EXHIBIT 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of July 26, 2005 , by and between LESCO, Inc., an Ohio corporation ("Seller"),
and Turf Care Supply Corp., a Delaware corporation ("Buyer"). An index of
defined terms used in this Agreement is attached as EXHIBIT A to this Agreement
and made a part hereof.
RECITALS
A. Seller is a manufacturer and distributor of lawn care and golf course
products, primarily for the professional turf care industry.
B. Buyer is Delaware corporation formed for the purpose of manufacturing
and distributing fertilizer and other turf care products for Seller and others.
C. On the terms and conditions hereinafter set forth, Seller desires to
sell, and Buyer desires to purchase, substantially all of the assets used by
Seller in the manufacture and/or distribution of fertilizers, seed, control
products, combination products, pest control and related products (collectively,
"Products").
NOW, THEREFORE, in consideration of the foregoing recitals and of the
respective covenants, agreements, representations and warranties herein
contained, and intending to be legally bound hereby, the parties hereto hereby
agree as follows:
ARTICLE I.
ASSETS TO BE PURCHASED
Section 1.1. Description of Purchased Assets. Upon the terms and subject to
the conditions set forth in this Agreement, at the Closing, Seller shall convey,
sell, transfer, assign and deliver to Buyer, and Buyer shall purchase and
acquire from Seller, free and clear of all Liens, all right, title and interest
of Seller in and to all assets, properties and rights of Seller (including all
assets used by any of the Transferred Employees) that are required for or used
primarily in the manufacture and/or distribution of the Products and the
operations ancillary thereto in a manner consistent with the past practice of
Seller (collectively, the "Purchased Assets") pursuant to a General Conveyance,
Assignment, Xxxx of Sale and Assumption Agreement in the form of EXHIBIT B
attached hereto and made a part hereof (the "Assignment and Assumption
Agreement"), including but without limitation the following:
(a) The owned real property located in Martins Ferry, Ohio
(manufacturing plant), Hatfield, Massachusetts (manufacturing plant plus the
approximately 28 acres of vacant land there), and Silverton, Oregon
(manufacturing plant building located on ground lease space), as further
described on SCHEDULE 1.1(A) (the "Owned Real Property"), and the rights and
claims under the leases of real property located in Silverton, Oregon (ground
lease for manufacturing plant), Sebring, Florida (manufacturing plants and
distribution center), Atlanta, Georgia (distribution center), and Westfield,
Massachusetts (distribution center), as further described on SCHEDULE 1.1(A)
(the "Leased Real Property");
(b) The equipment, machinery, computer hardware and fixtures required
for or used primarily in the manufacture or distribution of the Products or the
operations ancillary thereto including those described on SCHEDULE 1.1(B) (the
"Equipment");
(c) The furniture, supplies, vehicles and other tangible personal
property required for or used primarily in the manufacture or distribution of
the Products or the operations ancillary thereto including those described on
SCHEDULE 1.1(C) (the "Personal Property");
(d) The raw materials, supplies, component parts, work-in-process,
finished goods inventory (other than inventory that is obsolete or unsaleable in
the ordinary course of Seller's business, any inventory on any LESCO
"phase-out", "watch list", "Discontinued", "Liquidate" or "Purge" lists, or any
inventory located at a LESCO Service Center(R) or on any LESCO
Stores-on-Wheels(R)) and packaging used in the manufacture or distribution of
the Products including those described on SCHEDULE 1.1(D) (the "Inventory");
(e) The licenses, permits, consents, authorizations, and certificates
of any regulatory, administrative or other government agency or body (to the
extent the same are transferable) required for or used primarily in the
manufacture or distribution of the Products or the operations ancillary thereto
including those described on SCHEDULE 1.1(E) (the "Permits");
(f) The leases of equipment or other tangible personal property
(including vehicles) required for or used primarily in the manufacture or
distribution of the Products or the operations ancillary thereto including those
described on SCHEDULE 1.1(F) (the "Personal Property Leases");
(g) All contracts, agreements, contract rights, leases and license
agreements (each, a "Contract") to which Seller is a party that are required for
or used primarily in the manufacture or distribution of the Products or the
operations ancillary including those that are described on SCHEDULE 1.1(G)
including, but not limited to, Seller's Contracts with suppliers, third party
logistics providers ("3PLs"), freight carriers (e.g., Penske), Seller's
distribution agreements relating to the distribution of third-parties'
consumable products, Seller's Collective Bargaining Agreement covering certain
of its employees at xxx Xxxxxxx Ferry, Ohio facility, and, subject to Section
1.6, customers, provided that this Agreement will not constitute an assignment
of any Contracts with (i) any of (or any successor-in-interest to any of)
Seller's national sales account customers as of the Contract Date, (ii) Home
Depot, (iii) any professional pest control service provider; or (iv) any
professional turf care service provider;
(h) All rights, claims and credits to the extent relating to any
Purchased Asset or any Assumed Liability, including any such items arising under
insurance policies and all guarantees, warranties, indemnities and similar
rights (but expressly excluding any rights, claims and credits of Seller (i)
against any applicable workers compensation fund or coverage, (ii) against
FirstEnergy Corporation and/or its insurer for alleged losses suffered by Seller
in Belmont County, Ohio due to flood damage to certain if Seller's inventory,
(iii) providing coverage for any Retained Liability), (iv) pursuant to the
Corporate Knight Services production facilities audit of utility bills and
equipment purchases to evaluate possible sales tax refunds, or
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(v) pursuant to the Colonial Tax Sales/Use Tax Consulting Agreement for the
audit /refund of state and local sales and use taxes;
(i) All books, records, manuals, documents, and local phone numbers
and fax numbers at the Owned Real Property and the Leased Real Property required
for or used primarily in the manufacture or distribution of the Products or the
operations ancillary thereto;
(j) All credits, prepaid expenses, deferred charges, advance payments,
security deposits and prepaid items that are related to the manufacture or
distribution of the Products (but not any vendor rebates that were earned during
Seller's ownership of the Purchased Assets but are paid or credited thereafter);
and
(k) All unregistered, proprietary processes known to the Transferred
Employees and required for or used primarily in the manufacture or distribution
of the Products or the operations ancillary thereto (but not, for avoidance of
doubt, any of the other Proprietary Rights listed on Schedule 3.2(n) hereto).
Section 1.2. Non-Assignment of Certain Assets. Seller represents and
warrants to Buyer that SCHEDULE 1.2 lists and describes all Contracts, leases
for Leased Real Property and Permits that are non-assignable or the assignment
of which pursuant hereto requires the consent of any other party thereto, gives
any party thereto a right of termination or requires the payment of any premium
or penalty or the imposition of any other burden (including termination) if
consent is not obtained. Notwithstanding anything to the contrary in this
Agreement, to the extent that the assignment hereunder of any of the Contracts,
leases for Leased Real Property or Permits shall require the consent of any
other party (or if any thereof is non-assignable), neither this Agreement nor
any action taken pursuant thereto will constitute an assignment or an attempt to
make an assignment thereof if that assignment or attempted assignment would
constitute a breach thereof or result in the loss or diminution thereof. In each
such case, Seller shall use its commercially reasonable efforts to obtain the
consent of the applicable party to an assignment thereof to Buyer, provided that
the receipt of such consents shall not be a condition to the Closing except to
the extent set forth on SCHEDULE 1.2. If any such consent is not obtained, then
until such consent is obtained or Buyer otherwise enters into a new Contract,
lease for Leased Real Property or Permit, as applicable, with such third Person
(or otherwise replaces such Contract, lease for Leased Real Property or Permit),
Seller shall cooperate with Buyer in any commercially reasonable arrangement
designed to provide for Buyer the benefits of such Contracts, leases for Leased
Real Property and Permits including, without limitation, enforcement, for the
account and benefit of Buyer, of any and all rights of Seller against any
individual, corporation, partnership, joint venture, association, limited
liability company, joint stock company, trust, unincorporated organization, or
any other form of entity (each, a "Person") or any government, or any agency or
political subdivision thereof (each, a "Governmental Authority") with respect to
such Contracts, leases for Leased Real Property and Permits; and provided,
further, that, notwithstanding anything to the contrary herein, Seller shall be
entitled (but not obligated) to continue to perform any such agreement for so
long as Seller is unable to terminate such agreement without such payment, and
Buyer shall reimburse Seller for all costs and expenses incurred by Seller in
continuing any such agreements, provided that Buyer receives the benefits
thereunder.
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Section 1.3. Excluded Assets. Anything in this Agreement to the contrary
notwithstanding, all assets of Seller other than the Purchased Assets shall be
retained by Seller and are not being sold, conveyed or assigned to Buyer
hereunder (collectively, the "Excluded Assets"). For avoidance of doubt, the
Purchased Assets do not include (i) any inventory at LESCO Service Centers(R) or
on any LESCO Stores-on-Wheels(R), (ii) any accounts receivable, (iii) the lease
agreement for LESCO's headquarters in downtown Cleveland, Ohio, (iv) any LESCO
Service Centers(R), (v) any LESCO Stores-on-Wheels(R), (vi) any assets used by
Seller in the distribution of Products from or between LESCO Service Centers(R),
LESCO Stores-on-Wheels(R) and/or Seller's customers, or (vii) all Proprietary
Rights, whether registered or unregistered, statutory or common law (except for
unregistered, proprietary processes known to the Transferred Employees and
required for or used primarily in the manufacture or distribution of the
Products or the operations ancillary thereto, as specified in Section 1.1(k)
hereof).
Section 1.4. Assumption of Certain Obligations. Subject to the provisions
of this Agreement, from and after the Closing Date, Buyer shall, by the
Assignment and Assumption Agreement, assume only (i) the liabilities and
obligations relating to occurrences arising after the Closing under the leases
for Leased Real Property, Personal Property Leases, Contracts and Permits
forming part of the Purchased Assets, (ii) all obligations (including under the
Employee Benefit Plan described as "Health Plan Upper Ohio Valley/Rx" on
Schedule 3.2(i) hereto) to Transferred Employees that relate to occurrences
after the Closing Date; and (iii) all accrued vacation, sick pay, paid time off
and bonuses owing from Seller to the Transferred Employees (collectively, the
"Assumed Liabilities").
Section 1.5. Retained Liabilities. With the exception of the Assumed
Liabilities, Buyer shall not assume or otherwise be responsible for any
liability or obligation of Seller, liabilities related to the manufacture and/or
distribution of the Products prior to the Closing, or claims of such liability
or obligation (individually, a "Retained Liability" and collectively, the
"Retained Liabilities"), including, without limitation, those arising from or in
connection with: (a) the Excluded Assets; (b) the Purchased Assets to the extent
relating to or stemming from periods occurring prior to the Closing; or (c) any
federal, state, local, provincial or other income, capital gain or other tax
payable with respect to the Seller, the Products or the Purchased Assets for any
period prior to the Closing Date.
Section 1.6 Customers. Notwithstanding anything herein to the contrary,
with respect to any customer Contracts assigned hereunder providing for the
supply of raw material used to make sulfur-coated urea ("SCU") for Seller's
customers ("SCU Customer Contracts"), through December 31, 2005, Seller shall be
entitled to all the benefits, and responsible for all the liabilities, under
such SCU Customer Contracts. To the extent Buyer receives any amounts under such
SCU Customer Contracts relating to periods on or prior to December 31, 2005, it
shall promptly pay such amounts to Seller. All liabilities relating to periods
ending on or prior to December 31, 2005 shall constitute Retained Liabilities.
