STOCK PURCHASE AGREEMENT between Rowan Companies, Inc. (Seller) and Joy Global Inc. (Buyer) Dated as of May 13, 2011 TABLE OF CONTENTS

 

between

(“Seller”)

and

(“Buyer”)

Dated as of May 13, 2011

			Page
ARTICLE 1. PURCHASE AND SALE OF STOCK			1
Section 1.1		Purchase and Sale.	1
Section 1.2		Consideration.	1
Section 1.3		Post-Closing Working Capital Adjustment.	2
Section 1.4		Treatment of Longhorn Equity Awards.	3
ARTICLE 2. CLOSING			4
Section 2.1		Closing.	4
Section 2.2		Deliveries by Buyer at Closing.	4
Section 2.3		Deliveries by Seller at Closing.	5
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLER			6
Section 3.1		Organization and Good Standing.	6
Section 3.2		Authority; No Conflict.	6
Section 3.3		Capitalization.	8
Section 3.4		Financial Statements.	8
Section 3.5		Undisclosed Liabilities; Indebtedness; Support Obligations.	9
Section 3.6		Sufficiency of Assets.	9
Section 3.7		Real Property.	10
Section 3.8		Absence of Certain Changes and Events.	11
Section 3.9		Taxes.	12
Section 3.10		Employees and Employee Benefits.	13
Section 3.11		Compliance with Legal Requirements; Governmental Authorizations.	16
Section 3.12		Legal Proceedings; Orders	16
Section 3.13		Contracts; No Defaults.	17
Section 3.14		Environmental Matters.	19
Section 3.15		Employment and Labor Matters.	20
Section 3.16		Intellectual Property.	21
Section 3.17		Brokers and Finders.	22
Section 3.18		Insurance.	22
Section 3.19		Bank Accounts.	23
Section 3.20		Customers and Suppliers.	23
Section 3.21		Warranties.	23
Section 3.22		Product Liability.	23
Section 3.23		Backlog.	23
Section 3.24		Certain Business Practices.	23
Section 3.25		U.S. Trade Controls and Sanctions Regulations.	24
Section 3.26		No Other Representations and Warranties.	25
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER			25
Section 4.1		Organization of Buyer.	25
Section 4.2		Authority; No Conflict.	25

 

Schedule 1.3	Net Working Capital Calculation Methodology
Schedule 1.4(a)	Estimated Compensatory Award Consideration
Schedule 3.1(c)	Organizational Documents
Schedule 3.2(b)	No Conflicts
Schedule 3.2(c)	Notices, Reports, Registrations, Filings And Consents Required To Be Made Or Obtained By Seller
Schedule 3.3(a)	Capitalization
Schedule 3.3(c)	Interests in Other Persons; Predecessor Entities
Schedule 3.4(b)	Internal Controls
Schedule 3.5(b)	Indebtedness
Schedule 3.5(c)	Guaranties, Letters of Credit And Performance Bonds
Schedule 3.7(a)	Owned Real Property
Schedule 3.7(b)	Leased Real Property
Schedule 3.7(c)	Subleases and Licenses
Schedule 3.7(d)	Lease Modifications, Amendments, Renewals And Extensions
Schedule 3.7(h)	Persons in Possession of Real Property
Schedule 3.8	Absence Of Certain Changes And Events
Schedule 3.9	Taxes
Schedule 3.10(a)	Employee Benefit Plans
Schedule 3.10(b)(i)	ERISA Plans
Schedule 3.10(c)	Foreign Benefit Plan Compliance
Schedule 3.10(g)	Acceleration of Benefits
Schedule 3.11(b)	Permits

Schedule 3.12	Legal Proceedings And Orders
Schedule 3.13(a)	Contracts
Schedule 3.13(b)	Personal Contracts
Schedule 3.13(d)	Compliance with Contracts
Schedule 3.13(e)	Renegotiations
Schedule 3.14	Environmental Matters
Schedule 3.15	Employment And Labor Matters
Schedule 3.16(a)	Intellectual Property Assets
Schedule 3.16(b)	Exceptions And Encumbrances To Intellectual Property Assets
Schedule 3.16(c)	Intellectual Property Conflicts
Schedule 3.18(a)	Insurance Policies
Schedule 3.18(b)	Longhorn Insurance Policies
Schedule 3.19	Bank Accounts
Schedule 3.20	10 Largest Customers and Suppliers
Schedule 3.21	Warranties
Schedule 3.22	Product Liability
Schedule 3.23	Backlog
Schedule 5.2(a)	Operations Outside Of The Ordinary Course Of Business
Schedule 5.6	Continuing Intercompany Arrangements
Section 5.10	Other Agreements
Schedule 9.1(a)(i)	Transferred Employees

 

Exhibit A.

Form of Employee Services Agreement

Exhibit B.

Form of Lease Agreement

Exhibit C.

Form of Amendment No. 1 to Mobile Platform Construction Agreement

 

This STOCK PURCHASE AGREEMENT, dated as of May 13, 2011 (this “Agreement”), is by and between Joy Global Inc., a Delaware corporation (“Buyer”), and Rowan Companies, Inc., a Delaware  corporation (“Seller”).

 

 

A.          Seller owns all of the outstanding common stock, par value $.001 per share (the “Longhorn Stock”) of LeTourneau Technologies, Inc., a Texas corporation (“Longhorn”);

 

B.           Longhorn is engaged in the business of (i) designing, manufacturing, distributing and selling equipment, and providing aftermarket parts and services, for the oil and gas drilling industry, including jack-up rig kits, complete land rigs, mud pumps, drawworks, top drives, rotary tables, electric motors, variable frequency drives and other electrical components, (ii) designing, manufacturing, distributing and selling a range of high-performance front-end loaders serving the mining industry worldwide, (iii) designing, manufacturing, distributing and selling new and refurbishing used log stackers for the forestry industry mainly in the United States, and (iv) designing, producing, distributing and selling high strength specialty carbon, alloy and tool steel plate products (together with any other businesses of the Longhorn Entities incidental thereto, collectively, the “Business”).

 

C.           Seller desires to sell to Buyer the Longhorn Stock, and Buyer desires to purchase from Seller the Longhorn Stock, in the manner and subject to the terms and conditions set forth herein.

 

 

In consideration of the mutual covenants and promises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto agree as follows:

 

Section 1.1            Purchase and Sale.  Upon the terms and subject to the conditions set forth herein, on the Closing Date, Seller shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall acquire from Seller, all right, title and interest of Seller in and to the shares of Longhorn Stock free and clear of all Encumbrances.

Section 1.2            Consideration.  At the Closing, upon the terms and subject to the conditions set forth herein, Buyer shall pay to Seller for the sale, transfer, assignment, conveyance and delivery of the Longhorn Stock the aggregate amount of $1.1 billion (the “Purchase Consideration”).  All payments pursuant to this Section 1.2 shall be made by wire transfer of immediately available funds to an account designated by Seller (such designation to be made at least two Business Days prior to the Closing Date).  Payment of the Purchase Consideration shall be subject to adjustment as set forth in Section 1.3.

 

 

Section 1.3            Post-Closing Working Capital Adjustment.

 

(a)           As soon as reasonably practicable following the Closing Date, and in any event within 30 days thereafter, Buyer shall prepare and deliver to Seller a calculation of Net Working Capital as of the Closing Date in accordance with the accounting principles, practices, policies and methodologies set forth as Schedule 1.3, together with reasonably detailed supporting information (the “Net Working Capital Statement”).

 

(b)           From and after the delivery of the Net Working Capital Statement, Buyer shall provide Seller and its Representatives reasonable access to the records and employees of Buyer, and Buyer shall, and shall cause the employees of Buyer and its Affiliates to, (i) cooperate in all reasonable respects with Seller in connection with Seller’s review of the Net Working Capital Statement and (ii) provide Seller with access to accounting records, supporting schedules and relevant information relating to Buyer’s preparation of the Net Working Capital Statement and calculation of Net Working Capital as Seller shall reasonably request and that are available to Buyer or its Affiliates.  Within 30 days after Seller’s receipt of the Net Working Capital Statement, Seller shall notify Buyer as to whether Seller agrees or disagrees with the Net Working Capital Statement and, if Seller disagrees, such notice shall set forth in reasonable detail the particulars of such disagreement.  If Seller provides a notice of agreement or does not provide a notice of disagreement within such 30-day period, then Seller shall be deemed to have accepted the calculations and the amounts set forth in the Net Working Capital Statement delivered by Buyer, which shall then be final, binding and conclusive for all purposes hereunder.  If any notice of disagreement is timely provided in accordance with this Section 1.3(b), then Buyer and Seller shall each use commercially reasonable efforts for a period of 30 days thereafter (the “Net Working Capital Resolution Period”) to resolve any disagreements with respect to the calculations in the Net Working Capital Statement.

 

(c)           If, at the end of the Net Working Capital Resolution Period, Buyer and Seller are unable to resolve any disagreements as to items in the Net Working Capital Statement, then KPMG LLP (or such other independent accounting firm of recognized national standing in the United States as may be mutually selected by Buyer and Seller) shall resolve any remaining disagreements.  If neither KPMG LLP nor any such mutually selected accounting firm is willing and able to serve in such capacity, then Seller shall deliver to Buyer a list of three other accounting firms of recognized national or regional standing and Buyer shall select one of such three accounting firms (such firm as is ultimately selected pursuant to the aforementioned procedures being the “Accountant”).  The Accountant shall be charged with determining as promptly as practicable, but in any event within 30 days after the date on which such dispute is referred to the Accountant, whether Net Working Capital as set forth in the Net Working Capital Statement was prepared in accordance with this Agreement and (only with respect to the disagreements as to the items set forth in the notice of disagreement and submitted to the Accountant) whether and to what extent, if any, Net Working Capital requires adjustment.

(d)           The Accountant shall allocate its costs and expenses between Buyer and Seller based upon the percentage of the contested amount submitted to the Accountant that is ultimately awarded to each party such that each party bears a percentage of such costs and expenses equal to the percentage of the contested amount awarded to the other party.  For example, if Seller claims Net Working Capital is $1,000 greater than the amount determined by Buyer, and Buyer contests only $500 of the amount claimed by Seller, and if the Accountant ultimately resolves the dispute by awarding Seller $300 of the $500 contested, then the Accountant’s costs and expenses shall be allocated 60% (i.e. 300/500) to Buyer and 40% (i.e. 200/500) to Seller.  The determination of the Accountant shall be final, binding and conclusive for all purposes hereunder.

 

(e)           The date on which Net Working Capital is finally determined in accordance with this Section 1.3 is hereinafter referred to as the “Determination Date,” such amount as so finally determined is hereinafter referred to as the “Final Net Working Capital,” and the calculations thereof and the supporting information relating thereto is hereinafter referred to as the “Final Net Working Capital Statement”.

 

(f)           Promptly following the Determination Date, and in any event within five Business Days of the Determination Date, Buyer shall pay to Seller an amount equal to the excess, if any, of (x) the sum of (i) the Final Net Working Capital plus (ii) the Vale Prepayment Amount received by Buyer over (y) the Target Net Working Capital, or Seller shall pay to Buyer an amount equal to the excess, if any, of (x) the Target Net Working Capital over (y) the sum of (i) the Final Net Working Capital plus (ii) the Vale Prepayment Amount received by Buyer, in each case together with interest at a rate equal to five percent (5%) per annum on such amount from the Closing Date to the date of payment, such payment to be made by wire transfer of immediately available funds.

 

Section 1.4            Treatment of Longhorn Equity Awards.

 

(a)           At the Closing and without any action on the part of the holders thereof, Seller shall cause each stock appreciation right, stock option and restricted stock unit granted under the Longhorn Incentive Plan (each such stock appreciation right, stock option and restricted stock unit, a “Longhorn Compensatory Award”) that is outstanding as of immediately prior to the Closing, whether or not then vested or exercisable, to be cancelled, extinguished and automatically converted into the right to receive an amount in cash equal to the product obtained by multiplying (x) the aggregate number of vested shares of Longhorn Stock underlying such Longhorn Compensatory Award as of immediately prior to the Closing (after giving effect to any accelerated vesting that occurs pursuant to the terms of such Longhorn Compensatory Award as the result of the transactions contemplated by this Agreement and such additional accelerated vesting as may be provided by Seller in connection with the transactions contemplated by this Agreement (any such additional vesting, “Seller Discretionary Vesting” and the Compensatory Award Compensation attributable to such Seller Discretionary Vesting, “Discretionary Award Compensation”)) and (y) the per share Purchase Consideration less any per share exercise price of such Longhorn Compensatory Award (the “Compensatory Award Consideration”).  The estimated amount of the Compensatory Award Consideration including the estimated Discretionary Award Compensation to be paid to each individual is listed on Schedule 1.4(a).  In the event any Longhorn Compensatory Award is subject to Section 409A of the Code, the payment of the amount of cash with respect thereto shall be delayed to the extent necessary to comply with Section 409A of the Code.

(b)           Within five Business Days following the Closing  (or at such later date as required by Section 409A of the Code), Buyer shall cause to be paid to each holder of a Longhorn Compensatory Award an amount in Cash equal to the Compensatory Award Consideration with respect to such Longhorn Compensatory Award, less any required withholding obligations.  Within five Business Days following the Closing, Seller shall make a payment to Buyer in an amount equal to the sum of (x) the aggregate Discretionary Award Compensation, (y) the aggregate employment and other tax that the Buyer or a Longhorn Entity is required to pay as a result of payment of the Discretionary Award Compensation, and (z) the amount of any additional matching contributions that Buyer or a Longhorn Entity is required to contribute to a retirement plan as a result of the Discretionary Award Compensation (determined by assuming that the Discretionary Award Compensation does not increase the amount of contributions any employee would otherwise elect to make to such retirement plan).

 

Section 2.1            Closing.  Upon the terms and subject to the conditions set forth herein, the closing of the Transactions (the “Closing”) shall be held at 10:00 a.m. local time on the Closing Date at the offices of Latham & Watkins LLP, 717 Texas Street, Suite 1600, Houston, TX 77002-2855 unless the Parties hereto otherwise agree.

 

Section 2.2            Deliveries by Buyer at Closing.

 

(a)           Consideration to Seller.  Buyer shall deliver, or cause to be delivered, to Seller the Purchase Consideration.

 

(b)           Buyer Certificates.  Buyer shall furnish Seller with:

 

(i)           a certificate executed by the Secretary of Buyer certifying as of the Closing Date (i) a true and complete copy of the Organizational Documents of Buyer and (ii) incumbency matters with respect to Buyer;

 

(ii)          a certificate of the appropriate Governmental Entity certifying the status or Good Standing of Buyer in its jurisdiction of incorporation; and

 

(iii)         a certificate signed by an officer of Buyer as to the fulfillment of the conditions set forth in Sections 6.2(a) and (b).

 

(c)           Employee Services Agreement.  Buyer and Seller shall execute and deliver the Employee Services Agreement substantially in the form attached hereto as Exhibit A.

 

(d)           Lease Agreement.  Buyer and Seller shall execute and deliver the Lease Agreement substantially in the form attached hereto as Exhibit B.

Section 2.3            Deliveries by Seller at Closing.

 

(a)           Payments by Seller.  Seller shall deliver, or cause to be delivered, to Buyer a payment by wire transfer of immediately available funds to an account identified in writing to Seller by Buyer in the amount of the Vale Prepayment Amount plus the amount, if any, required to be paid by Seller to Buyer pursuant to Section 5.10.

 

(b)           Instruments and Possession.  To effect the sale and transfer referred to in Section 1.1, Seller shall execute and deliver to Buyer or its designee, as applicable:

 

(i)           certificates representing the Longhorn Stock duly endorsed (or accompanied by a duly executed stock power) and in form for transfer to Buyer or its designees, as applicable;

 

(ii)          the stock books, stock ledgers, minute books and corporate seals of each Longhorn Entity as of the Closing Date; provided, that any of the foregoing items shall be deemed to have been delivered pursuant to this Section 2.3(a)(ii) if such item has been delivered to or is otherwise certified to Buyer by a duly authorized officer of Seller to be located at the offices of the Longhorn Entities as of the Closing Date; and

 

(iii)         such other instruments and documents in form and substance reasonably acceptable to Buyer as shall be reasonably requested by Buyer to effect the Closing in accordance with the provisions hereof.

