.7 million in the prior year. Of these losses, $0.2 million in fiscal year 2006 and $0.4 million in fiscal year 2005 were primarily associated with the Company’s decision to close or relocate stores that were unproductive or not meeting expectations. In fiscal year 2006 a $0.4 million charge was recognized for impaired assets compared to $0.3 million in fiscal year 2005.

Adjusted EBITDA in 2006 increased 27.0% to $69.2 million from $54.5 million in fiscal year 2005. Approximately $7.3 million of the increase was the result of increased sales and expanded gross profit, with the remaining increase due to improved expense control and continued leveraging of fixed expenses during the year.

Operating income for 2006 increased 137.6% to $56.8 million from $23.9 million in 2005 as a result of stock compensation expenses previously noted above and by the gross profit improvements.

Interest expense was $19.4 million in 2006, as compared to $18.8 million in 2005. The increase was primarily the result of the increase in average debt balances.

The Company recorded income tax expense of $16.9 million in 2006, or an effective tax rate of 45.2%, versus $0.6 million in the prior year, or an effective tax rate of negative 16.1%. The effective rate increase in 2006 was primarily due to the non-deductibility of the preferred stock interest expense of $4.6 million.

Liquidity and Capital Resources

Overview

The following table highlights selected cash flow components for fiscal year 2007 and fiscal year 2006, and selected balance sheet components as of September 29, 2007 and September 30, 2006.

	Fiscal Years Ended
(Dollar amounts in thousands)	September 29, 2007			September 30, 2006			Dollar Change			Percent Change
Cash provided by (used in):
Operating activities	$	46,321		$	55,058		$	(8,737	)	(15.9	)%
Investing activities		(12,626	)		(10,950	)		(1,676	)	15.3	%
Financing activities		(12,918	)		(7,276	)		(5,642	)	77.5	%
Cash & cash equivalents	$	59,781		$	39,004		$	20,777		53.3	%
Working capital		66,657			43,213			23,444		54.3	%
Other long term liabilities		6,031			12,632			(6,601	)	(52.3	)%
Senior notes and long term debt		169,080			168,946			134		0.1	%

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Working capital

Working capital as of September 29, 2007 and September 30, 2006 consisted of the following:

	Fiscal Years Ended
(Dollar amounts in thousands)	September 29, 2007		September 30, 2006		Dollar Change			Percent Change
Cash and cash equivalents	$	59,781	$	39,004	$	20,777		53.3	%
Accounts and other receivables		8,790		7,315		1,475		20.2	%
Inventories		65,724		64,544		1,180		1.8	%
Prepaid expenses and other current assets		2,562		2,522		40		1.6	%
Deferred tax assets		6,939		8,201		(1,262	)	(15.4	)%
Total current assets		143,796		121,586		22,210		18.3	%
Accounts payable		29,471		31,473		(2,002	)	(6.4	)%
Accrued expenses		38,385		35,860		2,525		7.0	%
Income taxes payable		9,283		11,040		(1,757	)	(15.9	)%
Total current liabilities		77,139		78,373		(1,234	)	(1.6	)%
Working capital	$	66,657	$	43,213	$	23,444		54.3	%

From September 30, 2006 to September 29, 2007, total current assets increased $22.2 million from $121.6 million to $143.8 million. Approximately $20.8 million of the increase in current assets was the result of the increase in cash provided by operating activities.

From September 30, 2006 to September 29, 2007, total current liabilities decreased $1.2 million from $78.4 million to $77.1 million, primarily due to the decrease in income taxes payable.

For the fiscal year ended September 29, 2007, cash provided by operating activities was $46.3 million compared to cash provided by operating activities of $55.1 million in the prior year. The reduction was due primarily to fewer working capital reductions as compared to the prior year.

In 2007, cash used in investing activities was $12.6 million compared with cash used in investing activities of $11.0 million in the prior year, primarily due to the Company’s store growth plan.

Cash used in financing activities was $12.9 million in fiscal year 2007 compared with cash used in financing activities of $7.3 million in 2006. The significant increase in financing activities was due to the formation of Holdings and the cash dividend, which was paid to Holdings in August 2007.

The Company had no borrowings under its secured loan agreement at September 29, 2007 and no borrowings at September 30, 2006. At September 29, 2007 the Company had $75.0 million of borrowing capacity. Funds borrowed under this agreement are used primarily to fund working capital and other general corporate purposes.

From September 30, 2006 to September 29, 2007, other long term liabilities decreased by $6.6 million from $12.6 million to $6.0 million due to the elimination of dividends payable on the Company’s preferred stock which was assumed by Holdings.

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During February of 2007, the Company’s parent, Leslie’s Holdings, Inc. (“Holdings”) consummated a privately placed financing transaction. The Company did not guarantee or pledge support for this financing, nor were any of the proceeds made available to the Company. Holdings issued $310 million in senior notes due in 2017 and $100 million of preferred equity. The interest rate on the senior notes is 10.5% cash or 11.5% PIK, at Holdings’ option. The notes are non-callable for two years and have other covenants and terms that are customary for high yield issues. The preferred shares have a dividend rate of 11% and are exchangeable into debt under certain circumstances. The preferred shares have a mandatory redemption date of March 1, 2019. The Company does not expect that Holdings’ servicing of its debt will affect the Company’s liquidity.

The Company believes its internally generated funds, as well as its borrowing capacity, are adequate to meet its working capital needs, maturing obligations and capital expenditure requirements, including those relating to the opening of new stores.

Seasonality and Quarterly Fluctuations

The Company’s business exhibits substantial seasonality which the Company believes is typical of the swimming pool supply industry. In general, sales and net income are highest during the quarters ended June and September, which represent the peak months of swimming pool use. Sales are substantially lower during the quarters ended December and March when the Company will typically incur net losses. The principal external factor affecting the Company’s business is weather. Hot weather and the higher frequency of pool usage in such weather create a greater demand for more pool chemicals and supplies. Unseasonably early or late warming trends can increase or decrease the length of the pool season. In addition, unseasonably cool weather and/or extraordinary amounts of rainfall in the peak season decrease swimming pool use.

The Company expects its quarterly results of operations will fluctuate depending on the timing and amount of revenue contributed by new stores and, to a lesser degree, the timing of costs associated with the opening of new stores. The Company attempts to open its new stores primarily in the quarter ending in March in order to position itself for the following peak season.

Contractual Obligations and Commercial Commitments

The following table summarizes the Company’s significant contractual obligations as of September 29, 2007, and the effect such obligations are expected to have on the Company’s liquidity and cash flows in future periods. This table excludes amounts already recorded on the Company’s balance sheet as current liabilities at September 29, 2007 and certain other purchase obligations as discussed below.

(in thousands)	Payments Due By Period
Contractual Obligations	Total		Less than 1 Year		1 – 3 years		4 – 5 years		After 5 years
Senior notes*	$	240,182	$	13,175	$	26,350	$	26,350	$	174,307
Revolving Commitments*		—		—		—		—		—
Preferred stock*		—		—		—		—		—
Operating leases		131,057		38,879		57,499		27,451		7,228
Total contractual obligations	$	371,239	$	52,054	$	83,849	$	53,801	$	181,535

* Amounts include estimated interest and dividend payments

(in thousands)	Amounts of Commitment Expiration Per Period
Commercial Commitments	Total Amounts Committed		Less than 1 Year		1 – 3 years		4 – 5 years		After 5 years
Standby letters of credit	$	4,700	$	4,700	$	—	$	—	$	—
Financial responsibility bonds	$	106	$	106	$	—	$	—	$	—

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Purchase orders for raw materials, finished goods and other goods and services are not included in the above table. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements. For the purpose of this table, contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The Company’s purchase orders are based on the Company’s current manufacturing needs and are fulfilled by the Company’s vendors with relatively short timetables. We do not have significant agreements for the purchase of raw materials or finished goods specifying minimum quantities or set prices that exceed the Company’s short-term expected requirements.

The expected timing of payment of the obligations discussed above is estimated based on current information. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States which requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses. On an ongoing basis, the Company evaluates its estimates, including those related to inventory reserves, allowance for doubtful accounts, valuation allowance for the net deferred income tax asset, contingencies and litigation liabilities. The Company bases its estimates on historical experience, independent valuations, and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

Revenue on retail sales is recognized upon purchase by the customer. Revenue on services, is recognized as services are performed and the fee is fixed or determinable and collection is probable. Terms are customarily FOB shipping point or point of sale, net of related discounts. The Company does not provide an estimated allowance for sales returns as they are deemed to be immaterial.

Inventories

Inventories are stated at the lower of cost or market. The Company values inventory using the weighted average cost method. Included in cost of sales are the costs of services and purchased goods, chemical repackaging costs and related distribution costs. The Company establishes a reserve for inventory obsolescence and shrinkage, which is analyzed and reviewed periodically and may require adjustments based on physical inventory counts, the relationship and fluctuation of historical product sales versus inventory on hand and changes in customer preferences. The reserve is intended to reflect the value of inventory in excess of expected realizable value.

Vendor Rebates

The Company accounts for vendor rebates in accordance with Emerging Issues Task Force Issue 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor. The Company recognizes consideration received from vendors at the time its obligations to purchase products or perform services have been completed. These items are recorded as a reduction of inventory until we sell the product, at which time such rebates reduce cost of goods sold in the statement of operations.

Income Taxes

The Company records deferred tax assets or liabilities based on differences between financial reporting and tax basis of assets and liabilities using currently enacted rates and laws that will be in effect when the Company expects the differences to reverse. Due to changing tax laws and state income tax rates, judgment is required to estimate the effective tax rate expected to apply to tax differences which are expected to reverse in future periods. The Company and its subsidiaries will be included in the consolidated federal income tax return and certain state income tax returns of Holdings. The Company’s financial statements recognize the current and deferred income tax consequences that result from the Company’s activities during the current and preceding periods pursuant to the provisions of SFAS 109, as if the Company were a separate taxpayer rather than a member of Holding’s consolidated income tax return group.

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Self Insurance

The Company retains self insurance risks for workers compensation, general liability, property and health insurance programs. The Company has limited its exposure by maintaining excess liability coverage. The Company establishes self insurance reserves based on claims filed and estimates of claims incurred but not reported. The estimates are based upon information provided to the Company by the claims administrators and are periodically revised to reflect changes in loss trends.

The Company expects that the quarterly results of operations will continue to fluctuate depending on the season, weather conditions, and the timing and amount of revenue contributed by new stores. Due to the seasonal nature of the swimming pool industry, the results of any one or more quarters are not necessarily a good indication of results for an entire year, or of continuing trends.

Quarterly Financial Data

Summarized Quarterly Financial Data (Unaudited)

(Dollar Amounts In Thousands)

	13 Weeks Ended
2007	Dec. 30			March 30			June 30			Sept. 29
Sales	$	52,695		$	57,393		$	204,816		$	153,978
Gross profit		25,453			29,806			104,534			76,340
Operating income/(loss)		(8,509	)		(7,184	)		54,697			30,669
Net income/(loss)		(7,257	)		(7,101	)		30,122			16,462
Adjusted EBITDA(1)		(5,370	)		(3,789	)		57,571			34,376
Comparable store sales growth (2)		3.5	%		14.1	%		0.5	%		3.0	%
2006	Dec. 31			April 1			July 1			Sept. 30
Sales	$	48,145		$	48,352		$	198,114		$	145,954
Gross profit		22,754			25,473			98,436			71,520
Operating income/(loss)		(9,198	)		(8,433	)		48,929			25,502
Net income/(loss)		(8,842	)		(5,710	)		23,065			11,992
Adjusted EBITDA(1)		(6,160	)		(5,581	)		51,999			28,931
Comparable store sales growth (2)		12.0	%		1.0	%		10.7	%		9.1	%

⁽¹⁾ Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, loss/(gain) on disposition of fixed assets, stock compensation expense, write-off of debt issuance costs and unusual charges. Adjusted EBITDA is not a measure of financial performance under U.S. generally accepted accounting principles (“GAAP”), but is used by some investors to determine a company’s ability to service or incur indebtedness. Adjusted EBITDA is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. Adjusted EBITDA should not be construed as an indicator of a company’s operating performance or liquidity, and should not be considered in isolation from or as a substitute for net income (loss), cash flows from operations or cash flow data, all of

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which are prepared in accordance with GAAP. We have presented Adjusted EBITDA solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations. Adjusted EBITDA is not intended to represent and should not be considered more meaningful than, or as an alternative to, measures of operating performance as determined in accordance with GAAP.

⁽²⁾ The Company considers a store to be comparable in the first full month after it has completed 52 weeks of sales. Closed stores become non-comparable during their last partial month of operation. Stores that are relocated are considered comparable stores at the time the relocation is completed. Comparable store sales is not a measure of financial performance under GAAP. Comparable store sales is not calculated in the same manner by all companies and accordingly is not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 (revised), “Business Combinations”. SFAS No. 141 (revised) relates to business combinations and requires the acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The Company must adopt this standard for its 2010 fiscal year. The Company is currently evaluating the impact that adopting this standard will have on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities”. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted. The Company must adopt this standard for its 2009 fiscal year. The Company is currently evaluating the impact that adopting this standard will have on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company must adopt this standard for its 2009 fiscal year. The Company is currently evaluating the impact that adopting this standard will have on its consolidated financial statements.

In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes”. FIN 48 is an interpretation of FASB Statement No. 109 “Accounting for Income Taxes” and must be adopted by the Company no later than September 28, 2008. FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting, and disclosing in the financial statements uncertain tax positions that the company has taken or expects to take in its tax returns. The Company has not evaluated the impact of adopting FIN 48.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s Amended Loan and Security Agreement described in Note 6 to the consolidated financial statements as well as in Management’s Discussion and Analysis, carries interest rate risk. Amounts borrowed under this Agreement bear interest at either LIBOR plus 1.75%, or at the Company’s choice, the lender’s reference rate. Should the lenders’ base rate change, the Company’s interest expense will increase or decrease accordingly. As of September 29, 2007, there was no borrowing under this facility.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	22
Consolidated Balance Sheets — September 29, 2007 and September 30, 2006	23
Consolidated Statements of Operations— Fiscal Years Ended September 29, 2007, September 30, 2006 and October 1, 2005	24
Consolidated Statements of Stockholders’ Deficit — Fiscal Years Ended September 29, 2007, September 30, 2006 and October 1, 2005	25
Consolidated Statements of Cash Flows — Fiscal Years Ended September 29, 2007, September 30, 2006 and October 1, 2005	26
Notes to Consolidated Financial Statements	27

21

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Leslie’s Poolmart, Inc.:

We have audited the accompanying consolidated balance sheets of Leslie’s Poolmart, Inc. as of September 29, 2007 and September 30, 2006 and the related consolidated statements of operations, stockholders’ deficit and cash flows for each of the three years in the period ended September 29, 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Leslie’s Poolmart, Inc. at September 29, 2007 and September 30, 2006 and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 29, 2007, in conformity with U.S. generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Phoenix, Arizona

December 13, 2007

22

Leslie’s Poolmart, Inc.

(A Wholly-Owned Subsidiary of Leslie’s Holdings, Inc.)

Consolidated Balance Sheets

(Dollar Amounts in Thousands, Except Share Information)

	September 29, 2007			September 30, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	59,781		$	39,004
Accounts and other receivables, net		8,790			7,315
Inventories, net		65,724			64,544
Prepaid expenses and other current assets		2,562			2,522
Deferred tax assets		6,939			8,201
Total current assets		143,796			121,586
Property, plant and equipment, net		37,933			38,136
Intangible assets		8,096			8,072
Deferred financing costs, net		5,653			6,168
Deferred tax assets		3,834			4,445
Other assets		327			320
Total assets	$	199,639		$	178,727
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	29,471		$	31,473
Accrued expenses		38,385			35,860
Income taxes payable		9,283			11,040
Total current liabilities		77,139			78,373
Other long term liabilities		6,031			12,632
Redeemable preferred stock, $0.001 par value, authorized 1,000,000 shares, issued and outstanding no shares at September 29, 2007 and 41,000 Series A September 30, 2006		—			41,000
Senior notes, net		169,080			168,946
Total liabilities		252,250			300,951
Commitments and contingencies
Stockholders’ deficit:
Common stock, $0.001 par value, authorized 50,000,000 shares, issued and outstanding 100 shares at September 29, 2007 and 40,045,000 shares at September 30, 2006		—			40
Capital deficit		(91,984	)		(144,081	)
Treasury stock, no shares at September 29, 2007 and 90,000 shares at cost at September 30, 2006		—			(332	)
Retained earnings		39,373			22,149
Total stockholders’ deficit		(52,611	)		(122,224	)
Total liabilities and stockholders’ deficit	$	199,639		$	178,727

See accompanying Notes which are an integral part of these consolidated financial statements.

23

Leslie’s Poolmart, Inc.

(A Wholly-Owned Subsidiary of Leslie’s Holdings, Inc.)

Consolidated Statements of Operations

(Dollar Amounts in Thousands)

	Fiscal Years Ended
	September 29, 2007			September 30, 2006			October 1, 2005
Sales	$	468,882		$	440,565		$	388,506
Cost of merchandise and services sold, including warehousing and transportation expenses, and related occupancy costs		232,749			222,382			200,009
Gross profit		236,133			218,183			188,497
Selling, general and administrative expenses		166,274			160,783			163,889
Loss on disposition of fixed assets		186			600			703
Operating income		69,673			56,800			23,905
Other (income) expense:
Interest expense		16,102			20,087			18,839
Interest income		(1,390	)		(690	)		(5	)
Recapitalization expense		—			—			8,881
Total other expense		14,712			19,397			27,715
Income/(loss) before taxes		54,961			37,403			(3,810	)
Income tax expense		22,735			16,898			612
Net income/(loss)	$	32,226		$	20,505		$	(4,422	)
The following table presents details of the total stock-based compensation expense that is included in the line item in the consolidated statements of operations above:
	Fiscal Years Ended
	September 29, 2007			September 30, 2006			October 1, 2005
Selling, general and administrative expenses	$	—		$	—		$	17,998

See accompanying Notes which are an integral part of these consolidated financial statements.

24

Leslie’s Poolmart, Inc.

(A Wholly-Owned Subsidiary of Leslie’s Holdings, Inc.)