Buyer shall be entitled to all amounts under such SCU Customer Contracts
relating to periods beginning on an after January 1, 2006, and any liabilities
arising from events on or after January 1, 2006 shall constitute Assumed
Liabilities.
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ARTICLE II.
PURCHASE PRICE
Section 2.1. Consideration(a). Upon the terms and subject to the
conditions contained in this Agreement, in consideration for the Purchased
Assets, the Assumed Liabilities and the other covenants and agreements of Seller
hereunder, and in full payment therefor, at the Closing, Buyer shall pay to
Seller an amount equal to the Inventory Value of the Inventory (the "Purchase
Price"). For purposes of the foregoing, "Inventory Value" shall equal the value
of the Inventory as of the Closing Date as determined in accordance with U.S.
generally accepted accounting principles applied consistently with Seller's
prior practice ("GAAP"), provided that Seller shall not sell, nor shall Buyer
purchase, more than $53,100,000 of Inventory pursuant to this Agreement. To the
extent Buyer inadvertently acquires and pays for any Inventory that should have
been excluded pursuant to Section 1.1(d) hereof, it shall promptly be reimbursed
therefor by LESCO and shall make reasonable arrangements with LESCO regarding
the return or disposition thereof. Buyer shall assume all accrued vacation, sick
pay, paid time off and bonuses owing from Seller to the Transferred Employees,
and Buyer shall receive a credit toward the payment of the Purchase Price for
the aggregate dollar amount thereof. Seller and Buyer shall cooperate in good
faith in an effort to identify by the Closing Date other accounts payable of
LESCO that may be assumed by Buyer hereunder and credited against the payment of
the Purchase Price, it being Buyer's desire to assume that amount of LESCO's
accounts payable that would reduce the cash portion of the Purchase Price
payable by Buyer to $25,000,000.
Section 2.2. Allocation of Consideration. Buyer and Seller agree that the
Purchase Price will be allocated solely to Inventory, and that no dollar amount
shall be allocated to any of the other Purchased Assets. Buyer and Seller agree
to be bound by that allocation for Federal income tax, and all other, purposes
and to file all applicable tax returns and other filings in accordance
therewith.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller that, as of the date hereof and as of the Closing Date:
(a) Organization. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite power and authority (corporate and other) to own, lease and
operate its properties and conduct its business as now being conducted and as
contemplated by this Agreement.
(b) Authorization. Buyer has the requisite power and authority
(corporate and other) to (i) enter into this Agreement, a Long-Term Supply
Agreement in the form of EXHIBIT C attached hereto and made a part hereof (the
"Long-Term Supply Agreement"), a Transitional Services Agreement in the form of
EXHIBIT D attached hereto and made a part hereof (the "TSA"), and the other
documents to be executed and delivered in connection herewith and therewith
(collectively, the "Transaction Documents"), (ii) perform its obligations
hereunder and thereunder and (iii) consummate the transactions contemplated
hereby and thereby. Buyer has
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taken all necessary corporate action with respect to its authorization,
execution and delivery of the Transaction Documents. The Transaction Documents
(other than the Long-Term Supply Agreement and TSA) constitute valid and binding
obligations of Buyer and are enforceable against Buyer in accordance with their
respective terms (subject to bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or similar federal or state laws or judicial decisions of
general application, to general principles of equity, to judicial discretion,
and to general principles of interpretation and rules of construction of
contracts (the "Exceptions")). The Long-Term Supply Agreement and TSA will, when
executed and delivered by the parties, constitute the valid and binding
obligation of Buyer and, subject to the Exceptions, will be enforceable against
Buyer in accordance with its terms.
(c) No Conflicts. Neither the execution and delivery by Buyer of this
Agreement or the other Transaction Documents nor the consummation by Buyer of
the transactions contemplated hereby and thereby nor compliance by Buyer with
any of the provisions hereof or thereof will (i) conflict with or result in a
breach of any provision of the certificate of incorporation or by-laws of Buyer;
(ii) violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event that, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or result in the
creation of any Lien upon any of the properties of Buyer under, any mortgage,
indenture, deed of trust, contract, agreement or other instrument or commitment
or obligation to which Buyer or any of its properties may be bound or by which
any thereof may be affected; (iii) violate any order, writ, injunction, decree,
judgment, ruling, law, rule or regulation of any Governmental Authority
applicable to Buyer or any of its properties, except for such violations that
would not separately or in the aggregate have a Material Adverse Effect on
Buyer; or (iv) require any consent, approval or authorization of, or notice to,
or declaration, filing or registration with, any Person or Governmental
Authority, except if the failure to obtain any such consent, approval,
declaration or authorization or to make any such registration or filing would
not have a Material Adverse Effect on Buyer or except to the extent any such
consent, approval or authorization of, or notice to, or declaration, filing or
registration has been obtained or made.
For purposes of this Agreement, "Material Adverse Effect" shall mean a
material adverse effect on the Purchased Assets or on the manufacture or
distribution of the Products or the ability of the applicable party to fulfill
its obligations under this Agreement or the other Transaction Documents.
(d) Legal Proceedings, etc. There is no claim, litigation, action,
suit, proceeding, investigation or inquiry, administrative or judicial (an
"Action"), filed, pending or, to the knowledge of Buyer, threatened against
Buyer, at law or in equity, before any Governmental Authority, that might have
an adverse effect on its ability to perform any of its obligations under this
Agreement or upon the consummation of the transactions contemplated by this
Agreement.
(e) Brokers and Finders. Neither Buyer nor any of its officers,
directors, employees or agents has engaged any broker or finder or incurred any
liability for any brokerage fees, commissions, finders' fees or similar fees or
expenses, and no broker or finder has acted directly or indirectly for Buyer, in
connection with this Agreement or the transactions contemplated hereby.
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Section 3.2. Representations and Warranties of Seller. Seller represents
and warrants to Buyer that, as of the date hereof and as of the Closing Date:
(a) Organization. Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Ohio, and has all
requisite power and authority (corporate and other) to own, lease and operate
its properties and conduct its business as now being conducted. SCHEDULE 3.2(A)
lists each jurisdiction where Seller is authorized, qualified or licensed to
conduct business by virtue of its current manufacture of the Products.
(b) Authorization. Seller has the requisite power and authority
(corporate and other) to (i) enter into this Agreement and the other Transaction
Documents, (ii) perform its obligations hereunder and thereunder and (iii)
consummate the transactions contemplated hereby and thereby. Seller has taken
all necessary corporate action with respect to the authorization, execution and
delivery of this Agreement and the other Transaction Documents. The Transaction
Documents (other than the Long-Term Supply Agreement) constitute valid and
binding obligations of Seller and, subject to the Exceptions, are enforceable
against Seller in accordance with their respective terms. The Long-Term Supply
Agreement will, when executed and delivered by the parties, constitute the valid
and binding obligation of Seller and, subject to the Exceptions, will be
enforceable against Seller in accordance with its terms. No approval or consent
is required from or by Seller's shareholders to enter into or consummate the
transactions contemplated hereby the Transaction Documents.
(c) No Conflicts. Neither the execution and delivery by Seller of this
Agreement or the other Transaction Documents nor the consummation by Seller of
the transactions contemplated hereby and thereby nor compliance by Seller with
any of the provisions hereof and thereof will (i) conflict with or result in a
breach of any provision of the articles of incorporation or regulations of
Seller; (ii) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event that, with notice or lapse of time or
both, would constitute a default) under, or result in the termination, give
anyone a right of termination or result in the creation of any Lien upon any of
the Purchased Assets under any mortgage, indenture, deed of trust, license,
contract, agreement or other instrument or commitment or obligation by which
Seller or any of the Purchased Assets may be bound or by which any thereof may
be affected (notwithstanding Section 1.2 of this Agreement); (iii) violate any
order, writ, injunction, decree, judgment, ruling, law, rule or regulation of
any Governmental Authority applicable to Seller or any of the Purchased Assets,
except for such violations that would not separately or in the aggregate have a
Material Adverse Effect; or (iv) require any consent, approval or authorization
of, or notice to, or declaration, filing or registration with, any Person or
Governmental Authority, except if the failure to obtain any such consent,
approval, declaration or authorization or to make any such registration or
filing would not have a Material Adverse Effect or except to the extent any such
consent, approval or authorization of, or notice to, or declaration, filing or
registration has been obtained or made.
(d) Compliance With Law; Authorizations; Permits. Except as set forth
on SCHEDULE 3.2(D), Seller is not in violation of any, law, ordinance,
governmental or regulatory rule or regulation, judgment, decision or order,
whether federal, state or local, to which the Purchased Assets or Seller's
manufacture of the Products are subject (collectively, "Regulations")"), except
for any failure to comply which would not have a Material Adverse
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Effect. Except as set forth on SCHEDULE 3.2(D), Seller has procured and is now
in possession of, and is in material compliance with, all Permits required by
any applicable Governmental Authority for the manufacture or distribution of the
Products in each jurisdiction wherein Seller is now conducting or proposes to
conduct business. A list of all Permits used in the manufacture or distribution
of the Products is set forth on SCHEDULE 3.2(D).
(e) Condition and Sufficiency of and Title to Purchased Assets. Except
as set forth on SCHEDULE 3.2(E), (i) the Purchased Assets are in good condition
and working order for the manufacture of the Products in the manner that Seller
manufactured and distributed the Products immediately prior to the Closing Date
and in the manner that Buyer will be obligated to manufacture and distribute the
Products under the Long-Term Supply Agreement (assuming the same quantity and
quality of Products as Seller manufactured and distributed immediately prior to
the Closing Date), ordinary wear and tear excepted, (ii) except for purchases of
replenishable raw materials and other supplies necessary to fill orders for
Products, and except for the Excluded Assets and Seller's computer systems that
are not being acquired by Buyer, the Purchased Assets are sufficient, and
include all assets necessary and material, to manufacture and distribute the
Products in the manner that Seller manufactured and distributed the Products
immediately prior to the Closing Date (excluding, for clarity, the operations
associated with the Excluded Assets) and (iii) the Inventory is in a useable and
saleable condition in the ordinary course of Seller's business and meets all
specifications and quality requirements under the Long Term Supply Agreement.
Except as set forth on SCHEDULE 3.2(E), Seller owns and has good, valid and
marketable title to, or a valid right to use, all of the Purchased Assets.
Except for a security interest in favor of Seller's senior lending group which
will be released as of the Closing, each of the Purchased Assets is held free
and clear of all mortgages, liens, leases or other possessory interests,
security interests, restrictive covenants, negative pledges, encumbrances,
restrictions, rights of way, defects of title of any nature whatsoever or any
interest of any third party therein ("Liens"), except for the Liens set forth on
SCHEDULE 3.2(E) (the "Permitted Liens").
(f) Environmental Matters.