 

(c)           Seller Certificates.  Seller shall furnish Buyer with:

 

(i)           a certificate executed by the Secretary of Seller certifying as of the Closing Date (i) a true and complete copy of the Organizational Documents of Seller and (ii) incumbency matters with respect to Seller;

 

(ii)          a certificate of the appropriate Governmental Entity certifying the status or Good Standing of Seller in the State of Delaware;

 

(iii)         a certificate signed by Seller as to the fulfillment of the conditions set forth in Sections 6.1(a) and (b); and

 

(d)           Consents.  Seller shall deliver to Buyer executed copies of each of the Consents or Governmental Authorizations listed on Schedule 3.2(c).

 

(e)           Resignations of Seller Designated Directors and Officers.  Seller shall deliver to Buyer letters dated as of the Closing Date effecting the resignation of each director and officer of Longhorn or its Subsidiaries who serves in such position solely as a representative of Seller and not otherwise in an operational or managerial position with the Business.

 

(f)           Employee Services Agreement.  Buyer and Seller shall execute and deliver the Employee Services Agreement substantially in the form attached hereto as Exhibit A.

(g)           Lease Agreement.  Buyer and Seller shall execute and deliver the Lease Agreement substantially in the form attached hereto as Exhibit B.

 

(h)           Joe Douglas Amendment.  Seller and Longhorn shall execute and deliver the Amendment No. 1 to the Mobile Construction Platform Agreement, dated March 14, 2008 for LeTourneau Workhorse 240-C Class, LeTourneau Hull No. 242, substantially in the form attached hereto as Exhibit C.

 

Seller hereby represents and warrants to Buyer that the following representations and warranties are true and correct:

 

Section 3.1            Organization and Good Standing.

 

(a)           Seller is duly organized, validly existing and in Good Standing under the laws of the State of Delaware with full power and authority to conduct its business and to perform all its obligations under this Agreement.

 

(b)           Each Longhorn Entity is duly organized, validly existing and in Good Standing under the laws of the state, province or other jurisdiction of its formation with full power and authority to conduct its business, to own or use its assets and to perform all its obligations under any Contracts to which it is a party.  Each Longhorn Entity is duly qualified to do business and is in Good Standing under the laws of each state, province or other jurisdiction in which either the ownership of any of its assets or the operation of its businesses requires such qualification, except where the failure to be so qualified or in Good Standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(c)           Seller has made available to Buyer true and correct copies of the Organizational Documents of each of the Longhorn Entities, in each case as amended to the date hereof, and has made available to Buyer each of the Longhorn Entities’ minute books and membership, stock or comparable records, in each case true and correct through the date of this Agreement in all material respects.  None of the Longhorn Entities is in violation of its Organizational Documents and, except as set forth on Schedule 3.1(c), no amendments thereto are currently pending.

 

Section 3.2            Authority; No Conflict.

 

(a)           Seller has all requisite power, authority and capacity, and has taken all action necessary, to execute, deliver and perform its obligations under this Agreement.  This Agreement has been duly authorized, executed and delivered by Seller, and constitutes the legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms, except that enforceability of this Agreement may be limited by (i) bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors’ rights generally and (ii) general principles of equity, regardless of whether asserted in a proceeding in equity or at law.

(b)          Except as set forth on Schedule 3.2(b), neither the execution and delivery of this Agreement nor the consummation or performance of any of the Transactions will, directly or indirectly (with or without notice or lapse of time):

 

(i)           contravene, conflict with or result in a violation of (A) any provision of Seller’s or any Longhorn Entity’s Organizational Documents or (B) any resolution adopted by the board of directors or shareholders of Seller or any Longhorn Entity;

 

(ii)          contravene, conflict with or result in a violation of, or give any Governmental Entity (other than with respect to the Antitrust Approvals) or any other Person the right to challenge any of the Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which any Longhorn Entity may be subject;

 

(iii)         contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Entity the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by any Longhorn Entity;

 

(iv)         contravene, conflict with or result in a violation or breach of any provision of, or loss of benefit under, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify, any Contract set forth on Schedule 3.13(a); or

 

(v)          result in the imposition or creation of any Encumbrance upon or with respect to the Longhorn Stock or any material asset of any Longhorn Entity other than, with respect to any such asset other than the Longhorn Stock, Permitted Encumbrances.

 

With respect to clauses 3.2(b)(ii) through 3.2(b)(v) such representations are limited to those events as would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(c)           Except for the Antitrust Approvals and except as set forth on Schedule 3.2(c), no notices, reports, registrations or other filings are required to be made by Seller or any of the Longhorn Entities with, nor are any Consents required to be obtained that have not already been obtained by Seller or any of the Longhorn Entities from, any Person in connection with the execution, delivery or the performance of this Agreement by Seller, except where the failure to make such notice, report, registration or other filing or obtain such Consent would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 3.3            Capitalization.

 

(a)           Schedule 3.3(a) sets forth the name of each Longhorn Entity, its jurisdiction of organization, the amount of its authorized and outstanding capital stock (or other equity interests) and the record and beneficial owners of such outstanding capital stock (or other equity interests).  All the issued and outstanding shares of capital stock (or other equity interests) of each Longhorn Entity are duly authorized, validly issued, fully paid and non-assessable and free of any preemptive rights or Encumbrances, and were issued in accordance with all applicable Legal Requirements.  Except as set forth on Schedule 3.3(a), there are no outstanding (i) securities convertible into or exchangeable for the capital stock of, or equity interests in, any Longhorn Entity, (ii) options, warrants or other rights to purchase or subscribe for capital stock of, or equity interests in, any Longhorn Entity or (iii) Contracts or understandings of any kind relating to the issuance, acquisition, transfer, repurchase, redemption, reacquisition, registration, disposition or voting of any capital stock of, or equity interests in, any Longhorn Entity, any such convertible or exchangeable securities or any such options, warrants or rights, pursuant to which, in any of the foregoing cases, any of the Longhorn Entities or its holders of capital stock or other securities is subject or bound.  Except as set forth on Schedule 3.3(a), there is no Person (other than Buyer) who is entitled to acquire or receive any shares of capital stock or other securities of any Longhorn Entity.

 

(b)           At the Closing, Seller shall transfer to Buyer good and valid title to the Longhorn Stock free and clear of all Encumbrances.  At and following the Closing, Buyer will be the sole stockholder of Longhorn and will own the Longhorn Stock free and clear of any Encumbrances, other than those arising from acts of Buyer or its Affiliates.

 

(c)           Except as set forth on Schedule 3.3(c), none of the Longhorn Entities owns, directly or indirectly, any capital stock, membership or limited liability company interest, partnership interest, joint venture interest or other equity interest in any Person other than another Longhorn Entity.

 

Section 3.4            Financial Statements.

 

(a)           Seller has delivered to Buyer (i) the unaudited consolidated balance sheets for Longhorn as of March 31, 2011 and March 31, 2010 and the unaudited consolidated statements of income and cash flows of Longhorn for each of the three-month periods then ended, and (ii) an audited consolidated balance sheets of Longhorn as of December 31, 2010 (the “Balance Sheet”) and December 31, 2009 and the related audited consolidated statements of income, changes in shareholders’ equity, and cash flows of Longhorn for each of the fiscal years ended December 31, 2010, December 31, 2009 and December 31, 2008 (the financial statements listed in clauses (i) and (ii) are collectively, the “Financial Statements”), together with the notes to such consolidated financial statements and the reports thereon of Deloitte & Touche LLP, independent certified public accountants.  The Financial Statements fairly present, in all material respects, the financial condition and the results of operations, income, expenses, assets, liabilities, changes in shareholders’ equity, and cash flows of Longhorn as of the respective dates of, and for the periods referred to in, the Financial Statements, all in accordance with GAAP consistently applied during the periods involved, except as otherwise noted therein and subject, in the case of the unaudited financial statements, to the absence of notes to such unaudited financial statements and to normal year-end adjustments not material in scope or amount.

(b)           To the Knowledge of Seller, Longhorn maintains systems of internal control over financial reporting that have been designed by, or under the supervision of, its principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in conformity with GAAP, including internal accounting controls sufficient to provide reasonable assurance that, except as set forth on Schedule 3.4(b): (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of the Financial Statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

Section 3.5            Undisclosed Liabilities; Indebtedness; Support Obligations.

 

(a)           To the Knowledge of Seller, the Longhorn Entities do not have any Liabilities of a nature required by GAAP to be reflected on a consolidated balance sheet of the Longhorn Entities or in the notes thereto, except Liabilities that are (i) disclosed, reflected or reserved for in the Balance Sheet and the notes thereto or (ii) incurred in the Ordinary Course of Business since the Balance Sheet Date and that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)           Except as set forth on Schedule 3.5(b), the Longhorn Entities have no outstanding Indebtedness.

 

(c)           Schedule 3.5(c) sets forth a true, complete and correct list of all of the guaranties, letters of credit, performance bonds and other similar items issued and outstanding in connection with or for the benefit of the Business or any Longhorn Entity.

 

Section 3.6           Sufficiency of Assets.   Except with respect to real property, which is the subject of the representations and warranties contained in Section 3.7, the Longhorn Entities own and have good title to all material assets, properties and interests reflected on their books as owned by them, and valid and subsisting leasehold interests in all of the material assets and properties  purported to be leased by them, free and clear of all Encumbrances other than Permitted Encumbrances.  The assets, rights, properties (real and personal) and interests of the Longhorn Entities will, immediately following the Closing, constitute all assets, rights, properties (real and personal) and interests required to operate the Business in all material respects in the manner conducted by the Longhorn Entities during the period of one year prior to the date hereof, except for the disposition of obsolete or worn-out equipment in the Ordinary Course Of Business.

Section 3.7            Real Property.

 

(a)           Schedule 3.7(a) lists the legal description or address of all real property and interests in material real property owned by the Longhorn Entities (such property, together with all improvements thereon and rights on or appurtenances thereto, the “Owned Real Property”).  Other than as set forth on Schedule 3.7(a), with respect to each such parcel of Owned Real Property:

 

(i)           the identified owner has good and marketable title to the parcel of Owned Real Property, free and clear of any Encumbrances, other than Permitted Encumbrances;

 

(ii)          there are no material leases, subleases, licenses, concessions, or other agreements granting to any third party or third parties the right of use or occupancy of any Owned Real Property, or any material portion thereof; and

 

(iii)         there are no material outstanding options or rights of first refusal to purchase any Owned Real Property, or any material portion thereof or material interest therein.

 

(b)           No Longhorn Entity is a tenant under any material real property lease, except for the leases set forth on Schedule 3.7(b) (the “Real Property Leases”).

 

(c)           None of the material real property (including the improvements thereon and rights on or appurtenances thereto) leased to any Longhorn Entity pursuant to the Real Property Leases (the “Leased Real Property” and, together with the Owned Real Property, the “Real Property”) is subject to any material sublease or license to any third party made by or binding upon any Longhorn Entity.  Except as set forth on Schedule 3.7(c), the identified tenant has a valid and subsisting leasehold interest in all Leased Real Property, free and clear of any Encumbrances, other than Permitted Encumbrances.

 

(d)           Except as set forth on Schedule 3.7(d), none of the Real Property Leases has been, in any material respect, modified, amended, renewed or extended and each of the Real Property Leases is in full force and effect.  The Longhorn Entities have paid all rent and other charges due and complied, in all material respects, with all of their respective obligations under the Real Property Leases.

 

(e)           The Longhorn Entities have sufficient rights of physical and legal ingress and egress to and from the Real Property to the extent required in all material respects to operate the facilities used in the Business located on such real property substantially as currently operated, and, to the Knowledge of Seller, no conditions exist that would reasonably be expected to result in the termination of such rights of ingress and egress.

 

(f)           There are no pending, or, to the Knowledge of Seller, threatened, condemnation, annexation, fire, health, safety, building, zoning or other land use regulatory proceedings, lawsuits or administrative actions relating to any portion of the Real Property that would reasonably be expected to have a material adverse effect on or change in the value of or the use of such property as it is presently used in connection with the Business, nor has Seller or any Longhorn Entity received written notice of any pending or threatened special assessment proceedings affecting in any material respect the Owned Real Property or real property subject to the Real Property Leases.

(g)           Except with respect to those matters that have been fully resolved and are no longer pending as of the date of this Agreement, none of Seller or any Longhorn Entity has received any written notice or complaint with respect to any material violation of any covenants, conditions, restrictions or contractual obligations applicable to any of the Real Property.

 

(h)           To the Knowledge of Seller, there are no Persons in possession of any material portion of the Real Property other as set forth on Schedule 3.7(h).

 

Section 3.8            Absence of Certain Changes and Events.  Except as expressly provided herein or as set forth on Schedule 3.8, since the Balance Sheet Date through the date of this Agreement, the Longhorn Entities have been operated in the Ordinary Course of Business and there has been no:

 

(a)           event, change or effect that would reasonably be expected to have a Material Adverse Effect;

 

(b)           change in accounting methods, principles or practices by any Longhorn Entity other than as required by GAAP, SEC guidance or other applicable Legal Requirement;

 

(c)           damage, destruction or loss (whether or not covered by insurance) with an adverse economic consequence of more than $5,000,000 individually or in the aggregate on the Business;

 

(d)           waiver or release of any right or claim of any Longhorn Entity related to its activities or properties which had or will have an adverse economic consequence of more than $5,000,000 individually or in the aggregate on the Business;

 

(e)           amendment, cancellation or termination of any Contract or entry into any Contract which is not in the Ordinary Course of Business and involves payments or the exchange of goods or services in excess of $5,000,000 over a 12-month period;

 

(f)           mortgage, pledge or other Encumbrance of the Longhorn Stock or any asset of the Business, other than, in the case of assets other than the Longhorn Stock, Permitted Encumbrances incurred in the Ordinary Course of Business;

 

(g)          sale, assignment or transfer to any Person other than a Longhorn Entity of any of the assets related to or used in the Business with a value in excess of $5,000,000 in the aggregate, other than sales of inventory in the Ordinary Course of Business;

 

(h)           payment, discharge or satisfaction of any Liabilities of Seller using any assets of any Longhorn Entity, other than in the Ordinary Course of Business;

 

(i)            failure to pay or satisfy when due any Liability of any Longhorn Entity in each case other than in the Ordinary Course of Business; or

 

(j)            agreement by any Longhorn Entity to do any of the things described in the preceding clauses (a) through (i).

Section 3.9            Taxes.  Except as set forth on Schedule 3.9:

 

(a)           The Longhorn Entities have timely filed with the appropriate Tax authority all material Tax Returns required to be filed, taking into account any extensions of time within which to file such Tax Returns.  All such Tax Returns were complete and correct in all material respects.  All material Taxes whether or not shown as due on such filed Tax Returns have been paid.  For purposes of this Section 3.9 only, “material” is a change in Tax liability that is in excess of $250,000.

 

(b)           The Longhorn Entities have withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party.

 

(c)           (i) No material deficiencies for Taxes of the Longhorn Entities have been claimed, proposed or assessed in writing by any Tax authority that have not been finally settled or paid; (ii) there are no pending, or to the Knowledge of Seller, threatened audits, suits, proceedings, actions or claims for or relating to any material Liability in respect of Taxes of the Longhorn Entities; and (iii) the Longhorn Entities have not waived any statute of limitations with respect to material Taxes or agreed to any extension of time with respect to any material Tax assessment or deficiency for any open tax year.

 

(d)           There are no material Tax liens upon any property or assets of the Longhorn Entities except for Permitted Encumbrances.

 

(e)           The Longhorn Entities are not a party to or bound by any binding Tax sharing, Tax indemnity, Tax allocation or gain recognition agreement or other similar arrangement with any Person other than the Longhorn Entities (other than customary gross-up or indemnification provisions in credit agreements, derivatives, leases and similar agreements entered into in the Ordinary Course of Business).