Consolidated Statements of Stockholders’ Deficit

(Dollar Amounts in Thousands, Except Share Amounts)

	Common Stock
	Number of Shares		Amount			Stock Subscription Receivable			Capital Deficit			Treasury Stock			Retained Earnings			Total Stockholders’ Equity/(Deficit)
Balance, at October 2, 2004	7,369,502		$	7		$	(450	)	$	(44,714	)	$	—		$	6,066		$	(39,091	)
Stock option compensation	—			—			—			16,070			—			—			16,070
Equity transaction fees	—			—			—			(628	)		—			—			(628	)
Warrants exercised	1,592,223			2			—			14			—			—			16
Purchase of common stock	(10,598,964	)		(11	)		—			(158,974	)		—			—			(158,985	)
Repayment of stock subscription receivable	—			—			450			—			—			—			450
Issuance of common stock	41,637,239			42			—			44,016			—			—			44,058
Repurchase of treasury stock	(25,000	)		—			—			—			(25	)		—			(25	)
Net loss	—			—			—			—			—			(4,422	)		(4,422	)
Balance, at October 1, 2005	39,975,000			40			—			(144,216	)		(25	)		1,644			(142,557	)
Issuance of common stock	135,000			—			—			135			—			—			135
Repurchase of treasury stock	(65,000	)		—			—			—			(307	)		—			(307	)
Net income	—			—			—			—			—			20,505			20,505
Balance, at September 30, 2006	40,045,000			40			—			(144,081	)		(332	)		22,149			(122,224	)
Issuance of common stock	100			0			—			—			—			—			0
Converted common stock in Reorganization	(40,045,000	)		(40	)		—			40			—			—			0
Contributed redeemable preferred stock in Reorganization	—			—			—			50,305			—			—			50,305
Excess tax benefit from stock-based compensation	—			—			—			2,084			—			—			2,084
Payment of dividend	—			—			—			—			—			(15,002	)		(15,002	)
Repurchase and converted treasury stock in Reorganization	—			—			—			(332	)		332			—			0
Net income	—			—			—			—			—			32,226			32,226
Balance, at September 29, 2007	100		$	0		$	—		$	(91,984	)	$	—		$	39,373		$	(52,611	)

See accompanying Notes which are an integral part of these consolidated financial statements.

25

Leslie’s Poolmart, Inc.

(A Wholly-Owned Subsidiary of Leslie’s Holdings, Inc.)

Consolidated Statements of Cash Flows

(Dollar Amounts in Thousands)

	Fiscal Years Ended
	September 29, 2007			September 30, 2006			October 1, 2005
OPERATING ACTIVITIES:
Net income/(loss)	$	32,226		$	20,505		$	(4,422	)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Dividends and accretion on preferred stock		1,886			4,554			5,341
Depreciation and amortization		12,619			11,789			11,881
Stock option compensation		—			—			16,070
Amortization of loan fees		515			1,016			2,573
Amortization of loan discounts		134			96			108
Provision for doubtful accounts		2			109			258
Deferred income taxes		1,873			(2,540	)		1,434
Loss on disposition of fixed assets		186			600			703
Changes in operating assets and liabilities:
Accounts and other receivables		(1,477	)		4,267			(336	)
Inventories		(1,180	)		(3,619	)		(6,863	)
Prepaid expenses and other current assets		(40	)		(464	)		(654	)
Other assets		(7	)		192			(44	)
Accounts payable and accrued expenses		1,341			15,252			5,827
Income taxes payable		(1,757	)		3,301			(5,129	)
Net cash provided by operating activities		46,321			55,058			26,747
INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(13,038	)		(11,105	)		(12,196	)
Purchases of intangible assets		(84	)		(75	)		(109	)
Proceeds from disposition of fixed assets		496			230			137
Net cash used in investing activities		(12,626	)		(10,950	)		(12,168	)
FINANCING ACTIVITIES:
Net revolving commitment borrowing/(repayment)		—			(7,104	)		7,104
Excess tax benefit from stock-based compensation		2,084			—			—
Payment of dividend		(15,002	)		—			—
Preferred stock premium		—			—			1,041
Proceeds from warrants and options exercised		—			—			4,067
Purchase of common stock		—			—			(157,634	)
Proceeds from issuance of common stock, net of fees		—			135			39,378
Payments of deferred financing costs		—			—			(7,946	)
Payments of long-term debt		—			—			(59,495	)
Proceeds from sale of bonds		—			—			168,742
Repurchase of treasury stock		—			(307	)		(25	)
Purchase of preferred stock		—			—			(64,506	)
Proceeds from sale of preferred stock		—			—			40,100
Net cash used in financing activities		(12,918	)		(7,276	)		(29,174	)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		20,777			36,832			(14,595	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		39,004			2,172			16,767
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	59,781		$	39,004		$	2,172

See accompanying Notes which are an integral part of these consolidated financial statements.

26

Leslie’s Poolmart, Inc.

(A Wholly-Owned Subsidiary of Leslie’s Holdings, Inc.)

Notes to Consolidated Financial Statements

1. Business and Operations

Leslie’s Poolmart, Inc. (“Leslie’s” or the “Company”) is a specialty retailer of swimming pool supplies and related products. As of September 29, 2007, the Company markets its products under the trade name Leslie’s Swimming Pool Supplies through 577 retail stores in 35 states and through mail order catalogs sent to select swimming pool owners nationwide. The Company also repackages certain bulk chemical products for retail sale. The Company’s business is highly seasonal as the majority of its sales and all of its operating profits are generated in the quarters ending in June and September.

Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for the way that public companies report information about operating segments in annual financial statements and establishes standards for related disclosures about product and services, geographic areas and major customers. The Company has reviewed SFAS 131 and determined that we have a single reportable segment.

Holding Company Formation

During the fiscal year ended September 29, 2007 the Company consummated a reorganization, which the Company refers to collectively as the “2007 Reorganization”. The Company became a subsidiary of Leslie’s Holdings, Inc (“Holdings”) during February 2007, pursuant to a tax-free reorganization in which the Company’s shareholders became shareholders of Holdings in the same proportions (the “2007 Reorganization”). As a result of the 2007 Reorganization, each share of outstanding common stock of the Company was converted into one share of common stock of Holdings, and each share of outstanding 10% senior redeemable exchangeable cumulative preferred stock of the Company was converted into one share of 10% senior redeemable exchangeable cumulative preferred stock of Holdings with the same rights, privileges, and preferences, including as to liquidation. The conversion of the 10% senior redeemable exchangeable cumulative preferred stock of the Company for similar stock of Holdings was accounted for as contributed capital to the Company, given that the assumption of the obligation by Holdings without recourse to the Company had the effect of extinguishing the rights of the preferred stockholders and the resulting obligation.

2005 Recapitalization

During the fiscal year ended October 1, 2005 the Company consummated the following transactions, which the Company refers to collectively as the “2005 Recapitalization”.

The Merger

LPM Acquisition LLC (“LPM Acquisition”), a newly-formed entity controlled by GCP California Fund, L.P. (“GCP”), and affiliates of Leonard Green & Partners, L.P. (“LGP”), merged with and into Leslie’s on January 25, 2005, with Leslie’s continuing as the surviving entity in the merger.

The Tender Offer and Consent Solicitation

On December 23, 2004, the Company commenced a tender offer and solicitation of consents, or the “Tender Offer”, to purchase all of the $59.5 million outstanding principal amount of the Company’s 10 ³/8% Senior Notes due 2008, and to amend the indenture governing the 10 ³/8% notes to eliminate most of the covenants and certain events of default. On January 11, 2005, the Company entered into a supplemental indenture with The Bank of New York Trust Company, N.A., as the trustee, supplementing the indenture dated as of May 21, 2003 as contemplated by the terms of the tender offer.

Note Offering

On January 25, 2005, the Company issued an aggregate of $170.0 million principal amount of the Senior Notes. The net proceeds from the offering of the 7 ³/4% notes, together with borrowings under an amended credit facility, proceeds from the issuance of equity securities and cash on hand, were used to complete the Recapitalization and repurchase the outstanding 10 ³/8% notes that were tendered in the Tender Offer. Subsequent to the initial private placement of the 7 ³/4% notes, the notes were exchanged for new registered 7 ³/4% Senior Notes, Series B, in June 2005, pursuant to an exchange offer.

27

The Amended Credit Facility

On January 25, 2005, the Company amended its existing credit facility with Wells Fargo Retail Finance, LLC to provide for the extension by the lender of revolving loans and other financial accommodations in an aggregate principal amount of $75.0 million. The Company’s obligations under the amended credit facility are secured by a lien on substantially all of the Company’s assets.

The 2005 Recapitalization and the 2007 Reorganization were accounted for as a series of equity transactions and there was no change in the accounting basis for the Company’s recorded assets and liabilities. Accordingly, no goodwill or other intangible assets were recorded related to the 2005 Recapitalization and the 2007 Reorganization.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements of the Company include Leslie’s Poolmart, Inc., and its wholly owned subsidiaries, LPM Manufacturing Inc., Sandy’s Pool Supply, Inc. and Blackwood & Simmons, Inc. All significant inter-company transactions and accounts have been eliminated.

Fiscal Periods

The Company’s fiscal year ends on the Saturday closest to September 30. The fiscal year ended on September 29, 2007, September 30, 2006 and October 1, 2005 included 52 weeks.

Cash and Cash Equivalents

The Company considers all investments with a remaining maturity of three months or less when purchased to be cash equivalents.

Accounts and Other Receivables, Net

As a result of hurricane damages in 2005 the Company had insurance recovery receivables in the amount of $0.4 million recorded at October 1, 2005. The Company applies FASB Interpretation No. 30 Accounting for Involuntary Conversions of Non-Monetary Assets to Monetary Assets to account for these transactions.

Accounts and other receivables include allowances for doubtful accounts of $0.6 million, $0.8 million and $0.9 million at September 29, 2007, September 30, 2006, and October 1, 2005, respectively.

Allowance for doubtful accounts consists of the following:

(Dollar amounts in thousands)	Balance at beginning of period		Additions	Deductions		Balance at end of period
			Charged to costs and expenses	Write-off of bad debts
Balance at October 1, 2005	$	928	258	(265	)	$	921
Balance at September 30, 2006	$	921	109	(254	)	$	776
Balance at September 29, 2007	$	776	2	(188	)	$	590

28

Inventories, Net

Inventories are stated at the lower of cost or market. The Company values inventory using the weighted average method. The Company tests for obsolete inventory and records appropriate reserves.

Inventory reserves consist of the following:

	Balance at beginning of period		Additions	Deductions		Balance at end of period
(Dollar amounts in thousands)			Charged to costs and expenses	Write-off of Inventories
Balance at October 1, 2005	$	1,247	2,927	(1,043	)	$	3,131
Balance at September 30, 2006	$	3,131	279	(480	)	$	2,930
Balance at September 29, 2007	$	2,930	561	(159	)	$	3,332

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Costs of normal maintenance and repairs are charged to expense as incurred.

Major replacements or improvements of property, plant and equipment are capitalized. When items are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is included in the statements of operations.

Depreciation and amortization are computed using the straight-line method (considering appropriate salvage values) and leasehold improvements are amortized over the life of the initial lease term. These charges are based on the following estimated average useful lives:

Buildings and improvements	5-39 years
Vehicles, machinery and equipment	3-10 years
Office furniture and equipment	3-7 years
Leasehold improvements	5-10 years, not to exceed the lease life, including expected renewals

Consistent with FASB Statement 144 Accounting for the Impairment of Disposal of Long-Lived Assets the Company reviews its long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Intangibles

In accordance with the provisions of SFAS No. 141 Business Combinations and SFAS No. 142 Goodwill and Other Intangible Assets, the Company applied the new rules on accounting for goodwill and other intangible assets deemed to have indefinite lives beginning on September 29, 2002. The Company also performed the required impairment tests of goodwill and indefinite lived intangible assets and there was no impairment identified. The Company no longer amortizes its goodwill under SFAS No. 142, but does subject its goodwill to periodic assessments as defined therein. Our intangible assets consist primarily of goodwill, which had a balance of $7.5 million at September 29, 2007. The Company recorded no amortization for the years ended September 29, 2007, September 30, 2006 and October 1, 2005.

29

Other intangibles are comprised of costs associated with acquiring the mailing addresses for the Company’s customer database, which is used for purposes of market research, new store location decisions, customer research and in the Company’s ongoing advertising efforts. For the years ending September 29, 2007 and September 30, 2006, the gross amount capitalized on the balance sheet for mailing addresses were $1.0 million and $1.0 million, respectively. These other intangibles are amortized over a 15 year period and the amounts of annual amortization for other intangibles for the next five years are as follows:

(Dollar amounts in thousands)
2007	$	60
2008		60
2009		60
2010		60
2011		60

Deferred Financing Costs

In connection with issuing the Senior Notes due 2013 and entering into a credit agreement in 2005, the Company paid an aggregate of $7.9 million in financing costs that are being deferred and amortized over the lives of the corresponding agreements. During fiscal year 2005, the Company wrote off the remaining deferred issuance costs related to the Senior Notes due 2008 and the credit agreement in the amount of $1.5 million and $0.2 million, respectively. The deferred finance cost balance recorded at September 29, 2007 and September 30, 2006 was net of accumulated amortization of $2.3 million and $1.8 million, respectively.

Income Taxes

The Company provides for deferred income taxes relating to temporary timing differences in the recognition of income and expense items for financial and tax reporting purposes. The Company and its subsidiaries will be included in the consolidated federal income tax return and certain state income tax returns of Holdings. The Company’s financial statements recognize the current and deferred income tax consequences that result from the Company’s activities during the current and preceding periods pursuant to the provisions of SFAS 109, as if the Company were a separate taxpayer rather than a member of Holding’s consolidated income tax return group.

Sales

Revenue on retail sales is recognized upon purchase by the customer. Revenue on services is recognized as services are performed and the fee is fixed or determinable and collection is probable. Terms are customarily FOB shipping point or point of sale, net of related discounts. The Company does not provide an estimated allowance for sales returns as they are immaterial.

Sales Taxes

Revenues are presented net of sales taxes. The obligation is included in accrued expenses until the taxes are remitted to the appropriate taxing authorities.

Cost of Sales

Included in cost of sales are the costs of services and purchased goods, chemical repackaging costs and related distribution costs. The Company recognizes consideration received from vendors at the time the obligations to purchase products or perform services have been completed. These items are recorded as a reduction in cost of goods sold in the statement of income. For the years ending September 29, 2007, September 30, 2006, and October 1, 2005, the Company’s recorded advertising expense was shown net of cooperative advertising of $0.7 million, $0.8 million and $0.4 million respectively.

Shipping and Handing Costs

The Company records shipping and handling costs paid by customers as revenue. The actual costs for shipping and handling are charged to cost of sales.

30

Advertising

The Company expenses advertising costs as incurred. Advertising expense for the years ended September 29, 2007, September 30, 2006 and October 1, 2005, was approximately $8.7 million, $8.1 million, and $7.5 million, respectively.

Stock Based Compensation

Leslie’s Holdings, Inc., and prior to the 2007 Reorganization, Leslie’s Poolmart, Inc., may grant stock options for a fixed number of shares to the Company’s employees and directors with an exercise price equal to the fair market value of the shares at the date of grant. As the Company is a nonpublic company under the provisions of SFAS No. 123R, we were required to adopt SFAS No. 123R using the prospective method which requires the Company to apply the provisions of SFAS No. 123R prospectively to new awards and to awards modified, repurchased or cancelled after September 30, 2006. Awards granted after September 30, 2006 (of which there were none as of September 29, 2007) are valued at fair value in accordance with the provisions of SFAS No. 123R and recognized on a straight line basis over the service periods of each award. Compensation cost for the unvested portion of awards outstanding is recognized as the requisite service is rendered.

As of the 2007 Reorganization, the 2005 Plan and related agreements were assumed by Holdings. Any future grants of options under the 2005 Plan will be for equity of Holdings and not the Company, but will be recorded as an expense by the Company. During the second quarter of 2007 and pursuant to the 2005 Plan, Holdings’ board of directors approved the acceleration of the vesting of all outstanding stock options to purchase shares of common stock of Holdings. The fair value of the awards immediately before the modification of the vesting was the same value as the fair value after the modification took effect. Accordingly, no compensation expense was recorded under SFAS No. 123R for 2007. All of the options were exercised in February of 2007 after the 2007 Reorganization.

Fair Value of Financial Instruments

The fair value of the $170.0 million Senior Notes due 2013 using quoted market prices as of September 29, 2007 is $161.5 million. The carrying amounts of other long-term debt approximate fair value because either the interest rate fluctuates based on market rates or interest rates appear to approximate market rates for similar instruments. The fair value estimates are subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Reclassification of Accounts

Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassification had no effect on net income as previously reported.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 (revised), “Business Combinations”. SFAS No. 141 (revised) relates to business combinations and requires the acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The Company must adopt this standard for its 2010 fiscal year. The Company is currently evaluating the impact that adopting this standard will have on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities”. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted. The Company must adopt this standard for its 2009 fiscal year. The Company is currently evaluating the impact that adopting this standard will have on its consolidated financial statements.

31

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company must adopt this standard for its 2009 fiscal year. The Company is currently evaluating the impact that adopting this standard will have on its consolidated financial statements.

In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes”. FIN 48 is an interpretation of FASB Statement No. 109 “Accounting for Income Taxes” and must be adopted by the Company as a non-public filer no later than December 15, 2007. FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting, and disclosing in the financial statements uncertain tax positions that the company has taken or expects to take in its tax returns. The Company is required to adopt FIN 48 during the first quarter of fiscal 2008 and has not fully evaluated the impact of adopting FIN 48 to determine the impact, if any, on its financial statements.

3. Inventories

Inventories consist of the following:

(Dollar amounts in thousands)	September 29, 2007			September 30, 2006
Raw materials and supplies	$	1,232		$	1,116
Finished goods		67,824			66,358
Reserve		(3,332	)		(2,930	)
Total Inventories	$	65,724		$	64,544

4. Property, Plant and Equipment

Property, plant and equipment consists of the following:

(Dollar amounts in thousands)	September 29, 2007			September 30, 2006
Land	$	5,865		$	5,865
Buildings		8,106			7,902
Vehicles, machinery and equipment		6,428			5,703
Leasehold improvements		63,770			57,807
Office furniture, equipment and other		42,900			39,340
Construction-in-process		1,142			892
		128,211			117,509
Less – accumulated deprecation and amortization		(90,278	)		(79,373	)
Total Property, Plant and Equipment	$	37,933		$	38,136

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5. Other Current Liabilities

Other current liabilities consist of the following:

(Dollar amounts in thousands)	September 29, 2007		September 30, 2006
Accrued payroll and employee benefits	$	10,050	$	9,783
Self insurance reserves		8,324		8,742
All other current liabilities		20,011		17,335
Total Other Current Liabilities	$	38,385	$	35,860

6. Loan and Security Agreement/Assets Subject to Lien

On January 25, 2005, the Company entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with the lenders noted therein and Wells Fargo Retail Finance LLC as agent for the Lenders. The Loan Agreement provides for the extension by the lenders of revolving loans and other financial accommodations in an aggregate principal amount of $75.0 million. The amended credit facility was and will be used to refinance the existing credit facility, to provide a portion of the financing required to consummate the 2005 Recapitalization, and for general corporate purposes. A portion of the amended credit facility is available for letters of credit. The obligations under the amended credit facility are secured by a lien on substantially all of the Company’s assets.