(i) To the knowledge of Seller, except as set forth on SCHEDULE
3.2(F) (or disclosed in any report or assessment listed thereon), (A) Seller's
operation and use of any Owned Real Property or Leased Real Property and use of
any Hazardous Materials thereon or transport to or therefrom currently are in
compliance in all material respects with all Environmental, Health and Safety
Laws that apply to that property and the operations thereon; (B) there has been
no Release of any Hazardous Material on the Leased Real Property or the Owned
Real Property or any former owned or leased property used in the manufacture or
distribution of the Products for which Buyer could be liable; and (C) Seller has
not received any notice alleging in any manner that Seller is responsible for
any Release of Hazardous Materials or any costs or liabilities arising under or
material violation of any law relating to Environment, Health and Safety Laws.
Seller has made available to Buyer copies of all environmental audits or other
studies or reports listed on SCHEDULE 3.2(F). Except as set forth on SCHEDULE
3.2(F), there are no judicial or administrative proceedings pending or, to
Seller's knowledge, threatened against Seller arising under or relating to any
Environment, Health and Safety Law or making any claim based on any Environment,
Health and Safety Law. Except as set forth on SCHEDULE 3.2(F), to Seller's
knowledge, neither the Leased Real Property nor the Owned Real Property is
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subject to any liabilities (fixed or contingent) relating to any suit,
settlement, judgment or claim asserted or arising under any Environmental,
Health and Safety Laws and no liens are now existing against any such
properties. Except as set forth on SCHEDULE 3.2(F), to Seller's knowledge, no
Hazardous Materials are required to be remediated from any of the Owned Real
Property or Leased Real Property or from any formerly owned or leased real
property used in the manufacture or distribution of the Products for which Buyer
could be liable. Except as set forth on SCHEDULE 3.2(F), to Seller's knowledge,
Seller has not received any request for information, notice of claim, demand or
notification that it is or that indicates that it may be a "potentially
responsible party" with respect to any investigation or remediation of any
threatened or actual Release of any Hazardous Material onsite or on or at any
offsite location. Except as set forth on SCHEDULE 3.2(F), no above-ground or
underground storage tanks are located at any Owned Real Property or Leased Real
Property. Except as set forth on SCHEDULE 3.2(F), to Seller's knowledge, there
are no Hazardous Materials in any of the Owned Real Property or Leased Real
Property having a concentration level above what is permitted under
Environmental, Health and Safety Laws to allow for the unrestricted use of such
properties.
For purposes of this Agreement, the term "Environmental, Health and
Safety Laws" means any applicable federal, state, or local statute, law,
ordinance, code, order, injunction, decree or ruling, and any regulations
promulgated thereunder that regulates or controls (A) pollution,
contamination, or the condition of groundwater, surface water, soil,
sediment or air or (B) a spill, leak, emission, discharge, release or
disposal into groundwater, surface water, soil, sediment or air.
For purposes of this Agreement, the term "Hazardous Substances" means
any toxic substance, hazardous substance, hazardous waste, hazardous
material, solid waste, residual waste, infectious waste, contaminant,
pollutant, or constituent thereof, whether solid, semi-solid, liquid or
gaseous, that is regulated, listed or controlled by or under any applicable
Environmental, Health and Safety Laws.
For purposes of this Agreement, the term "Release" means any spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, or disposing into the environment.
(g) Brokers and Finders. Except for Western Reserve Partners, LLC, the
fees and expenses of which are solely the responsibility of Seller, Seller has
not engaged any broker or finder or incurred any liability for any brokerage
fees, commissions, finders' fees or similar fees or expenses, and no broker or
finder has acted for Seller in connection with this Agreement or the
transactions contemplated hereby.
(h) Legal Proceedings, etc. Except as set forth on SCHEDULE 3.2(H),
there is no material Action filed, pending or, to the knowledge of Seller,
threatened against Seller involving or relating to the manufacture or
distribution of the Products, the Purchased Assets, this Agreement or the
transactions contemplated hereby, at law or in equity, before any Governmental
Authority.
(i) Employee Benefits. Seller and its affiliates have complied in all
respects with all of its and their obligations under each Employee Benefit Plan
maintained by Seller or its
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affiliates and all law, rules and regulations applicable to such plans, and each
such plan has, at all times, been administered so as to comply with all
applicable law, except to the extent noncompliance would not have a Material
Adverse Effect on Seller. SCHEDULE 3.2(I) lists all written bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock and stock option
plans, all written employment or severance contracts, health and medical
insurance plans, life insurance and disability insurance plans, and all other
material employee benefit plans, contracts or arrangements which cover
Transferred Employees including, but not limited to, "employee benefit plans"
described in Section 3(3) of ERISA (the "Employee Benefit Plans"). Seller has
furnished to the Buyer true and correct copies of all documents evidencing
plans, obligations, or arrangements referred to in SCHEDULE 3.2(I) (or true and
correct written summaries of such plans, obligations, or arrangements to the
extent not evidenced by documents).
Seller does not maintain or contribute to or in any way directly or indirectly
have any liability (whether contingent or otherwise) with respect to any
"multiemployer plan", within the meaning of Section 3(37) or 4001(a)(3) of
ERISA. There are no defined benefit pension benefits accrued or payable to any
Transferred Employee, or provided under any Employee Benefit Plan under which
any benefit accrues to any Transferred Employees. No Employee Benefit Plan
contains any provision that would prohibit the transactions contemplated by this
Agreement or that would give rise to any severance, termination or other
payments to a Transferred Employee solely as a result of the transactions
contemplated by this Agreement.
Except for health continuation coverage as required by Section 4980B of the Code
or Part 6 of Title 1 of ERISA, Seller does not have any obligation to any
current employee upon retirement, under any Employee Benefit Plan for health or
life benefits. There are no split dollar life or key man executive insurance
agreements for any Transferred Employee.
(j) Contracts and Commitments. Except for Excluded Assets and open
purchase and sale orders entered in the ordinary course of business consistent
with past practices, SCHEDULES 1.1(A), 1.1(F) AND 1.1(G) list or briefly
describe all Contracts to which Seller is a party (whether or not legally bound
thereby) that relate primarily to the manufacture of the Products. Subject to
Section 1.2 of this Agreement, all such Contracts constitute Purchased Assets
hereunder. Except for a security interest in favor of Seller's senior lending
group, which will be released as of the Closing, Seller has not assigned,
mortgaged, pledged, encumbered, or otherwise hypothecated any of its right,
title or interest under any Contract. To Seller's knowledge, Seller is not in
material violation or default of any Contract that constitutes (or with consent
would constitute) a Purchased Asset. To Seller's knowledge, no third party to
any such Contract is in material breach or violation thereof, and such Contracts
are binding on and enforceable against such third party. No employee will become
entitled to any additional compensation payable as a result of the transactions
contemplated hereby.
(k) Availability of Documents. Seller has made available to Buyer
copies of all documents, including, without limitation, all agreements,
Contracts, commitments, plans, instruments, undertakings and Proprietary Rights,
listed in the Schedules hereto or referred to herein.
10
(l) Insurance. Seller is insured by insurers unaffiliated with Seller
with respect to the Purchased Assets and its manufacture and distribution of the
Products in such amounts and against such risks as are adequate to protect the
Purchased Assets (when owned by Seller) in accordance with normal industry
practice. A list of such insurance policies is attached hereto as SCHEDULE
3.2(L), which sets forth with respect to each such policy a description of the
insured loss coverage, the dollar limitations of coverage and whether such
policy is claims based or insurance based. To Seller's knowledge, no facts or
circumstances (other than the sale contemplated by this Agreement) exist that
would cause Seller to be unable to renew its existing insurance coverage as and
when the same shall expire upon terms at least as favorable as those currently
in effect, other than possible increases in premiums that do not result from any
act or omission of Seller.
(m) [Intentionally deleted.]
(n) Proprietary Rights. Set forth on SCHEDULE 3.2(N) is a complete
list of all Proprietary Rights that are material to the manufacture or
distribution of the Products (or the operations ancillary thereto) (for
avoidance of doubt, Section 1.1(k) (and not this Section 3.2(n)) governs the
Proprietary Rights that are being assigned to Buyer hereunder). To Seller's
knowledge, except as set forth on SCHEDULE 3.2(N), neither the Proprietary
Rights nor Seller's use thereof (or Buyer's prospective use thereof pursuant to
the Long-Term Supply Agreement) infringes upon any copyright, patent, trademark,
trade name, service xxxx or proprietary right of another Person. No claims have
been made to Seller by any person that (x) Seller does not own or have the right
to use any Proprietary Rights included within the Transferred Assets, or (y)
that the use of any Proprietary Rights included within the Transferred Assets by
Seller infringes upon the intellectual property rights of a third party. Seller
has taken all reasonable steps as it, in its business judgment, deemed prudent
and practicable, to protect its Proprietary Rights.
For purposes of this Agreement, "Proprietary Rights" means all of the
following: (i) trademarks and service marks, trade dress, logos, trade names and
other indications of origin, applications or registrations in the United States
of America and Canada pertaining to the foregoing and all goodwill associated
therewith, but not including any rights to the LESCO name or trademark or any
trademarks or trade names that include or incorporate the LESCO name; (ii)
inventions, discoveries, improvements, ideas, formula methodology, processes,
technology, computer software, source code, object code, development
documentation, programming tools, drawings, specifications and data, but
excluding off-the-shelf software) and patents in the United States of America
and Canada pertaining to the foregoing, including re-issues, continuations,
divisions, continuations in part, renewals or extensions; (iii) trade secrets,
including confidential information and the right in the United States of America
and Canada to limit the use or disclosure thereof; (iv) copyrighted works, mask
works or other works, applications or registrations in the United States of
America and Canada for the foregoing; (v) database rights; and (vi) Internet Web
sites and associated content and data, domain names and applications and
registrations pertaining thereto.
(o) Financial Statements. The quarterly and annual financial
statements included in filings made by Seller with the United States Securities
and Exchange Commission ("SEC") since 2003 have been prepared in accordance with
GAAP, subject to any exceptions stated therein and subject, in the case of
financial statements included in Seller's quarterly reports, to
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year end adjustments, the absence of footnotes and a physical inventory. Such
financial statements fairly present in all material respects the financial
position, results of operations and cash flows of Seller as at the respective
dates thereof and for the respective periods indicated therein. All unaudited
monthly or quarterly financial statements prepared by or on behalf of Seller
which have been delivered by or on behalf of Seller to Buyer fairly present in
all material respects the financial position, results of operations and/or cash
flows set forth therein as at the respective dates thereof and for the
respective periods indicated therein.
(p) Absence of Material Change. Subject to the "Risk Factors" and
other disclosures set forth in Seller's filings with the SEC, and except as set
forth on Schedule 3.2(p), since January 1, 2004, (i) there has been no casualty
of any nature with respect to the Purchased Assets that has resulted in a
Material Adverse Effect thereon, nor any change in the financial condition,
operations, assets, or business of Seller that would have a Material Adverse
Effect on the Purchased Assets or Buyer, and (ii) Seller has operated only in
the ordinary course and has not made any material change in any pricing,
purchasing, allowance or accounting practice, policy or method.
(q) Suppliers. During the period beginning January 1, 2004, no
material supplier to Seller that relates to the manufacture or distribution of
the Products (other than Syngenta) has terminated its relationship with or
adversely curtailed its accommodations, sales or services to Seller or, to
Seller's knowledge, has indicated (for any reason) its intention to terminate
such relationship or curtail its accommodations, sales or services, including as
a result of the transactions contemplated hereby.