 

(f)           No claim has been made in writing in the last five years by any Tax authority in a jurisdiction where any Longhorn Entity does not file a Tax Return that such Longhorn Entity is or may be subject to taxation by that jurisdiction.

 

(g)           No Longhorn Entity has at any time participated in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).

 

(h)           No Longhorn Entity has constituted a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of shares qualifying for tax-free treatment under Section 355 of the Code in the two years prior to the date of this Agreement.

 

(i)           No Longhorn Entity has been a member in the last five years of a consolidated, combined or unitary Tax group other than any group that includes Seller or consists solely of Longhorn Entities.

(j)           No Longhorn Entity has any material income or gain reportable for a Post-Closing Tax Period attributable to a transaction (e.g., an installment sale) occurring in a Pre-Closing Tax Period which resulted in a deferred reporting of income or gain from such transaction.  No Longhorn Entity will be required to include any adjustment in taxable income for any Post-Closing Tax Period under Section 481(a) of the Code (or any similar provision of the Tax laws of any jurisdiction) as a result of a change in method of accounting for a Pre-Closing Tax Period or under Section 108(i) of the Code (or any similar provision of the Tax laws of any jurisdiction) in respect of any cancellation of indebtedness income realized on or prior to the Closing and deferred to a Post-Closing Tax Period.

 

(k)           The Longhorn Entities have delivered or made available to the Buyer true, correct and complete copies of (i) all material Tax Returns filed by or on behalf of the Longhorn Entities for all completed Tax years of the Longhorn Entities that remain open for audit or review by the relevant Tax Authority and (ii) all ruling requests, notices of proposed deficiencies, settlement agreements, tax opinions and memoranda, and similar documents or communication sent or received by the Longhorn Entities relating to Taxes in each case for taxable periods in which the statute of limitations (including extensions thereof) has not expired.

 

Section 3.10          Employees and Employee Benefits.

 

(a)           Schedule 3.10(a) sets forth a correct and complete list of all Employee Plans in effect on the date of this Agreement.

 

(b)           With respect to each Employee Plan that is maintained under the laws of the United States (each a “U.S. Benefit Plan”):

 

(i)           except as set forth on Schedule 3.10(b)(i), no U.S. Benefit Plan is subject to Title IV of ERISA.  To Seller’s Knowledge, no assets of the Longhorn Entities are subject to a lien under Section 4064 or 4068 of ERISA;

 

(ii)          each U.S. Benefit Plan which is intended to qualify under Section 401(a), Section 401(k), Section 401(m) or Section 4975(e)(6) of the Code has either received a favorable determination letter from the IRS as to its qualified status or the remedial amendment period for such U.S. Benefit Plan has not yet expired, and, to the Knowledge of Seller, no event has occurred that is reasonably likely to result in such U.S. Benefit Plan losing its tax-qualified status;

 

(iii)         except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, each U.S. Benefit Plan has been operated in compliance with all Legal Requirements, and each U.S. Benefit Plan that is a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) has been in compliance in form and in operation with Section 409A of the Code;

 

(iv)         to the Knowledge of Seller, there has been no prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code other than a transaction that is exempt under a statutory or administrative exemption) with respect to any U.S. Benefit Plan that could reasonably be expected to result in a material Liability to any Longhorn Entity;

(v)          except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, no U.S. Benefit Plan constitutes a multiemployer plan (within the meaning of Section 3(37) of ERISA), and neither Longhorn nor any of its ERISA Affiliates has, in the past six years, contributed to or otherwise had any Liability in connection with (i) any multiemployer plan (within the meaning of Section 3(37) of ERISA) or (ii) a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which any Longhorn Entity could reasonably be expected to incur any Liability under Section 4063 or 4064 of ERISA;

 

(vi)         except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, with respect to each U.S. Benefit Plan that is subject to Title IV or Part 3 of Title I of ERISA or Section 412 of the Code (other than a Multiemployer Plan):  (A) no reportable event (within the meaning of Section 4043 of ERISA, other than an event for which the reporting requirements have been waived by regulations) has occurred in the current plan year or in the previous two plan years of such U.S. Benefit Plan; (B) there was not an accumulated funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of the Code) for which an excise tax is due (or would have been due in the absence of a waiver) as of the most recently ended plan year of such U. S.  Benefit Plan; (C) all premiums (and interest charges and penalties for late payment, if applicable) due prior to the date of this Agreement have been paid when due to the PBGC; and (D) no filing has been made by Seller or any ERISA Affiliate with the PBGC and no proceeding has been commenced by the PBGC to terminate any U.S. Benefit Plan and, to the Knowledge of Seller, no condition exists prior to the date of this Agreement which could constitute grounds for the termination of any such U.S. Benefit Plan by the PBGC; and

 

(vii)        except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, no existing circumstances nor the transactions contemplated by this Agreement could reasonably be expected to result in any Liabilities with respect to any U.S. Benefit Plan under Title IV of ERISA, other than for payment of premiums to the PBGC, and no existing circumstances exist that could reasonably be expected to result in any Liabilities with respect to any U.S. Benefit Plan under Section 4971 of the Code.

 

(c)           Except as disclosed on Schedule 3.10(c), with respect to each Employee Plan that is maintained primarily for the benefit of Longhorn Employees employed in countries other than the United States (each a “Foreign Benefit Plan”):

 

(i)           except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, each Foreign Benefit Plan is in compliance with all Legal Requirements;

 

(ii)          except for accrued benefits under the Foreign Benefit Plan and except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, no material Liability exists or reasonably could be imposed upon the assets of any Longhorn Entity by reason of such Foreign Benefit Plan; and

(iii)         except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, each Foreign Benefit Plan required to be registered has been registered and maintained in all respects in good standing with applicable Governmental Entities.

 

(d)           Seller has made available to Buyer complete copies of (i) each Employee Plan (or, if not written, a written summary of its material terms), including without limitation all plan documents, trust agreements, and all amendments thereto, (ii) the most recent annual reports (Form 5500 series) filed with the IRS with respect to each U.S. tax-qualified retirement plan, (iii) the most recent determination or opinion letter, if any, issued by the IRS with respect to any U.S. Benefit Plan and any pending request for such a determination letter, (iv) with respect to each U.S. Benefit Plan, all filings made with any Governmental Entities with respect to any voluntary compliance, tax qualification or other programs, other than routine filings of premiums or informational returns, and (v) with respect to each U.S. Benefit Plan that is subject to Title IV of ERISA, the most recent valuation report.

 

(e)           Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, all contributions due with respect to any Employee Plan have been made in all material respects as required and have been accrued on the Financial Statements in accordance with GAAP (except as indicated in the notes thereto).

 

(f)           Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, there are no actions, claims, lawsuits or arbitrations pending or, to the Knowledge of Seller, threatened in writing with respect to any Employee Plan other than routine claims for benefits, and there are no audits, inquiries or proceedings pending or, to the Knowledge of Seller, threatened by any Governmental Entity with respect to any Employee Plan.

 

(g)           Except as disclosed on Schedule 3.10(g), the execution of this Agreement and the consummation of the transactions contemplated hereby (alone or together with any other event) will not (i) entitle any Person to any material payment, forgiveness of indebtedness, vesting, distribution, or increase in benefits under or with respect to any Employee Plan, (ii) otherwise trigger any material acceleration (of vesting or payment of benefits or otherwise) under or with respect to any Employee Plan, or (iii) trigger any obligation to materially fund any Employee Plan.  No benefit that is or may become payable as a result of the consummation of the transactions contemplated hereby shall constitute an excess parachute payment (as defined in Section 280G(b)(1) of the Code) that is subject to the imposition of an excise tax under Section 4999 of the Code or that would not be deductible by reason of  Section 280G of the Code.

 

(h)           No Employee Plan provides for retiree medical or other material post-employment welfare benefits (except COBRA or similar coverage required by applicable law).  No Longhorn Entity maintains any welfare benefit trust that is intended to be exempt from federal income tax under Section 501(c)(9) of the Code.

 

(i)           After payment of the Compensatory Award Consideration pursuant to Section 1.4, including any related Taxes, neither Longhorn nor any Longhorn Entity shall have any liability with respect to any award granted under the Longhorn Incentive Plan, or any other equity award granted to an employee, former employee, independent contractor or former independent contractor of a Longhorn Entity, that was granted on or before the Closing Date.

Section 3.11          Compliance with Legal Requirements; Governmental Authorizations.

 

(a)           Other than with respect to laws concerning Taxes (which are addressed in Section 3.9), laws concerning employee benefits (which are addressed in Section 3.10), and Environmental Laws (which are addressed in Section 3.14):

 

(i)           each Longhorn Entity is, and at all times since January 1, 2010 has been, in compliance in all material respects with each Legal Requirement that is or was applicable to it;

 

(ii)          no event has occurred or circumstance exists (with or without notice or lapse of time) (A) that is reasonably likely to constitute or result in a material violation by any Longhorn Entity of, or a material failure on the part of any Longhorn Entity to comply with, any Legal Requirement applicable to it or (B) that is reasonably likely to give rise to any material obligation on the part of any Longhorn Entity; and

 

(iii)         no Longhorn Entity has received, at any time since January 1, 2010, any written or other notice or other communication from any Governmental Entity or any other Person regarding (A) any actual or alleged violation of, or failure to comply with, any Legal Requirement applicable it or (B) any actual or alleged material obligation on the part of any Longhorn Entity.

 

(b)           Except as set forth on Schedule 3.11(b), each Longhorn Entity possesses all material Permits, all such material Permits are in full force and effect, and each Longhorn Entity is and at all times since January 1, 2010 has been in compliance in all material respects with all material Permits.  No Longhorn Entity has received any notice to the effect that, or otherwise been advised of (i) any actual or alleged material violation of, or failure to comply with, any material Permits or (ii) any actual or alleged revocation, withdrawal, suspension, cancellation or termination of, or any modification to, any material Permit or the commencement or threatened commencement of any proceeding to do any of the foregoing.  To the Knowledge of Seller, no event has occurred or circumstance exists that (with or without notice or lapse of time) is reasonably likely to  (i) constitute or result directly or indirectly in a material violation by any Longhorn Entity of, or a failure on the part of any Longhorn Entity to comply with, any material Permits or (ii) result directly or indirectly in the revocation, withdrawal, suspension, cancellation or termination of, or any modification to, any material Permit.

 

Section 3.12          Legal Proceedings; Orders.  Except as set forth on Schedule 3.12, there is no Legal Proceeding or Order (a) pending or, to the Knowledge of Seller, Threatened against or affecting any Longhorn Entity or its assets, properties, operations or business or (b) that challenges or that may have the effect of preventing, making illegal, delaying or otherwise interfering with any of the Transactions.  Except as set forth on Schedule 3.12, no Longhorn Entity is subject to or is in Default with respect to any Order of any Governmental Entity, and there are no unsatisfied judgments against any of them.  To the Knowledge of Seller, there is no investigation of Seller or any of its Affiliates relating to the Business by a Governmental Entity that would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

Section 3.13          Contracts; No Defaults.

 

(a)           Schedule 3.13(a) contains a complete and accurate list, and Seller has made available to Buyer true and complete copies (excluding certain technical or other contract attachments which are not reasonably necessary for an understanding of the contracts and the terms thereof and the parties’ rights and obligations thereunder), of:

 

(i)           each Contract that involves performance of services or delivery of goods by a Longhorn Entity or the Business during any 12-month period as of the date of this Agreement of an amount or value, individually or, for a series of related Contracts, in the aggregate, in excess of $2,000,000;

 

(ii)          each Contract that involves performance of services or delivery of goods or materials to a Longhorn Entity or the Business during any 12-month period as of the date of this Agreement, of an amount or value, individually or, for a series of related Contracts, in the aggregate, in excess of $4,000,000;

 

(iii)         each Contract related to a Longhorn Entity or the Business that was not entered into in the Ordinary Course of Business and that involves goods or services of an amount or value in excess of $4,000,000;

 

(iv)         each lease relating to the Real Property Leases and lease of tangible personal property of any Longhorn Entity and other Contracts, in each case, affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any other assets used in the Business (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments, in each case, of less than $1,000,000 and with terms of less than one year);

 

(v)          each material license agreement involving any Longhorn Entity with respect to patents, trademarks, copyrights or other material Intellectual Property used in the Business, excluding licenses for software that is commercially available from a third party pursuant to “shrink wrap,” “click-through” or other standard form license agreements with an individual one-time or annual royalty or license fee of $100,000 or less;

 

(vi)         each joint venture or partnership involving a Longhorn Entity or the Business and each other Contract, in each case involving a sharing of profits, losses, costs or liabilities related to the Business with any other Person;

 

(vii)        each Contract containing covenants that in any way purport to restrict the business activity of any Longhorn Entity or the Business;

 

(viii)       each Contract related to the Business providing for payments to or by any Person based on sales, purchases or profits, other than direct payments for goods with a value less than $1,000,000;

(ix)         each Contract related to the Business for capital expenditures in excess of $4,000,000 from and after the date of this Agreement;

 

(x)          each Contract entered into or assumed by a Longhorn Entity after January 1, 2007 in which a Longhorn Entity has an obligation in respect of providing for indemnification or purchase price adjustment in connection with any disposition, sale or other transfer of any present or former business or commercial activity and with respect to which any party thereto has continuing material obligations;

 

(xi)         each Contract that contains a provision involving a change of control of a Longhorn Entity requiring the consent of a third party to, or giving a third party the right to terminate following, such change of control and that is material to the Longhorn Entities taken as a whole;

 

(xii)        each Contract under which a Longhorn Entity has directly or indirectly guaranteed Indebtedness or Liabilities (other than endorsements for the purpose of collection in the Ordinary Course Of Business) of any Person other than a Longhorn Entity which, individually, is in excess of $1,000,000;

 

(xiii)       each Contract granting any Encumbrance (other than a Permitted Encumbrance) upon any asset, property or right that is material to the Longhorn Entities taken as a whole;

 

(xiv)       each Contract relating to the Business that is a distributor, agency, dealer, sales representative or similar Contract;

 

(xv)        each Contract relating to the Business that is an advertising or marketing Contract and that is material to the Business taken as a whole;

 

(xvi)       each Contract between a Longhorn Entity on the one hand, and Seller or any Affiliate of Seller (other than a Longhorn Entity) on the other hand;

 

(xvii)      each Contract that is for services with any employee, director, or consultant and any such oral agreements which are not terminable at will by a Longhorn Entity; and

 

(xviii)     each amendment, supplement, and modification (whether oral or written) in respect of any of the foregoing.

 

(b)           Except as set forth on Schedule 3.13(b), to the Knowledge of Seller, no officer, director, agent, employee or consultant of any Longhorn Entity is bound by any Contract that purports to limit the ability of such officer, director, agent, employee or consultant to (A) engage in or continue any conduct, activity or practice related to the Business or (B) assign to any other Person any rights to any invention, improvement or discovery related to the Business.

 

(c)           Each Contract identified on Schedule 3.13(a) is in full force and effect and is valid and enforceable against the Longhorn Entity party thereto and, to the Knowledge of Seller, against each other party thereto in accordance with its terms, except to the extent enforceability may be limited by (i) bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors’ rights generally and (ii) general principles of equity, regardless of whether asserted in a proceeding in equity or at law.

(d)           For each Contract identified on Schedule 3.13(a) and except as set forth on Schedule 3.13(d):

 

(i)           each Longhorn Entity is in compliance in all material respects with all terms and requirements of each such Contract (other than provisions relating to maintaining the confidentiality of such terms to the extent violated by disclosures of such terms to prospective purchasers of the Business in connection with the sale of the Business to Buyer);

 

(ii)          to the Knowledge of Seller, each other Person that has or had any obligation or Liability under any such Contract is in compliance in all material respects with all terms and requirements of such Contract; and

 

(iii)         since January 1, 2010, no Longhorn Entity has given to or received from any other Person any written notice or other communication regarding the termination of or any actual or alleged material violation or breach of, or material default under, any such Contract.

 

(e)           Except as set forth on Schedule 3.13(e), there are no renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate, any amounts paid or payable to any Longhorn Entity in excess of $2,000,000 under Contracts remaining to be performed as of the date of this Agreement.