Borrowings under the amended credit facility bear interest at the lender’s reference rate or at LIBOR plus the applicable LIBOR rate margin. The applicable LIBOR rate margin will be adjusted quarterly based on the Company’s EBITDA (as defined in the amended credit facility) for the 12 month period ended as of the end of the latest fiscal quarter. The applicable margin for the amended credit facility is initially 0% with respect to base rate loans and 1.75% with respect to eurodollar loans.

On the closing of the 2005 Recapitalization, the Company paid the lender an upfront fee as well as a commitment fee on the $30.0 million over-advance facility. In addition, the Company is obligated to pay the lender a commitment fee equal to ¹/4 of 1% per annum of the unused portion of the $75.0 million commitment. The Company is also obligated to pay a commission on all outstanding letters of credit as well as customary administrative, issuance, fronting, amendment, payment and negotiation fees.

The amended credit facility contains customary representations and warranties, covenants and conditions to borrowing. There can be no assurance that the conditions to borrowing under the amended credit facility will be satisfied.

The amended credit facility requires the maintenance of certain quarterly financial and operating ratios and covenants, including minimum calculated EBITDA levels, fixed charge coverage ratio, and senior leverage ratio.

The amended credit facility also contains customary events of default, including default upon the nonpayment of principal, interest, fees or other amounts or the occurrence of a change of control.

To the Company’s knowledge, no event of default has occurred under the Loan Agreement.

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7. Senior Notes

On January 25, 2005, the Company sold, through a private placement exempt from the registration requirements under the Securities Act of 1933, as amended, $170 million in aggregate principal amount of its 7.75% Senior Notes due 2013 (the “Notes”). Interest-only payments on the Notes are payable semi-annually on February 1 and August 1 of each year, beginning with August 1, 2005. The Notes were sold in the United States only to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. persons in accordance with Regulation S under the Securities Act. The Notes were not registered under the Securities Act and can not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Company used the net proceeds of this offering to finance the 2005 Recapitalization and to redeem $59.5 million of its 10.375% Senior Notes due 2008. In connection with the closing of the Private Placement, the Company entered into (i) an indenture, dated January 25, 2005 with The Bank of New York Trust Company, N.A., as the trustee, governing the terms and conditions of the Notes (the “Indenture”) and (ii) a registration rights agreement, dated January 25, 2005 with the initial purchasers of the Notes in the Private Placement (the “Registration Rights Agreement”).

Under the Registration Rights Agreement, the Company agreed to use its best efforts to register notes having substantially identical terms as the Notes with the Securities and Exchange Commission as part of an offer to exchange freely tradeable exchange notes for the Notes initially issued under the Indenture. The Company filed a registration statement for the exchange notes with the Commission on April 22, 2005 and caused such registration statement for the 7.75% Senior Notes, Series B, due 2013, to be declared effective June 16, 2005.

The Indenture contains customary covenants, including those that will limit the Company’s ability to grant liens on assets to secure debt, enter into certain sale and lease-back transactions, and merge or consolidate with another company or sell substantially all assets. To the Company’s knowledge, no event of default has occurred under the Indenture.

8. Leases

The Company leases certain store, office, distribution and manufacturing facilities under operating leases which expire at various dates through 2015. Lease agreements generally provide for increases related to cost of living indices and require the Company to pay for property taxes, repairs and insurance. Future annual minimum lease payments at September 29, 2007 are as follows:

(Dollar amounts in thousands)
2008	$	38,879
2009		32,927
2010		24,573
2011		16,808
2012		10,644
Thereafter		7,226
	$	131,057

Certain leases are renewable at the option of the Company for periods of one to ten years. Rent expense charged against income totaled $35.9 million, $33.7 million, and $31.1 million in fiscal years 2007, 2006 and 2005 respectively. Only five leases provided for rent contingent on sales exceeding specific amounts.

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9. Income Taxes

The provision/(benefit) for income taxes is comprised of the following:

(Dollar amounts in thousands)	Fiscal 2007		Fiscal 2006			Fiscal 2005
Federal:
Current	$	16,899	$	15,637		$	(531	)
Deferred		1,517		(2,123	)		926
	$	18,416	$	13,514		$	395
State:
Current	$	3,963	$	3,916		$	(291	)
Deferred		356		(532	)		508
		4,319		3,384			217
Total	$	22,735	$	16,898		$	612

A reconciliation of the provision for income taxes to the amount computed at the federal statutory rate is as follows:

(Dollar amounts in thousands)	Fiscal 2007			Fiscal 2006			Fiscal 2005
Federal income tax at statutory rate	$	19,236		$	13,091		$	(1,333	)
Permanent differences		617			1,633			2,273
State taxes, net of federal benefit		2,898			2,200			141
Reduction in tax contingency reserve		(16	)		(26	)		(469	)
	$	22,735		$	16,898		$	612

The tax effect of temporary differences which give rise to significant portions of the deferred tax asset and liability are summarized below.

	Fiscal 2007				Fiscal 2006
(Dollar amounts in thousands)	Deferred Tax Assets		Deferred Tax Liabilities		Deferred Tax Assets			Deferred Tax Liabilities
Depreciation and amortization	$	3,833	$	—	$	4,445		$	—
State income taxes		210		—		—			(128	)
Inventory		1,869		—		1,853			—
Reserves and other accruals		2,325		—		3,207			—
Deferred rent		1,824		—		2,474			—
Compensation accruals		712		—		773			—
Net operating loss		—		—		235			—
Valuation allowance		—		—		(213	)		—
	$	10,773	$	—	$	12,774		$	(128	)

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The company had federal net operating losses (NOL) of $0.6 million available to offset future tax liabilities expiring in calendar tax year 2006. The losses were subject to Internal Revenue Code Section 382, which limits the annual utilization of NOL’s after an ownership change. The Company’s annual Section 382 limitation was approximately $0.1 million. Approximately $0.5 million of these NOL’s expired as worthless during fiscal 2007 and therefore no benefits have been recorded for these amounts. The company has recorded a valuation allowance amount of $0.0 million and $0.2 million as of September 29, 2007 and September 30, 2006, respectively.

The Company’s current income taxes payable has been reduced by the tax benefit from employee stock incentive plans. These benefits totaled $2,084 and $0 for the years ended September 29, 2007 and September 30, 2006, respectively, and were reflected as an increase to the additional paid-in capital in the Consolidated Statements of Shareholder’ Equity. The Company includes only the direct tax effects of the employee stock incentive plans in calculating this increase to additional paid-in capital.

10. Contingencies

The Company is a defendant in lawsuits or potential claims encountered in the normal course of business; such matters are being vigorously defended. In the opinion of management, the resolutions of these matters will not have a material effect on the Company’s financial position or results of operations.

The Company’s workers’ compensation insurance program, general liability insurance program and employee group medical plan have self-insurance retention features of $0.3 million, $0.3 million and $0.1 million per incident, respectively. As of September 29, 2007 and September 30, 2006, the Company had standby letters of credit outstanding in the amounts of $4.7 million and $4.3 million, respectively, for the purpose of securing such obligations under its workers’ compensation self insurance programs.

11. 401(k) Plan

The Company provides for the benefit of its employees a voluntary retirement plan under Section 401(k) of the Internal Revenue Code. During 2007, the plan covered all eligible employees and provided for a matching contribution by the Company of 50% of each participant’s contribution up to 4% of the individual’s compensation as defined. The expenses related to this program were $0.6 million, $0.6 million and $0.4 million for fiscal years 2007, 2006 and 2005 respectively.

12. Equity Transactions

Preferred and Common Stock

The Company became a subsidiary of Leslie’s Holdings, Inc (“Holdings”) during February 2007, pursuant to a tax-free reorganization in which the Company’s shareholders became shareholders of Holdings in the same proportions (the “2007 Reorganization”). As a result of the 2007 Reorganization, each share of outstanding common stock of the Company was converted into one share of common stock of Holdings, and each share of outstanding 10% senior redeemable exchangeable cumulative preferred stock of the Company was converted into one share of 10% senior redeemable exchangeable cumulative preferred stock of Holdings with the same rights, privileges, and preferences, including as to liquidation. The conversion of the 10% senior redeemable exchangeable cumulative preferred stock of the Company for similar stock of Holdings was accounted for as contributed capital to the Company, given that the assumption of the obligation by Holdings without recourse to the Company had the effect of extinguishing the rights of the preferred stockholders and the resulting obligation.

13. Related Party Transactions

With the consummation of the 2005 Recapitalization in January 2005, the Company entered into a Management Services Agreement with LGP. The Management Services Agreement provides that the Company will pay LGP an annual fee of $1.0 million for ongoing management, consulting and financial services. In addition, the Management Services Agreement provides that LGP may provide the Company with financial advisory or investment banking services in connection with major financial transactions, and LGP will be paid a customary fee for such services. The Management Services Agreement will terminate on the earlier of (a) the tenth anniversary of its execution dated January 25, 2005; provided that the agreement will automatically extend for one year periods thereafter unless either the Company or LGP gives the other three months prior notice of termination, (b) the consummation of a change of control, including the date that LGP affiliates hold 40% or less of the Company’s shares and (c) the consummation of a public offering of the Company’s common stock in an aggregate offering amount of at least $50 million or as a result of which at least 15% of the Company’s shares of common stock is publicly traded. In the event of the Company’s bankruptcy, liquidation, insolvency or winding-up, the payment of all accrued and unpaid fees pursuant to the Management Services Agreement is subordinated to the prior payment in full of all amounts due and owing under the indenture governing the notes.

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During the fiscal years ended September 29, 2007, September 30, 2006 and October 1, 2005, the Company paid management fees to LGP in the amount of $1.0 million, $1.0 million and $0.8 million respectively, and the Company paid a structuring fee of $5.0 million to LGP for services rendered in support of the 2005 Recapitalization.

During February of 2007, the Company’s parent, Leslie’s Holdings, Inc. (“Holdings”) consummated a privately placed financing transaction. The Company does not guarantee or pledge support for this financing, nor were any of the proceeds made available to the Company, and therefore, the Company’s financial statements do not reflect the debt and its related costs. Holdings issued $310 million in senior notes due in 2017 and $100 million of preferred equity. The interest rate on the senior notes is 10.5% cash or 11.5% PIK, at Holdings’ option. The notes are non-callable for two years and have other covenants and terms that are customary for high yield issues. The preferred shares have a dividend rate of 11% and are exchangeable into debt under certain circumstances. The preferred shares have a mandatory redemption date of March 1, 2019. The Company is not required to service any obligations of Holdings and the sole source of funds that might be provided by the Company would be in the form of dividends to Holdings.

14. Stock Based Compensation Plans

In November 1998, the Leslie’s board of directors adopted its 1998 Incentive Stock Option Plan (the “1998 Plan”), and reserved 300,000 shares of nonvoting common stock for issuance thereunder. In January 2000, the Board approved an amendment to the Plan to increase the number of shares of nonvoting common stock issuable thereunder to 500,000 shares in the aggregate.

All existing options were accelerated and terminated on January 25, 2005 in connection with the 2005 Recapitalization and each optionholder received with respect to each option held an amount equal to the excess of $15.00 over the exercise price of such option. As a result, the Company recorded a stock compensation charge of $16.1 million for the year ended September 30, 2006.

In August 2005, Leslie’s board of directors adopted its 2005 Incentive Stock Option Plan (the “2005 Plan”), and reserved 1,300,000 shares of nonvoting common stock for issuance thereunder. As of the 2007 Reorganization, the 2005 Plan and related agreements were assumed by Holdings. Any future grants of options will be for equity of Holdings and not the Company with any related expense recognized by the Company. During the second quarter of 2007 and pursuant to the 2005 Plan, Holdings’ board of directors approved the acceleration of the vesting of all outstanding stock options to purchase shares of common stock of Holdings. The fair value of the awards immediately before the modification of the vesting was the same value as the fair value after the modification took effect. Accordingly, no compensation expense was recorded under SFAS No. 123R for 2007.

All outstanding options were exercised in February of 2007 after the 2007 Reorganization, which gave rise to a tax benefit of approximately $2.1 million attributed to the Company. Given that the tax benefit meets the realization criteria of SFAS 123(R), the benefit has been recorded as a credit to equity since the entire benefit exceeded the recorded expense of zero. The Company did not otherwise grant or modify any share-based compensation during the 52 weeks ended September 29, 2007. As of September 29, 2007 the Company had no outstanding equity awards to its employees or non-employees either directly or through grants by Holdings that would be attributable to the Company’s employees or non-employees and thereby accounted for as an expense of the Company.

In November of 2008, the board of directors of Holdings approved grants of options to a number of key individuals of the Company. These options to purchase approximately 373,000 shares of Holdings common stock vest over a five year period at a rate of 20% annually on each anniversary of the date of grant.

Prior to the adoption of SFAS 123(R), the Company accounted for stock-based compensation plans under APB Opinion No. 25, under which no compensation expense has been recognized in the accompanying consolidated financial statements for stock-based employee awards with an exercise price equal to or greater than the fair value of the common stock on the date of grant. For purposes of SFAS No. 123, Accounting for Stock-Based Compensation, the fair value of each option granted has been estimated at the date of the grant using the Black-Scholes option pricing model using the following weighted-average assumptions used for grants for each of the fiscal years ended 2007, 2006 and 2005: risk free interest rate of 4.0%, expected volatility of 0%, expected lives of 7 years and no expected dividend yield. Based on these assumptions, the weighted average fair value of the options granted is $0.00 in 2007, since no grants were awarded, $ 0.38 in 2006 and $1.42 in 2005.

A summary of option activities for all plans is as follows:

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	Fiscal 2007				Fiscal 2006				Fiscal 2005
	Shares		Wt. Avg. Ex Price		Shares		Wt. Avg. Ex Price		Shares		Wt. Avg. Ex Price
Outstanding at beginning of year	1,233,500		$	1.91	700,000		$	1.00	1,628,760		$	2.42
Granted (Plans prior to 2005)	—			—	—			—	26,000			5.80
Granted (2005 Plan)	—			—	538,500			3.08	700,000			1.00
Exercised	—			—	—			—	(1,637,239	)		2.47
Cancelled	—			—	(5,000	)		1.00	(17,521	)		1.31
Assigned to Leslie’s Holdings, Inc.	(1,233,500	)		1.91	—			—	—			—
Outstanding at end of year	—		$	—	1,233,500		$	1.91	700,000		$	1.00
Exercisable at end of year	—		$	—	175,000		$	1.00	—		$	—

The fair value of the common stock underlying the 1998 Incentive Stock Option Plan options granted during fiscal year 2005 was determined to be $5.80 per share, as that amount was the most recent price paid for the Company’s common stock by a third party and no significant intervening events had occurred to change this established fair value price and as these options were granted prior to the 2005 Recapitalization. Between August and September of 2003, 1,088,030 shares of the Company’s common stock and 526,820 warrants for the Company’s common stock (greater than 15% of fully diluted shares then outstanding) were either sold or repurchased for $5.80 per share in eleven separately negotiated arms length transactions. As the Company’s stock is privately held and has no quoted market price, the Company determined the $5.80 per share to be the fair value of the common stock underlying the options granted during fiscal year 2005.

The fair value of the common stock underlying the 2005 Incentive Stock Option Plan options granted during fiscal year 2005 was determined to be $1.00 per share, consistent with the value of the Company’s common stock after the 2005 Recapitalization. As the Company’s stock is privately held and has no quoted market price, the Company determined the fair value of options granted during fiscal year 2006 to be based on an enterprise value of 6.5 times the Company’s trailing twelve-month Adjusted EBITDA results as reported in the company’s SEC filings.

For the purpose of Statement 123(R) “Share Based Payment”, the Company is considered a “non-public entity” because it does not have equity securities trading in a public market. For “non-public entities” the effective date to adopt the complete provisions of Statement 123(R) is for fiscal years beginning after December 15, 2005. Statement 123(R) was effective for the Company beginning October 1, 2006. If stock options had been accounted for consistent with SFAS No. 123, these amounts would be amortized on a straight-line basis as compensation expense over the average vesting period of the options and the Company’s net income would not have been effected for the fiscal year ended 2007. The Company’s net income would have decreased by less than $0.1 million in fiscal year 2006, with no effect in fiscal year 2005.

15. Supplemental Cash Flow Disclosures

The Company paid interest charges of $13.6 million, $14.4 million, and $15.2 million in 2007, 2006 and 2005, respectively. The Company paid income taxes of $20.5 million, $16.1 million and $4.3 million in 2007, 2006 and 2005, respectively. The Preferred Stock dividends and the accretion of the Warrants were excluded from the statement of cash flows as non-cash transactions.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded as of the Evaluation Date that the Company’s disclosure controls and procedures were effective such that the material information relating to the Company, including its consolidated subsidiaries, required to be disclosed in the Company’s Securities and Exchange Commission (“SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and was made known to the Company’s principal executive officer and principal accounting officer during the period when this report was being prepared to allow timely decisions regarding required disclosure.

In addition, there were no changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date. We have not identified any significant deficiencies or material weaknesses in the Company’s internal controls, and therefore there were no corrective actions taken.

ITEM 9B. OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The directors, executive officers and significant employees of the Company are as follows:

Name	Age	Positions
Lawrence H. Hayward	53	Chairman of the Board and Chief Executive Officer
Steven L. Ortega	46	Executive Vice President, Chief Financial Officer and Director
Michael L. Hatch	54	President, Chief Operating Officer and Director
Edward C. Agnew	68	Director
John M. Baumer	40	Director
John G. Danhakl	51	Director
Michael J. Fourticq	63	Director
Janet I. McDonald	50	Senior Vice President, Chief Information Officer
Rick D. Carlson	43	Senior Vice President, Commercial, Service and Logistics
Brian P. Agnew	42	Senior Vice President, Store Operations

Lawrence H. Hayward is Chairman of the Board of Directors and Chief Executive Officer. He joined the Company in January 2000 as President and Chief Executive Officer and assumed the additional role of Chairman of the Board in September 2000. Most recently, Mr. Hayward was the President of ABCO Desert Markets located in Phoenix, Arizona. From 1995 until 1999, he served as President and Chief Executive Officer of Carr Gottstein Foods Co., Alaska’s largest food and drug retailer and wholesale provider. From 1990 to 1995, Mr. Hayward held other senior level positions at Buttrey Food and Drug Store Company. From 1981 until 1990 he served in various corporate positions at American Stores Company headquartered in Salt Lake City, Utah. Mr. Hayward is also a director of Petco Animal Supplies, Inc.