(r) Employment Matters. To the knowledge of Seller, no executive or
manager associated with the manufacture or distribution of the Products plans to
terminate his or her employment, including as a result of the transactions
contemplated hereby. Seller is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours and occupational safety and health
pertaining to employees associated with the manufacture or distribution of the
Products, and Seller is not engaged in any unfair labor practice within the
meaning of the National Labor Relations Act. There is no unfair labor practice,
charge or complaint or any other matter against or involving Seller pending or,
to the knowledge of Seller, threatened before the National Labor Relations Board
or any court or other Governmental Authority pertaining to the manufacture or
distribution of the Products. There is no labor strike, dispute, slowdown or
stoppage pending or, to the knowledge of Seller, threatened against Seller
pertaining to the manufacture or distribution of the Products. Except as set
forth on SCHEDULE 3.2(R), Seller is not a party to any collective bargaining
agreement or other labor union contract, nor to Seller's knowledge are there any
activities or proceedings of any labor union to organize any employees
associated with the manufacture or distribution of the Products. Seller is in
material compliance with all collective bargaining agreements or other labor
union contracts, including with respect to any consultations, bargaining or
negotiations required thereunder or under applicable law in connection with the
transactions contemplated hereby. Except as set forth on SCHEDULE 3.2(R), there
are no charges, investigations, administrative proceedings or formal complaints
of discrimination (including discrimination based upon sex, age, marital status,
race, national origin, sexual preference, handicap or veteran status) pending
or, to the knowledge of Seller, threatened before the Equal Employment
Opportunity Commission or any
12
federal, state or local agency or court against Seller pertaining to any
employee associated with the manufacture or distribution of the Products. All
employment, change-in-control, severance and retention agreements and contracts
are listed on SCHEDULE 3.2(R) or elsewhere in Seller's Disclosure Schedules.
Except as disclosed in the agreements listed in SCHEDULE 3.2(R) or elsewhere in
Seller's Disclosure Schedules, none of the Transferred Employees will become
entitled to any bonuses, commissions or other payments as a result of the
transactions contemplated hereby. None of the Transferred Employees have been
improperly classified prior to the Closing Date as being independent contractors
or leased employees rather than employees, except to the extent that such
misclassification will not result in a material liability of Buyer.
(s) SEC Filings. During the prior five years, Seller has filed all
forms, reports and documents with the SEC as required under applicable
securities laws and regulations. During such period, all such forms, reports and
documents filed by Seller with the SEC, (i) were prepared in accordance with the
requirements of the Securities Act of 1933, as amended and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and
the rules and regulations thereunder, (ii) did not at the time they were filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading, and (iii) did not at the time they were filed omit any documents
required to be filed as exhibits thereto.
(t) Real Property. No condemnation proceeding is pending or, to the
knowledge of Seller, threatened which would impair the occupancy, use or value
of any Owned Real Property. No building on any Owned Real Property (i) is in
violation of applicable setback requirements, zoning laws, or ordinances, (ii)
is subject to "permitted non-conforming use" or "permitted non-conforming
structure" classifications or (ii) encroaches on any property owned by, or
easement granted in favor of, any person or entity.
(u) Valid Buyer Liens. The Long-Term Supply Agreement delivered
pursuant to Sections 4.3 and 4.4 will, upon execution and delivery thereof and
of the intercreditor agreement referred to in Section 4.2(a) hereof, be
effective to create in favor of Buyer legal, valid and enforceable Liens on, and
security interests in, all of Seller's right, title and interest in and to the
Collateral (as defined in the Long-Term Supply Agreement), and when all
appropriate filings or recordings are made in the appropriate offices as may be
required under applicable law, such Liens in favor of Buyer will constitute
fully perfected Liens on, and security interests in, all right, title and
interest of Seller in such Collateral, in each case subject to no Liens other
than the applicable Permitted Liens and the Lien of Seller's senior secured
lender, PNC Bank, National Association, as agent.
Section 3.3. No Additional Representations. SELLER IS NOT MAKING ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER WITH
RESPECT TO SELLER, INCLUDING WITH RESPECT TO ANY OF THE PURCHASED ASSETS, EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE III.
13
EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE III, THE PURCHASED ASSETS ARE
BEING CONVEYED, SOLD, TRANSFERRED, ASSIGNED AND DELIVERED TO BUYER ON AN "AS IS,
WHERE IS, WITH ALL FAULTS" BASIS.
ARTICLE IV.
CLOSING
Section 4.1. Closing. The Closing of the transactions contemplated hereby
shall take place on August 31, 2005 or, if not all of the conditions to the
obligations of the parties to consummate the transactions contemplated hereby as
set forth in Section 4.2 (other than conditions with respect to actions the
respective parties will take at the Closing itself) have been satisfied as of
August 31, 2005, as soon as practicable thereafter following the satisfaction or
waiver of such conditions, or such other date as the parties may mutually
determine. The Closing shall occur at the offices of Xxxxx & Xxxxxxxxx LLP, 0000
Xxxx 0xx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxx 00000, or such other place or by
such other manner as the parties may agree. The "Closing" means the deliveries
to be made by Buyer and Seller, respectively, pursuant to this Article IV and in
accordance with this Agreement. "Closing Date" means the date on which the
Closing occurs. The Closing will be effective as of the close of business, 6
P.M., Eastern Time, on the Closing Date.
Section 4.2. Conditions to Obligation to Close.
(a) Conditions to Obligation of Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction (or waiver by Buyer) of the following conditions:
(i) the representations and warranties set forth in Section 3.2 shall
be true and correct in all material respects at and as of the Closing Date;
(ii) Seller shall have performed and complied in all material respects
with all of its covenants hereunder that are required to be performed and
complied with by the Closing Date;
(iii) No action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction orbefore any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of
Buyer to own and operate the Purchased Assets (and no such injunction,
judgment, order, decree, ruling, orcharge shall be in effect);
(iv) All actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all deliveries to
be made by Seller pursuant to Section 4.3 will have been taken or made and
be reasonably satisfactory in form and substance to Buyer;
14
(v) No event, action or condition shall have occurred that has had or
is reasonably likely to have a Material Adverse Effect or a material
adverse effect on the business or financial condition of Seller;
(vi) Buyer shall have entered into an intercreditor agreement with PNC
Bank, National Association, on substantially the same terms and conditions
described in Section 6(d) of the Long-Term Supply Agreement;
(vii) Buyer and Seller shall have agreed to revise Schedule 5.1 as of
the Closing Date to account for LESCO's headquarters personnel that will
transfer to Buyer; and
(viii) Buyer shall have entered into financing arrangements sufficient
to enable Buyer to finance the Inventory acquired by Buyer under this
Agreement and the anticipated accounts receivable owing to Buyer from
Seller under the Long-Term Supply Agreement that provides for (i) an
interest rate of not greater than LIBOR plus 000 xxxxx xxxxxx, (xx) a
borrowing base of at least 50% of Buyer's gross inventory and 75% of Buyer
gross accounts receivable, (iii) an equity contribution by Buyer and its
affiliates of not more than $10,000,00 and (iv) other terms and conditions
substantially similar to those set forth in the commitment letter dated
February 8, 2005 from PNC Bank and other customary and reasonable terms and
conditions
Buyer may waive any condition specified in this Section 4.2(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of Seller. The obligation of Seller to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction (or waiver by Seller) of the following conditions:
(i) the representations and warranties set forth in Section 3.1 shall
be true and correct in all material respects at and as of the Closing Date;
(ii) Buyer shall have performed and complied in all material respects
with all of its covenants hereunder that are required to be performed and
complied with by the Closing Date;
(iii) No action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction orbefore any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to be
rescinded following consummation;
(iv) All actions to be taken by Buyer in connection with consummation
of the transactions contemplated hereby and all deliveries to be made by
Buyer pursuant to
15
Section 4.4 will have been taken or made and be reasonably satisfactory in
form and substance to Seller.
Seller may waive any condition specified in this Section 4.2(b) if it executes a
writing so stating at or prior to the Closing.
Section 4.3. Deliveries by Seller. At or prior to the Closing, Seller shall
deliver to Buyer, all duly and properly executed, if applicable, the following:
(a) The Assignment and Assumption Agreement.
(b) One or more customary deeds or other appropriate instruments of
transfer, transferring full title and ownership of the Owned Real Property to
Buyer;
(c) Such other separate instruments of sale, assignment or transfer
that Buyer reasonably may deem necessary or appropriate in order to perfect,
confirm or evidence title to all or any part of the Purchased Assets.
(d) All approvals, consents, waivers and notices from or to
governmental and other regulatory agencies as Buyer shall deem reasonably
necessary or desirable (including the passage of any required notice periods)
and all approvals, consents and waivers from customers, suppliers, lessors and
other third parties as specified on SCHEDULE 1.2.
(e) The Long-Term Supply Agreement and the TSA.
(f) Resolutions of the Board of Directors of Seller authorizing the
execution and delivery of this Agreement by Seller and the performance of its
obligations hereunder, certified by the Corporate Secretary of the Seller.
(g) The Articles of Incorporation of Seller, certified as of a recent
date by the Secretary of State of the State of Ohio.
(h) A certificate of the Secretary of State of the State of Ohio dated
as of a recent date as to the good standing of Seller in such state.
(i) An environmental insurance policy insuring Buyer for any
environmental matters arising prior to the Closing on the Owned Real Property
and the Leased Real Property;
(j) ALTA Form Owner's Policy of Title Insurance insuring Buyer as
owner of fee simple title to the Owned Real Property and an affidavit executed
by Seller stating that Seller is not a "foreign person" as defined in the
Federal Foreign Investment in Real Property Tax Act of 1980 and the 1984 Tax
Reform Act.
(k) Evidence reasonably satisfactory to Buyer of the release of any
Liens on the Purchased Assets (other than Permitted Liens).
(l) If reasonably requested by Buyer and required by applicable laws,
a certificate, dated the Closing Date, setting forth in each case the name,
address and Federal tax
16
identification number of the transferor of any Purchased Asset and stating under
penalty of perjury that such transferor is not a "foreign person" within the
meaning of Section 1445 of the Internal Revenue Code, such certificate to be in
the form set forth in the regulations prescribed pursuant to such Code.
(m) Disclosure schedules updated as of the Closing Date, if necessary
due to a change in circumstances.
(n) The L/C referred to in Section 6.2(d) of the Long-Term Supply
Agreement.
(o) A letter in the form attached as EXHIBIT E attached hereto and
made a part hereof prohibiting offsets of certain amounts owed by Seller to
Buyer, to the extent set forth therein.
(p) A certificate to the effect that each of the conditions specified
in Section 4.2(a) is satisfied in all material respects (unless waived by
Buyer).
Section 4.4. Deliveries by Buyer. At or prior to the Closing, Buyer shall
deliver to Seller, all duly and properly executed, the following:
(a) The Purchase Price.
(b) A counterpart copy of the Assignment and Assumption Agreement.
(c) A counterpart copy of the Long-Term Supply Agreement.
(d) Resolutions of the board of directors of Buyer authorizing the
execution and delivery of this Agreement by Buyer and the performance of its
obligations hereunder, certified by the Secretary of Buyer.
(e) The Certificate of Incorporation of Buyer, certified as of a
recent date by the Secretary of State of the State of Delaware.