 

Section 3.14          Environmental Matters.  Except as set forth on Schedule 3.14 or (with respect to subsections (a) through (f) below) as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:

 

(a)           Each Longhorn Entity is, and for the last five years has been, in compliance with all Environmental Laws applicable to it, and no Longhorn Entity has any Liability under any such Environmental Law.

 

(b)          Each Longhorn Entity holds, and is in compliance in all respects with, all Environmental Permits (each of which is in full force and effect) required for it to own, use, operate, and conduct its business under applicable Environmental Laws, and is, and within the period of the last five years has been, in compliance with all such Environmental Permits.  There are no unresolved or uncorrected violations in respect of any such Environmental Permits; no proceeding is pending or, to the Knowledge of Seller, threatened to revoke or limit any such Environmental Permit; and the consummation of the transactions contemplated by this Agreement will not result in the review, non-renewal, revision, major modification, revocation or termination of any such Environmental Permit or subject any such Environmental Permit to prior consent by any Governmental Entity.

(c)           No Longhorn Entity has received any written notice, demand, letter or request for information alleging violation of or Liability that has not been confirmed in writing to have been addressed to the satisfaction of the responsible Government Entity under any Environmental Law and no Environmental Claim is pending or, to the Knowledge of Seller, threatened against any Longhorn Entity.

 

(d)           There are no past or present events, conditions, circumstances, activities, incidents, actions or omissions relating to or in any way affecting the Longhorn Entities or, in respect of the Business, any of their respective Affiliates, or any past or current Facility, including Releases at real property owned, operated or leased by a third party, that would reasonably be expected to give rise to any liability for Cleanup by, or be expected to form the basis of any Environmental Claim against, any Longhorn Entity, or against any Person whose Liability has been imposed upon, retained by, or assumed by, any Longhorn Entity, in each case either contractually or by operation of law.

 

(e)           There are no above-ground or underground storage tanks that contain or contained Hazardous Material, polychlorinated biphenyls or friable asbestos-containing material at any Facility owned or operated by any Longhorn Entity since January 1, 2006 that are not or were not at all relevant times maintained, operated, sealed, closed or disposed of in accordance with all applicable Environmental Laws.

 

(f)           Buyer has been given access to all non-privileged, third party environmental audits, investigations, studies, tests, reviews, and reports conducted since January 1, 2007, including all environmental assessments (e.g., Phase 1 or Phase 2 reports), which, in each case, are in the possession or control of Seller or any of its Affiliates relating to the past or current Facilities or operations of the Longhorn Entities and their predecessors.

 

(g)           This Section 3.14 is the sole and exclusive representation regarding matters under Environmental Law, Environmental Claims, Environmental Permits, or otherwise relating to Hazardous Materials or the Environment.

 

Section 3.15          Employment and Labor Matters.  Except as set forth in Schedule 3.15 or, other than with respect to clause (iii) below, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) there are no suits, actions, investigations, proceedings, charges, grievances or attorney demand letters, pending or, to the Knowledge of Seller, Threatened, involving any Longhorn Entity and any Longhorn Employee or former Longhorn employee, (ii) there is no labor strike, slowdown, stoppage, lockout or labor dispute pending, affecting or, to the Knowledge of Seller, Threatened, against any Longhorn Entity, and since January 1, 2010, there has not been any such action, (iii) neither Longhorn nor its Subsidiaries is a party to any collective bargaining agreement, labor union contract or legally binding commitment to any labor union or works council applicable to any Longhorn Employee, and, to the Knowledge of Seller, there are no union organizing activities among any Longhorn Employees or proceedings involving any labor union to organize or represent any such Longhorn Employees, (iv) to the Knowledge of Seller, neither Longhorn nor any of its Subsidiaries has engaged in any unfair labor practices as defined in the National Labor Relations Act or other similar Law, (v) there are no unfair labor practice charges or other applications or proceedings before a labor relations board or any similar authority currently pending or, to the Knowledge of Seller, Threatened, involving any Longhorn Entity and any Longhorn Employee, (vi) neither Longhorn nor any of its Subsidiaries is a party to, or otherwise bound by, any consent decree with, or citation or other order by, any Governmental Entity relating to employment practices with respect to any Longhorn Employees, and (vii) since January 1, 2010, neither Longhorn nor any of its Subsidiaries has effected (y) a “plant closing” (as defined by the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of Longhorn or any of its Subsidiaries in the United States or (z) a “mass layoff” (as defined by the WARN Act) affecting any site of employment or facility of Longhorn or any of its Subsidiaries in the United States, nor has Longhorn or any of its Subsidiaries in the United States engaged in layoffs or employment termination in the United States that were sufficient in number to trigger application of any similar Law, and (viii) each Longhorn Entity is in compliance with all applicable laws, Contracts and policies relating to employment practices, wages, hours and terms and conditions of employment, employment standards, termination of employment, employee whistle-blowing, immigration, employee privacy, human rights and occupational safety with respect to Longhorn Employees.

Section 3.16          Intellectual Property.

 

(a)           Schedule 3.16(a) hereto sets forth a correct and complete list of all registered trademarks, trademark applications, issued patents, patent applications, registered copyrights, copyright applications, domain names and domain name applications that are owned by any Longhorn Entity or are material to the Business and licensed to any Longhorn Entity and all owners of each of the foregoing.  The Intellectual Property Assets (including those set forth on Schedule 3.16(a)) include all Intellectual Property used or held for use in the Business.

 

(b)           Except as set forth on Schedule 3.16(b) or as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) each Longhorn Entity owns all right, title and interest in, or otherwise licenses the Intellectual Property Assets, including those set forth on Schedule 3.16(a), and the Intellectual Property Assets are free and clear of all Encumbrances (other than Permitted Encumbrances); (ii) each Longhorn Entity has taken all commercially reasonable actions required to maintain the validity and effectiveness of all registered Intellectual Property Assets and, such Intellectual Property Assets owned by any Longhorn Entity, and to the Knowledge of the Seller, all registered Intellectual Property Assets licensed to any Longhorn Entity are valid, enforceable and in full force and effect; (iii) each Longhorn Entity has taken commercially reasonable measures to (A) protect the confidentiality of the Trade Secrets included in the Intellectual Property Assets and (B) protect and secure all other confidential information of such Longhorn Entity and all inventions and other rights to Intellectual Property developed on behalf of, or otherwise owned or controlled by, such Longhorn Entity; (iv) all licenses relating to any Intellectual Property Assets are in full force and effect, and no Longhorn Entity is, nor has received any notice that it is, in Default (or, with the giving of notice or lapse of time or both, would be in Default) under any license relating to such Intellectual Property Assets; (v) the operation and conduct of the Business, as it has been and is currently conducted, has not infringed upon, misappropriated, or otherwise violated, and does not infringe upon, misappropriate, or otherwise violate, any Intellectual Property of any Person;  (vi) to the Knowledge of Seller, no Person has been or is infringing, misappropriating or otherwise violating any Intellectual Property Assets; and (vii) no claim or proceeding (including any opposition, interference, invalidation, concurrent use, reissue, re-examination or cancellation proceeding) has been threatened in writing or brought by or against any Longhorn Entity, or to the Knowledge of Seller, by or against any licensor of any of the Intellectual Property Assets licensed to any Longhorn Entity,  in connection with any Intellectual Property Assets or any of the matters described in the preceding clauses (v) or (vi).

(c)           Upon consummation of the transactions contemplated in this Agreement, Seller and any Affiliate thereof shall not own or otherwise retain or possess any right, title or interest in or to any of the material Intellectual Property Assets.  Except as set forth in Schedule 3.16(c), none of the execution or delivery of this Agreement, the consummation of the transactions contemplated hereby, or the performance by Seller of its obligations hereunder shall in any material respect conflict with, alter or impair any material rights of any Longhorn Entity in or to any material Intellectual Property Assets or the validity, enforceability, use, right to use, ownership, license rights, scope, priority, effectiveness or duration of any material Intellectual Property Assets.

 

Section 3.17          Brokers and Finders.  None of Seller or any Longhorn Entity nor any of their respective Representatives has incurred any obligation or Liability for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with this Agreement, other than to Barclays Capital Inc., whose fees shall be paid by Seller.

 

Section 3.18          Insurance.

 

(a)           Schedule 3.18(a) sets forth all insurance policies in effect since January 1, 2008 (and all other insurance arrangements or contracts for the transfer or sharing of insurance risks since such date), specifying the insurer, amount and dates of coverage and type of insurance, covering the assets, businesses, operations, employees, officers or directors of any of the Longhorn Entities or their predecessors (the “Insurance Policies”).

 

(b)           Schedule 3.18(b) sets forth all insurance policies currently in effect exclusively covering the assets, businesses, operations, employees of certain foreign Longhorn Entities which are named insureds under said policies and these policies will continue in force until the policy expiration unless cancelled by Buyer, at Buyer’s election (the “Longhorn Insurance Policies”).

 

(c)           All Insurance Policies are (i) in full force and effect or were in full force and effect during the periods of time that such Insurance Policies purported to be in effect, and (ii) valid, enforceable, existing and binding and all premiums due thereon have been timely paid.  No further premiums, fees or payments (including brokerage fees and commissions due thereon) on any Insurance Policies will be due (except for those policies normally subject to premium audit) after the Closing with respect to periods prior to the Closing, and those Insurance Policies that are currently in effect will remain in full force and effect until the Closing (subject to any renewals thereof), at which time, future coverage thereunder will be discontinued with respect to the Longhorn Entities and their respective businesses (except for those policies set forth on Schedule 3.18(b) which may be continued at Buyer’s election).  There is no material claim pending under any Insurance Policy as to which coverage has been questioned, denied or disputed by the underwriters of such Insurance Policy.

Section 3.19          Bank Accounts.  Schedule 3.19 identifies all bank and brokerage accounts of the Longhorn Entities and lists the respective signatories therefor.

 

Section 3.20         Customers and Suppliers.  Schedule 3.20 sets forth a true, correct and complete list of the 10 largest suppliers to, and customers of, the Business for each of the fiscal years ended December 31, 2010 and 2009 (determined on the basis of the total dollar amount of purchases or sales, as the case may be).  Since January 1, 2010 through the date of this Agreement, there has been no termination, cancellation or material curtailment of the business relationship of the Business with any such customer or supplier.

 

Section 3.21         Warranties.  No guaranties, warranties or indemnities are provided with respect to the performance or integrity of any of the products manufactured or sold or services provided by the Business, except (i) for those written guaranties, warranties or indemnities that (A) are included in the copies of the Contracts that have been previously provided to Buyer or (B) have been entered into in the Ordinary Course of Business and relating to the purchase or sale of goods with a value of less than $500,000, or (ii) as disclosed in Schedule 3.21.

 

Section 3.22         Product Liability.  Except as set forth on Schedule 3.22, there is no material claim for damages, litigation or investigation pending or, to the Knowledge of Seller, threatened, against Seller, any Longhorn Entity or the Business and arising from actual or alleged harm, injury or damage to persons, property or business by products manufactured by the Business.  Except as set forth on Schedule 3.22, (a) none of Seller or any of its Affiliates has received written notice from any Person imposing any material liability or obligation to institute or undertake any recall, notification, retrofit, field safety, service bulletin, or other remedial or corrective actions relating to any products of the Business, and (b) to the Knowledge of Seller, none of Seller or any of its Affiliates has any material liability or obligation to institute or undertake any recall, notification, retrofit, field safety, service bulletin, or other remedial or corrective actions relating to any products.

 

Section 3.23         Backlog.  Schedule 3.23 sets forth as of March 31, 2011, a statement of the backlog of orders for the sale of products or services relating to the Business for which revenues have not been recognized.  All of the items represented on the Backlog Report are reasonable and customary and have been incurred in the Ordinary Course of Business and are evidenced by contracts or purchase orders.

 

Section 3.24          Certain Business Practices.

 

(a)           None of the Longhorn Entities, their respective Affiliates or their or their Affiliates’ respective officers, directors or employees (collectively, “Agents”), or, to the Knowledge of Seller, their respective joint venture partners, dealers, agents, distributors, brokers, freight forwarders or consultants, or any officer, director or employee of any of the foregoing, while acting on behalf of any of Seller, any Longhorn Entity or any of their respective Affiliates in connection with the Business, has (A) taken any action, directly or indirectly, that would result in a violation by such Persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), or other any anti-corruption or anti-bribery Legal Requirement, including offering, paying, promising to pay or authorizing the payment of any money, or offering, giving, promising to give, or authorizing the giving of any property, gift, financial or other advantage, or anything else of value, directly or indirectly, to (i) any official or employee of any Governmental Entity; (ii) any instrumentality of a Governmental Entity, including any enterprise owned or controlled by a Governmental Entity; (iii) any political party or official thereof or any candidate for political office; or (iv) any official or employee of any public organization, in each case, for the purpose of influencing any act or decision of such official, employee, party or candidate or of inducing such official, employee, party or candidate to do or omit to do any act in violation of the lawful duty of such official, employee, party or candidate, or of securing any improper advantage for any Longhorn Entity or any of their respective Affiliates or joint venture partners, including receiving favorable treatment in obtaining or retaining business, or otherwise promoting the Business; or (B) made any bribe, unlawful rebate, payoff, influence payment, or kickback in violation of a Legal Requirement.

(b)          To the Knowledge of Seller, the Longhorn Entities, their respective Affiliates and their and their Affiliates’ respective Agents, joint venture partners, dealers, agents, distributors, brokers, freight forwarders or consultants, or any officer, director or employee of any of the foregoing, while acting on behalf of any Longhorn Entity or any of its respective Affiliates, have conducted the Business in compliance in all material respects with the FCPA and all other applicable anti-corruption or anti-bribery Legal Requirements.

 

(c)           To the Knowledge of Seller, none of the Longhorn Entities, their respective Affiliates or their or their Affiliates’ respective Agents, joint venture partners, dealers, agents, distributors, brokers, freight forwarders or consultants, or any officer, director or employee of any of the foregoing, while acting on behalf of any Longhorn Entity or any of its respective Affiliates, is, or has been, under administrative, civil, or criminal investigation, indictment, information, suspension, debarment, or audit (other than a routine contract audit) by any Governmental Entity, in connection with alleged or possible violations of any Legal Requirement related to the Business that prohibits payments to influence foreign or domestic government officials improperly, or has received notice from, or made a voluntary disclosure to, any Governmental Entity regarding alleged or possible violations of any Legal Requirement related to the Business that prohibits payments to influence foreign or domestic government officials improperly.

 

Section 3.25         U.S. Trade Controls and Sanctions Regulations.  To the Knowledge of Seller, the Longhorn Entities are currently and have within the past three years been in compliance in all material respects with all applicable U.S. export and foreign trade control Legal Requirements, including the Export Administration Regulations, 15 C.F.R. pts. 730-774; the Executive Orders and regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, which implement U.S. economic sanctions (31 C.F.R. pts. 500-598); the Arms Export Control Act, 22 U.S.C. § 2778, and the International Traffic in Arms Regulations, 22 C.F.R. pts. 120-130; and related regulations enforced by the Bureau of Alcohol, Tobacco, Firearms and Explosives governing importation into the United States.

 

Section 3.26          No Other Representations and Warranties.  Except for the representations and warranties contained in this Article 3, as modified, supplemented or qualified by the Schedules referred to in this Article 3, Buyer acknowledges and agrees that none of Seller, any Subsidiaries or Affiliates of Seller nor any other Person is making any express, implied or statutory representation or warranty with respect to the Longhorn Stock, the Longhorn Entities, the assets of the Longhorn Entities, the Business or otherwise, including any implied warranties of merchantability, fitness for a particular purpose, title, enforceability or non-infringement, including as to (a) the physical condition or usefulness for a particular purpose of the real or tangible personal property included in the assets of the Longhorn Entities, (b) the use of the assets of the Longhorn Entities, and the operation of the Business by Buyer after the Closing in any manner, or (c) the probable success or profitability of the ownership, use or operation of the Business by Buyer after the Closing.  Except for the representations and warranties contained in this Article 3, as modified, supplemented or qualified by the Schedules referred to in this Article 3, all assets of the Longhorn Entities are conveyed on an “AS IS” and “WHERE IS” basis.  Except for the representations and warranties contained in this Article 3, as modified, supplemented or qualified by the Schedules referred to in this Article 3, or in the indemnification obligations set forth in Article 7 or claims based on fraud, neither Seller nor any other Person will have or be subject to any liability or indemnification obligation to Buyer or any other Person for any information provided to Buyer or its Representatives relating to the Business or otherwise in expectation of the transactions contemplated by this Agreement and any information, document, or material made available to Buyer or its Representatives in Buyer’s due diligence review, including in certain “data rooms” (electronic or otherwise) or management presentations.