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Steven L. Ortega is Executive Vice President, Chief Financial Officer and Director of the Company and joined the Company in August, 2005. Mr. Ortega served as Executive Vice President and Chief Financial Officer for BI-LO LLC from 1999 to 2005. Prior to joining BI-LO, Mr. Ortega was with American Stores Company, where he held various positions within their supermarket and drug store subsidiaries, including Vice President – Finance and Administration, and Vice President – Logistics. Prior to this period at American Stores, Mr. Ortega held various management positions in finance, accounting, audit and store operations at Lucky Stores, Inc., where he last held the position of Director of Finance and Accounting.

Michael L. Hatch has been President, Chief Operating Officer and Director of the Company since September 2006. Prior to that, Mr. Hatch served as Senior Vice President, Merchandising and Marketing of the Company since November 2000. Mr. Hatch has more than 30 years of experience in the retail industry. Most recently, Mr. Hatch was the President of ABCO Desert Markets, located in Phoenix, Arizona. From 1996 to 1999 he was employed by Smiths Food and Drug where he held various positions including Senior Vice President and Southwest Manager and Vice President of Sales, Merchandising and Marketing. From 1970 to 1996, Mr. Hatch held various senior management positions at Smitty’s Super Valu, Inc. located in Phoenix, Arizona, which later merged with Smith’s Food and Drug.

Edward C. Agnew became a director in December 2002. He is a former retail executive with over 36 years of retail experience. Mr. Agnew held various officer level assignments with Jewel Companies, Inc., Buttrey Food and Drug, Inc., and American Stores/Albertsons, Inc. Mr. Agnew began his career in 1963 with Jewel Food & Drug Stores where he served in various capacities including General Manager of its Midwest Division. In 1987, Mr. Agnew was appointed President and Chief Executive Officer of Buttrey Food and Drug, Inc. In 1990, Mr. Agnew successfully led a leveraged buyout of Buttrey Food and Drug Store Company and successfully completed an initial public offering of the Company in early 1993. In 1994, Mr. Agnew returned to American Stores, Inc., where he served as a Senior Vice President and member of the Company’s Executive Committee until his retirement in 1999.

John M. Baumer became a director of the Company in November 2001. He has been an executive officer and equity owner of LGP, the firm that manages Green Equity Investors II, L.P. (“GEI”), since 1999. Mr. Baumer had previously been a Vice President at Donaldson, Lufkin & Jenrette Securities Corporation (“DLJ”), and had been with DLJ since 1995. Prior to joining DLJ, Mr. Baumer was at Fidelity Investments and Arthur Andersen. Mr. Baumer is also a director of FTD, Inc., Intercontinental Art, Inc., VCA Antech, Inc., The Brickman Group, Ltd. and Petco Animal Supplies, Inc.

John G. Danhakl became a director of the Company in June 1997. He has been an executive officer and an equity owner of LGP, the firm that manages GEI, since 1995. Mr. Danhakl had previously been a Managing Director at DLJ and had been with DLJ since 1990. Prior to joining DLJ, Mr. Danhakl was a Vice President at Drexel Burnham Lambert Incorporated. Mr. Danhakl is also a director of Arden Group, Inc., Petco Animal Supplies, Inc., The Neiman Marcus Group, Inc., Sagittarius Brands, The Tire Rack, Inc. and Horseshows In The Sun.

Michael J. Fourticq became a director of the Company in June 1997. He also served as Chairman of the Board of Directors from May 1988 until January 2000. Between May 1988 and August 1992, he served as the Company’s Chief Executive Officer. From 1995 to 2001, Mr. Fourticq had been the Chairman and Chief Executive Officer of Brown Jordan International, a leading manufacturer of outdoor and casual furniture products. Since 1985 he has been the sole general partner of Hancock Park Associates, which is the general partner and affiliate of several investment partnerships. Mr. Fourticq is also on the Boards of Mikol Missile-Air, Brown Jordan International, Gordon Biersch, FHI dba Body Home Fitness, The Right Start, Classic Party Rentals, Stanton International and Saleen, Inc.

Janet I. McDonald is Senior Vice President, Chief Information Officer of the Company. She joined the Company in August of 2000. Ms. McDonald has over 29 years of retail experience. Most recently Ms. McDonald owned and operated her own consulting business where she provided project management, management training, marketing, economic and other business services. From 1990 to 1992 she served as Director Information Technology for Buttrey Food and Drug Store Company. From 1981 to 1990 she held progressive levels of management responsibility in corporate technology for American Stores Company.

Rick D. Carlson is Senior Vice President of Commercial, Service and Logistics of the Company. Mr. Carlson has over 16 years of retail experience and has been with the Company since February of 2000 when he joined the team as Vice President of Logistics. Most recently Mr. Carlson was the General Manager of the Alaska Division of Totem Ocean Trailer Express. From 1995 until 1999, he was the Director of Transportation and Freight Operations of Carr Gottstein Foods Co., Alaska’s largest food and drug retailer and wholesale provider. Prior to that time he held several management positions at Buttrey Food and Drug Co.

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Brian P. Agnew became Senior Vice President, Store Operations on September 29, 2005. Brian Agnew is a 15 year retail veteran and was previously the regional Vice President of Operations in the Company’s Southeast Region from September 2003 through October 2005. From May 2003 through September 2003 he held the position of District Manager with the Company. Prior to joining Leslie’s, Brian Agnew held several management positions in the retail grocery industry with Jewel Foods, American Stores Company and Albertson’s, Inc. Brian Agnew is the son of Edward C. Agnew, who has served as a director of the Company since December 2002.

On July 12, 2007, the Company accepted the resignation, of Mr. Ted C. Nark from the Company’s board of directors.

All executive officers of the Company are chosen by the Board of Directors and serve at the Board’s discretion except as provided in the employment agreements described below under “Executive Compensation – Employment Agreements”.

No Audit Committee

The Company does not have an audit committee, nor is any member of the Board a “financial expert” within the meaning of the regulations of the Securities and Exchange Commission. As a voluntary filer without a public market for our equity securities, we are not required to have an audit committee or a financial expert. We do not believe that we could recruit a financial expert without unwarranted expense and difficulty.

Code of Ethics

The Company has adopted a Code of Ethics and a copy may be obtained, without charge, by written request to the Company Attention: Corporate Secretary.

Section 16(a) is Not Applicable

The Company is a voluntary filer without a public market for its equity securities. Consequently, the executive officers and directors are not required to comply with Section 16(a) of the Exchange Act.

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ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION, DISCUSSION AND ANALYSIS

The Board of Directors of the Company does not maintain a compensation committee. Our Board of Directors reviews and approves our compensation practices for attracting, retaining and motivating our Named Executive Officers (or NEOs).

The following Compensation Discussion and Analysis details the Company’s strategy and practices for compensating our NEOs, who in fiscal 2007 were:

Name	Title
Lawrence H. Hayward	Chief Executive Officer and Chairman of the Board
Steven L. Ortega	Chief Financial Officer, EVP and Director
Michael L. Hatch	President, Chief Operating Officer and Director
Janet I. McDonald	Senior Vice President, Chief Information Officer
Rick D. Carlson	Senior Vice President, Commercial, Service and Logistics

Objectives of the Executive Compensation Program

Our compensation programs are designed to provide a competitive level of total compensation (base salary, variable pay, and benefits) to attract and retain talented executives and to motivate our Named Executive Officers to achieve the Company’s business objectives, as approved by the Board of Directors. The Board of Directors uses published surveys to determine whether the compensation provided to NEOs and other executives is competitive. However, the Board does not benchmark against any specific companies. Total compensation is reviewed when the Board of Directors deems it necessary but such review does not typically occur on an annual basis.

Elements of Executive Compensation

The elements of the Company’s compensation are comprised of:

• Base salary;

• At risk variable bonuses tied to the Company’s performance;

• Benefits and other perquisites; and

• Severance and other post-termination payments as defined in certain of the Named Executive Officers’ employment agreements.

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What the Compensation Element is Designed to Reward and How It Relates to the Objectives

Each pay element is designed to reward different results as shown below:

Compensation Element	Designed to Reward	Relationship to the Objectives
Base Salary	Experience, knowledge of the Company and industry, dedication to assigned job, and performance by the executive on behalf of the Company	Provides competitive pay to attract and retain talented NEOs
Bonus	Success in achieving the Company’s financial and operational goals	Motivate and reward executives to achieve the Company’s annual business objectives Provide competitive pay to attract and retain talented NEOs
Benefits and Other Perquisites	Initial and continued employment by the NEOs	Provide competitive compensation to attract and retain talented executives
Severance and Other Post-Termination Payments	Initial and continued employment by the executive	Provide competitive compensation to attract and retain talented executives

Base Salary

Base salary is paid for on-going employment throughout the year. It is intended to compensate the NEOs for their basic services performed for the Company thorough the year. In setting base salary, the Board of Directors considers each NEO’s experience, role and job responsibilities. The Board or Directors reviews base salary when it deems necessary and such review does not always occur on an annual basis.

Bonus

In the first quarter of each fiscal year, the Board of Directors meets to review the Company’s budget and targeted EBITDA goals for the fiscal year. At that meeting, the Board approves a threshold EBITDA target for the Company before bonuses will be paid to NEOs. If the EBITDA target is not achieved, bonuses will not be paid. Consequently, all bonuses are at risk.

In fiscal 2007, the Board of Directors set $76.1 million as the annual EBITDA threshold before bonuses would be paid. Bonuses for NEOs were subject to a cap of 150% of the target bonus and bonuses were targeted in the following amounts:

Name	Target Bonus
Lawrence H. Hayward	70% of base salary
Steven L. Ortega	60% of base salary
Michael L. Hatch	60% of base salary
Janet I. McDonald	35% of base salary
Rick D. Carlson	35% of base salary

The Company exceeded the EBITDA threshold and, consequently, each of the NEOs received more than their target bonus, as set forth in detail in the Summary Compensation Table below.

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Benefits and Other Perquisites

401(k) Plan

The Company maintains a 401(k) plan that is available for all eligible employees, including the NEOs. Participants may elect to defer up to 25% of their compensation as pre-tax contributions through regular payroll deductions, subject to the limitations set forth in the Internal Revenue Code. Participants who have attained age 50 before the end of the year are also eligible to make catch-up contributions. The Company currently provides a discretionary matching contribution to each eligible participant’s account, equal to 50% of an eligible employee’s elective contributions, up to 4% of their total compensation.

Welfare Benefits

The NEOs are eligible to participate in any medical, dental, life insurance, disability, 401k or stock option plan made generally available by the Company to executives.

Cash Allowance

Messrs. Hayward and Ortega’s employment agreements provide for the payment by the Company of an annual cash allowance for expenses, including those which may be considered partially or wholly personal in nature. The annual cash allowance is automatically increased annually by 5% from that paid in the prior year. In addition, Messrs. Hayward and Ortega are each entitled to a tax gross-up for any taxes related to his receipt of the cash allowance. In fiscal 2007, Mr. Hayward’s annual cash allowance was $55,125 and his gross-up amount was $33,233. In fiscal 2007, Mr. Ortega’s annual cash allowance was $16,500 and his gross-up amount was $10,854.

Separation Arrangements

As described in detail below, employment agreements for three of the NEOs specify certain severance benefits to be paid in the event of an involuntary termination of such executive’s employment. Mr. Hayward’s employment agreement also provides for severance payment if he elects to terminate his employment following a change in control of the Company. The Company provides such separation benefits in order to remain competitive in attracting and retaining executives.

For further details, please refer to the section “Severance, Termination and Change in Control Payments” below.

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Stock Option Awards

As of the 2007 Reorganization, all contractual rights and obligations relating to the Company’s 2005 Stock Option Plan and related Option Agreements and Notices of Option Grants were adopted by Holdings and deemed to apply to Holdings common stock. During the second quarter of 2007, Holdings’ Board of Directors accelerated the vesting of all outstanding stock options to purchase shares of common stock of Holdings. Each of the NEOs exercised his or her outstanding options in February of 2007.

During fiscal 2007, the Company did not grant any additional option or stock awards to their Named Executive Officers. However, in November 2007 the Board of Directors of Holdings approved grants of time based options to a number of employees of the Company, including the NEOs as follows:

Name	Number of Options Granted for Fiscal 2008
Lawrence H. Hayward	40,000
Steven L. Ortega	20,000
Michael L. Hatch	20,000
Janet I. McDonald	10,000
Rick D. Carlson	10,000

The options vest over a five year period at a rate of 20% annually on each anniversary of the date of grant and have an exercise price of $2.30 per share. These option grants are not included in the compensation tables below because they do not relate to compensation for fiscal 2007.

The Board of Directors determined to issue options to purchase shares of Holdings’ common stock in order to provide an incentive to the NEOs to remain in the employ of the Company and to align the NEOs interests with the shareholders of Holdings in order to maximize long-term value.

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Compensation of the Named Executive Officers

The following tables show, for fiscal year 2007, compensation awarded or paid to, or earned by, our CEO, CFO, and three most highly compensated executive officers other than the CEO and CFO. We refer to these executives collectively herein as the Named Executive Officers or NEOs.

SUMMARY COMPENSATION TABLE

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Grants ($)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)		Total ($)
(a)	(b)	(c)	(d)	(e)	(f)	(g)(1)	(h)	(i)		(j)
Lawrence H. Hayward Chief Executive Officer and Chairman of the Board	2007	517,000	—	—	—	496,521	—	94,558	(2)	1,108,079
Steven L. Ortega Chief Financial Officer, EVP and Director	2007	330,750	—	—	—	272,270	—	31,754	(3)	634,774
Michael L. Hatch President, Chief Operating Officer and Director	2007	320,000	—	—	—	263,421	—	4,400	(4)	587,821
Janet I. McDonald Senior Vice President, Chief Information Officer	2007	177,500	—	—	—	84,814	—	4,211	(4)	266,525
Rick D. Carlson Senior Vice President, Commercial, Service and Logistics	2007	170,000	—	—	—	81,273	—	4,400	(4)	255,673

(1) Bonuses are attributed to the year earned and are paid out after the conclusion of the fiscal year. For fiscal 2007, certain of the NEOs received their bonuses in November 2007 and others will receive their bonuses in January 2008.

(2) Represents (i) a cash allowance of $55,125 for all expenses, including those that may be personal in nature, (ii) a gross up payment of $33,233 related to the cash allowance, (iii) legal and accounting expenses paid by the Company and incurred by Mr. Hayward in connection with negotiating his amended employment agreement, and (iv) the Company’s matching contributions to Mr. Hayward’s 401(k) account.

(3) Represents (i) a cash allowance of $16,500 for all expenses, including those that may be personal in nature, (ii) a gross up payment of $10,854 related to the cash allowance, and (iii) the Company’s matching contributions to Mr. Ortega’s 401(k) account.

(4) Represents the Company’s matching contributions to each NEO’s 401(k) account.

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GRANTS OF PLAN-BASED AWARDS

For Fiscal Year ended September 29, 2007

Name	Grant Date	Estimated Future Payouts Under Non-Equity Incentive Plan Awards
(a)	(b)	Threshold ($) (c)	Target ($) (d)	Maximum ($) (e)
Lawrence H. Hayward	11/15/2006	180,950	361,900	542,850
Steven L. Ortega	11/15/2006	99,225	198,450	297,675
Michael L. Hatch	11/15/2006	96,000	192,000	288,000
Janet I. McDonald	11/15/2006	31,063	62,125	93,188
Rick D. Carlson	11/15/2006	29,750	59,500	89,250

As of the 2007 Reorganization, all contractual rights and obligations relating to the Company’s 2005 Stock Option Plan (the “2005 Plan”) and related agreements were assumed by Holdings. During the second quarter of 2007 and pursuant to the 2005 Plan, Holdings’ board of directors approved the acceleration of the vesting of all outstanding stock options to purchase shares of common stock of Holdings. The fair value of the awards immediately before the modification of the vesting was the same value as the fair value after the modification took effect. All of the outstanding options were exercised in February of 2007 after the 2007 Reorganization and all exercises by the NEOs are reflected in the table below.

During fiscal 2007, our Named Executive Officers did not receive any grants of stock options or other stock awards. However, as described above in the Compensation, Discussion & Analysis, in November 2008 the Board of Directors of Holdings approved grants of time based options to a number of employees of the Company, including the NEOs. The options vest over a five year period at a rate of 20% annually on each anniversary of the date of grant.

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OPTION EXERCISES

For Fiscal Year Ended 2007

	Option Awards
Name of Executive Officer	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)
(a)	(b)	(c)
Lawrence H. Hayward	50,000	291,500
Steven L. Ortega	720,000	6,822,600
Michael L. Hatch	45,000	323,850
Janet I. McDonald	20,000	154,100
Rick D. Carlson	20,000	154,100

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Severance, Termination and Change in Control Payments

Employment Agreements

Lawrence H. Hayward

The Company entered into an amended and restated employment agreement with Lawrence Hayward on June 15, 2007, for his employment as Chief Executive Officer and Chairman of the Board of the Company. Under the employment agreement, the Company shall pay Mr. Hayward a salary at an annual rate of $517,000. Mr. Hayward shall also be eligible to participate in the Company’s bonus plan, with a target bonus for each year of not less than 70% of his base salary in effect at the end of such year. Under the employment agreement, the Company shall pay Mr. Hayward an annual cash allowance for expenses, which was $55,125 for 2007 (increased annually by 5%), that relates to his employment which might be considered partially or wholly personal in nature, and he is entitled to a tax gross-up for any taxes related to his receipt of the cash allowance. Mr. Hayward is entitled to receive other benefits such as four (4) weeks of vacation each year, personal and sick leave, insurance and other benefits consistent with the then-current policies of the Company and equal to those benefits extended to the most senior executives of the Company. The employment agreement expires on June 15, 2012 but shall automatically extend for successive one-year periods unless notice is provided in accordance with the terms of the employment agreement. Mr. Hayward’s employment agreement also contains non-solicitation and confidentiality covenants and provides that Mr. Hayward serves as a Director at the will of the Company’s Board of Directors.