(f) A certificate of the Secretary of State of each state where the
failure to be authorized, qualified or licensed to do business would have a
Material Adverse Effect or a material adverse effect on the business or
financial condition of Seller, each such certificate to be dated as of a recent
date as to the good standing of Buyer in such state.
(g) A certificate to the effect that each of the conditions specified
in Section 4.2(b) is satisfied in all material respects (unless waived by
Seller).
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ARTICLE V.
ADDITIONAL COVENANTS
Section 5.1. Employees.
(a) Attached hereto as SCHEDULE 5.1 is a list of the personnel
primarily associated with Seller's operations on the Owned Real Property and the
Leased Real Property, and certain other employees, all as determined by the
parties (the "Employees") as of the date hereof. Giving effect to any additions
or subtractions from such list as a result of personnel changes occurring in the
ordinary course of business, Buyer shall offer employment to all of the
Employees as of the Closing Date on an "at will" basis with the same base salary
and annual cash bonus opportunity as in effect for such Employee immediately
prior to the Closing Date and, otherwise subject to Buyer's terms, conditions
and policies of employment; provided, however that any Employee who is absent
from work immediately prior to the Closing Date due to injury, disability or
approved leave of absence, shall be offered employment hereunder effective upon
the Employee's return to active employment, if such Employee returns to active
employment no later than (1) if on a short-term disability, workers'
compensation leave or on an approved leave of absence under the Family and
Medical Leave Act of 1993, as amended ("FMLA" or under the Uniformed Services
Employment and Reemployment Rights Act of 1994 ("USERRA"), the last day on which
the Employee may return to work under the provisions of the applicable Seller
short-term disability plan, FMLA, USERRA or workers' compensation act, or (2)
for all other approved leaves of absence workers' compensation leave, within six
(6) months of the Closing Date. Employees who accept such offers of employment
from Buyer shall become employees of Buyer as of the Closing Date or, for
Employees who are absent from work on the Closing Date due to, injury,
disability or approved leave of absence, as of the date of their return to
active employment as described in the previous sentence (the "Transferred
Employees"). Nothing herein shall require Buyer to employ any Transferred
Employee for any length of time.
(b) Buyer is not assuming any of the Employee Benefit Plans or any
liabilities thereunder other than the Assumed Accounts Payable and the Employee
Benefit Plan described as "Health Plan Upper Ohio Valley/Rx" on Schedule 3.2(i)
hereto. Effective as of the date an Employee becomes a Transferred Employee,
such Transferred Employee shall cease to be covered by Seller's employee welfare
benefit plans, including plans, programs, policies and arrangements which
provide medical and dental coverage, life and accident insurance, disability
coverage (collectively, "Seller Welfare Plans"). Seller shall retain
responsibility for all medical benefit claims incurred by Employees prior to the
date they become Transferred Employees. For purposes of this subsection, a claim
shall be deemed to have been incurred on the date the medical service giving
rise to the claim is performed. With respect to the Transferred Employees,
effective as of the date an Employee becomes a Transferred Employee, Buyer shall
provide medical and dental coverage, life and accident insurance, and disability
or similar coverage (collectively, "Buyer Welfare Plans") that are reasonably
comparable to the Seller Welfare Plans. The Buyer Welfare Plans shall waive
pre-existing condition exclusions, evidence of insurability provisions, waiting
period requirements or similar provisions to the extent such exclusions,
requirements and provisions were waived or satisfied under the applicable Seller
Welfare Plan as of the Closing Date. In addition, Buyer shall cause the
applicable Buyer Welfare Plans to credit Transferred Employees with amounts
18
credited by Seller under Seller's health and dental plans toward the
satisfaction of annual deductible and out-of-pocket maximums under such Buyer
health and dental plans during the calendar year in which an Employee becomes a
Transferred Employee.
(c) Seller shall provide to Buyer access to employee records, as
needed for Buyer to comply with this Section 5.1. Seller and Buyer shall each
cooperate with the other and shall provide to the other such documentation,
information and assistance as is reasonably necessary to effect the provisions
of this Section 5.1. At Closing, Seller will provide all employment records and
any employee data which relates to Transferred Employees provided the disclosure
of which is not prohibited by applicable law or would result in a liability to
Seller.
(d) Seller shall be responsible for providing or discharging any and
all notifications, benefits and Liabilities to Business Employees and
governmental entities under the Worker Adjustment and Retraining Notification
Act of 1988 (the "WARN Act") or by any other law relating to plant closings,
mass layoffs or employee separations or severance pay that are first required to
be provided or discharged on or prior to the Closing Date, and Buyer shall be
responsible for providing any notice required pursuant to WARN with respect to a
plant closing, layoff or employee separation or severance pay relating to the
Transferred Employees after the Closing Date to the extent resulting from events
occurring after the Closing Date. Seller shall retain COBRA responsibility for
any Employees who do not become Transferred Employees. Buyer shall be
responsible for the administration of and shall assume any and all obligations,
if any, arising after the Closing Date under COBRA with respect to Transferred
Employees and their beneficiaries to the extent resulting from events occurring
after the Closing Date.
(e) Seller shall retain liability for all grants of stock options and
restricted stock that were granted to Employees prior to the Closing Date,
including all employer taxes and employer costs associated with the exercise or
sale of shares acquired thereunder. Seller shall cause each Employee who becomes
a Transferred Employee to cease to accrue any additional benefits in any Seller
equity compensation plans or programs as of the Closing Date, it being
understood that Transferred Employees may have the right to exercise options
under such plans or programs.
(f) As of the Closing Date (or as of the date such individuals become
Transferred Employees in accordance with this Section 5.1), the Transferred
Employees shall cease active participation in the LESCO, Inc. Stock Investment &
Salary Savings Plan & Trust 401(k) Plan (the "Seller Savings Plan"), and Buyer
will take, or cause to be taken, all action as may be necessary or appropriate
to cause such Transferred Employees who have account balances under the Seller
Savings Plan to become participants in a defined contribution plan to be
established by Buyer (the "Buyer Savings Plan") effective as of the Closing
Date. Account balances relating to the Transferred Employees shall be
transferred in kind, to the extent possible, or otherwise in cash, to the Buyer
Savings Plan, inclusive of any loan balances, as soon as practicable after the
Closing Date but in no event later than ninety (90) days after the Closing Date.
Service of each Transferred Employee recognized under terms of the Seller
Savings Plan for periods prior to the Closing Date shall be credited to the
Transferred Employee for purposes of eligibility and vesting under Buyer Savings
Plan. Transferred
19
Employees who are participants in the Seller Savings Plan will be 100% vested in
their accrued benefits and individual account balances under such Seller Savings
Plan as of the Closing Date (or as of the date such individuals become
Transferred Employees hereunder).
(g) As of the Closing Date, Buyer or one of its affiliates shall
establish a flexible spending account for medical and dependent care expenses
under a new or existing plan established or maintained under Section 125 and
Section 129 of the Code ("Buyer's FSA") for each Transferred Employee who, on or
prior to such date, is a participant, and maintains an account balance, in a
flexible spending account for medical or dependent care expenses under a plan
maintained by Seller pursuant to Section 125 and Section 129 of the Code
("Seller's FSA"). Buyer shall credit the applicable account of each such
Transferred Employee under the Buyer's FSA with an amount equal to the balance
of each such Transferred Employee's account under the Seller's FSA on the date
immediately prior to the commencement of participation in Buyer's FSA, and
Seller will transfer to Buyer in cash an amount equal to the account balances of
Transferred Employees under the Seller's FSA as of the Closing Date.
(h) Seller hereby waives, effective on and after the Closing Date, any
breach that would result under any agreement made by any employee in favor of
Seller not to compete with Seller, its business activities or otherwise, solely
insofar as such breach arises by virtue of such employee's employment by Buyer
after the Closing Date.
(i) In accordance with applicable law, Seller shall notify the union
representative(s) representing the Transferred Employees covered by the
Collective Bargaining Agreement at Seller's Martins Ferry, Ohio facility that
Buyer has assumed such Collective Bargaining Agreement.
Section 5.2. Non-Solicitation of Employees. Neither party nor their
respective representatives shall, without the prior written consent of the other
party, directly or indirectly solicit for employment, or employ, any person who
was or is an employee of the other party within twelve (12) months of the date
of the desired employment commencement date for such person; provided that this
Section 5.2 (or any similar section in the Long-Term Supply Agreement) shall not
apply with respect to the Employees to whom Buyer will offer employment under
Section 5.1 hereof or to Xxxxx O'Block. The foregoing provision shall survive
for one (1) year beyond the date hereof.
Section 5.3. [Intentionally deleted].
Section 5.4. Non-Competition Provision.
(a) From the date hereof to and including the end of the Contract Term
(as defined in the Long-term Supply Agreement) and for a period of one (1) year
thereafter neither Seller nor its affiliates nor their respective successors or
assigns shall, without the prior written consent of Buyer, knowingly directly or
indirectly own, manage, operate, control, provide material financial assistance
to, use Buyer's intellectual property for the benefit of, or materially
participate in the operation, ownership, management or control of any business
entity that competes with Buyer's business of manufacturing and distributing
products identical to or
20
similar to the Products within the largest geographic area that is legally
enforceable (except to the extent that Seller is permitted to buy Product from
third-parties pursuant to the Long-Term Supply Agreement, or unless Seller has
re-obtained the manufacturing assets of Buyer (or its successors) pursuant to
the Long-Term Supply Agreement, in which case Seller may commence manufacturing
and distributing products identical to, similar to or related to the Products)
(the "Buyer Restrictive Covenant").
(b) (i) From the date hereof to and including the end of the Contract
Term (as defined in the Long-Term Supply Agreement) or within one (1) year
thereafter neither Buyer nor its affiliates nor their respective successors or
assigns shall, without the prior written consent of Seller, knowingly directly
or indirectly sell any product that is substantially similar to the Products (as
defined in the Long-Term Supply Agreement) within the continental United States
to any person (or a successor-in-interest to any person) who is, or within the
prior twelve (12) months was, a named account customer of LESCO.
(ii) From the date hereof to and including the end of the Contract
Term (as defined in the Long-Term Supply Agreement) and for a period of one
(1) year thereafter neither Buyer nor its affiliates nor their respective
successors or assigns shall, without the prior written consent of Seller,
directly or indirectly own, manage, operate, control, provide material
financial assistance to, use Seller's intellectual property for the benefit
of, or materially participate in the operation, ownership, management or
control of any business entity that operates one or more retail stores that
derives more than twenty-five percent (25%) of its revenues selling
products that compete with LESCO's sale of the Products to end users within
the continental United States (subsection (b)(i) and (b)(ii), the "Seller
Restrictive Covenant").
For purposes of sub-paragraph (b)(i), EXHIBIT F, which shall be attached hereto
and made a part hereof as of the Closing Date, shall set forth a listing of
LESCO's named account customers as of the Closing Date; such list shall be
updated by LESCO at least quarterly during the Contract Term, but in any event
shall not include more than 50 entities. The restrictions set forth in
sub-paragraph (b)(i) shall not apply to customers of entities that may be
acquired by Buyer, its affiliates or their respective successors or assigns
after the Closing Date, that also appear on EXHIBIT F, as updated from time to
time.