 

 

Buyer hereby represents and warrants to Seller as follows:

 

Section 4.1            Organization of Buyer.  Buyer is a corporation duly organized, validly existing and in Good Standing under the laws of the state, province or other jurisdiction of its formation with full corporate power and authority to conduct its business as now conducted.

 

Section 4.2            Authority; No Conflict.

 

(a)           This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except that enforceability of this Agreement may be limited by (i) bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors’ rights generally and (ii) general principles of equity, regardless of whether asserted in a proceeding in equity or at law.  Buyer has the absolute and unrestricted right, power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement.

 

(b)           Neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Transactions by Buyer will give any Person the right to prevent, delay or otherwise interfere with any of the Transactions pursuant to:  (i) any provision of Buyer’s Organizational Documents; (ii) any resolution adopted by the board of directors or the stockholders of Buyer except as would not have a materially adverse impact on Buyer’s ability to consummate the Transactions; (iii) (assuming receipt of the Antitrust Approvals) any Legal Requirement or Order to which Buyer may be subject except as would not have a materially adverse impact on Buyer’s ability to consummate the Transactions; or (iv) any Contract to which Buyer is a party or by which Buyer may be bound except as would not have a materially adverse impact on Buyer’s ability to consummate the Transactions.  Except for the Antitrust Approvals, Buyer is not and will not be required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Transactions.

 

Section 4.3            Proceedings.  There is no pending Legal Proceeding that has been commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Transactions.  As of the date of this Agreement, to Buyer’s Knowledge, no such Legal Proceeding has been Threatened.

 

Section 4.4            Brokers or Finders.  Buyer and their respective Representatives have incurred no obligation or Liability, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with this Agreement for which Seller or any of its Subsidiaries would be responsible.

 

Section 4.5            Financing.  Buyer has access to sufficient Cash or other sources of immediately available funds to enable it to pay the Purchase Consideration and any other amounts to be paid by it hereunder.

 

Section 4.6            Investment Representation.  Buyer is purchasing the Longhorn Stock for its own account with the present intention of holding the Longhorn Stock for investment purposes and not with a view to or for sale in connection with any public distribution of the Longhorn Stock.  Buyer has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Longhorn Stock.  Buyer acknowledges that the Longhorn Stock has not been registered under any federal, state or foreign securities laws and that the Longhorn Stock may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is registered under any federal, state or foreign securities laws or pursuant to an exemption from registration under any federal, state or foreign securities laws.

 

 

Seller and Buyer covenant and agree with each other as follows:

 

Section 5.1            Access and Investigation.  From the date of this Agreement until the earlier to occur of the Closing Date or termination of this Agreement, Seller shall cause Longhorn to allow Buyer and its Representatives reasonable access, at all reasonable times during normal business hours, upon reasonable notice, to the officers, employees and other personnel, attorneys, accountants, lenders and other representatives, records and files, correspondence, audits and properties, as well as to all information relating to commitments, contracts, titles and financial position and results of operations, or otherwise pertaining to the business, operations, and affairs of the Longhorn Entities, including inspection of such properties.  Notwithstanding the foregoing, no Longhorn Entity shall be required to provide any information that (x) it reasonably believes it may not provide to Buyer by reason of Legal Requirements, (y) the disclosure of which would reasonably be expected to jeopardize applicable attorney/client privilege or work product protections; provided that Buyer and Seller shall consider in good faith on a case-by-case basis whether such privilege or protection may be preserved by entering into a common interest agreement, joint defense agreement or similar arrangement, or (z) it is required to keep confidential by reason of contract or agreement with third parties, provided that in lieu of providing any such contract or agreement Longhorn provides Buyer with a reasonably detailed summary of the material terms thereof.  All requests for site visits and related discussions or questions regarding procedures shall be coordinated with the chief financial officer or chief legal officer of Seller, unless such individual directs otherwise, and in no event shall Buyer or anyone on Buyer’s behalf communicate with any past, present or prospective supplier, customer, consultant, creditor, bank or employee of Seller or any Longhorn Entity, or with any Governmental Entity, concerning or related to the Transactions contemplated by this Agreement, unless Seller consents in advance to such communication, which consent shall not be unreasonably withheld, conditioned or delayed.  For the avoidance of doubt, the term “inspection” herein shall not encompass, and neither Buyer nor its Representatives shall be entitled to conduct (except as may be consented to in writing by Seller in its sole discretion), any Phase I review (whether conducted pursuant to applicable ASTM standards or otherwise) or any invasive, surface or subsurface testing or sampling, whether contemplated by any on-site investigation conducted in accordance with the current ASTM standards for the conduct of a Phase II on-site investigation or otherwise, including any soil borings, hand borings, geoprobes, test pits or monitoring wells.  IN CONNECTION WITH ANY ENVIRONMENTAL DUE DILIGENCE, SUBJECT TO SECTIONS 7.2(d) and 7.2(f)(vii), BUYER SHALL PROTECT, DEFEND, INDEMNIFY AND HOLD SELLER, THE LONGHORN ENTITIES AND EACH OF THE BUYER INDEMNIFIED PARTIES HARMLESS FROM AND AGAINST ANY AND ALL DAMAGES (AS DEFINED IN SECTION 10.2(a)(i) AND BELOW IN THIS SECTION 5.1) ARISING OUT OF OR RELATING TO THE DUE DILIGENCE CONDUCTED BY, BUT ONLY TO THE EXTENT CAUSED BY, BUYER, BUYER’S AFFILIATES OR ANY PERSON ACTING ON BUYER’S OR ITS AFFILIATES’ BEHALF, IN CONNECTION WITH ANY REAL PROPERTY SITE VISITS, REAL PROPERTY SITE INSPECTIONS AND ANY SAMPLING OF ANY ENVIRONMENTAL MEDIA FROM ANY REAL PROPERTY (IF AND TO THE EXTENT SELLER CONSENTS TO SUCH ACTIVITIES).  Without limiting the foregoing, for purposes of this Section 5.1, “Damages” includes demands, claims, lawsuits, causes of action, losses, investigations and other proceedings, and other elements of “Damages” related thereto, brought by or asserted by the Longhorn Entities’ customers and the owners of any affected Leased Real Property.   Buyer shall, and shall cause its Representatives to, in connection with the conduct of the due diligence investigations described in this Section 5.1, comply fully with all rules, regulations, policies and instructions reasonably issued by Seller or the Longhorn Entities and provided to Buyer regarding such Person’s actions while upon, entering or leaving any Real Property.  Buyer shall not, and shall cause its Representatives not to, unreasonably interfere with the day-to-day operations of the Business in conducting any due diligence activities.

 

Section 5.2            Conduct of Business.

 

(a)           Prior to the Closing, except as requested or consented to by Buyer in writing, as required by this Agreement, or as set forth in Schedule 5.2(a), Seller shall cause the Longhorn Entities to conduct the Business only in the Ordinary Course of Business, and to (i) use commercially reasonable efforts to preserve intact the Business and its relationships with its employees, suppliers, distributors, dealers and others having business relationships with it, (ii) maintain insurance coverage at levels consistent with presently existing levels, (iii) pay and discharge the debts of the Business in the Ordinary Course of Business and (iv) pay the accounts payable of the Business in the Ordinary Course of Business, and collect the Accounts Receivable of the Business in the Ordinary Course of Business.

 

 

(b)           Without limiting the generality of the foregoing, except as required by this Agreement, or as set forth on Schedule 5.2(a), from the date hereof to the Closing, Seller shall cause the Longhorn Entities and its Subsidiaries not to do any of the following with respect to the Business, without the prior written consent of Buyer, which consent shall not be unreasonably withheld, conditioned or delayed:

 

(i)           sell or Encumber the Longhorn Stock or sell or Encumber any assets, rights, properties or claims used in the Business, other than sales or Encumbrances of such assets, rights, properties or claims made or incurred in the Ordinary Course of Business;

 

(ii)          enter into any Contract or series of related Contracts related to the Business involving more than $5,000,000 in the aggregate, in each case, other than Contracts for the purchase of supplies or the sale of products or services in the Ordinary Course of Business;

 

(iii)         take any action that could result in the acceleration, termination, modification, or cancellation of any Contract or series of related Contracts related to the Business involving more than $5,000,000 in the aggregate;

 

(iv)         issue any capital stock, membership interests or any option, warrant or right relating thereto or any securities convertible into or exchangeable for any shares of capital stock or membership interests;

 

(v)          issue any note, bond, or other debt security or create, incur, assume, or guarantee any Indebtedness, or capitalized lease obligation or incur or assume any Liabilities, except in the Ordinary Course of Business;

 

(vi)         cancel, compromise, waive, or release any right or claim or series of related rights and claims related to the Business involving more than $5,000,000 in the aggregate;

 

(vii)        institute, settle, or agree to settle any Legal Proceeding related to the Business, except with respect to claims having a value less than $5,000,000 in the aggregate;

 

(viii)       with respect to any registered trademarks, trademark applications, issued patents, patent applications, registered copyrights, copyright applications and other material Intellectual Property Assets, abandon any rights or allow any application or registration to lapse, permit any material license to lapse or go into breach under such license, grant any license or sublicense of any rights under (except in the Ordinary Course of Business), or enter into any settlement regarding any breach or infringement, or modify any existing rights with respect thereto;

 

 

(ix)         enter into any employment contract, sales commission agreement, consulting agreement, deferred compensation, severance, retirement or similar agreement, written or oral, or modify the terms of any such existing Contract or agreement with respect to any Longhorn Employee, other than in the Ordinary Course of Business or as required by applicable Legal Requirements;

 

(x)          except for Seller Discretionary Vesting and as required (as reasonably determined by Seller) to ensure that any Employee Plan in effect on the date hereof (or the administration thereof) is not out of compliance with any applicable Legal Requirement or as required to comply with any Employee Plan in effect on the date hereof or as specifically required pursuant to this Agreement:

 

(1)      grant any increase in the base compensation or benefits of, or agree to pay a bonus or make any loan to or increase a rate of commission for any employee of a Longhorn Entity (except (i) for annual pay raises made in the Ordinary Course of Business and in accordance with the Longhorn Entity’s normal schedule for such pay raises, and (ii) except for increases in compensation or benefits for employees with an annual base salary of $175,000 or less (determined after such increase) if such increase is either non-material or made in connection with a promotion made in the Ordinary Course of Business);

 

(2)      adopt, establish, amend, modify or terminate any Employee Plan;

 

(3)      grant or amend any awards under any Employee Plan (including the grant or amendment of any equity or equity-based or related compensation) or remove or modify existing restrictions in any Employee Plan or awards made thereunder, other than any Discretionary Award Compensation;

 

(4)      grant or pay any severance, separation, change in control, retention, incentive compensation, termination or similar compensation or benefits to, or increase in any manner the severance, separation, change in control, retention, incentive compensation, termination or similar compensation or benefits of, any employee of a Longhorn Entity, except for the payment of severance, termination or similar compensation to employees with an annual base salary of $175,000 or less, if such payment is not material and is made in the Ordinary Course of Business;

 

(5)      enter into any trust, annuity or insurance contract or similar agreement with respect to, or take any action to fund or in any other way secure the payment of compensation or benefits under, any Employee Plan;

 

(6)      take any action to accelerate the time of payment or vesting of any compensation or benefits under any Employee Plan;

 

 

(7)      make any determination under any Employee Plan that is inconsistent with the Ordinary Course of Business;

 

(xi)         except in the case of employment offers made by a Longhorn Entity in the Ordinary Course of Business prior to the date of this Agreement (which offers may be honored), without prior notification to Buyer, hire any employee, officer or independent contractor, in each case at an annual base salary of $175,000 or above or terminate the employment of any employee of a Longhorn Entity earning an annual base salary of $175,000 or above;

 

(xii)         make or commit to make any non-emergency capital expenditure related to the Business other than in the Ordinary Course of Business;

 

(xiii)        make any (A) change in any accounting practices followed by it with respect to the Business (other than changes required by GAAP or applicable law) or (B) material Tax election or settle or compromise any material Tax Liability;

 

(xiv)       amend its Organizational Documents;

 

(xv)        loan or advance any money or other property to any Person (other than another Longhorn Entity), other than advances to employees for travel or business expenses in the Ordinary Course of Business;

 

(xvi)       incur or assume any Encumbrance with respect to any material asset or property of any Longhorn Entity or the Business, other than Permitted Encumbrances;

 

(xvii)      change the primary line of business of the Longhorn Entities;

 

(xviii)     acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner (including, by purchasing equity interests of), any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire any assets (other than inventory) that are material, individually or in the aggregate, to any Longhorn Entity;

 

(xix)        make, apply for or agree to any general or specific plan, zoning, subdivision map, conditional use Permit or other discretionary governmental entitlement or any material modification to any of the foregoing with respect to any of the Owned Real Property or real property leased by any Longhorn Entity;

 

(xx)         make any material changes in the selling or distribution practices of the Business or, other than in the Ordinary Course of Business, the advertising, promotion, terms of sale or collection, purchase or payment practices of the Business; or

 

(xxi)        enter into any Contract or other agreement to do any of the foregoing.

 

(c)           From the date hereof to the Closing, Seller shall not permit any Longhorn Entity to accelerate the delivery or sale of products or services, or offer discounts or price protection on the sale of products or services, or agree in writing to do any of the foregoing, except in the Ordinary Course of Business.

 

(d)           Notwithstanding anything to the contrary contained in Section 5.2(b), neither Longhorn nor its Subsidiaries shall be prohibited from (i) transferring any Cash held by such entities, whether or not used in the Business and whether by distribution, dividend, repayment of indebtedness or otherwise, to Seller or any of its direct or indirect Subsidiaries prior to the Closing or (ii) settling any intercompany accounts payable, accounts receivable or Indebtedness prior to the Closing.

 

Section 5.3            Required Consents and Approvals; Separation of Contracts.

 

(a)           Each party hereto hereby agrees to cooperate with each other party and use its reasonable best efforts to (i) promptly prepare and file all necessary documentation to effect all necessary notices, reports, registrations or other filings and submissions with third parties and Governmental Entities, (ii) engage in consultations with appropriate third parties and Governmental Entities, (iii) investigate, initiate, defend, contest and resist any litigation, administrative or judicial action, or other proceeding, (iv) make reasonable offers of compromise, and (v) obtain as promptly as practicable, and no later than the Outside Date, all necessary Consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the Transactions, including taking all actions necessary to ensure that (A) no requirement for non-action, a waiver, consent or approval of any Governmental Entity, (B) no decree, judgment, injunction, temporary restraining order or any other order in any proceeding and (C) no other matter relating to any Antitrust Law would preclude consummation of the Transactions as promptly as practicable and no later than the Outside Date; provided however, that nothing in this Agreement shall require any party to sell, hold separate or otherwise dispose of or conduct their businesses and assets in a specified manner, or agree to sell, hold separate or otherwise dispose of or conduct their businesses and assets in a specified manner, or permit the sale, holding separate or other disposition of, any assets or the conduct of their businesses and assets in a specified manner, whether as a condition to obtaining any approval from a Governmental Entity or any other Person or for any other reason, if such sale, holding separate or other disposition or the conduct of their businesses and assets in a specified manner is not conditioned on the Closing or, in the aggregate, would reasonably be expected to have a material adverse effect on Buyer and its Affiliates and subsidiaries taken as a whole, after giving effect to the Transactions.  In carrying out the foregoing obligations, each of Buyer and Seller shall act reasonably and as promptly as practicable.  Each of Buyer and Seller agree that it will keep the other party apprised of the status of matters relating to completion of the Transactions, including promptly furnishing the other with copies of notice or other communications received by Buyer, Seller or their respective Affiliates from all third parties and Governmental Entities with respect to the Transactions contemplated herein.