If the Company terminates Mr. Hayward’s employment for any reason other than his death, disability, Just Cause, or pursuant to the Company’s retirement policy or if Mr. Hayward terminates his employment for Good Reason, the Company shall pay him a lump sum cash amount equal to 200% of the sum of (i) his base salary in effect at the time of the termination, (ii) the greater of his target bonus for such year and the average of his bonuses for the prior five years, (iii) an amount equal to the monthly premium payable to Mr. Hayward for health and medical-care insurance coverage of Mr. Hayward and his dependents for coverage period required under COBRA, and (iv) an amount equal to the monthly premium payable by Mr. Hayward for health and medical-care insurance coverage of Mr. Hayward and his dependents for coverage period after the expiration of COBRA period multiplied by 12, provided however, that the amount of such premium will be capped at 150% of the premium that was payable under COBRA. In addition, Mr. Hayward is entitled to a tax gross-up if excise taxes are imposed as a result of any payments made under the agreement. The amount of the gross-up will be sufficient to cover all such taxes, interests and penalties.

“Just Cause” is defined in the employment agreement as termination of employment for any of the following reasons: (i) Mr. Hayward’s conviction of a felony, without the right of further appeal, which has an adverse impact on the Company or which involves the material misappropriation of the Company’s assets, (ii) an intentional or grossly negligent violation by Mr. Hayward of any reasonable policy of the Board of Directors of the Company that results in material damage to the Company and which, if such violation is curable, after notice to do so, Mr. Hayward fails to correct within a reasonable time, or (iii) the performance of services by Mr. Hayward for any other company, entity, or person which directly competes with the Company during the time Mr. Hayward is employed by the Company, without the written approval of the Company’s Board of Directors.

“Good Reason” is described in the employment agreement as (i) relocation of Mr. Hayward’s home due to the relocation of the corporate office beyond a 25-mile radius of the current office located in Phoenix, Arizona, or (ii) the consummation of a Change in Control.

“Change in Control” is defined as any of the following: (i) GCP California Fund, L.P. and its affiliates cease to beneficially own, directly or indirectly, a majority of the voting securities of the Company, (ii) a merger or consolidation of Holdings or the Company, or (iii) the sale of substantially all of the assets of the Company, in each case in a transaction or series of transactions as a result of which a majority of the voting securities of the Company cease to be beneficially owned, directly or indirectly, by GCP California Fund, L.P. or any of its affiliates.

Steven L. Ortega

The Company entered into an amended and restated employment agreement with Steven Ortega on June 15, 2007, for his employment as Executive Vice President and Chief Financial Officer of the Company. The employment agreement provides for a minimum base salary of no less than $330,750 annually. Mr. Ortega is also eligible to participate in the Company’s bonus plan with a target bonus of at least 60% of his base salary in effect for the fiscal year.

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The bonus plan shall provide for a minimum bonus of 50% of target upon achievement of threshold performance. Mr. Ortega is also entitled to receive prompt reimbursement for all expenses reasonably and necessarily incurred by him in performing his duties. Under the employment agreement, Mr. Ortega is paid an annual cash allowance for expenses, which was $16,500 for 2007 (increased annually by 5%), that relates to his employment which might be considered partially or wholly personal in nature, and he is entitled to a tax gross-up for any taxes related to his receipt of the cash allowance. Mr. Ortega is eligible to participate in any medical, dental, life insurance, disability, retirement, profit-sharing, savings, stock option plan or stock-based compensation plan made generally available by the Company to executives. Additionally, he is eligible to receive vacation (not less than 4 weeks paid vacation per year) and sick leave. The employment agreement contains non-solicitation and confidentiality covenants and provides that Mr. Ortega will serve as a Director at the will of the Company’s Board of Directors. The employment agreement expires on April 22, 2010 but shall automatically extend for successive one-year periods unless notice is given in accordance with the employment agreement.

If the Company terminates Mr. Ortega’s employment for any reason other than Cause or Mr. Ortega terminates his employment for Good Reason, Mr. Ortega will receive the following: (i) any unpaid base salary that has been earned at the time of such termination, (ii) a pro-rata portion of the cash allowance of the year less any amount previously disbursed in that year, (iii) any reimbursements to which he was entitled, (iv) compensation for accrued but unused vacation, (v) any other amounts or benefits due after the termination of employment under the terms of other agreements, (vi) 200% percent of (A) his base salary in effect at the time of the termination, plus (B) his target bonus for the year of termination to be paid in accordance with the Company’s normal payroll procedures, (vii) reimbursement for the premium payable by Mr. Ortega for health and medical-care insurance coverage under COBRA for a period of 18 months after termination, and (viii) independent, offsite, executive career transition and outplacement services.

“Cause” is defined in the employment agreement as any of the following: (i) Mr. Ortega’s breach of the employment agreement or a material Company policy, (ii) the engaging by Mr. Ortega in willful, reckless or grossly negligent misconduct, or (iii) Mr. Ortega failing or refusing to perform any material obligation or to carry out the reasonable directives of his supervisor consistent with his duties, and Mr. Ortega fails to cure the same within a period of 10 days after written notice of such failure is provided to him by the Company.

“Good Reason” is deemed to exists if (i) there is a material diminution in the title and/or duties, responsibilities or authority of Mr. Ortega, (ii) the Company requires Mr. Ortega to move to another location of the Company or any affiliate and the distance between the new job site is at least 50 miles away from metropolitan Phoenix, Arizona, (iii) there is a willful failure or refusal by the Company to perform any material obligation under the employment agreement, or (iv) there is a reduction in Mr. Ortega’s base salary or annual bonus target amount.

Michael L. Hatch

The Company entered into an employment agreement with Michael L. Hatch on June 15, 2007, for his employment as the President and Chief Operating Officer of the Company. The employment agreement provides for an annual minimum base salary of $320,000, and provides that Mr. Hatch is eligible during each fiscal year for an annual bonus of 60% of his annual base salary. The employment agreement provides that Mr. Hatch is eligible to participate in the Company’s benefit plans consistent with the benefits generally available to executives. Such benefits include four (4) weeks of vacation each year, personal and sick leave, disability, and medical and life insurance. Under the employment agreement Mr. Hatch is also subject to non-solicitation and confidentiality covenants, and he serves at the will of the Company’s Board of Directors.

If the Company terminates Mr. Hatch’s employment for any reason other than (i) under its retirement policy, (ii) upon Mr. Hatch’s death or disability, or (iii) for Just Cause, then the Company shall pay him a lump sum amount equal to his current annual salary and target bonus, less normal withholdings and will reimburse Mr. Hatch for a period of twelve (12) months after termination for his health and medical-care insurance coverage.

“Just Cause” is defined in the employment agreement as termination of employment for any of the following reasons: (i) Mr. Hatch’s breach of the employment agreement or of a material policy of the Board of Directors of the Company, (ii) the engaging by Mr. Hatch in willful, reckless or grossly negligent misconduct, (iii) Mr. Hatch’s indictment, charge, conviction or guilty pleas (or plea of nolo contendere) with respect of an offense involving moral turpitude or a felony, (iv) Mr. Hatch’s failing or refusing to perform any material obligation or to carry out the reasonable directives of Mr. Hatch’s supervisor consistent with his duties, and Mr. Hatch fails to cure the same within a period of 10 days after written notice of such failure is provided to Mr. Hatch, or (v) the performance of services by Mr. Hatch for any other company, entity, or person which directly competes with the Company during the time Mr. Hatch is employed by the Company, without the written approval of the Board of the Company.

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We did not execute employment agreements with any other Named Executive Officers.

Potential Payments Upon Termination or Change in Control

The following table sets forth potential payments for each Named Executive Officer in the event of various termination circumstances. This presentation assumes termination has occurred on the last business day of fiscal 2007. Due to uncertainties inherent in this estimation process, it is possible actual payments may vary from these estimates.

Name	Termination by the Company other than for Cause			Resignation by the NEO for Good Reason			Voluntary Resignation by the NEO	Retirement (7)	Death			Disability			Termination by NEO after a Change in Control
Lawrence H. Hayward	$	2,010,412	(1)	$	2,010,412	(1)	—	—	$	1,377,860	(2)	$	1,377,860	(2)	$	2,010,412	(3)
Steven L. Ortega	$	1,093,381	(4)	$	1,093,381	(4)	—	—		198,450	(5)		—			—
Michael L. Hatch	$	523,537	(6)		—		—	—		—			—			—
Janet I. McDonald		—			—		—	—		—			—			—
Rick D. Carlson		—			—		—	—		—			—			—

(1) Comprised of 200% of (i) Mr. Hayward’s base salary in effect at the time of termination, (ii) the greater of his target bonus for such year and the average of his bonuses for the prior five years, (iii) an amount equal to the monthly premium payable by Mr. Hayward for health and medical insurance coverage for him and his dependents for eighteen months and (iv) an amount equal to the monthly premium payable by Mr. Hayward for health and medical insurance for him and his dependents coverage for the period after expiration of COBRA for twelve additional months but subject to a cap at 150% of the premium payable under COBRA.

(2) Comprised of (i) 18 months of Mr. Hayward’s base salary,(ii) a pro-rata portion of the greater of his target bonus or the bonus to which he would otherwise have been entitled for the year, (iii) a pro rata portion of his cash allowance for the year, and (iv) continuation of health insurance coverage for Mr. Hayward’s dependents for 18 months under COBRA.

(3) Comprised of all amounts set forth in footnote (1) above. In addition, Mr. Hayward may be entitled to a tax gross-up calculated in accordance with the terms of his employment agreement.

(4) Comprised of (i) 200% of Mr. Ortega’s base salary in effect at the time of termination, (ii) 200% of his target bonus for such year, (iii) an amount equal to the monthly premium payable by Mr. Ortega for health and medical insurance coverage for him and his dependents for eighteen months, and (iv) an estimate of the costs of providing Mr. Ortega with the career transition and outplacement services set forth in his employment agreement.

(5) If Mr. Ortega’s employment terminates on account of death, he will receive his target bonus for the fiscal year in which he died.

(6) Comprised of (i) Mr. Hatch’s annual salary at the time of termination, (ii) his target bonus for such year, and (iii) an amount equal to the monthly premium payable by Mr. Hatch for health and medical insurance coverage for him and his dependents for twelve months.

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Directors’ Compensation

The following table lists each of our directors, who is not also an NEO. Generally, Directors do not receive any compensation for their service on the Company’s Board of Directors other than reimbursement for reasonable out-of-pocket expenses incurred in connection with attending meetings. However, Mr. Edward Agnew and prior to his resignation, Mr. Ted Nark, received $4,000 per each quarterly meeting of the Company’s Board of Directors.

DIRECTOR COMPENSATION

For Fiscal Year Ended 2007

Name (a)	Fees Earned or Paid in Cash ($) (b)	Stock Awards ($) (c)	Option Awards ($) (d)	Non-Equity Incentive Plan Compensation ($) (e)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (f)	All Other Compensation ($) (g)	Total ($) (h)
Edward C. Agnew	16,000	—	—	—	—	—	16,000
Ted C. Nark (1)	8,000	—	—	—	—	—	8,000
John M. Baumer	—	—	—	—	—	—	0
John G. Danhakl	—	—	—	—	—	—	0
Michael J. Fourticq	—	—	—	—	—	—	0

(1) On July 12, 2007, the Company accepted the resignation, of Mr. Ted C. Nark from the Company’s board of directors. As of the effective time of Mr. Nark’s resignation, he had attended two meetings of the Board of Directors and was entitled to a fee of $4,000 per meeting.

Compensation Committee Interlocks and Insider Participation

The Board of Directors of the Company does not have a compensation committee. The independent members of the Company’s Board of Directors sets compensation in executive session. None of our Named Executive Officers participated in discussions of the Board of Directors related to executive compensation in fiscal 2007.

Compensation Committee Report

The Company’s Board of Directors does not have a compensation committee. The Board of Directors of the Company reviewed and discussed with management the Compensation Discussion and Analysis set forth above for the 2007 fiscal year. As a result of this review and discussion, the Board of Directors approved, the Compensation Discussion and Analysis for inclusion in this annual report.

BOARD OF DIRECTORS:	Lawrence H. Hayward (Chairman)
	Steven L. Ortega
	Michael L. Hatch
	Edward C. Agnew
	John M. Baumer
	John G. Danhakl
	Michael J. Fourticq

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Holdings beneficially owned 100% of the Company’s common stock as of September 29, 2007. Accordingly, Holdings owned 100% of the economic and voting power in the Company. The following table sets forth information as of September 29, 2007 with respect to (i) all persons known by us to be the beneficial owner of more than 5% of Holdings’ common stock; (ii) all executive officers; (iii) all directors; and (iv) all directors and executive officers as a group.

Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership of Common Stock	Percentage of Shares Outstanding
Leslie’s Coinvestment, LLC(2)	9,152,403	21.0
John M. Baumer(2)(3)	33,867,730	77.6
John G. Danhakl(2)(3)	33,867,730	77.6
GCP California Fund, L.P.(3)	24,715,327	56.6
Michael J. Fourticq	732,270	1.7
Edward C. Agnew	—	—
Lawrence H. Hayward	3,050,000	7.0
Steven L. Ortega	920,000	2.1
Michael L. Hatch	420,000	1.0
Janet I. McDonald	235,000	0.5
Rick D. Carlson	270,000	0.6
All executive officers and directors as a group (10 persons)	39,495,000	90.4

(1) The address of Messrs. Fourticq, Hayward, Ortega, Hatch and Carlson and Ms. McDonald is 3925 E. Broadway Road, Suite 100, Phoenix, Arizona 85040. The address of LGP, GCP and Messrs. Baumer and Danhakl is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025.

(2) Leslie’s Coinvestment, LLC is a Delaware limited liability company managed by LGP. Each of Messrs. Jonathan D. Sokoloff, Peter J. Nolan, John D. Danhakl, Jonathan A. Seiffer, John M. Baumer and Timothy J. Flynn, either directly (whether through ownership interest or position) or through one or more intermediaries, may be deemed to control LGP. Accordingly, for certain purposes, Messrs. Sokoloff, Nolan, Danhakl, Seiffer, Baumer and Flynn may be deemed to be beneficial owners of the shares of the Company’s common stock held or controlled by LGP. However, such individuals disclaim beneficial ownership of the securities held by LGP, except to the extent of their respective pecuniary interests therein.

(3) GCP is a Delaware limited partnership managed by an affiliate of LGP, which is an affiliate of the general partner of GCP. Each of Messrs. Sokoloff, Nolan, Danhakl, Seiffer, Baumer and Flynn either directly (whether through ownership interest or position) or through one or more intermediaries, may be deemed to control the affiliate of LGP and such general partner. The affiliate of LGP and such general partner may be deemed to control the voting and disposition of the shares of the Company’s common stock owned by GCP. Accordingly, for certain purposes, Messrs. Sokoloff, Nolan, Danhakl, Seiffer, Baumer and Flynn may be deemed to be beneficial owners of the shares of the Company’s common stock held by GCP. However, such individuals disclaim beneficial ownership of the securities held by GCP, except to the extent of their respective pecuniary interests therein.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Management Services Agreement

We entered into a Management Services Agreement with LGP concurrent with the consummation of the 2005 Recapitalization. The Management Services Agreement provides that we will pay LGP an annual fee of $1.0 million for ongoing management, consulting and financial services. In addition, the Management Services Agreement provides that LGP may provide us with financial advisory or investment banking services in connection with major financial transactions, and LGP will be paid a customary fee for such services. The Management Services Agreement will terminate on the earlier of (a) the tenth anniversary of its execution dated January 25, 2005; provided that the agreement will automatically extend for one year periods thereafter unless either we or LGP gives the other three months prior notice of termination, (b) the consummation of a change of control, including the date that LGP affiliates hold 40% or less of the Company’s shares and (c) the consummation of a public offering of the Company’s common stock in an aggregate offering amount of at least $50 million or as a result of which at least 15% of the Company’s shares of common stock is publicly traded. In the event of the Company’s bankruptcy, liquidation, insolvency or winding-up, the payment of all accrued and unpaid fees pursuant to the Management Services Agreement is subordinated to the prior payment in full of all amounts due and owing under the indenture governing the notes.

Stockholders Agreement

We entered into a Stockholders Agreement with GCP and each of the Company’s other stockholders concurrent with the consummation of the 2005 Recapitalization. The Stockholders Agreement generally restricts the transferability of the Company’s stock and gives GCP and its affiliates a right of first refusal in the event any other stockholder seeks to transfer any of the Company’s stock to a third party. In addition, GCP and its affiliates have certain “drag-along” rights and if GCP and its affiliates desire to sell any of the Company’s stock, other stockholders will have certain “tag-along” rights to participate in such sale. We and certain of the non-management stockholders have certain rights to repurchase a portion of the stock held by management upon their ceasing to provide services to us. The Stockholders Agreement also grants demand registration rights to the non-management stockholders and piggyback registration rights for all stockholders. Finally, Mr. Fourticq has certain rights to be elected as a director of Leslie’s.

On October 25, 2005, certain provisions of the Stockholders Agreement were amended dealing with termination of employment and in February 2007, the Stockholders Agreement was amended further reflecting the certain modifications related to the 2007 Reorganization.

Indemnification

We have agreed that we will indemnify all of the Company’s current and former directors and officers after the consummation of the 2005 Recapitalization for all costs and expenses incurred in proceedings arising out of or pertaining to the 2005 Recapitalization.

Director Independence

We are a corporation with public debt (not listed on any exchange) whose equity is privately held by Holdings, a private holding company. Although our Board has not made a formal determination on the matter, under current New York Stock Exchange listing standards (which we are not currently subject to) and taking into account any applicable committee standards, we believe that Messrs. Hayward, Ortega and Hatch would not be considered independent under any general listing standards or those applicable to any particular committee due to their employment relationship with the Company, Mr. Edward Agnew would not be considered independent under any general listing standards or those applicable to any particular committee due to his son’s employment with the Company as Senior Vice President of Operations, and Messrs. Danhakl and Baumer may not be considered independent under any general listing standards or those applicable to any particular committee, due to their direct relationship with LGP and GCP, our largest shareholders.

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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

	Fiscal 2007		Fiscal 2006
Audit Fees (1)	$	363,000	$	297,000
Audit-Related Fees (2)		38,000		30,000
Total	$	398,000	$	327,000

⁽¹⁾ Includes fees and expenses related to the fiscal year audit and interim reviews, notwithstanding when the fees and expenses were billed or when the services were rendered.