(b) The parties recognize and agree that the provisions of this
Section 5.4 are an integral part of this Agreement and that neither would agree
to enter into this Agreement and sell/buy the Purchased Assets but for the
agreements of the other set forth herein. Each party has carefully read and
considered the provisions of the Restrictive Covenant and, having done so,
agrees that the restrictions set forth in this Section 5.4, including without
limitation the time period of restriction and the geographic area of restriction
set forth herein, are fair and reasonable and are reasonably required for the
protection of the legitimate business and economic interests of each party. In
the event that, notwithstanding the foregoing, any of the provisions of this 5.4
or any parts hereof shall be held to be invalid or unenforceable, the remaining
provisions or parts hereof shall nevertheless continue to be valid and
enforceable as though the invalid or unenforceable portions or parts had not
been included herein. In the event that any provision of this Section 5.4
relating to the time period and/or the area of restriction and/or related
aspects shall be declared by a court of competent jurisdiction to exceed the
maximum restrictiveness such court deems reasonable and enforceable, then the
parties request that the time period and/or
21
area of restriction and/or related aspects deemed reasonable and enforceable by
such court shall become, and thereafter be, the maximum restrictions in such
regard, this Section 5.4 shall be deemed modified accordingly, and the
provisions of the Restrictive Covenant shall remain enforceable to the fullest
extent deemed reasonable by such court.
(c) Each party agrees that in the event of any conduct by it or its
affiliates or their respective representatives violating any provision of this
Section 5.4, the other party shall be entitled to institute and prosecute
proceedings in any court of competent jurisdiction, either at law or in equity,
to obtain damages for such conduct, to enforce specific performance of such
provision, to enjoin the other party from such conduct, to obtain an accounting
and repayment of all profits, compensation, commissions, remuneration or other
benefits that the other party directly or indirectly has realized and/or may
realize as a result of, growing out of, or in connection with any such
violation, or to obtain any other relief, or any combination of the foregoing,
that the party may elect to pursue. The party found to be violating the
provisions of this Section 5.4 shall pay all legal fees and other costs incurred
by the non-violating party to enforce the provisions of this Section 5.4 and to
obtain the remedies provided herein.
(d) The provisions of this Section 5.4 shall not be deemed violated
solely as a result of the sale of Buyer or Seller, or the permitted assignment
of this Agreement, to a person (such person, a "Transferee") that, at the time
of such sale or assignment, does business or has customers or stores that would
be considered violative of this Section 5.4, nor shall the provisions of this
Section 5.4 be deemed to restrict, prohibit or curtail the business of any such
Transferee.
Section 5.5. Cooperation. Subject to Section 1.2 of this Agreement, each
party covenants to the other party that if, at any time after the execution of
this Agreement, the other party will reasonably consider or be advised that any
further actions, assignments or assurances are necessary or desirable to carry
out the terms and conditions of this Agreement, it will take such actions,
execute and make all such assignments and assurances and do all things necessary
or appropriate to carry out the terms and conditions of this Agreement, or
otherwise consummate the transactions contemplated by this Agreement according
to its respective terms. In addition, Buyer hereby covenants and agrees to grant
Seller and its representatives access to all Owned Real Property and/or Leased
Real Property at any time after the Closing if reasonably required in order for
Seller to fulfill its indemnification obligations hereunder and/or to implement
any corrective action(s) required by any governmental or quasi-governmental
authorities.
Section 5.6. Publicity. No public announcement or other disclosure shall be
made by any person with regard to the transactions contemplated by this
Agreement or the Long-Term Supply Agreement without the express prior consent of
Seller and Buyer; provided; however, that either party may make such disclosure
if advised by counsel that it is legally required to do so, provided that prior
to the issuance of such disclosure, it shall be disclosed to the other party
hereto and such other party will be given an opportunity to comment thereon.
Seller shall seek confidential treatment of the financial terms and formulas set
forth herein to the extent that Seller, on the advice of its legal counsel,
reasonably believes that such information would be granted confidential
treatment by the SEC. (For avoidance of doubt, the foregoing shall not in any
way or manner limit Seller's ability to comply with any and all disclosure
obligations under any applicable securities law.) Following any disclosure in
accordance with the terms hereof,
22
either party may make additional announcements, tombstones or publications that
are consistent with such prior disclosures and are in accordance with applicable
laws.
Section 5.7. Confidentiality. Following the Closing, each party (i) shall,
and shall cause each of its affiliates and their respective representatives to,
keep in confidence any confidential information concerning the manufacture,
distribution or sale of the Products for any purpose adverse to the interests of
Seller and Buyer. The restrictions and prohibitions set forth in this section
will not apply to confidential information that at the time of disclosure is
already available in the public domain or becomes available in the public
domain, in each case other than as a result of a breach of this Section 5.7.
Notwithstanding anything to the contrary in this Agreement or in any other
agreement to which the parties hereto are parties or by which they are bound,
the obligations of confidentiality contained herein and therein, as they relate
to the transactions contemplated by this Agreement, shall not preclude
disclosures to the extent necessary to comply with accounting, SEC and other
disclosure obligations imposed by applicable law and shall not apply to the tax
structure or tax treatment of the transactions contemplated by this Agreement.
Each party hereto (and any representative of any party hereto) may disclose to
any and all Persons, without limitation of any kind, the tax structure and tax
treatment of the transactions contemplated hereby and all materials of any kind
(including opinions or other tax analysis) that are provided to such party
relating to such tax treatment and tax structure; provided, however, that such
disclosure shall not include the name (or other identifying information not
relevant to the tax structure or tax treatment) of any Person and shall not
include information for which nondisclosure is reasonably necessary in order to
comply with applicable securities laws.
Section 5.8. Insurance. The parties hereby agree that Buyer may, after the
Closing Date, bring or continue to pursue claims for recovery under the
"occurrence" based policies and insurance coverage, if any, maintained by Seller
and its affiliates concerning the manufacture or distribution of the Products
for events that occurred prior to the Closing Date and that are Assumed
Liabilities.
Section 5.9 Financial Information. During the term of the Long-Term Supply
Agreement, Seller shall provide Buyer with copies of all monthly financial
reporting packages prepared for and delivered to Seller's senior secured
lender(s), if any.
Section 5.10 Tax Cooperation. Seller will cooperate with Buyer and Buyer's
agents to provide Buyer the adequate payroll tax records required by federal and
state agencies necessary for Buyer to optimize federal and state payroll tax law
relating to successor-in-interest transactions, including the transactions
contemplated by this Agreement.
Such records shall include, but not be limited to, the following:
1. An executed release form granting permission to Buyer and its agents
to obtain quarterly payroll data from all states within which the
Seller conducted operations relating to the manufacture or
distribution of the Products.
2. When required by state taxing agencies, Seller will provide signed (or
notarized signatures) necessary to grant permission for Buyer to file
for transfers of experience
23
of payroll tax accounts in states which require a signed release by
the predecessor Seller.
3. Seller will provide Buyer and its agents with the most recent Annual
940 Report complete with part I and Part II (computation of tentative
credits), and most recent years "tax rate notices" received from
individual state agencies.
4. Seller will provide copies of all Seller's quarterly wage detail
reports filed with individual state agencies in the calendar year
through the Closing Date.
If Seller utilized an outside payroll tax administrator, then Seller grants
Buyer permission to have access to relevant successor-in-interest reports from
the payroll vendor, such as state tax rate notices, state quarterly contribution
reports, W2s and federal recap reports such as 940 and 941. Seller will provide
Buyer with a contact person at the payroll vendor.
Section 5.11 Expense Reimbursement. Simultaneous with the Closing, Seller
shall pay Buyer $2,000,000 in immediately available funds as reimbursement for
certain expenses incurred by Buyer in connection with the transactions
contemplated hereby.
Section 5.12 Access to Information. From the date hereof through the
Closing Date, Seller shall provide Buyer and its representatives, advisors and
potential financing sources ("Representatives") with reasonable access to the
Purchased Assets and Employees in order to make such investigation as they shall
reasonably request and shall furnish or cause to be furnished to Buyer and its
Representatives all data and information concerning the Purchased Assets as may
be reasonably requested.
Section 5.13 Conduct of the Business. Except as specifically contemplated
by this Agreement, from the date hereof through the Closing Date, Seller shall
operate the Purchased Assets in the ordinary course and consistent with past
practice and shall use reasonable efforts to maintain satisfactory relationships
with its suppliers and keep available the service of the Employees. Without
limiting the generality of the foregoing, Seller shall not, without the prior
written consent of Buyer, which shall not be unreasonably withheld: (a) increase
in any manner the cash compensation and other non-equity based benefits of any
Employee except in the ordinary course of business consistent with past practice
or as required by law or contract; (b) enter into any agreement with any
Employee relating to any such pension, retirement allowance or other employee
benefit, except as required under currently existing agreements, plans or
arrangements in accordance with their present terms; (c) authorize or commit to
make capital expenditures with respect to the Purchased Assets in excess of
$100,000 in any one month period; (d) enter into or materially amend any
contract with any material supplier, distributors, 3PL's or freight carriers or
(e) agree to do any of the foregoing.
Section 5.14 Reasonable Efforts. Seller and Buyer shall use commercially
reasonable efforts to bring about the satisfaction of their respective
conditions precedent to the consummation of the transactions contemplated
hereby, and shall take all action and do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
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Section 5.15 Termination. Prior to Closing, this Agreement may be
terminated:
(i) By the mutual written agreement of Buyer and Seller;
(ii) By the non-breaching party, upon a material breach by the other
party hereto of such party's representations, warranties or covenants
herein, provided that such breaching party shall have a period of 30 days
to cure such breach after receipt of notice thereof by the non-breaching
party; or
(iii) By either party if the Closing has not occurred by October 31,
2005, provided that the party seeking termination did not commit any breach
of this Agreement that led to the Closing not having occurred by October
31, 2005.
Section 5.16 Break-Up Fee.
(i) If all of the conditions to Buyer's obligation to close, as set
forth in Section 4.2(a) hereof (including Seller being ready, willing and
able to make the deliveries set forth in Section 4.3 hereof), have been
satisfied on or before October 31, 2005, and Buyer fails or refuses to
Close, or if the failure to satisfy any one or more of such conditions is
due to Buyer's action(s) or inaction(s) in material breach of this
Agreement, then Buyer immediately shall pay to Seller in immediately
available funds an amount equal to the Break-Up Fee plus the Transaction
Expenses.
(ii) For purposes of this Agreement, the "Break-Up Fee" shall be an
amount equal to Two Million Dollars ($2,000,000).
(iii) For purposes of this Agreement, "Transaction Expenses" mean an
amount equal to all of the other party's out-of-pocket costs and expenses
incurred in connection with this Agreement, the Long-Term Supply Agreement
and the TSA, and the transactions contemplated therein, including without
limitation fees and disbursements of its outside legal counsel, accountants
and other consultants retained by or on behalf of such other party,
together with the other out-of-pocket costs incurred by such other party in
connection with analyzing and structuring the transactions contemplated
therein, negotiating the terms and conditions of this Agreement and any
other agreements or other documents relating to such transactions and
conducting due diligence and other activities related to such agreement and
such transactions. Anything in this Agreement to the contrary
notwithstanding, in no event shall a party owing a Break-Up Fee to the
other party be obligated to pay the other party's Transaction Expenses in
excess of Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate.