 

 

(b)           Each of Buyer and Seller agree to prepare and file the Notification and Report Form and/or other documentation required to be filed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) within five (5) Business Days after the date of this Agreement.  Each party hereby covenants to request early termination of the waiting period required by the HSR Act (unless otherwise agreed by their legal counsel) and to cooperate with the other parties to the extent reasonably necessary to assist in making reasonable supplemental presentations to the applicable Governmental Entities and, if requested by such entities, to promptly amend or furnish additional information thereunder.  Each of Buyer and Seller shall provide copies to the other party of the final drafts of all correspondence and filings prior to submission of such correspondence and filings to the applicable Governmental Entities in connection with the Transactions, and shall take into account reasonable comments made by the other party with respect thereto, and shall provide copies to the other party of the final correspondence and filings immediately after the submission or filing of such documents.  Subject to any appropriate confidentiality protections, with the exception of business documents deemed confidential by the possessing party (including documents submitted as attachments to the party's filings referred to in the first sentence of this Section 5.3(b)), Seller and Buyer shall each furnish to the other such necessary information and reasonable assistance as the other party may request in connection with the foregoing.  Each of Seller and Buyer will promptly notify the other of any oral or written communication made to or received by either Seller or Buyer, as the case may be, from any Governmental Entity regarding any of the transactions contemplated hereby.  Buyer and Seller shall consult with each other prior to taking any substantive position with respect to the filings under any Antitrust Law in discussions with or filings to be submitted to any Governmental Entity.

 

(c)           If reasonably necessary to satisfy local Legal Requirements, each party hereto shall enter into separate agreements and other conveyance documents as needed to effectuate the Transactions, provided that the terms of such other agreements and documents do not alter in any material respect the rights and obligations of the Parties under this Agreement.

 

(d)           Notwithstanding anything to the contrary in this Agreement, except as set forth in Section 5.3(a) with respect to Antitrust Approvals and except as required by Section 5.8 and Section 5.10, (i) neither Seller or any Longhorn Entity on the one hand or Buyer and its Affiliates on the other hand shall be required to take any action in connection with satisfying its obligations to obtain Consents (including without limitation any Consents listed on Schedule 3.2(c)) if such actions would require such Person to make any material payments or suffer any material burden on such Person in order to obtain any Consent; and (ii) without the prior written consent of Buyer, neither Seller nor any Longhorn Entity will, in seeking to obtain any such Consents, agree to amend, modify, terminate or waive any rights under the applicable Contracts to which such Consents relate or otherwise require any Longhorn Entity to make any payments or suffer any burden in connection therewith.

 

Section 5.4            Notification.  Between the date of this Agreement and the Closing, each party shall promptly notify the other party hereto in writing if such party becomes aware of any fact or condition that causes or constitutes a breach of any of its representations and warranties as of the date of this Agreement, or if such party becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a breach of any such representation or warranty of such party had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition; provided, however, that such disclosure shall not be deemed to cure any breach of a representation or warranty.  During the same period, each party to this Agreement will promptly notify the other parties hereto of the occurrence of any breach of any covenant or agreement by such party in this Agreement or of the occurrence of any event that may make the satisfaction of the conditions in Article 6 impossible or unlikely; provided, however, that such disclosure shall not be deemed to cure any breach of a covenant or agreement or to satisfy a condition.  Each party to this Agreement shall promptly notify the other parties of the threat or commencement of any Legal Proceeding before the Closing that could in any way affect the ability of such party to consummate the Transactions.

 

 

Section 5.5            No Negotiation.  From the date of this Agreement through the earlier of the Closing Date or the date on which this Agreement is earlier terminated pursuant to Article 10, neither Seller nor any of its Subsidiaries, Affiliates or Representatives shall, directly or indirectly, solicit, initiate or encourage any inquiries or proposals from, discuss or negotiate with, provide any information to or consider any inquiries or proposals from, any Person (other than Buyer and its Affiliates and Representatives) relating to any transaction involving the sale of all or any portion of the Business, whether affected by sale of assets, sale of stock, merger or otherwise.  Seller shall (i) ensure that its Subsidiaries, Affiliates and Representatives are aware of the provisions of this Section 5.5, (ii) be responsible for any breaches by any such parties of this Section 5.5, and (iii) notify Buyer promptly upon the receipt by it of any inquiries or proposals from any third party relating to any such potential transaction, such notice to include the name of such third party and the material terms and conditions of any such inquiries or proposals.  At or prior to Closing, Seller shall request and require the return or destruction of all confidential information concerning the Business or any of the Longhorn Entities made available to any third party (other than Buyer and its Affiliates and Representatives) since January 1, 2010 with respect to or in connection with any inquiries, proposals or access to information prior to the Closing Date and of a type described in the first sentence of this Section 5.5 to the full extent provided in the confidentiality agreement entered into between Seller and/or Longhorn and such third party in connection therewith.  In addition, Seller shall not release any such third party from any such confidentiality agreement (or any obligation thereunder) or waive, amend or alter any of such third party’s obligations thereunder and, at the reasonable request and expense of Buyer enforce the terms of such confidentiality agreement against such third party and assign to Buyer (to the extent assignable without the consent of such third party) Seller’s rights thereunder as it relates to the Business and the Longhorn Entities.

 

Section 5.6            Intercompany Arrangements; Indebtedness.  Except as set forth on Schedule 5.6, at or prior to the Closing, Seller shall cause all Intercompany Arrangements to be terminated and have no further force and effect as of the Closing, with no Liability on the part of any party thereto continuing after the Closing (it being understood that all Liabilities of the Business and all other parties under Intercompany Arrangements shall be eliminated as of the Closing).  Seller shall cause any outstanding Indebtedness of any Longhorn Entity to be repaid, cancelled or eliminated prior to the Closing.

 

Section 5.7            Commercially Reasonable Efforts.  Subject to Section 5.3(d), between the date of this Agreement and the Closing Date, each of the Parties hereto shall use their commercially reasonable efforts to cause the conditions in Sections 6.1 and 6.2 to be satisfied.

 

 

Section 5.8            Replacement of Bonds, Letters of Credit and Guarantees.  The Parties understand that none of the bonds, letters of credit and guarantees, if any, listed on Schedule 3.5(c) and posted by Seller or any of its Affiliates with any Governmental Entity or third Person and relating to the Business are to be transferred to Buyer.   On or before Closing, Buyer shall obtain, or cause to be obtained in the name of Buyer, replacements for such bonds, letters of credit and guarantees, to the extent such replacements are necessary to permit the cancellation of the bonds, letters of credit and guarantees posted by Seller and such Affiliates or to consummate the transactions contemplated by this Agreement.

 

Section 5.9            Title Insurance, Zoning Reports and Surveys.  Seller acknowledges that Buyer intends to obtain Title Insurance, Zoning Reports and Surveys in connection with, or following, the Closing.  Seller shall use its commercially reasonable efforts to assist Buyer in obtaining an ALTA Owner’s Title Insurance Policy (or equivalent foreign report) (the “Title Policies”) for each Owned Real Property and each Leased Real Property identified by Buyer (the “Material Leased Real Property”), issued by a title insurance company reasonably satisfactory to Buyer (the “Title Company”).  Promptly following receipt by Seller of reasonable evidence of the existence of Encumbrances of a fixed or ascertainable amount (that individually exceeds $500,000) appearing on the commitments issued for such Title Policies, Seller shall use its reasonable best efforts (whether prior to or following Closing) to cure such Encumbrances over $500,000.  Seller shall provide the Title Company with any affidavits (including owner's and non-imputation endorsement affidavits), indemnities or other assurances reasonably requested by the Title Company to issue the Title Policies.  Seller shall use its commercially reasonable efforts to assist Buyer in obtaining a survey for each Owned Real Property and Material Leased Real Property, dated no earlier than the date of this Agreement, prepared by a licensed surveyor reasonably satisfactory to Buyer (the “Surveys”).  Seller shall use its commercially reasonable efforts to assist Buyer in obtaining a zoning report (or equivalent foreign report) (which, in each case, may include obtaining a zoning compliance letter from the respective municipality) for each Owned Real Property and Material Leased Real Property, dated no earlier than the date of this Agreement (the “Zoning Reports”).  Buyer shall pay all fees, costs and expenses with respect to the Title Policies, Zoning Reports and Surveys.  Nothing in this Section 5.9 shall require such cooperation from Seller to the extent it would interfere unreasonably with the Business or operations of Seller or delay the Closing.

 

Section 5.10          Other Agreements.  Seller and Buyer agree that each of them shall perform their respective obligations set forth in Schedule 5.10.

 

Section 5.11          Rig Contract.

 

(a)           At the Closing, Seller will cause (i) the Longhorn Entity that currently owns the rig and allocated inventory associated with such rig (collectively, the “Transferred Rig”) that is the subject of the Contract listed as item 13on Schedule 3.13(a)(i) to transfer and convey all of such Longhorn Entity’s right, title and interest in such Transferred Rig to Seller or one of its Affiliates (other than a Longhorn Entity), (ii) such Longhorn Entity to assign all of such Longhorn Entity’s rights and obligations under such Contract to Seller or one of its Affiliates (other than a Longhorn Entity) and such assignee to assume all of such obligations and upon such assignment and assumption such Longhorn Entity will have no further obligations thereunder.  All documentation relating to such transactions shall be subject to Buyer’s prior review and approval not to be unreasonably withheld.

 

 

(b)           Following the Closing, Buyer agrees that the Transferred Rig may continue to remain at the Longhorn facility where it is currently located until the earlier of (i) delivery by Seller to a third party customer or (ii) the first anniversary of the Closing Date, at which time Seller will cause the Transferred Rig to be removed from such Longhorn facility at Seller’s sole cost and expense; provided that neither Buyer nor any Longhorn Entity will have any responsibility for any loss or damage to the Transferred Rig or for maintaining insurance covering the Transferred Rig or any loss or damage thereon while it is stored at such Longhorn facility or as a result of the removal by Seller of the Transferred Rig.  Seller agrees that it will maintain reasonable insurance coverage for any such loss or damage to the Transferred Rig.

 

(c)           For a one year period following the Closing, Buyer shall cause the Longhorn Entities to provide reasonable assistance to Seller in selling the Transferred Rig to a third party customer; provided that Seller shall reimburse Buyer for reasonable out-of-pocket expenses incurred by Buyer in providing such assistance.  To the extent Seller desires for additional work to be conducted on the  Transferred Rig, Seller will enter into a purchase order with Longhorn to perform such work on a time and materials basis plus a profit of 10%.  For purposes of this provision, “time and materials” means actual cost of products or equipment used, and actual labor, without any overhead allocation or other expense.  In addition, if Seller desires to provide a warranty to any third party customer, Buyer agrees to cause Longhorn to enter into an agreement with Seller to perform any warranty work on a time and materials basis plus a profit of 10% for a period no longer than one year following the delivery of the Transferred Rig to a third party customer.  In addition, as reasonably requested by Seller, Buyer agrees to cause Longhorn to provide reasonable access during normal business hours to any Seller personnel who are managing the project or are attempting to sell the Transferred Rig.

 

Section 5.12          Financing.  From the date hereof until the Closing Date, Seller agrees to provide to Buyer, and shall cause the Longhorn Entities and its and their Representatives to provide to Buyer, such cooperation that is reasonably requested by Buyer in connection with any debt financing that Buyer contemplates entering into in connection with the Closing to finance all or any portion of the Purchase Consideration.

 

 

Section 6.1            Conditions to Obligations of Buyer.  The obligation of Buyer to consummate the Transactions and to take the other actions to be taken by Buyer at the Closing is subject to the satisfaction at or prior to the Closing, of each of the following conditions (any of which may be waived in writing in whole or in part by Buyer):

 

(a)           Representations and Warranties.  The representations and warranties in Section 3.1(b) (first sentence), Section 3.2(a), Section 3.2(c), Section 3.3(a) (with respect to Longhorn only) and Section 3.3(b) shall be true and correct in all respects and the representations and warranties in Section 3.3(a) (with respect to the Longhorn Entities other than Longhorn) shall be true and correct in all material respects, in each case on and as of the date of this Agreement and the Closing Date as if made on and as of such date (except for the representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and correct, as of such date or with respect to such period), and each of the other representations and warranties of Seller contained in this Agreement shall be true and correct, in each case on and as of the date of this Agreement and the Closing Date as if made on and as of such date (except for the representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and correct, as of such date or with respect to such period), except to the extent that the failure of any such representations and warranties to be true and correct (without giving effect to any limitation on any representation or warranty indicated by the words “Material Adverse Effect”, “in all material respects”, “in any material respect”, “material” or “materially”) would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect.

 

 

(b)           Covenants.  Seller shall have performed in all material respects all obligations required to be performed by Seller under this Agreement at or prior to the Closing Date, and Buyer shall have received a certificate, dated as of the Closing Date, signed by an authorized officer of Seller to that effect.

 

(c)           Litigation.  No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Legal Requirement or Order (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits or challenges the validity or legality of the sale of the Longhorn Stock or the other Transactions (each, a “Governmental Prohibition”), and no such Governmental Entity shall have instituted any Legal Proceeding seeking to put in place or enforce a Governmental Prohibition or otherwise questioning the validity or legality of this Agreement or the Transactions contemplated hereby.

 

(d)           Antitrust Approvals and Consents.  All Antitrust Approvals shall have been made or obtained.

 

(e)           Resignations of Seller Designated Directors and Officers.  Seller shall have delivered to Buyer letters dated as of the Closing Date effecting the resignation of each director and officer of any Longhorn Entity who serves in such position solely as a representative of Seller and not otherwise in an operational or managerial position with the Business.

 

(f)            No Material Adverse Effect.  Since the date of this Agreement, there shall not have occurred any event, change or effect that has had, or would reasonably be expected to have, a Material Adverse Effect.

 

Section 6.2            Conditions to Obligations of Seller.  The obligation of Seller to consummate the Transactions and to take the other actions to be taken by Seller at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived in writing in whole or in part by Seller):

 

 

(a)           Representations and Warranties.  The representations and warranties in Section 4.2(a) shall be true and correct in all respects, in each case on and as of the date of this Agreement and the Closing Date as if made on and as of such date (except for the representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and correct, as of such date or with respect to such period), and each of the other representations and warranties of Buyer contained in this Agreement shall be true and correct, in each case on and as of the date of this Agreement and the Closing Date as if made on and as of such date (except for the representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and correct, as of such date or with respect to such period), except to the extent that the failure of any such representations and warranties to be true and correct (without giving effect to any limitation on any representation or warranty indicated by the words “Material Adverse Effect”, “in all material respects”, “in any material respect”, “material” or “materially”) would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect.

 

(b)           Covenants.  Buyer shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Seller shall have received a certificate, dated as of the Closing Date, signed by an authorized officer of Buyer to such effect.

 

(c)           Litigation.  No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Governmental Prohibition.

 

(d)           Antitrust Approvals.  All Antitrust Approvals shall have been made or obtained, as the case may be.

 

 

Section 7.1            Survival of Claims.  All representations and warranties of Seller and Buyer contained herein and all claims for breaches of pre-Closing covenants in Article 5 shall survive until the one year anniversary of the Closing Date; provided, however, that the representations and warranties contained in Section 3.1 (Organization and Good Standing), Section 3.2(a) (Authority), Section 3.3 (Capitalization), Section 3.9 (Taxes), Section 4.1 (Organization of Buyer), and Section 4.2(a) (Authority) (collectively, the “Fundamental Reps”) and all claims for breach of any other covenant shall survive the Closing indefinitely (except for the representations and warranties contained in Section 3.9 (Taxes), which shall survive until 30 days past the applicable statute of limitations, and the representations and warranties contained in Section 3.10 (Employees and Employee Benefits), which shall survive until the third anniversary of the Closing Date).  The right to indemnification based on such representations, warranties, covenants, agreements and obligations herein will not be affected by any investigation conducted with respect to, or any Knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, agreement or obligation.