⁽²⁾ Includes fees and expenses for various services rendered from October through September of the fiscal year, notwithstanding when the fees and expenses were billed.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1), (2) The following financial statements and financial statement schedules are included herewith and are filed as part of this annual report.

Report of Independent Registered Public Accounting Firm	22
Consolidated Balance Sheets—September 29, 2007 and September 30, 2006	23
Consolidated Statements of Operations—Years Ended September 29, 2007, September 30, 2006 and October 1, 2005	24
Consolidated Statements of Stockholders’ Deficit—Years Ended September 29, 2007, September 30, 2006 and October 1, 2005	25
Consolidated Statements of Cash Flows— Years Ended September 29, 2007, September 30, 2006 and October 1, 2005	26
Notes to Consolidated Financial Statements	27

(a)(3) The following exhibits set forth below are filed as part of this annual report or are incorporated herein by reference.

Exhibit Number	Description
2.1*	Agreement and Plan of Merger dated as of January 7, 2005 between the Company and LPM Acquisition LLC (previously filed as Exhibit 2.1 to the Current Report on Form 8-K filed on January 11, 2005)
2.2*	Agreement and Plan of Merger to Form Holding Company (previously filed as Exhibit 2.1 to the Quarterly Report on Form 10-Q filed on February 9, 2007)
3.1*	Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on January 25, 2005 (previously filed as Exhibit 3.1 to the Registration Statement on Form S-4 filed on April 22, 2005)
3.2*	Bylaws of the Company (previously filed as Exhibit 3.5 to the Registration Statement on Form S-1 filed on June 27, 1997)
3.3*	Form of Certificate of Incorporation of Surviving Corporation (previously filed as Exhibit 3.1 to the Quarterly Report on Form 10-Q filed on February 9, 2007)
4.1*	Indenture dated as of May 21, 2003 between the Company and The Bank of New York Trust Company, N.A. (previously filed as Exhibit 4.1 to the Registration Statement on Form S-4 filed on July 18, 2003)
4.2*	Supplemental Indenture dated as of January 11, 2005 between the Company and The Bank of New York Trust Company, N.A. (previously filed as Exhibit 10.01 to the Current Report on Form 8-K filed on January 25, 2005)
4.3*	Indenture dated as of January 25, 2005 between the Company and The Bank of New York Trust Company, N.A. (previously filed as Exhibit 10.2 to the Current Report on Form 8-K filed on January 28, 2005)
10.1*	Stockholders Agreement dated as of January 25, 2005 among the Company, GCP California Fund, L.P., Leslie’s Coinvestment, LLC and the stockholders identified on the signature pages thereto (previously filed as Exhibit 10.1 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.2*	Amendment dated as of October 25, 2005 to the Stockholders Agreement dated as of January 25, 2005 among the Company, GCP California Fund, L.P., Leslie’s Coinvestment, LLC and the stockholders identified on the signature pages thereto (previously filed as Exhibit 10.3 to the Annual Report on Form 10-K filed on December 20, 2005)
10.3*	Management Services Agreement dated as of January 25, 2005 between the Company and Leonard Green & Partners, L.P. (previously filed as Exhibit 10.2 to the Registration Statement on Form S-4 filed on April 22, 2005)

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Exhibit Number	Description
10.4*	Lease Agreement dated as of August 30, 1990 by and between Adams Property Associates and the Company (previously filed as Exhibit 10.7 to the Registration Statement on Form S-1/A filed on July 21, 1997)
10.5*	First Amendment dated as of June 21, 1996 to the Lease Agreement dated August 30, 1990 by and between Adams Property Associates and the Company (previously filed as Exhibit 10.4 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.6*	Second Amendment dated as of September 30, 1999 to the Lease Agreement dated August 30, 1990 by and between Adams Property Associates and the Company (previously filed as Exhibit 10.5 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.7*	Third Amendment dated as of April 14, 2000 to the Lease Agreement dated August 30, 1990 by and between Adams Property Associates and the Company (previously filed as Exhibit 10.6 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.8*	Fourth Amendment dated as of November 1, 2004 to the Lease Agreement dated August 30, 1990 by and between Adams Property Associates and the Company (previously filed as Exhibit 10.9 to the Annual Report on Form 10-K filed on December 20, 2005)
10.9*	Lease dated as of November 26, 1996 by and between Bedford Property Investors, Inc. and the Company (previously filed as Exhibit 10.8 to Registration Statement on Form S-1/A filed on July 21, 1997)
10.10*	Addendum dated as of November 1996 to the Lease dated November 26, 1996 by and between Bedford Property Investors, Inc. and the Company (previously filed as Exhibit 10.8 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.11*	Lease Agreement dated as of December 30, 1997 by and between Liberty Property Limited Partnership and the Company (previously filed as Exhibit 10.8 to the Registration Statement on Form S-1/A filed on July 21, 1997)
10.12*	First Amendment dated as of June 3, 1999 to the Lease Agreement dated December 30, 1997 by and between Liberty Property Limited Partnership and the Company (previously filed as Exhibit 10.10 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.13*	Lease dated as of April 30, 1998 by and between Paul Hemmer Development Co., III and the Company (previously filed as Exhibit 10.11 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.14*	First Addendum dated as of July 21, 1999 to the Lease dated April 30, 1998 by and between Paul Hemmer Development Co., III and the Company (previously filed as Exhibit 10.12 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.15*	Lease Agreement dated as of March 30, 2004 between ProLogis and the Company (previously filed as Exhibit 10.13 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.16*	Lease dated as of October 31, 2000 between Broadway Business Center LLC and the Company (previously filed as Exhibit 10.14 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.17*	First Amendment dated as of November 30, 2000 to the Lease dated as of October 31, 2000 between Broadway Business Center LLC and the Company (previously filed as Exhibit 10.15 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.18*	Second Amendment dated as of June 26, 2001 to the Lease dated as of October 31, 2000 between Broadway Business Center LLC and the Company (previously filed as Exhibit 10.16 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.19*	Third Amendment dated as of May 31, 2002 to the Lease dated as of October 31, 2000 between Broadway Business Center LLC and the Company (previously filed as Exhibit 10.17 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.20*	Fourth Amendment dated as of April 9, 2004 to the Lease dated as of October 31, 2000 between Broadway Business Center LLC and the Company (previously filed as Exhibit 10.18 to the Registration Statement on Form S-4 filed on April 22, 2005)

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Exhibit Number	Description
10.21*	Form of Director’s and Officer’s Indemnification Agreement dated as of January 1, 2000 between the Company and certain members of management (previously filed as Exhibit 10.19 to the Registration Statement on Form S-4 filed on April 22, 2005)
10.22*†	2005 Stock Option Plan (previously filed as Exhibit 10.23 to the Annual Report on Form 10-K filed on December 20, 2005)
10.23†	Amended and Restated Employment Agreement dated June 15, 2007 between the Company and Lawrence H. Hayward
10.24†	Amended and Restated Executive Employment Agreement dated as of June 15, 2007 between the Company and Steven L. Ortega
10.25*†	Employment Agreement dated as of June 15, 2007 between the Company and Michael L. Hatch (previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed on June 19, 2007)
10.26*	Amended and Restated Loan and Security Agreement dated as of January 25, 2005 between the Company, LPM Manufacturing, Inc., Wells Fargo Retail Finance LLC and the other lenders parties thereto (previously filed as Exhibit 10.3 to the Current Report on Form 8-K filed on January 28, 2005)
10.27*	Registration Rights Agreement, dated as of January 25, 2005, between the Company and certain holders of the Company’s 7.75% Senior Notes due 2013 (previously filed as Exhibit 10.01 to the Current Report on Form 8-K filed on January 28, 2005)
10.28	First Amendment dated as of July 26, 2007 to the Lease dated November 26, 2006 by and between Bedford Property Investors, Inc. and the Company
10.29*	Amendment No. 2 dated as of June 15, 2006 to the Stockholders Agreement dated as of January 25, 2005 among the Company, GCP California Fund, L.P., Leslie’s Coinvestment, LLC and the stockholders identified on the signature pages thereto (previously filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on February 9, 2007)
10.30*	Amendment No. 3 dated as of February 7, 2007 to the Stockholders Agreement dated as of January 25, 2005 among the Company, GCP California Fund, L.P., Leslie’s Coinvestment, LLC and the stockholders identified on the signature pages thereto (previously filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on February 9, 2007)
21.1*	Subsidiaries (previously filed as Exhibit 21.1 to the Annual Report on Form 10-K405 filed on December 22, 1999)
24.1	Power of Attorney (included on signature page)
31.1	Certification of Lawrence H. Hayward
31.2	Certification of Steven L. Ortega
32.1	Certification of Lawrence H. Hayward and Steven L. Ortega

* Previously filed

† Management contract or compensatory plan

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COPIES OF THIS FORM 10-K MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN

REQUEST TO THE COMPANY AT THE FOLLOWING ADDRESS:

LESLIE’S POOLMART, INC.

3925 E. BROADWAY RD., SUITE #100

PHOENIX, ARIZONA 85040

ATTN: CORPORATE SECRETARY

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Phoenix, State of Arizona, on December 17, 2007.

LESLIE’S POOLMART, INC. (Registrant)
By:	/s/ STEVEN L. ORTEGA
	Steven L. Ortega Chief Financial Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Lawrence H. Hayward, Steven L. Ortega, and each of them, his true and lawful attorney or attorneys-in-fact and agent or agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including pre-or post-effective amendments) to this Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the date indicated.

Signature	Capacity	Date
/S/ LAWRENCE H. HAYWARD Lawrence H. Hayward	Chairman of the Board of Directors and Chief Executive Officer	December 17, 2007
/S/ EDWARD C. AGNEW Edward C. Agnew	Director	December 17, 2007
/S/ JOHN M. BAUMER John M. Baumer	Director	December 17, 2007
/S/ JOHN G. DANHAKL John G. Danhakl	Director	December 17, 2007
/S/ MICHAEL J. FOURTICQ Michael J. Fourticq	Director	December 17, 2007
/S/ MICHAEL L. HATCH Michael L. Hatch	President, Chief Operating Officer and Director	December 17, 2007
/S/ STEVEN L. ORTEGA Steven L. Ortega	Chief Financial Officer, Director and Principal Accounting Officer	December 17, 2007

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EX-10.23

EXHIBIT 10.23

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

Leslie’s Poolmart, Inc.

Lawrence H. Hayward

This Amended and Restated Employment Agreement (“Agreement”) is made as of June 15, 2007, by and among LESLIE’S POOLMART, INC., a Delaware corporation (“LPM”), LESLIE’S HOLDINGS, INC., a Delaware corporation (“Holdings” and together with LPM, the “Companies”) and LAWRENCE H. HAYWARD (“Mr. Hayward”).

RECITALS

A. LPM is a corporation organized under the laws of Delaware. It is engaged in the business of marketing pool supplies and related pool equipment and products.

B. Holdings was formed in February 2007 and owns 100% of the voting stock of LPM.

C. LPM and Mr. Hayward are parties to that certain Amended and Restated Employment Agreement November 21, 2003 and amended January 24, 2005 governing LPM’s employment of Mr. Hayward (the “Original Agreement”). LPM, Holdings and Mr. Hayward wish to supplement and restate the Original Agreement in its entirety.

D. LPM wishes to continue the employment of Mr. Hayward as Chief Executive Officer and Chairman of the Board of LPM and Holdings wishes Mr. Hayward to serve as its Chief Executive Officer and Chairman of the Board, and Mr. Hayward desires to be so employed by LPM and to act in such capacities.

AGREEMENT

Accordingly, the parties agree as follows:

1. Employment. LPM agrees to continue to employ Mr. Hayward on the terms set forth herein and Mr. Hayward accepts such employment. Mr. Hayward will serve as the Chief Executive Officer and Chairman of the Board of each of Holdings and LPM. Mr. Hayward will serve at the will of the Boards of Directors of the Companies. Mr. Hayward shall be accorded the authority by the Boards of Directors of the Companies commensurate with his position as Chief Executive Officer and Chairman of the Board, and he shall make a good faith effort to act in the best interests of LPM and Holdings and to perform those duties reasonably assigned to him by the Boards of Directors of the Companies. Mr. Hayward will devote himself full-time to the interests of the Companies and shall not accept other employment except with the consent of the Boards of Directors of the Companies, although he may serve on boards and committees of other businesses or industrial groups, attend to personal investments, and engage in civic and charitable endeavors, provided that such activities are not competitive with the business of Company and do not unduly interfere with Mr. Hayward’s attention to his responsibilities under this Agreement. During the Term, the Companies will nominate and recommend Mr. Hayward as a member of their respective Boards of Directors and Mr. Hayward agrees to serve on each such Board of Directors.

2. Location of Employment. Mr. Hayward’s principal place of employment shall be at the executive offices of LPM or at such other location as mutually agreed upon by the parties.

3. Term. The term of employment for Mr. Hayward hereunder will last for five years (the “Term of Employment”) from the date of this Agreement and the Term of Employment will automatically extend for successive one-year period following the fifth anniversary of such date unless:

(a) each of-LPM, on the one hand, or Mr. Hayward, on the other hand, delivers written notice to the other party no later than ninety (90) days prior to the fifth anniversary of the foregoing date or any subsequent anniversary thereof, as the case may be, of intent not to renew; or

(b) Mr. Hayward’s employment is terminated in accordance with Section 4(e) or 4(f)]

4. Compensation.

(a) Salary. LPM shall pay Mr. Hayward a salary at the annual rate of $517,000.00, less normal withholdings, for each calendar year, prorated for any portion thereof, payable in substantially equal installments in accordance with LPM’s usual payroll practice, but in no event less frequently than monthly.

(b) Bonus. Mr. Hayward shall participate in LPM’s bonus plan applicable to top executives, with a target bonus for each year of not less than 70% of his base salary in effect at the end of such year. The bonus shall be paid promptly upon completion of LPM’s year-end audit for such year.

(c) Cash Allowances. LPM shall pay Mr. Hayward an annual cash allowance for expenses that relate to his employment but which might be considered partially or wholly personal in nature. The allowance shall be $55,125.00 for 2007, increased annually by 5%, plus the amount necessary to gross Mr. Hayward up for any and all tax liabilities incurred by Mr. Hayward as result of the allowance (so that Mr. Hayward receives, in 2007 for example, $55,125.00 after payment of applicable taxes). In addition, LPM shall pay all expenses relating to Mr. Hayward’s reasonable out-of-pocket legal and accounting expenses incurred in connection with the preparation and negotiation of this Agreement, also grossed up for any taxes that may apply.

(d) Other Benefits. Mr. Hayward shall receive other benefits such as four (4) weeks of vacation each year (accruing pursuant to LPM’s company policy), personal and sick leave, insurance and other benefits consistent with the then-current policies of LPM and equal to those benefits extended to the most senior executives of LPM. Mr. Hayward will be provided with office facilities, secretarial support, and business expense reimbursement consistent with the policies of LPM with respect to its most senior executives.

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(e) Severance. If Mr. Hayward’s employment is terminated by LPM for any reason other than Mr. Hayward’s death, disability, Just Cause (as defined below), or pursuant to LPM’s retirement policy, and not withstanding any remaining portion of the Term, LPM shall pay him a lump-sum cash amount equal to 200% of the sum of (i) his base salary in effect at the time of termination, (ii) the greater of his target bonus for such year and the average of his bonuses for the prior five years, (iii) an amount equal to the monthly premium payable by Mr. Hayward for health and medical-care insurance coverage of Mr. Hayward and his dependents for coverage period required under COBRA and (iv) an amount equal to the monthly premium payable by Mr. Hayward for health and medical-care insurance coverage of Mr. Hayward and his dependents for coverage period after the expiration of COBRA period multiplied by 12, provided, however, that the amount of such premium will be capped at 150% of the premium that was payable under COBRA. Such payment shall be made at the time Mr. Hayward’s employment terminates or at such later time as the amount of such payment becomes reasonably determinable. For the purpose of this section, a termination for “Just Cause” shall mean a termination of employment for any of the following reasons:

(i) Mr. Hayward’s conviction of a felony, without the right of further appeal, which has an adverse impact on LPM or which involves the material misappropriation of LPM’s assets;

(ii) an intentional or grossly negligent violation by Mr. Hayward of any reasonable policy of the Board of Directors of LPM that results in material damage to LPM and which, if such violation is curable, after notice to do so, Mr. Hayward fails to correct within a reasonable time;

(iii) the performance of services by Mr. Hayward for any other company, entity, or person which directly competes with LPM during the time Mr. Hayward is employed by LPM, without the written approval of the Board of Directors of LPM.

Further, Mr. Hayward shall be entitled to all of the severance set forth in this Section 3(e) if Mr. Hayward terminates his employment with LPM for “Good Reason.” Mr. Hayward shall be entitled to terminate his employment for “Good Reason” only upon:

(i) written notice of such termination to LPM, effective within 30 days after being notified that Mr. Hayward is required by LPM to relocate from his existing home due to the relocation of the corporate office beyond a 25-mile radius of the current office location in Phoenix, AZ; or

(ii) written notice of such termination to LPM, provided such notice is given no later than 15 days from the earlier of (1) the date of execution of a definitive agreement for or the consummation of a Change of Control (provided that the termination will only be effective upon consummation of the Change of Control) and (2) the consummation of a Change of Control. “Change of Control” shall mean (i) GCP California Fund, L.P. (“GCP”) and its Affiliates (which term shall mean any entity that is controlled by the same individuals who control Leonard Green & Partners, L.P.) shall cease to beneficially own, directly or indirectly, a

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majority of the voting securities of LPM, (ii) a merger or consolidation of Holdings or LPM or (iii) the sale of substantially all of the assets of LPM, in each case in a transaction or series of related transactions as a result of which a majority of the voting securities of LPM cease to be beneficially owned (directly or indirectly) by GCP or any of its Affiliates.