Section 5.17 Determination of Historical Costs under Section 1 of
Attachment E of the Long-Term Supply Agreement. Within 15 days of the date of
this Agreement, Seller will provide to Buyer its determination of the Historical
Metrics (as defined in the Long-Term Supply Agreement) for purposes of Section 1
of Attachment E of the Long-Term Supply Agreement (the "Cost Savings Historical
Metrics") together with reasonable support for such determination. Such Cost
Savings Historical Metric shall be determined based on the historical costs
incurred by Seller for the items set forth on Schedule 1-A of Section 1 of
Attachment E of the Long-Term
25
Supply Agreement taking into account the additional or duplicative costs that
may reasonably be required by Buyer to perform the services required by the
Long-Term Supply Agreement. Within the longer of 15 days of receipt of Seller's
determination of the Cost Savings Historical Metrics or 30 days from the date of
this Agreement, Buyer will provide Seller with its determination of the Cost
Savings Historical Metrics. In the event of any disagreement between Buyer and
Seller as to the Cost Savings Historical Metrics, the parties shall in good
faith attempt to resolve such disagreement within 15 days of Seller's receipt of
Buyer's determination of the Cost Savings Historical Metrics. If Buyer and
Seller are unable to resolve such disagreement within such 15 days period, the
disagreement will be resolved by Deloitte & Touche LLP (or if Deloitte & Touche
LLP cannot or is unwilling to serve in such capacity, a nationally recognized,
independent public accounting firm selected by mutual agreement of the parties,
or if they cannot agree, selected by mutual agreement of the independent public
accounting firms regularly used by the parties in the conduct of their
respective businesses) (the "Arbitrator"), who shall be engaged to provide a
final and conclusive resolution of all unresolved disputes with respect to the
Cost Savings Historical Metric within ninety (90) days after such engagement,
including responsibility for the parties' costs relating to the dispute referred
to it pursuant to this Section 5.17. Seller shall provide Buyer with reasonable
access to its books, records and systems for purposes of making its
determination of the Cost Savings Historical Metric.
ARTICLE VI.
INDEMNIFICATION
Section 6.1. Survival. The representations and warranties contained in this
Agreement shall survive the Closing for eighteen (18) months, provided that the
representations and warranties in Sections 3.2(b), (e) (as to title), and (f)
shall survive indefinitely or until the end of the applicable statute of
limitations applicable to such claim. Written notice of any claim for
indemnification under Section 6.2(a)(i) must be delivered by or one behalf of
the Indemnified Party within such time period; provided that if a claim is
brought within such period it shall remain valid thereafter until ultimately
resolved.
Section 6.2. Indemnification.
(a) Seller shall indemnify and hold harmless Buyer, its stockholders,
subsidiaries, affiliates, successors and permitted assigns, and their respective
directors, officers, partners, members, employees, agents and representatives
(each, a "Buyer Indemnified Party") from and against any and all losses,
liabilities, damages, demands, claims, suits, actions, judgments or causes of
action, assessments, costs and expenses, including, without limitation,
interest, penalties, reasonable attorneys' fees, any and all expenses incurred
in investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation (collectively, "Damages"), asserted against,
resulting to, imposed upon, or incurred or suffered by a Buyer Indemnified
Party, directly or indirectly, as a result of or arising from the following
(individually a "Buyer Indemnifiable Claim" and collectively the "Buyer
Indemnifiable Claims"):
26
(i) Any inaccuracy in or breach of any of the representations or
warranties made by Seller in this Agreement or in any agreement, document
or instrument required to be delivered by Seller pursuant to this
Agreement;
(ii) Any nonperformance of any of the covenants or obligations made by
Seller in this Agreement;
(iii) Any Retained Liability, including any liability or Damage
arising from the operation or the manufacture of the Products by Seller
prior to the Closing Date, including any claims arising under any theory of
"successor liability;
(iv) Any claim from any of Seller's shareholders or creditors relating
to the transactions contemplated hereby;
(v) Any taxes of any nature arising from Seller's ownership of the
Purchased Assets as a result of, or with respect to or relating to periods
ending on or prior to, the Closing; and
(vi) Any liability arising under any Environmental, Health and Safety
Laws or as a result of the Release of any Hazardous Material, in each case
to the extent relating to actions, omissions, events or occurrences prior
to the Closing; provided that this shall include any liability, costs or
expenses incurred in connection with item 1 and item 5 on Schedule 3.2(h),
whether relating to events occurring before or after the Closing Date.
(b) Buyer shall indemnify and hold harmless Seller, its shareholders,
subsidiaries, affiliates, successors and permitted assigns, and their respective
directors, officers, employees, agents and representatives (each, a "Seller
Indemnified Party") from and against any and all Damages asserted against,
resulting to, imposed upon, or incurred or suffered by a Seller Indemnified
Party, directly or indirectly, as a result of or arising from the following
(individually a "Seller Indemnifiable Claim" and collectively the "Seller
Indemnifiable Claims"):
(i) Any inaccuracy in or breach of any of the representations or
warranties made by Buyer in this Agreement or in any agreement, document or
instrument required to be delivered by Buyer pursuant to this Agreement;
and
(ii) Any nonperformance of any of the covenants or obligations made by
Buyer in this Agreement.
Section 6.3. Limitations on Indemnification. No Buyer Indemnified Party, on
the one hand, or any Seller Indemnified Party, on the other hand, shall be
entitled to indemnification hereunder with respect to an Indemnifiable Claim
pursuant to Sections 6.2(a)(i) or Sections 6.2(b)(i), as applicable (or, if more
than one such Indemnifiable Claim is asserted, with respect to all such
Indemnifiable Claims) until the aggregate amount of Damages with respect to all
such Indemnifiable Claims or Buyer Indemnified Parties or Seller Indemnified
Parties, as the case may be, exceeds Twenty-Five Thousand Dollars ($25,000) (the
"Threshold"), in which event such Buyer Indemnified Party or Seller Indemnified
Party, as the case may be, shall be entitled to indemnification hereunder for
all Damages in excess of the Threshold, provided that the
27
Threshold will not apply to a breach of representation or warranty under
Sections 3.2(b), (e) (as to title), or (f). Furthermore, the maximum aggregate
liability of Seller with respect to all Indemnifiable Claims pursuant to
Sections 6.2(a)(i) and the maximum aggregate liability of Buyer with respect to
all Indemnifiable Claims pursuant to Sections 6.2(b)(i) shall be Twelve Million
Dollars ($12,000,000) (the "Cap"), provided that the Cap will not apply in
instances of fraud or in the event of a breach of representation or warranty
under Sections 3.2(b), (e) (as to title), or (f). Furthermore, no Buyer
Indemnified Party, on the one hand, or any Seller Indemnified Party, on the
other hand, shall be entitled to indemnification hereunder with respect to an
Indemnifiable Claim pursuant to Section 6.2, as applicable (or, if more than one
such Indemnifiable Claim is asserted, with respect to all such Indemnifiable
Claims) to the extent such Indemnified Party receives insurance proceeds or
third party contractual payments for the Indemnifiable Claim or to the extent
that the Indemnifiable Claim is included in the calculation of Standard Cost
pursuant to the Long-Term Supply Agreement. Buyer shall not be entitled to
indemnification under Section 6.2(a)(vi) to the extent that Buyer incurs costs,
expenses or liability other than (x) for a clean-up action or remediation
required by law or initiated by a third-party (including, but not limited to, a
governmental authority or agency) or (y) discovered in the ordinary course of
Buyer's business.
Section 6.4. Procedure for Indemnification with Respect to Third-Party
Claims.
(a) If any Indemnified Party determines to seek indemnification under
this Article VI with respect to Buyer's Indemnifiable Claims or Seller'
Indemnifiable Claims ("Indemnifiable Claims") resulting from the assertion of
liability by third parties, it shall give notice to the Indemnifying Party as
soon as is reasonably practicable under the circumstances but in all events
within forty-five (45) days after the Indemnified Party's becoming aware of such
Indemnifiable Claim or of facts upon which such Indemnifiable Claim will be
based; provided that failure to give notice within such time period shall not
restrict the Indemnified Parties right to indemnification hereunder except to
the extent the Indemnifying Party is prejudiced by the failure to receive notice
within such 45 day period. This notice shall set forth the information with
respect thereto that is then reasonably available to the Indemnified Party. If
any such liability is asserted against the Indemnified Party, and the
Indemnified Party notifies the Indemnifying Party thereof, the Indemnifying
Party will be entitled, if it so elects by written notice delivered to the
Indemnified Party within 20 days after receiving the Indemnified Party's notice,
to assume the defense thereof with counsel reasonably satisfactory to the
Indemnified Party. Notwithstanding the foregoing (i) the Indemnified Party also
shall have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the Indemnified Party
(as long as the Indemnifying Party continues to defend such matter), unless the
representation of the Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential conflicting
interests between the Indemnified Party and the Indemnifying Party in the
opinion of counsel to the Indemnified Party, in which case the Indemnified Party
will be entitled to retain its own counsel with fees and expenses to be paid by
the Indemnifying Party; (ii) the Indemnified Party shall not have any obligation
to give any notice of any assertion of liability by a third party unless such
assertion is in writing; and (iii) the rights of the Indemnified Party to be
indemnified hereunder in respect of Indemnifiable Claims resulting from the
assertion of liability by third parties shall not adversely be affected by its
failure to give notice pursuant to the foregoing unless, and, if so, only to the
extent that the Indemnifying Party is materially
28
prejudiced thereby. With respect to any assertion of liability by a third party
that results in an Indemnifiable Claim, the parties hereto shall make available
to each other all relevant information in their possession material to any such
assertion.
(b) If the Indemnifying Party, within 20 days after receipt of the
aforesaid notice of an Indemnifiable Claim, fails to assume the defense of the
Indemnified Party against such Indemnifiable Claim, the Indemnified Party shall
have the right to undertake the defense, compromise or settlement of such action
on behalf of and for the account and risk of the Indemnifying Party.
(c) Notwithstanding anything in this Section to the contrary, (i) if
there is a reasonable probability that an Indemnifiable Claim may materially and
adversely affect the Indemnified Party, other than as a result of money damages
or other money payments, the Indemnified Party shall have the right, at the cost
and expense of the Indemnifying Party, to defend, compromise or settle such
Indemnifiable Claim; and (ii) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Indemnifiable
Claim or consent to entry of any judgment in respect thereof unless such
settlement, compromise or consent includes as an unconditional term thereof
providing for the giving by the claimant or the plaintiff to the Indemnified
Party and all affiliates of the Indemnified Party a release from all liability
in respect of such Indemnifiable Claim and does not otherwise place any
restrictions or limitations on the Indemnified Party.