 

 

Section 7.2            Indemnification.

 

(a)           By Seller.  From and after the Closing, Seller shall indemnify, defend and hold harmless Buyer and each of its Affiliates, Subsidiaries and Representatives (collectively, the “Seller Indemnified Parties”), from and against any and all costs, losses, Liabilities, obligations, damages, lawsuits, deficiencies, claims, demands or expenses (whether or not arising out of thirty party claims), including without limitation interest, penalties, reasonable legal fees and all reasonable amounts paid in investigation or defense, and all amounts paid in settlement, of any of the foregoing (collectively, “Damages”), resulting from:

 

(i)           any breach of any representations or warranty made by Seller in this Agreement (provided that, except with respect to the representation and warranty contained in Section 3.8(a), for purposes of determining whether there has been a breach of any such representation or warranty and/or the amount of any Damages related to such breach, such representation or warranty shall be considered without regard to any “material adverse effect” or “Material Adverse Effect” qualifications set forth therein);

 

(ii)          any breach of any covenant or agreement made by Seller in this Agreement;

 

(iii)         any claim by any Person for brokerage or finder’s fees or commissions or similar payments based on any agreement or understanding alleged to have been made by such Person with Seller or any Longhorn Entity (or any Person acting (or purportedly acting) on behalf of any such Person) in connection with the Transactions; or

 

(iv)         any claim by any Person against Buyer and its Affiliates (including, following the Closing, any Longhorn Entity) relating to the Contract listed as item 13 on Schedule 3.13(a)(i) (including any claim for breach of such Contract) and any Legal Proceeding in connection therewith.

 

(b)           Notwithstanding Section 7.2(a), this Section 7.2 shall not duplicate the indemnity obligation to Seller for a Tax Damage for which indemnification provisions are set forth in Section 8.12.

 

(c)           By Buyer.  From and after the Closing, Buyer shall indemnify, defend and hold harmless each of Seller and its respective Subsidiaries, Affiliates and Representatives (the “Buyer Indemnified Parties”) from and against any and all Damages resulting from:

 

(i)           any breach of any representation or warranty made by Buyer in this Agreement (provided that, for purposes of determining whether there has been a breach of any such representation or warranty and/or the amount of any Damages related to such breach, such representation or warranty shall be considered without regard to any  “material adverse effect” qualifications set forth therein);

 

(ii)          any breach of any covenant or agreement made by Buyer in this Agreement;

 

(iii)         any claim by any Person for brokerage or finder’s fees or commissions or similar payments based on any agreement or understanding alleged to have been made by such Person with Buyer or any Affiliate thereof (or any Person acting (or purportedly acting) on behalf of any such Person) in connection with the Transactions; or

 

(iv)         any claims, to the extent relating to the Business, by any Person under any bond, letter of credit or guarantee listed on Schedule 3.5(c) and posted or made by Seller or any of its Affiliates (other than the Longhorn Entities) with any Governmental Entity or third Person in connection with or for the benefit of the Business.

 

(d)           Notice of Claims.  If a claim for Damages (a “Claim”) is to be made by a party entitled to indemnification hereunder against the indemnifying party, the party claiming such indemnification shall give written notice (a “Claim Notice”) to the indemnifying party as soon as practicable after the party entitled to indemnification becomes aware of any fact, condition or event which may give rise to Damages for which indemnification may be sought under this Section 7.2; provided, however, that the failure to provide such written notice shall not excuse the indemnifying party from any of its obligations under this Section 7.2 except to the extent (and only to the extent) that such failure shall have caused the Damages for which the indemnifying party is obligated to be materially greater than such Damages would have been had the indemnified party given the indemnifying party prompt notice hereunder.

 

(e)           Defense of Third-Party Claims.  If any lawsuit or enforcement action is filed by a third party against any party entitled to the benefit of indemnity hereunder with respect thereto, written notice thereof shall be given to the indemnifying party as promptly as practicable (and in any event within 15 calendar days after the service of the citation or summons).  The failure of any indemnified party to give timely notice hereunder shall not affect rights to indemnification hereunder, except to the extent that the indemnifying party has been materially damaged by such failure as described in the provision to Section 7.2(c)).  After such notice, if (1) the indemnifying party shall acknowledge in writing to the indemnified party that the indemnifying party is obligated under the terms of its indemnity hereunder to fully indemnify the indemnified party in connection with such lawsuit or action, and (2) such third party claim is solely for monetary damages, and is not brought by a customer, Governmental Entity or a supplier listed on Schedule 3.20, then the indemnifying party shall be entitled, if it elects to do so, at its own cost, risk and expense, (i) to take control of the defense and investigation of such lawsuit or action, (ii) to employ and engage legal counsel of its own choice, but, in any event, reasonably acceptable to the indemnified party, to handle and defend the same unless the named parties to such action or proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and the indemnified party has been advised by counsel that there may be one or more legal defenses available to such indemnified party that are different from or additional to those available to the indemnifying party, in which event the indemnified party shall be entitled, at the indemnifying party’s cost, risk and expense, to separate counsel of its own choosing.  The indemnifying party shall not, without the written consent of the indemnified party, which shall not be unreasonably withheld, conditioned or delayed, (x) settle or compromise any Claim or consent to the entry of any judgment which does not include an unconditional written release by the claimant or plaintiff of the indemnified party from all liability in respect of such Claim or (y) settle or compromise any Claim if the settlement imposes equitable remedies or obligations on the indemnified party other than financial obligations for which such indemnified party will be fully indemnified hereunder.  No Claim which is being defended in good faith by the indemnifying party in accordance with the terms of this Agreement shall be settled or compromised by the indemnified party without the written consent of the indemnifying party, which consent shall not be unreasonably withheld.

 

 

If the indemnifying party fails to assume the defense of such lawsuit or action within 30 calendar days after receipt of the Claim Notice or is not permitted to assume such defense pursuant to this Section 7.2(d), the indemnified party against which such lawsuit or action has been asserted will (upon delivering notice to such effect to the indemnifying party) have the right to undertake, at the indemnifying party’s cost and expense, the defense, compromise or settlement of such lawsuit or action on behalf of and for the account and risk of the indemnifying party; provided, however, that such lawsuit or action shall not be compromised or settled without the written consent of the indemnifying party, which consent shall not be unreasonably withheld, conditioned or delayed.  If the indemnified party settles or compromises such lawsuit or action without the prior written consent of the indemnifying party, the indemnifying party will bear no liability hereunder for or with respect to such lawsuit or action unless the indemnifying party unreasonably withheld, conditioned or delayed its consent.  In the event either party assumes the defense of a particular lawsuit or action in the manner contemplated above, the party assuming such defense will keep the other party reasonably informed of the progress of any such defense, compromise or settlement.  The indemnifying party shall be liable for any settlement of any action effected pursuant to and in accordance with this Section 7.2 and for any final judgment (subject to any right of appeal), and the indemnifying party agrees to indemnify and hold harmless the indemnified party from and against any Damages by reason of such settlement or judgment.

 

(f)           Exclusivity.  Except as provided in Section 8.12,  Section 9.6(c), Section 9.7(c) and Section 11.14, the indemnification provided in this Article 7 shall be the sole and exclusive remedy of any Seller indemnified party and any Buyer indemnified party in respect of matters addressed in Sections 7.2(a) and (b), respectively.  Except as set forth in the immediately preceding sentence, the indemnification provisions of this Article 7 and Article 8 shall govern all claims by the Parties for breaches of this Agreement, except with respect to breaches or claims based upon fraud, as to which the Parties shall have, in addition to the indemnification provisions of this Article 7 and Article 8, all of their rights and remedies at law.

 

(g)           Limitation on Indemnity/Commitments.

 

(i)           The indemnification obligations of Seller and Buyer with respect to any breach of any representation, warranty or pre-Closing covenant in Article 5 pursuant to Sections 7.2(a)(i), 7.2(a)(ii), 7.2(b)(i), or 7.2(b)(ii), respectively, shall be limited to Claims made on or prior to the applicable last date of survival thereof referred to in Section 7.1.  The indemnification obligations of Seller and Buyer with respect to any other basis for indemnification obligations, including the indemnification obligations of Seller pursuant to clauses (ii) (other than with respect to pre-Closing covenants in Article 5), (iii) and (iv) of Section 7.2(a), and the indemnification obligations of Buyer pursuant to clauses (ii) (with respect to post-Closing covenants) and (iii) of Section 7.2(b) shall survive indefinitely subject to the terms of this Agreement.

 

 

(ii)           The Seller Indemnified Parties may not recover Damages from Seller pursuant to Section 7.2(a)(i) until the aggregate amount of Damages relating to all Claims for which the Seller Indemnified Parties, in the aggregate, are seeking indemnification under Section 7.2(a)(i) exceeds $10,000,000 (the “Deductible”) and then only for the amount by which the aggregate amount of Damages for which the Seller Indemnified Parties are seeking indemnification pursuant to Section 7.2(a)(i) exceeds the Deductible; provided, however, that Claims for Damages pursuant to Section 7.2(a)(i) resulting from fraud or a breach of the Fundamental Reps made by Seller shall not be subject to the Deductible, and shall be recoverable from the first dollar.  In calculating the Deductible, any Damages that individually, or collectively as part of a series of items arising from the same or substantially similar facts or circumstances, amount to less than $250,000 shall be excluded in their entirety, shall not be counted toward the Deductible and Seller shall have no Liability to the Seller Indemnified Parties therefor.  The Seller Indemnified Parties shall have the right to make a Claim under Section 7.2(a)(i) prior to the time the Deductible has been surpassed for the purpose of asserting such Claim within the relevant survival period and any such Claim made within such period shall, to the extent the Deductible ultimately is met, survive until its final resolution.  This Section 7.2(f)(ii) shall not apply to Claims for indemnification made pursuant to clause (ii), (iii) and (iv) of Section 7.2(a).

 

(iii)           The aggregate amount of Damages that may be recovered by the Seller Indemnified Parties pursuant to Sections 7.2(a)(i) may not exceed $90.0 million (the “Cap”); provided, however, that this limitation shall not apply to Claims for Damages pursuant to Section 7.2(a)(i) resulting from fraud or a breach of the Fundamental Reps made by Seller.  This Section 7.2(f)(iii) shall not apply to Claims for indemnification made pursuant to clause (ii), (iii) and (iv) of Section 7.2(a).

 

(iv)           The Buyer Indemnified Parties may not recover Damages from Buyer pursuant to Section 7.2(b)(i) until the aggregate amount of Damages for which the Buyer Indemnified Parties, in the aggregate, are seeking indemnification pursuant to Section 7.2(b)(i) exceeds the Deductible and then only for the amount by which the aggregate amount of Damages for which the Buyer Indemnified Parties are seeking indemnification pursuant to Section 7.2(b)(i) exceeds the Deductible; provided, however, that Claims for Damages pursuant to Section 7.2(b)(i) resulting from fraud or a breach of the Fundamental Reps made by Buyer shall not be subject to the Deductible, and shall be recoverable from the first dollar.  The Buyer Indemnified Parties shall have the right to make a Claim under Section 7.2(b)(i) prior to the time at which the Deductible has been surpassed for the purpose of asserting such Claim within the relevant survival period and any such Claim made within such period shall, to the extent the Deductible ultimately is met, survive until its final resolution.  The aggregate amount of Damages that may be recovered by the Buyer Indemnified Parties pursuant to Section 7.2(b)(i) may not exceed the Cap; provided, however, that this limitation shall not apply to Claims for Damages pursuant to Section 7.2(b)(i) resulting from fraud or breach of the Fundamental Reps made by Buyer.  This Section 7.2(f)(iv) shall not apply to Claims for indemnification made pursuant to clause (ii) or (iii) of Section 7.2(b) .

 

(v)           Neither (A) the termination of the representations or warranties contained herein, nor (B) the expiration of the indemnification obligations described above, will affect the rights of a Person in respect of any Claim made by such Person prior to the expiration of the applicable survival period provided herein.

 

(vi)           (A) To the extent that any Damages that are subject to indemnification under this Agreement are covered by insurance, the amount of any indemnity payment shall be net of the Net Proceeds of any insurance policy paid to the indemnified party with respect to such Damages, (B) any indemnification under this Agreement shall be decreased by the amount of any Tax Benefit, (C) any Damages that are subject to indemnification under this Agreement shall be decreased to the extent that such Damages are reflected in the Final Net Working Capital Statement and (D) no indemnification for Damages under this Agreement shall arise or be required to the extent that such Damages (1) relate to Taxes for a Post-Closing Tax Period, except to the extent such Taxes arise from a breach of a representation or warranty set forth in Section 3.9(j), or (2) result from or arise out of any reduction or limitation on the use of any Tax attribute (including without limitation any net operating loss carryover or credit carryover) of the Longhorn Entities attributable to a Pre-Closing Tax Period, except to the extent such reduction or limitation results in a Tax liability which is subject to indemnification pursuant to Section 8.12(a)(i).  For purposes of this Section 7.2(f)(vi), “Net Proceeds” shall mean the insurance proceeds actually received, less any expenses of recovery, deductibles, and/or co-payments.  If any amounts are reimbursed under insurance coverage subsequent to indemnification under this Article, the indemnified party shall reimburse the indemnifying party in an amount equal to the amounts subsequently received under insurance coverage (net of the expenses of recovery).  For purposes of this Section 7.2(f)(vi), to the extent a Tax Benefit is not realized in the year in which the indemnity payment is required to be made, the indemnified party (or any Affiliate thereof) shall pay to the indemnifying party (or any Affiliate thereof) the amount of such Tax Benefit when it is realized.

 

(vii)           In no event shall an indemnifying party be liable for punitive, special or consequential damages sustained or claimed by an indemnified party except to the extent such damages arise from a third-party Claim.  Damages must be established with reasonable certainty and are limited to those Damages that were reasonably foreseeable or in the reasonable contemplation of the Parties as of the date of this Agreement, except to the extent such damages arise from a third-party Claim.  Liabilities shall be determined after taking into account any indemnity, contribution or other similar payment actually received by the indemnified party from any third party with respect thereto.

 

Section 8.1            Tax Returns.

 

(a)           Seller shall prepare (or cause to be prepared) in a manner consistent with applicable Law and past practice and file (or cause to be filed) all Tax Returns of the Longhorn Entities that are filed on a separate return basis for all Tax periods ending on or before the Closing Date that are filed after the Closing Date.  Seller shall, without duplicating Seller’s indemnity obligation under Section 8.12, pay (or cause to be paid) to Buyer not less than five Business Days prior to the due date of any such Tax Return all Taxes shown as due on such Tax Returns, except to the extent such Taxes are shown as a reserve on the Final Net Working Capital Statement.  At least 20 Business Days prior to the filing of any such Tax Returns, Seller shall permit Buyer to review and comment on such Tax Returns and shall make such revisions to such Tax Returns as are reasonably requested by Buyer (provided, however, Seller shall not be required to make any revision requested by Buyer if such revision relates to an item that Seller prepared in accordance with applicable Law and past practice).  Buyer shall file such Tax Returns on or prior to the due date thereof.

 

(b)           Seller will prepare and file all federal, state, local or foreign Tax Returns with respect to any Pre-Closing Tax Period (“Consolidated Pre-Closing Tax Returns”) that are filed on a consolidated, combined or unitary basis, include any Longhorn Entity, and are required to be filed after the Closing Date, and shall pay all Taxes shown as due on such Tax Returns.  The Longhorn Entities will provide, at Seller’s sole expense, all information in their possession and not otherwise available to Seller that is required to be included in such Consolidated Pre-Closing Tax Returns as Seller may reasonably request within 10 days of such request .

 

(c)           Buyer shall prepare (or cause to be prepared) in a manner consistent with past practice and file (or cause to be filed) all Tax Returns of the Longhorn Entities that are filed on a separate return basis for all Straddle Periods.  At least 20 Business Days prior to the filing of any such Tax Returns, Buyer shall permit Seller to review and comment on such Tax Returns and shall make such revisions to such Tax Returns as are reasonably requested by Seller (provided, however, Buyer shall not be required to make any revision requested by Seller if such revision relates to an item that Buyer prepared in accordance with applicable Law and the past practice of the Longhorn Entities).