(f) Disability or Death. “Disability.” For purposes of this Agreement, Executive will be considered “disabled” when Executive is unable to perform the essential functions of Executive’s job, with or without reasonable accommodation, for a period of 12 workweeks or more in a rolling 12-month period. Executive acknowledges that, given Executive’s position, it would be unreasonable and/or an undue hardship for LPM to be without an individual able to perform the essential functions of Executive’s position for any longer period of time. If Mr. Hayward’s employment is terminated as a result of disability or in the case of death, Mr. Hayward or his estate shall be entitled to receive (i) any unpaid base salary that had been earned or would have been earned through the end of the month of termination; (ii) 18 months of Mr. Hayward’s base salary paid in installments in accordance with LPM’s normal payroll procedures; and (iii) a pro-rata portion of the greater of his target bonus or the bonus to which he would otherwise have been entitled for the year, based on the number of months in the year of termination during which he was employed, to be paid at such time bonuses are paid to other executives; (iv) a pro-rata portion of his cash allowance for the year, (v) any reimbursements to which he is entitled; (vi) compensation for unused vacation; (vii) continuation of health insurance coverage for Mr. Hayward’s dependents at LPM’s expense for 18 months under COBRA; and (viii) any other amounts or benefits due after the termination of employment under the terms of other agreements, awards, plans’ arrangements, policies or programs.

5. Reimbursement for Expenses. During the term of this Agreement, if LPM’s executive offices are relocated to a location beyond a 25 mile radius of metropolitan Phoenix, Arizona, LPM shall reimburse Mr. Hayward for his increase in travel, housing and living expenses incurred as a result of such relocation, in addition to the reimbursement of those business expenses set forth in Section 3 above.

6. Representation of Mr. Hayward. Mr. Hayward represents and warrants that execution or delivery of this Agreement, or his performance hereunder will conflict with, or result in a breach of, any obligation, contract, agreement, covenant or instrument to which he is a party.

7. Dispute Resolution. This Agreement shall be governed and construed in accordance with the laws of the state of Mr. Hayward’s principal place of employment. Mr. Hayward and LPM agree that any and all disputes, controversies or claims of any nature between them including, without limitation, any disputes arising out of or concerning this Agreement, Mr. Hayward’s employment or his termination shall be determined exclusively by final and binding arbitration before a single arbitrator located in the same county as Mr. Hayward’s principal place of employment, administered by the American Arbitration Association (“AAA”) under the National Rules For Resolution Of Employment Disputes of the AAA, and that judgment upon the award of the arbitrator may be rendered in any court of competent jurisdiction. This includes any claims Mr. Hayward may have against LPM or against LPM’s officers, directors, employees or agents in

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their capacity as such or otherwise. The arbitrator shall be a former jurist or an attorney with substantial experience in employment matters and mutually agreed to by the parties in their reasonable discretion. This agreement to arbitrate does not include claims covered by unemployment insurance and workers’ compensation statutes.

The arbitrator’s authority and jurisdiction shall be limited to determining the dispute in arbitration in conformity with law to the same extent as if such dispute were determined as to liability and remedy by a court without a jury. The arbitrator shall render an award which shall include a written statement of opinion setting forth the arbitrator’s findings of fact and conclusions of law. MR. HAYWARD AND LPM EXPRESSLY WAIVE ALL RIGHTS TO A JURY TRIAL IN COURT ON ALL STATUTORY OR OTHER CLAIMS.

8. Golden Parachute Tax Gross-up

(a) Application of Gross-up. All payments and benefits provided to Mr. Hayward by LPM are intended to be reasonable compensation for services by Mr. Hayward, and LPM intends that Mr. Hayward receive the full economic benefit of such payments and benefits. In the event that it is determined that any payment or benefit provided by LPM to or for the benefit of Mr. Hayward, either under this Agreement or otherwise, and regardless of under what plan or arrangement it was made, will be subject to the excise tax imposed by section 4999 of the Code or any successor provision (“section 4999”), LPM will, prior to the date on which any amount of the excise tax must be paid or withheld, make an additional lump-sum payment (the “gross-up payment”) to Mr. Hayward. The gross-up payment will be sufficient, after giving effect to all federal, state and other taxes and charges (including interest and penalties, if any) with respect to the gross-up payment, to make Mr. Hayward whole for all taxes (including withholding taxes) and any associated interest and penalties, imposed under or as a result of section 4999.

(b) Determinations. Determinations under this Section will Section will be made by LPM’s tax accountants unless Mr. Hayward has reasonable objections to the use of that firm, in which case the determinations will be made by a comparable firm chosen by Mr. Hayward after consultation with LPM mutually acceptable to both parties (the firm making the determinations to be referred to as the “Firm”). The determinations of the Firm will be binding upon LPM and Mr. Hayward except as the determinations are established in resolution (including by settlement) of a controversy with the Internal Revenue Service to have been incorrect. LPM will pay all fees and expenses of the Firm.

(c) Controversy with IRS. If the Internal Revenue Service asserts a claim that, if successful, would require LPM to make a gross-up payment or an additional gross-up payment, LPM and Mr. Hayward will cooperate fully in resolving the controversy with the Internal Revenue Service. LPM will make or advance such gross-up payments as are necessary to prevent Mr. Hayward from having to bear the cost of payments made to the Internal Revenue Service in the course of, or as a result of, the controversy. The Firm will determine the amount of such gross-up payments or advances and will determine after resolution of the controversy whether Mr. Hayward must return any advances must be returned by Mr. Hayward to LPM. LPM will bear all expenses of the controversy and will gross Mr. Hayward up for any additional taxes that may be imposed upon Mr. Hayward as a result of its payment of such expenses.

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(d) Cooperation with LPM. Mr. Hayward shall notify LPM promptly (in any event no less than 10 days following receipt thereof) and in writing of any proposed or final claim by the Internal Revenue Service that, if successful, would require the payment by LPM of any amount under this Section 8. Mr. Hayward shall not pay such claim prior to the expiration of the thirty (30) calendar day period following the date on which Mr. Hayward gives such notice to LPM (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If LPM notifies Mr. Hayward in writing prior to the expiration of such period that LPM desires to contest such claim (or if Mr. Hayward pays the related taxes within such shorter period and LPM requests, within such thirty (30)-day period, that Mr. Hayward claim a refund of some or all of such taxes), then Mr. Hayward shall:

(i) give LPM any information reasonably requested by LPM relating to such claim,

(ii) take such action in connection with contesting such claim or claiming such refund as LPM shall reasonably request in writing from time to time, including accepting legal representation with respect to such claim by an attorney reasonably selected by LPM,

(iii) cooperate with LPM in good faith in order effectively to contest such claim or pursue such refund, and

(iv) permit LPM to participate in any proceedings relating to such claim; provided, however, that LPM shall bear and pay directly all costs and expenses incurred in connection with such contest or refund claim (including, but only to the extent reasonably incurred, out-of-pocket costs and expenses incurred by Mr. Hayward), and shall indemnify and hold Mr. Hayward harmless, on an after-tax basis, for any excise tax or income tax imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this subsection 8(d), LPM shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole discretion, either direct Mr. Hayward to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Mr. Hayward agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as LPM shall determine. If the advancement described below is permitted under applicable law, LPM may direct Mr. Hayward to pay such claim and sue for a refund, and shall advance the amount of such payment to Mr. Hayward, on an interest-free basis, and shall indemnify and hold Mr. Hayward harmless, on an after-tax basis, from any excise tax or income tax imposed with respect to such advance or with respect to any imputed income in connection with such advance; and provided, further, that any

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extension of the statute of limitations relating to payment of taxes for the taxable year of Mr. Hayward with respect to which such contested amount is claimed to be due (other than any such extension arising by operation of law) is limited solely to such contested amount or issues. Furthermore, LPM’s control of the contest shall be limited to issues with respect to which the payment under this Section 8 would be payable hereunder, and Mr. Hayward shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(e) If, after the receipt by Mr. Hayward of a payment under this Section 7 or an amount advanced by LPM pursuant to subsection 7(d), Mr. Hayward becomes entitled to receive any refund with respect to the excise tax to which such payment relates or with respect to such claim, Mr. Hayward shall promptly pay to LPM the amount of such refund (together with any interest paid or credited thereon after Taxes applicable thereto), less any taxes required to be paid by Mr. Hayward with respect to the receipt thereof. If, after the receipt by Mr. Hayward of an amount advanced by LPM pursuant to this Section 7 a determination is made that Mr. Hayward shall not be entitled to any refund with respect to such claim and LPM does not notify Mr. Hayward in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) calendar days after LPM’s receipt of notice of such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall be offset, to the extent thereof, against the amount of payment required to be paid. LPM may request that Mr. Hayward pursue a refund of any payment under this Section 7, and in such case the provisions of subsection 7(d) and this subsection 7(e) shall govern the pursuit of such refund.

(f) Notwithstanding any other provision of this Section 7, LPM may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of Mr. Hayward, all or any portion of any payment and Mr. Hayward hereby consents to such withholding.

(g) LPM’s obligations under this Section 7 will survive the termination of the Employment Period and any termination of this Agreement. Mr. Hayward shall cooperate as reasonably requested by LPM in order to reduce the amount of any payments or benefits to Mr. Hayward that would be subject to the tax imposed by section 4999.

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9. Entire Agreement/Modifications. This Agreement constitutes the entire agreement of the parties with respect to Mr. Hayward’s employment with LPM. It supersedes any prior agreement, statement or representation. It may be modified only by written instrument executed by the party against which the modification is asserted. Failure to require performance of any provision shall not affect the right at a later time to enforce the same. No waiver by either party of a breach, whether by conduct or otherwise, shall be construed as a further or continuing waiver of any such breach. Termination of Mr. Hayward’s employment at any time will not terminate those provisions of this Agreement imposing obligations that, by character or design must be performed after such termination of the employment.

10. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

11. Assignabilitv: Third Party Beneficiary:

(a) Subject to the provisions of Section 4(e) above, in the event that Holdings or LPM shall merge or consolidate with any other partnership, limited liability company, corporation, or business entity or all or substantially all LPM’s business or assets shall be transferred in any manner to any other partnership, limited liability company, corporation or business entity, such successor shall thereupon succeed to, and be subject to, all rights, interests, duties, obligations of, and shall thereafter be deemed for all purposes hereof to be, LPM hereunder.

(b) This Agreement is personal in nature and none of the parties hereto shall, without the written consent of the other, assign or transfer this Agreement or any rights or obligations hereunder, except by operation of law or pursuant to the terms of Section 11 (a) above.

(c) Nothing expressed or implied herein is intended or shall be construed to confer upon or give to any person, other than the parties hereto, any right, remedy or claim under or by reason of this Agreement or of any term, covenant or condition hereof.

12. Confidentiality and Non-Solicitation. The parties recognize that Mr. Hayward will have access to trade secrets and proprietary information of Holdings and LPM, and they recognize that should such information be revealed to a competitor, Holdings and LPM would be materially damaged in an amount difficult to calculate. During the term of this Agreement and thereafter, Mr. Hayward promises not to disclose or use or induce or assist in the disclosure or use any of the above information except for the benefit of Holdings and LPM. Accordingly, Mr. Hayward agrees that for one (1) year after termination of his employment with Holdings and LPM, regardless of the reason for such termination, he shall not, directly or indirectly, on his behalf or the behalf of any other person or entity, solicit any customers of LPM to cease to do business or to reduce the amount of business with LPM or to do business with another company that is a competitor of LPM or solicit any person who is an employee of Holdings or LPM to terminate such employment.

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13. Withholding. All amounts or benefits payable hereunder shall be subject to applicable tax withholding, and the withholding of any such amounts shall be treated as payment thereof to Mr. Hayward for purposes of determining whether all amounts required hereunder to be paid have been paid. Withholding of tax from any non-cash amounts or benefits that are subject to withholding may be made from cash amounts otherwise payable to Mr. Hayward.

(Signature Page Follows)

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

LESLIE’S POOLMART, INC:
By:	/s/ Steven L. Ortega
	Name:	Steven L. Ortega
	Title:	Executive Vice President/CFO
LESLIE’S HOLDINGS, INC:
By:	/s/ Steven L. Ortega
	Name:	Steven L. Ortega
	Title:	Executive Vice President/CFO
/s/ LAWRENCE H. HAYWARD
LAWRENCE H. HAYWARD

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EX-10.24

EXHIBIT 10.24

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (“Agreement”), dated as of June 15, 2007 (the “Effective Date”), is made by and among Leslie’s Poolmart, Inc. (the “Company”), Leslie’s Holdings, Inc., a Delaware corporation (“Holdings” and, together with the Company, the “Companies”) and Steven L. Ortega (“Executive”).

RECITALS

A. The Company is a corporation organized under the laws of Delaware. It is engaged in the business of marketing pool supplies and related pool equipment and products.

B. Holdings was formed in February 2007 and owns 100% of the voting stock of the Company.

C. Executive and the Company are parties to that Executive Employment Agreement April 22, 2005 and amended July 1, 2005 governing the Company’s employment of Executive (the “Original Agreement”). The Company, Holdings and Executive wish to supplement and restate the Original Agreement in its entirety.

D. The Company wishes to continue the employment of Executive as Chief Financial Officer of the Company and Holdings wishes Mr. Ortega to serve as its Chief Financial Officer, and Executive desires to be so employed by the Company and to act in such capacities.

The parties agree as set forth below:

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

2. Term. The term of employment of Executive commenced on the date of the Original Agreement (the “Start Date”) and will last for five years (the “Term of Employment”) from the Start Date. The Term of Employment will automatically extend for successive one-year periods following the fifth anniversary of the Start Date, unless:

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

(b) Executive’s employment is terminated in accordance with Sections 5, 6 or 7.

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

3. Position and Duties. During the Term of Employment, Executive will serve as Executive Vice President and Chief Financial Officer of Holdings and the Company. Executive will have responsibilities and authority, and perform executive duties, appropriate to his position. Excluding periods of vacation and sick leave, Executive is to devote substantially his full attention and time to his responsibilities to Holdings and the Company. However, he may serve

on boards and committees of other businesses or industrial groups, attend to personal investments, and engage in civic and charitable endeavors, provided that such activities are not competitive with the business of Company and do not unduly interfere with Executive’s attention to his responsibilities under the Agreement. During the Term, the Companies will nominate and recommend Executive for reelection to the Boards of Directors of the Companies at each appropriate meeting of stockholders and Executive agrees to serve on the Boards of Directors of the Companies.

If, during the Term, the Company offers, and the Executive accepts, a position different than that described in Section 3, and such new position represents a Material Diminution in position or requires Relocation (as those terms are defined in Section 6(b)), then the Executive shall have no more than 60 days after beginning work in such new position to exercise the Good Reason termination clause under Section 6(b); following which 60-day period, if he has not then so terminated, Executive shall be deemed to have thereafter waived all rights to terminate for Good Reason in respect of such Material Diminution or Relocation.

4. Compensation and Benefits.

(a) Base Salary. Executive’s base salary will be no less than $330,750 less normal withholdings per year, paid in accordance with Company’s standard payroll practices.

(b) Executive Bonus Plan. Executive will participate in Company’s bonus plan applicable to its senior executives. Executive’s target bonus will be at least 60% of his base salary in effect for the fiscal year and the plan shall provide for a minimum bonus of 50% of target upon achievement of threshold performance. The annual bonus thereafter will be paid in accordance with Company’s standard bonus payment practices.

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

(d) Cash Allowance. Company will pay Executive an annual cash allowance for expenses that relate to his employment which might be considered partially or wholly personal in nature. The allowance will be $16,500.00 for 2007, increased annually by 5%, plus an amount equal to the Federal, state and local taxes he will incur as a result of such payment. The Cash Allowance will be paid to Executive at the same time as it is regularly paid to other executives entitled to a comparable benefit.

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

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5. Termination of Employment by Company.

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

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

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

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

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

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

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

(i) all amounts and benefits specified in Section 5(a) above;

(ii) 200% of the sum of (A) Executive’s base salary in effect at the time of the termination, plus (B) his target bonus for the year of termination to be paid in accordance with Company’s normal payroll procedures and as a lump sum in respect of the amount attributable to the first 12 months after termination of employment, paid to Executive no later than 14 days after the termination date;

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

(iv) The Executive shall be entitled to independent, offsite, executive career transition and outplacement services provided by a nationally recognized outplacement firm, including one-on-one coaching covering reemployment,

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career changes, entrepreneurial/consulting ventures, etc., and access to comprehensive office and administrative services for a period not to exceed six months following Executive’s termination of employment. Such outplacement services will be provided by an organization selected mutually by the Executive and the Company and paid for by the Company.

6. Executive Termination.

(a) Voluntary Termination. During the Term, the Executive may terminate his employment for any reason upon not less than 30 days prior written notice to the Company and Holdings; provided, that the Companies may accelerate the Executive’s employment termination date to the date on which the Executive gives the Company notice of termination or on any date between such dates. If the Company accelerates the Executive’s termination date, the Executive shall be paid the amounts and benefits specified in Section 5(a) above as if he had worked the entirety of the actual notice period, but not in excess of 30 days.

(b) Good Reason Termination. Notwithstanding paragraph 6(a), the Executive may terminate his employment for “Good Reason” in accordance with and during the period specified in Section 3 above upon 15 day’s prior notice to the Company. For this purpose, “Good Reason” shall be deemed to exist if

(i) there is a material diminution in title and/or duties, responsibilities or authority of the Executive (“Material Diminution”);

(ii) the Company requires the Executive to move to another location of the Company or any affiliate and the distance between the new job site is at least 50 miles away from Metropolitan Phoenix, Arizona (“Relocation”);

(iii) there is a willful failure or refusal by the Company to perform any material obligation under this Agreement; or

(iv) there is a reduction in the Executive’s Base Salary or annual bonus target amount.

In each such case, the Executive shall provide the Company and Holdings with written notice of the grounds for a Good Reason termination, and the Companies shall have a period of 10 days to cure after receipt of the written notice. Resignation by the Executive following the Companies’ cure or before the expiration of the 10-day cure period shall constitute a voluntary resignation and not a termination for Good Reason. If, during the Term, the Executive terminates his employment for Good Reason, the Executive will be entitled to the amounts and benefits provided in Sections 5(c)(i) through (iv).

7. Mitigation. Executive agrees that upon any termination pursuant to Section 5(c) hereof, Executive shall have a duty to mitigate his damages to the extent required hereunder. Executive will not be obligated to actively seek employment or to accept employment unsatisfactory to Executive. Moreover as to the first twelve months of salary payments, and the pro rata portion corresponding to such twelve months in respect of the bonus payments provided for above, the deduction provided in the next sentence will not apply. Thereafter, and with prospective effect Executive agrees that if he obtains other employment before the payments set forth in

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Section 5(c)(ii) have been fully paid, any further payments under Section 5(c)(ii) will be reduced by the amounts payable to Executive from such new employment. Executive further agrees that if in the event Executive obtains other employment before the expiration of the eighteen-month period noted in Section 5(c)(iii), under which Executive and his dependents would be provided health and medical-care insurance coverage under such employer’s benefit plans or policies, then the Company’s obligation to continue health and medical-care insurance coverage under Section 5(c)(iii) shall immediately cease and terminate.