Section 6.5. Procedure For Indemnification with Respect to Non-Third-Party
Claims. If the Indemnified Party asserts the existence of an Indemnifiable Claim
(excluding claims resulting from the assertion of liability by third parties),
it shall give written notice to the Indemnifying Party specifying the nature and
amount of the claim asserted. If the Indemnifying Party, within 45 days after
the mailing of notice by the Indemnified Party, shall not give written notice to
the Indemnified Party announcing its intent to contest such assertion of the
Indemnified Party, such assertion shall be deemed accepted and the amount of
claim shall be deemed a valid Indemnifiable Claim. During the time period set
forth in the preceding sentence, the Indemnified Party shall cooperate fully
with the Indemnifying Party in respect of such Indemnifiable Claim. If, however,
the Indemnifying Party contests the assertion of a claim by giving written
notice to the Indemnified Party within that period, then the parties hereto,
acting in good faith, shall attempt to reach agreement with respect to that
Indemnifiable Claim within ten days after that notice. If the parties cannot
reach agreement with respect to that Indemnifiable Claim within 30 days after
that notice, any party shall seek to resolve such dispute first by mediation
(not to exceed six months) and then in the courts identified in Section 7.14.
Section 6.6. Exclusive Remedy of Buyer. After the Closing, the remedies
provided for in this Article VI shall be the exclusive remedy of Buyer and
Seller for any breach by Seller or Buyer of this Agreement or any dispute
arising in connection with or as a result of the transactions contemplated by
this Agreement; provided that this shall not prejudice any rights or remedies
available to the parties under the Long-Term Supply Agreement or the TSA.
29
ARTICLE VII.
MISCELLANEOUS PROVISIONS
Section 7.1. Notices. All notices and communications required under this
Agreement shall be in writing and shall be sent by hand, by registered or
certified mail return receipt requested, by overnight courier service
maintaining records of receipt, or by facsimile transmission with confirmation
of successful transmission of such facsimile, and shall be effective on the
earlier of receipt or (a) the date delivered by hand, or (b) the third Business
Day after being mailed, or (c) the following Business Day if sent by overnight
courier service, or (d) upon receipt of successful transmission confirmation, if
sent by facsimile. Any notice, demand or request required or permitted to be
given under this Agreement shall be in writing and shall be deemed to have been
duly given and made when electronically confirmed if sent by telecopy on the
date of personal delivery, and on the date of confirmed delivery if mailed by
U.S. certified or registered mail, return receipt requested, or if sent by a
nationally recognized overnight courier service. Any such notice, demand or
request shall be addressed to the following addresses or such other address as
may be designated in writing hereafter by, such party:
If to Seller, to:
LESCO, Inc.
0000 Xxxx 0xx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxxxx, CFO
Telecopy No: (000) 000-0000
If to Buyer, to:
Turf Care Supply Corp.
000 X. Xxxxxxxx Xxxx, Xxxxx Xxxxxxxx
Xxxxxxx Xxxxx, XX 00000
Attn: Xxx Xxxxxxxx, Esq.
Telecopy No: (000) 000-0000
Section 7.2. Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all references to
Sections, Articles, Schedules or Exhibits are to Sections, Articles, Schedules
or Exhibits of or to this Agreement, (ii) each accounting term not otherwise
defined in this Agreement has the meaning assigned to it in accordance with GAAP
as in effect on the date hereof, (iii) "or" is disjunctive but not necessarily
exclusive, (iv) words in the singular include the plural and vice versa and (v)
all references to "including" shall mean "including without limitation." All
references to "$" or dollar amounts will be to lawful currency of the United
States of America.
30
(b) For purposes of this Agreement, an entity shall be deemed to have
"knowledge" of a particular fact, matter or circumstance if any individual
listed on SCHEDULE 7.2(B) has knowledge of such fact, matter or circumstance.
(c) The parties have participated jointly in the negotiation and
drafting of this Agreement. If an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
Section 7.3. Further Assurances. At and after the Closing, Seller shall,
from time to time, at the request of, and without further cost or expense to,
Buyer, execute and deliver such other instruments of assignment, conveyance and
transfer and take such other actions as reasonably may be requested by Buyer in
order to more effectively consummate the transactions contemplated hereby.
Section 7.4. Entire Agreement. This Agreement, the Exhibits and Schedules
hereto, and the documents referred to herein embody the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof,
and supersede all prior and contemporaneous agreements and understandings, oral
or written, relative to that subject matter.
Section 7.5. Binding Effect; Assignment. This Agreement and the various
rights and obligations arising hereunder inure to the benefit of and are binding
upon Seller and their respective successors and permitted assigns, and Buyer,
its successors and permitted assigns. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be transferred or assigned (by
operation of law or otherwise) by any of the parties hereto without the prior
written consent of the other party or parties. Notwithstanding the foregoing,
but subject in all events to the provisions of Section 5.4(a)(ii) of this
Agreement, Buyer may assign all or a part of its rights and obligations under
this Agreement to any other Person that is a direct or indirect wholly owned
subsidiary of Platinum Equity, LLC or of Platinum Equity Capital Partners, L.P.,
a private equity fund of which an affiliate of Platinum Equity, LLC is the
general partner and (i) assign any or all of its rights, interests and
obligations hereunder to one or more of its affiliates, (ii) make a collateral
assignment of any rights or benefits hereunder to any lender or (iii) assign any
or all of its rights, interests or obligations hereunder in connection with any
sale of all or substantially all of its assets, a change in control, or other
extraordinary corporate event.
Section 7.6. Severability. With respect to any provision of this Agreement
finally determined by a court of competent jurisdiction to be unenforceable,
Seller and Buyer hereby agree that such court shall have jurisdiction to reform
such provision, and Seller and Buyer hereby request such court to reform such
provision, so that it is enforceable to the maximum extent permitted by law, and
the parties agree to abide by such court's determination. In the event that any
provision of this Agreement cannot be reformed, such provision shall be deemed
to be severed from this Agreement, but every other provision of this Agreement
shall remain in full force and effect.
Section 7.7. Waiver; Consent. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part,
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except by a writing executed by the parties hereto. No waiver of any of the
provisions or conditions of this Agreement or of any of the rights of a party
hereto shall be effective or binding unless that waiver is in writing and signed
by the party claimed to have given or consented thereto. Except to the extent
that a party hereto may have otherwise agreed in writing, no waiver by that
party of any condition of this Agreement or breach by any other party of any of
its obligations or representations hereunder or thereunder shall be deemed to be
a waiver of any other condition or subsequent or prior breach of the same or any
other obligation or representation by that other party, nor shall any
forbearance by any party to seek a remedy for any noncompliance or breach by any
other party be deemed to be a waiver by the first party of its rights and
remedies with respect to such noncompliance or breach.
Section 7.8. No Third Party Beneficiaries. Nothing herein, expressed or
implied, is intended or will be construed to confer upon or give to any Person
(including any employee of Seller or Buyer), other than the parties hereto and
their permitted successors and assigns and any Indemnified Parties, any rights,
remedies or other benefits under or by reason of this Agreement.
Section 7.9. Counterparts. This Agreement may be executed simultaneously in
multiple counterparts (including by facsimile), each of which will be deemed an
original, but all of which taken together constitute one and the same
instrument. This Agreement will become binding when one or more counterparts
have been executed and delivered by each of the parties hereto.
Section 7.10. Governing Law. This Agreement is governed in all respects,
including as to its validity, interpretation and effect, by the internal laws of
the State of Ohio without regard to the principles of conflicts of laws thereof.
Section 7.11. Venue; Consent to Service. Each of the parties irrevocably
submits to the jurisdiction of the state courts of Ohio and the United States
District Courts sitting in Ohio for the purpose of any action or proceeding
arising out of or relating to this Agreement, and each of the parties
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in any Ohio state court sitting in Cuyahoga County, Ohio
or the any United States District Court sitting in Ohio. Each of the parties
agrees that a final judgment in any action or proceeding therein shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Each of the parties agrees that service of
process or notice in any such action or proceeding shall be effective if in
writing and sent by certified or registered mail, return receipt requested,
postage prepaid, as provided in Section 7.1 hereof.
Section 7.12. Bulk Sales Waiver. Buyer and Seller hereby waive compliance
with any applicable bulk sale laws in connection with the transactions
contemplated by this Agreement; provided, however, that Seller shall indemnify
and hold Buyer and its affiliates harmless from and against any losses,
liabilities, costs and expenses arising out of noncompliance with any such laws
if and to the extent that any such laws confer upon Sellers in transactions of
this type primary responsibility for compliance, and liability for
noncompliance, therewith.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be executed as of the day and year first above written.
BUYER:
Turf Care Supply Corp.
By: /s/ Xxx X. Xxxxxxxx
------------------------------------
Title: Secretary
SELLER:
LESCO, Inc.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
------------------------------------
Title: Senior Vice President and Chief
Financial Officer
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INDEX OF EXHIBITS
Exhibit A Index of Defined Terms
Exhibit B Assignment and Assumption Agreement
Exhibit C Long-Term Supply Agreement
Exhibit D Transitional Services Agreement
Exhibit E No Offset Letter
Exhibit F Seller Customer List
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INDEX OF SCHEDULES
Schedule 1.1(a) Owned Real Property and Leased Real Property
Schedule 1.1(b) Equipment
Schedule 1.1(c) Personal Property
Schedule 1.1(d) Inventory
Schedule 1.1(e) Permits
Schedule 1.1(f) Personal Property Leases
Schedule 1.1(g) Contracts
Schedule 1.1(k) Proprietary Rights
Schedule 1.2 Non-Assignability of Assets
Schedule 1.4 Assumed Liabilities
Schedule 3.2(a) Foreign Qualifications
Schedule 3.2(d) Compliance with Laws; Authorizations; Permits
Schedule 3.2(e) Condition and Sufficiency of and Title to Purchased Assets
Schedule 3.2(f) Environmental Matters
Schedule 3.2(h) Legal Proceedings
Schedule 3.2(i) Employee Benefit Plans
Schedule 3.2(l) Insurance Policies
Schedule 3.2(m) Product Warranty Experience
Schedule 3.2(n) Proprietary Rights
Schedule 3.2(p) Material Changes
Schedule 3.2(r) Employment Matters
Schedule 5.1 Employees
Schedule 7.2(b) List of Employees for "Knowledge" Purposes
THE COMPANY AGREES TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED EXHIBIT AND
SCHEDULE TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST.
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EXHIBIT A
INDEX OF DEFINED TERMS
TERM PAGE
---- ----
Action 6
Agreement 1
Assignment and Assumption Agreement 1
Assumed Liabilities 4
Break-Up Fee 25
Buyer 1
Buyer Indemnifiable Claim/Claims 26
Buyer Indemnified Party 26
Cap 27
Closing 14
Closing Date 14
Contracts 2
Contract Term 20
Damages 26
Employee Benefit Plans 10
Employees 18
Environmental Health and Safety Laws 9
Equipment 2
Exceptions 6
Exchange Acr 13
Excluded Assets 4
GAAP 5
Governmental Authority 3
Hazardous Substances 9
Indemnifiable Claims 28
Inventory 2
knowledge 31
Leased Real Property 1
Liens 8
Long-Term Supply Agreement 5
Material Adverse Effect 6
Owned Real Property 1
Permits 2
Permitted Liens 8
Person 3
Personal Property 2
Personal Property Leases 2
Products 1
Proprietary Rights 11
Purchase Price 5
Purchased Assets 1
36
Regulations 7
Release 9
Restrictive Covenant 21
Retained Liability/Retained Liabilities 4
SEC 11
Seller 1
Seller Indemnifiable Claim/Claims 27
Seller Indemnified Party 27
Threshold 27
Transaction Documents 5
Transferred Employees 18
TSA 5
31168, 94002, 101108069.1, Platinum APA - 10-Q version
37
