EXHIBIT 2 ASSET PURCHASE AGREEMENT

 

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                                                                       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, Bill 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");

 

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          (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 the Martins 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.

 

 

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          (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 mark 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

 

 

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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