8. Death and Disability.

(a) Disability. If Executive should become disabled from performing his duties hereunder for a period exceeding the maximum leave allowed under the Family and Medical Leave Act (“FMLA”) and any analogous state law, the Company may terminate Executive’s employment upon thirty (30) days’ written notice. It is agreed that given the nature of Executive’s position it would not be reasonable for the Company to provide for a leave for a longer period of time. In the event of such termination, the Company shall pay to Executive the amounts described in Section 5(a) above. Executive’s rights under any benefit plan as described in Section 4(f) will be those rights accorded to any terminated employee under the plan provisions and applicable law.

(b) Death. If Executive should die during the Term of Employment, his estate will receive the payments described in Section 5(a) above, and in addition, Executive’s target bonus for the fiscal year.

9. Confidentiality and Trade Secrets. Executive recognizes that he will have access to trade secrets and proprietary information (the “Company Information”) of Holdings and the Company and any affiliate of either (a “Company Affiliate”), and he recognizes that should such information be revealed to a competitor, Company would be materially damaged in an amount difficult to calculate. Except in the performance of his duties to Holdings and the Company, Executive shall not, during the Term of Employment and at all times thereafter, directly or indirectly for any reason whatsoever, disclose or use any such Company Information. All records, files, drawings, documents, equipment and other tangible items, wherever located, relating in any way to or containing Company Information, which Executive has prepared, used or encountered or shall in the future prepare, use or encounter, shall be and remain Company’s sole and exclusive property and shall constitute Company Information. Upon the expiration of the Term of Employment or earlier termination of this Agreement, or whenever requested by the Company, Executive shall promptly deliver to Company any and all of Company Information and copies thereof, not previously delivered to Company, that may be in the possession or under the control of Executive. The foregoing restrictions shall not apply to the use, divulgence, disclosure or grant of access to Company Information to the extent, but only to the extent, (i) expressly permitted or required pursuant to any other written agreement between or among Executive and Company (and/or Company Affiliates), (ii) such Company Information which has become publicly known and made generally available through no wrongful act of Executive or of others who were under confidentiality obligations as to the item or items involved, or (iii) Executive is required to disclose Company Information by or to any court of competent jurisdiction or any governmental or quasi-governmental agency, authority or instrumentality of competent jurisdiction; provided, that Executive shall, prior to any such disclosure, immediately notify the Company of such requirement; provided, further, that Company shall have the right, at its expense, to object to such disclosures and to seek confidential treatment of any Company Information to be so disclosed on such terms as it shall determine.

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

11. Noninterference.

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

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

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

(iii) Either directly or indirectly, for himself or on behalf of or in conjunction with any other Person, solicit, hire or divert any Person who is, or who is, at the time of termination of the Executive’s employment, or has been within six (6) months prior to the time of termination of Executive’s employment, a customer or supplier of the Company or any Company Affiliate for the purpose or with the intent of (A) inducing or attempting to induce such Person to cease doing business with the Company or any Company Affiliate or (B) in any way interfering with the relationship between such Person and the Company or any Company Affiliate.

(b) The covenants in this Section 11 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth herein are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent that such court deems reasonable, and the Agreement shall thereby be reformed to reflect the same.

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(c) All of the covenants in this Section 11 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Executive against Holdings or the Company whether predicated on this Agreement or otherwise shall not constitute a defense to the enforcement by Holdings or the Company of such covenants. It is specifically agreed that the period following the termination of the Executive’s employment with the Company during which the agreements and covenants of the Executive made in this Section 11 shall be effective, shall be computed by excluding from such computation any time during which the Executive is in violation of any provision of this Section 11.

(d) Notwithstanding any of the foregoing, if any applicable law, judicial ruling or order shall reduce the time period during which the Executive shall be prohibited from engaging in any competitive activity described in Section 11 hereof, the period of time for which the Executive shall be prohibited pursuant to Section 11 hereof shall be the maximum time permitted by law.

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

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

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

14. Assignability; Third Party Beneficiary.

(a) In the event the Company shall merge or consolidate with any other partnership, limited liability company, corporation, or business entity or all or substantially all the Company’s business or assets shall be transferred in any manner to any other partnership,

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limited liability company, corporation or business entity, such successor shall thereupon succeed to, and be subject to, all rights, interests, duties, obligations of, and shall thereafter be deemed for all purposes hereof to be, the Company hereunder.

(b) This Agreement is personal in nature and none of the parties hereto shall, without the written consent of the other, assign or transfer this Agreement or any rights or obligations hereunder, except by operation of law or pursuant to the terms of Section 14(a) above.

Nothing expressed or implied herein is intended or shall be construed to confer upon or give to any person, other than the parties hereto, any right, remedy or claim under or by reason of this Agreement or of any term, covenant or condition hereof

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

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

If to Executive:

Mr. Steven L. Ortega

[ADDRESS]

If to the Company and Holdings:

3925 East Broadway Road, Suite 100

Phoenix, Arizona 85040

Attn.: Chairman of the Board

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

17. Successors. Any payments and benefits due to Executive under the Agreement that have not been made to Executive at the time of Executive’s death will be made to his surviving spouse or, if none, to his estate. The Agreement will inure to the benefit of, and be enforceable by, Holdings, the Company and their respective successors and Executive and his beneficiaries, administrators and executors.

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

19. Counterparts. This Agreement may be executed in counterparts. When each party has signed and delivered at least one such counterpart, each counterpart shall be deemed an original,

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and, when taken together with other signed counterparts, shall constitute one Agreement which shall be binding upon and effective as to all parties. No counterpart shall be effective until all parties hereto have executed and exchanged an executed counterpart hereof.

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

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

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

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

[signature page follows]

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

LESLIE’S HOLDINGS, INC.
By:	/s/ Lawrence H. Hayward
	Name:	Lawrence H. Hayward
	Title:	Chief Executive Officer
LESLIE’S POOLMART, INC.
By:	/s/ Lawrence H. Hayward
	Name:	Lawrence H. Hayward
	Title:	Chief Executive Officer
/s/ STEVEN L. ORTEGA
STEVEN L. ORTEGA

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EX-10.28

Exhibit 10.28

FIRST AMENDMENT TO

STANDARD INDUSTRIAL/COMMERCIAL

MULTI-TENANT LEASE—MODIFIED NET

This FIRST AMENDMENT TO STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE—MODIFIED NET (“Amendment”) is dated as of July 26, 2007, by and between LBA REALTY FUND II—WBP II, LLC, a Delaware limited liability company (“Lessor”), as successor-in-interest to Bedford Property Investors, Inc. (“Bedford”), and LESLIE’S POOLMART, INC., a Delaware corporation (“Lessee”), formerly LESLIE’S POOLMART (INC.), a California corporation (“Corporation”).

R E C I T A L S:

A. Bedford and Corporation entered into that certain Standard Industrial/Commercial Multi-Tenant Lease—Modified Net dated November 26, 1996 (the “Lease”), pursuant to which Lessor currently leases to Lessee that certain space known as 1595 Dupont Avenue, Ontario, California (the “Premises”). The Building is part of the development known as Dupont Industrial Center (the “Project”). The Premises contains approximately 183,244 aggregate square feet of Rentable Area. Lessor has succeeded to Bedford’s interest as Lessor under the Lease. Corporation has merged out of existence into LESLIE’S POOLMART, INC., a Delaware corporation.

B. Defined terms which are used in this Amendment without definition have the meanings given to them in the Lease.

C. Lessee exercised, by written notice dated as of July 21, 2006 (the “Extension Notice”), Lessee’s first of two (2) options to renew the Lease, and Lessee and Lessor hereby agree to extend the Original Term of the Lease for one (1) period of five (5) years upon the terms and conditions set forth below. Lessee and Lessor have agreed to modify and extend the first option term to ninety-five (95) months.

A G R E E M E N T:

NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants and agreements contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as follows:

1. First Extended Term. Lessor and Lessee agree that the Term of the Lease which expired January 31, 2007 shall be extended for ninety-five (95) months (the “First Extended Term”), commencing as of February 1, 2007 (the “Extended Term Commencement Date”) and expiring on December 31, 2014, unless sooner terminated pursuant to the terms of the Lease. Lessee shall have the right to extend the First Extended Term for one (1) remaining additional and consecutive period of five (5) years upon written notice to Lessor delivered not more than twelve (12) months, and not less than nine (9) months, prior to the First Extended Term expiration date and otherwise upon the terms and conditions as set forth in Paragraph 18 of the Addendum to Lease dated November 26, 1996.

2. Base Rent. Effective as of the Extended Term Commencement Date and during the First Extended Term, Lessee shall pay Base Rent for the Premises to Lessor in accordance with the following schedule:

Lease Period (in Months)*	Base Rent per Month
01-12	$	21,646.58
13-30	$	64,135.40
31-54	$	67,342.17
55-78	$	70,709.28
79-95	$	74,244.75

* Measured from the Extended Term Commencement Date

3. Condition of Premises: Allowance for Lessee’s Work. Lessor shall have no obligation whatsoever to alter or improve the condition of the Premises and Lessee hereby

accepts the Premises “AS IS”. Notwithstanding the above and subject to Lessee’s execution of this Amendment, within thirty (30) days after the date hereof, Lessor shall pay to Lessee an allowance in the amount of Two Hundred Twenty-Five Thousand and no/100 Dollars ($225,000.00) for improvements to the Premises previously performed by Lessee.

4. Lessee’s Pro Rata Share. As of the Extended Term Commencement Date and continuing for the duration of the First Extended Term, Lessee occupies 100% of the Building and Lessee’s Pro Rata Share of the Project is 40.6%, based upon 183,244 square feet of Rentable Area in the Premises and 451,192 total square feet of Rentable Area in the Project.

5. Right to Lease Additional Space.

(a) Subject to the terms of this Paragraph 5, Lessee shall have an on-going right to lease (“Lessee’s Right to Lease”) additional space in the Project to the extent such space becomes available for lease to third parties during the First Extended Term and following the expiration of any lease for such space, including the expiration of all renewal or extension options (“First Offer Space”). Lessee’s Right to Lease is subject and subordinate to the current rights of all other existing tenants of the Building or Project with prior expansion or lease rights relative to any First Offer Space and Lessee’s Right to Lease is superior to future rights granted to future tenants of the Building or Project relative to any First Offer Space.

(b) Upon written request from Lessee, Lessor will give Lessee written notice of any qualified First Offer Space in the Project which is then available or is expected to come available within six (6) months after the date of Lessee’s request and the date the existing tenant or occupant, if any, is expected to vacate such space (“Lessor’s Availability Notice”). Within five (5) days following delivery of Lessor’s Availability Notice, Lessee will have the right to request from Lessor in writing a written statement setting forth the basic economic terms, including, but not limited to, Lessor’s determination of the fair market rent, tenant improvement allowance, if any, and all other economic terms and conditions (collectively, the “Economic Terms”), upon which Lessor is willing to lease the First Offer Space desired by Lessee, either to Lessee or to a third party effective at such time as such First Offer Space actually becomes available for occupancy. Such Economic Terms will represent Lessor’s reasonable determination of the fair market rental rate for such First Offer Space. Notwithstanding the foregoing, the Lease Term as to any First Offer Space shall be coterminous with the Lease Term with respect to the Premises as the same may be extended.

(c) Within fifteen (15) days after receipt of the Economic Terms from Lessor, Lessee must give Lessor written notice pursuant to which Lessee shall elect to either: (i) lease such First Offer Space upon such Economic Terms and the same non-Economic Terms as set forth in the Lease with respect to the Premises; (ii) refuse to lease such First Offer Space, specifying that such refusal is not based upon the Economic Terms, but upon Lessee’s lack of need for such First Offer Space, in which event Lessor may at any time thereafter lease such First Offer Space to any party upon any terms Lessor deems appropriate; or (iii) refuse to lease the First Offer Space, specifying that such refusal is based upon the Economic Terms, in which event Lessee will also specify revised Economic Terms upon which Lessee is willing to lease such First Offer Space (provided that Lessee may not specify a different lease term for the First Offer Space). Lessee’s failure to timely choose either clause (i), clause (ii) or clause (iii) above will be deemed to be Lessee’s choice of clause (ii) above.

(d) If Lessee gives Lessor notice pursuant to clause (c)(iii) above, Lessor may elect, within five (5) days following receipt of such notice from Lessee, either to: (i) lease such First Offer Space to Lessee upon such revised Economic Terms proposed by Lessee (or such other economic terms as to which the parties may agree within such time period), and the same other non-Economic Terms as set forth in the Lease as amended hereby; or (ii) lease the First Offer Space at any time thereafter to any third party upon terms which are not substantially more favorable to said party than the Economic Terms last proposed by Lessee. Lessor’s failure to timely choose either clause (i) or clause (ii) above will be deemed to be Lessor’s choice of clause (ii) above.

(e) If Lessee chooses (or is deemed to have chosen) clause (c)(ii) above, or if Lessor chooses (or is deemed to have chosen) clause (d)(ii) above, Lessee’s Right to Lease any First Offer Space will be null and void and of no further force or effect; provided, however, that if Lessor intends to enter into a lease with a third party for the First Offer Space upon Economic Terms which are more favorable than the Economic Terms last proposed by Lessee, then, before leasing the First Offer Space to such third party, Lessor shall first give Lessee written notice of the Economic Terms of such proposed lease, and Lessee shall have a period of five (5) days after receipt of such notice within which to accept and agree to lease the First Offer Space upon such more favorable Economic Terms or Lessor shall be free to lease the First Offer Space to such third party on such more favorable terms and Lessee’s Right to Lease

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such First Offer Space will be null and void and of no further force or effect. If Lessee exercises it’s Right to Lease as provided herein, the parties will promptly thereafter execute an amendment to this Lease to include the First Offer Space in the Premises and to document the lease terms thereof. If Lessor is required to furnish Improvements for the First Offer Space, rent for the First Offer Space shall be due and payable upon the earlier of the date of substantial completion of any Lessee improvements for the First Offer Space or the date Lessee first occupies the First Offer Space.

(f) As provided above, Lessee’s Right to Lease is subject to all expansion and extension rights and other rights to lease, as applicable, which Lessor has granted to other tenants prior to the date of this Lease. Thus, Lessor’s Economic Terms will be delivered to Lessee only after Lessor has appropriately notified and received negative responses from all other tenants with rights in the First Offer Space superior to Lessee’s rights.

6. Hazardous Substances: Within ten (10) business days of the execution of this Amendment, Lessee shall execute and deliver to Lessor the Environmental Questionnaire in form of Exhibit “A” attached hereto. Attached hereto as Exhibit “B” is a list of chemicals currently utilized by Lessee at the Premises. This list shall supersede any list of chemicals previously provided by Lessee in the Lease.

7. Lessor and Lessor’s Notice Address; Lessor and Lessee hereby acknowledge and confirm the Lessor under the Lease is hereby amended to LBA REALTY FUND II—WBP III, LLC, a Delaware limited liability company. Lessor’s addresses for notices and payment of rent set forth in the Lease as amended are hereby deleted and replaced by the following addresses.

LBA REALTY FUND II—WBP III, LLC

c/o LBA Realty

17901 Von Karman Avenue, Suite 950

Irvine, California 92614

Attention: Asset Manager—Dupont Industrial Center

For payment of rent:

LBA REALTY FUND II—WBP III, LLC

P.O. Box 51364

Los Angeles, California 90051-5594

8. Lessee and Lessee’s Notice Address: Lessee’s address for notices is as follows:

LESLIE’S POOLMART, INC.

3925 East Broadway Road, Suite 100

Phoenix, Arizona 85040-2976

Attention: Director of Real Estate & General Counsel

9. Broker(s): Lessor and Lessee acknowledge that Cushman and Wakefield, Inc. (“Broker”) is representing Lessee in this transaction and shall be paid a commission by Lessor pursuant to Lessor’s separate agreement with Broker. Lessor and Lessee each represents and warrants to the other that neither it nor its officers or agents nor anyone acting on its behalf has dealt with any real estate broker other than Broker in the negotiating or making of this Amendment, and each party agrees to indemnify and hold harmless the other from any claim or claims, and costs and expenses, including attorneys’ fees, incurred by the indemnified party in conjunction with any such claim or claims of any other broker or brokers to a commission in connection with this Amendment as a result of the actions of the indemnifying party.

10. No Other Modification. Lessor and Lessee agree that except as otherwise specifically modified in this Amendment, the Lease and Addendum to Lease have not been modified, supplemented, amended, or otherwise changed in any way and the Lease remains in full force and effect between the parties hereto as modified by this Amendment. To the extent of any inconsistency between the terms and conditions of the Lease and the terms and conditions of this Amendment, the terms and conditions of this Amendment shall apply and govern the parties. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one in the same Amendment.

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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date set forth above.

LESSEE:		LESSOR:
LESLIE’S POOLMART, INC.,		LBA REALTY FUND II–WBP II, LLC
a Delaware corporation		a Delaware limited liability company
By:	/s/ Steven L. Ortega	By:	/s/ Phil A. Belling
Print Name:	STEVEN L. ORTEGA	Print Name:	Phil A. Belling
Print Title:	EVP & CFO	Print Title:	Authorized Signatory

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT

OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

CERTIFICATION

I, Lawrence H. Hayward, certify that:

1. I have reviewed this annual report on Form 10-K, of Leslie’s Poolmart, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances, under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and others financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision; to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting; principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses to the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 17, 2007

/s/ LAWRENCE H. HAYWARD

Lawrence H. Hayward

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT

OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

CERTIFICATION

I, Steven L. Ortega certify that:

1. I have reviewed this annual report on Form 10-K, of Leslie’s Poolmart, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances, under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and others financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision; to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting; principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses to the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 17, 2007

/s/ Steven L. Ortega

Steven L. Ortega

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Lawrence H. Hayward, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Leslie’s Poolmart, Inc. on Form 10-K for the fiscal year ended September 29, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of Leslie’s Poolmart, Inc.

Dated: December 17, 2007

By:	/s/ Lawrence H. Hayward
Name:	Lawrence H. Hayward
Title:	Chief Executive Officer

I, Steven L. Ortega, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Leslie’s Poolmart, Inc. on Form 10-K for the fiscal year ended September 29, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of Leslie’s Poolmart, Inc.

Dated: December 17, 2007

By:	/s/ Steven L. Ortega
Name:	Steven L. Ortega
Title:	Executive Vice-President and
	Chief Financial Officer