 

Section 8.2            Amending Tax Returns.  Buyer shall not file (or cause to be filed) or amend (or cause to be amended) or make (or cause to be made) any Tax election that could adversely affect, any Tax Return of the Longhorn Entities for any Pre-Closing Tax Period without the prior written consent of Seller, which consent shall not be unreasonably withheld.

 

Section 8.3            Tax Refunds.  Seller shall be entitled to the amount of any refund or credit of Taxes of the Longhorn Entities with respect to a Pre-Closing Tax Period which refund or credit is actually recognized by Buyer or its Affiliates (including the Longhorn Entities) after the Closing.  Buyer shall pay, or cause to be paid, to Seller any amount to which Seller is entitled pursuant to the prior sentence within ten Business Days of the receipt or recognition of the applicable refund or credit by Buyer or its Affiliates.

 

 

Section 8.4            Post-Closing Actions.  Other than with respect to the Section 338(h)(10) Election, Buyer agrees to indemnify Seller for any additional Tax owed by Seller (including tax owed by Seller due to this indemnification payment) resulting from any transaction engaged in by the Longhorn Entities not in the Ordinary Course of Business occurring on the Closing Date after Buyer’s purchase of the Longhorn Stock.  If Buyer reasonably believes that a Longhorn Entity is required by applicable Law to file a Tax Return for a Post-Closing Tax Period in a jurisdiction in which the relevant Longhorn Entity has not previously filed a Tax Return (such Tax Return, a “New Jurisdiction Tax Return”), Buyer shall promptly notify Seller of its belief and provide Seller with a statement setting forth in reasonable detail Buyer’s basis for its belief.  Buyer and Seller shall discuss for a period of 30 days in good faith whether such New Jurisdiction Tax Return is in fact required to be filed under applicable Law.  Following such consultation period, Buyer shall be free to file any such New Jurisdiction Tax Return if Buyer continues to reasonably believe such Tax Return is required to be filed.  Such filing in no way shall prejudice Buyer’s right to indemnification under Section 8.12.

 

Section 8.5            Cooperation.  Buyer, the Longhorn Entities, and Seller shall reasonably cooperate, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns pursuant to this Agreement and any Tax Contest.  Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such Tax Contest and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

 

Section 8.6            Transfer Taxes.  All transfer, stamp, documentary, sales, use, registration, value-added and other similar Taxes (including all applicable real estate transfer Taxes) incurred in connection with this Agreement and the Transactions contemplated hereby (“Transfer Taxes”) shall be borne equally by Buyer and Seller.

 

Section 8.7            Characterization of Payments.  Any indemnification payments made pursuant to Article 7 or this Article 8 shall constitute an adjustment of the consideration paid for the Longhorn Stock for Tax purposes and shall be treated as such by Parties to the extent permitted by law.

 

Section 8.8            Certain Deductions.  Notwithstanding any other provision of this Agreement, the parties hereto agree pursuant to Treasury Regulations Section 1.1502-76(b)(1)(ii) that the Tax deductions arising out of any payment made pursuant to Section 1.4 (Treatment of Longhorn Equity Awards) shall be allocated to and reported in the taxable year of Longhorn ending on the Closing Date, except as otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code, or by similar provision of applicable state or local income, franchise or other relevant Tax law.

 

Section 8.9            Overlap Provisions.  In the event of any conflict or overlap between the provisions of this Article 8 and Article 7, the provisions of this Article 8 shall control.

 

Section 8.10          Section 338(h)(10) Election.

 

(a)           Seller shall join with Buyer in making an election under Section 338(h)(10) of the Code (and any corresponding election under state, local, and foreign Tax law) (the “Section 338(h)(10) Election”) with respect to the purchase and sale of the shares of the stock of Longhorn and its Subsidiaries that are U.S. corporations for United States federal income tax purposes (each, a “338(h)(10) Entity”).

 

(b)           Buyer and Seller shall cooperate fully in making the Section 338(h)(10) Election, including the filing of all required IRS forms and related forms under state, local or foreign Tax law (collectively, the “Section 338 Election Forms”).  Prior to the Closing Date, the Seller shall prepare IRS Form 8023.  Seller shall permit Buyer to review and comment on such Form 8023 and shall consider in good faith any comment or revision reasonably requested by Buyer.  On the Closing Date, Seller shall execute and deliver the fully completed Form 8023 to Buyer.  Buyer shall file the Form 8023 on or prior to the due date for filing such Form 8023.

 

(c)           Within 120 days after Closing, Buyer shall prepare an allocation (the “Asset Allocation”) of the Purchase Consideration among the assets of the 338(h)(10) Entities in accordance with Sections 338 of the Code and the Treasury Regulations promulgated thereunder, and any comparable provisions of state, local or other Tax law, and shall deliver the Asset Allocation to Seller.  Buyer shall permit Seller to review and comment on the Asset Allocation and shall consider in good faith any comment or revision reasonably requested by Seller within 20 days after delivery of the Asset Allocation by Buyer.  In the event an agreement regarding the Asset Allocation cannot be reached, Buyer and Seller shall jointly retain the Accountant to resolve the dispute.

 

(d)           Buyer, Seller and the 338(h)(10) Entities shall file all Tax Returns (including but not limited to the Section 338 Election Forms and IRS Form 8883) consistent with the Section 338(h)(10) Election and the Asset Allocation and shall not voluntarily take any action inconsistent therewith upon any audit or examination of any Tax Return or in any other filing or proceeding relating to Taxes, unless required pursuant to a determination as defined in Section 1313(a) of the Code or any similar provision of any foreign, state or local law; provided however, that nothing contained herein shall prevent Buyer or Seller from settling any proposed deficiency or adjustment by any Governmental Entity based upon or arising out of the Asset Allocation, and neither Buyer nor Seller shall be required to litigate before any court any proposed deficiency or adjustment by any Governmental Entity challenging the Asset Allocation.  If the Purchase Consideration paid by Buyer to Seller pursuant to this Agreement is adjusted in any manner as provided in this Agreement, Buyer shall promptly revise the Asset Allocation to reflect such adjustments to the Purchase Consideration paid pursuant to this Agreement.  Buyer shall permit Seller to review and comment on such revised Asset Allocation and shall consider in good faith any comment or revision reasonably requested by Seller within 20 days after delivery of the revised Asset Allocation by Buyer.  In the event an agreement regarding the Asset Allocation cannot be reached, Buyer and Seller shall jointly retain the Accountant to resolve the dispute.

 

(e)           In connection with the transactions contemplated under this Agreement, if Buyer makes an election under Section 338(g) and the Treasury Regulations promulgated thereunder and any corresponding or similar elections under state or local Tax Law with respect to any foreign Subsidiary of Longhorn, Buyer agrees to reimburse Seller for any adverse Tax consequences suffered by Seller resulting from such election.  Such reimbursement shall be limited to $500,000.  Any direct or indirect Subsidiary of Longhorn that is a “controlled foreign corporation” for purposes of section 957 of the Code shall not take any action on or after the Closing Date and through the end of 2011 that is outside the Ordinary Course of Business.

 

 

Section 8.11         FIRPTA Certificate.  Seller shall deliver to Buyer on or prior to the Closing Date, a certificate signed by Seller, in a form reasonably satisfactory to Buyer, to the effect that Seller is not a “foreign person” as defined in Section 1445 of the Code.

 

Section 8.12         Tax Indemnification.

 

(a)           Except to the extent reflected in the Final Net Working Capital Statement and subject to Section 7.2(f)(vi), Seller hereby indemnifies Buyer and each of its Affiliates, Subsidiaries and Representatives, against and agrees to hold them harmless from any (i) Tax Liabilities of the Longhorn Entities for all Pre-Closing Tax Periods and (ii) Taxes of any member (other than any Longhorn Entity) of an affiliated, consolidated, combined or unitary group of which Seller or any Longhorn Entity is or was a member on or prior to the Closing Date by reason of Liability under Treasury Regulation Section 1.1502-6, or comparable provision of foreign, state or local Law.

 

(b)           For purposes of Section 8.12(a), in the case of any Taxes that are payable for a Straddle Period, the portion of such Tax related to the Pre-Closing Tax Period shall (i) in the case of any Taxes imposed on a periodic basis (e.g. ad valorem, property and license fees) other than Taxes set forth in clause (ii) below, be deemed to be the amount of such Tax for the entire Tax period multiplied by a fraction the numerator of which is the number of days in the Tax period ending as of the Closing Date and the denominator of which is the number of days in the entire Tax period, and (ii) in the case of any non-periodic Taxes, including any Tax based upon or related to income, gains or receipts or based upon or related to employment or sales or use, value added, and customs duty, be deemed equal to the amount that would be payable if the relevant Tax period ended as of the Closing Date.  Any credits relating to a Tax period that begins before and ends after the Closing Date shall be taken into account as though the relevant taxable period ended on the Closing Date.  The portion of any credits relating to a Straddle Period shall be determined as though the relevant taxable period ended on and included the Closing Date.

 

(c)           Payment by Seller of any amount due under Section 8.12(a) shall be made within ten Business Days following written notice by the indemnitee that payment of such amounts to the appropriate Tax authority is due, provided that Seller shall not be required to make any payment earlier than five Business Days before it is due to the appropriate Tax authority.  In the case of a Tax that is contested in accordance with the provisions of Section 8.12 below, payment of the Tax to the appropriate Tax authority shall not be considered to be due earlier than the date a final determination to such effect is made by the appropriate Tax authority or court.  All costs and expenses, including any deposit or similar payment required to be made to any Tax authority and any out-of-pocket costs incurred in order to pursue or continue the contest of any Tax Claim or incurred in connection with a Tax Claim shall be paid by Seller (but only to the extent such Tax Claim relates to a Pre-Closing Tax Period or, for a Straddle Period, to the portion of such period that ends on the Closing Date).

 

 

Section 8.13          Tax Indemnification Procedures.

 

(a)           Seller shall promptly notify the Buyer in writing upon receipt of notice of any pending Tax audits or assessments relating to the income, properties or operations of any Longhorn Entity.  If a claim shall be made against the Buyer or any of their Affiliates by any Tax authority, which, if successful, would result in an indemnity payment to the Buyer or one of its Affiliates pursuant to Section 8.12(a) (a “Tax Claim”), the Buyer shall promptly notify Seller, in writing of such Tax Claim stating the nature and basis of such Tax Claim and the amount thereof, to the extent known by the Buyer, provided, however, that the failure to provide such written notice shall not excuse the Seller from any of its obligations under a Tax Claim except to the extent (and only to the extent) that the Seller is materially prejudiced thereby.

 

(b)           With respect to any Tax Claim that relates to a Pre-Closing Tax Period, Seller shall control at its expense all proceedings taken in connection with such Tax Claim (including selection of counsel) but shall not, without the prior written approval of Buyer (which shall not be unreasonably withheld or delayed), agree or consent to compromise or settle, either administratively or after the commencement of litigation, any issue or claim arising in such proceeding, or otherwise agree or consent to any Tax Liability, to the extent that any such compromise, settlement, consent or agreement may increase the Tax Liability of Buyer or any of its Affiliates for any Tax period that ends after the Closing (or portion thereof in the case of a Straddle Period), unless the Seller indemnifies the Buyer for the increase in Taxes resulting from such compromise, settlement, consent or agreement.  Buyer shall have the right to consult with Seller regarding any audit or proceeding that could result in an increase to the Tax Liability of Buyer or any of its Affiliates for any Post-Closing Tax Period.

 

(c)           Buyer shall have the right to control the conduct of any Tax Claim that relates to a Straddle Period.  The Buyer shall control all proceedings taken in connection with such Tax Claim (including selection of counsel) but shall not, without the prior written approval of Seller (which shall not be unreasonably withheld or delayed), agree or consent to compromise or settle, either administratively or after the commencement of litigation, any issue or claim arising in such proceeding, or otherwise agree or consent to any Tax Liability, to the extent that any such compromise, settlement, consent or agreement may increase the Tax Liability of Seller, any Longhorn Entity or any of their Affiliates for any Pre-Closing Tax Period, unless the Buyer indemnifies the Seller for the increase in Taxes resulting from such compromise, settlement, consent or agreement.  Seller shall have the right to consult with Buyer regarding any audit or proceeding relating to a Straddle Period.

 

 

Section 9.1            Employee Related Matters.

 

(a)           Employment.

 

(i)           Each Person who is employed by a Longhorn Entity immediately prior to the Closing shall continue employment with such Longhorn Entity immediately following the Closing without further action on the part of Buyer or Seller (such Persons are referred to herein as “Longhorn Employees”), provided, that prior to the Closing, Seller shall cause each Longhorn Entity to transfer to Seller (or an Affiliate of Seller or a third party contracted by Seller, in each case, that is not a Longhorn Entity) the employment of any employee of such Longhorn Entity whose principal place of employment is the Longhorn facility identified on Schedule 9.1(a)(i) unless such employee is identified on Schedule 9.1(a)(i) as remaining employed by such Longhorn Entity (such transferred Persons are referred to herein as “Transferred Employees”).  Longhorn shall offer or cause to be offered to Transferred Employees COBRA coverage to the extent such Transferred Employees are eligible for COBRA coverage and shall remain liable for the provision of such coverage to the extent the provision of COBRA coverage is required by applicable law, following the Closing.  Notwithstanding the foregoing, on or prior to the Closing Date, Seller shall cause the applicable Longhorn Entity to terminate the employment of each employee of a Longhorn Entity requested by Buyer in writing no less than ten Business Days prior to the Closing Date (each such employee, a “Terminated Longhorn Employee”), other than as required by applicable law.  Longhorn shall offer or cause to be offered to Terminated Longhorn Employees COBRA coverage to the extent such Terminated Longhorn Employees are eligible for COBRA coverage and shall remain liable for the provision of such coverage, to the extent the provision of COBRA coverage is required by applicable law, following the Closing.  Neither Buyer nor any Longhorn Entity shall have any liability on or after the Closing Date for any severance, change in control, or other post-termination compensation or benefits (other than COBRA) with respect to Transferred Employees and Terminated Longhorn Employees  (such payments “Termination Payments”), provided, that if Buyer or an Affiliate of Buyer hires as an employee or engages as a consultant any such Terminated Longhorn Employee during the Restricted Period, Buyer shall reimburse Seller for all Termination Payments made to such Terminated Longhorn Employee within five Business Days following the date of hire or engagement.

 

(ii)           For the period of time commencing on the Closing Date and ending on the last day of the calendar year in which the Closing Date occurs, Buyer shall provide, or cause to be provided, to Longhorn Employees employee benefits that, in the aggregate, are substantially similar to employee benefits (other than equity and cash incentives) provided to the Longhorn Employees immediately prior to the Closing Date.

 

(b)           Defined Benefit Plan; 401(k) Plan; Transition Incentives; Amendment Authority.

 

(i)           Seller shall take such action as is necessary so that, as of the Closing Date, no Longhorn Entity has any obligation to fund (or otherwise has any liability with respect to) any pension plan that is subject to Title IV of ERISA, including, for example, transferring sponsorship of each Employee Plan that is subject to Title IV of ERISA to Seller or another member of Seller’s controlled group that is not a Longhorn Entity.

 

 

(ii)          With respect to each Employee Plan that (a) is a defined contribution retirement plan, (b) is intended to be “qualified” within the meaning of Section 401(a) of the Code, and (c) is sponsored by Longhorn or any of its Subsidiaries immediately prior to the Closing Date (each, a “Longhorn 401(k) Plan”), the assets of each such Longhorn 401(k) Plan shall, as of the Closing Date, consist only of cash, shares of investment companies registered under the Investment Company Act of 1940 (as amended), notes evidencing outstanding participant loans, or such other assets reasonably acceptable to Buyer, but in no event shall such assets include stock or other securities of Seller, any of its Affiliates, Longhorn, or any of its Subsidiaries.  Seller shall take such action as is necessary, on or before the Closing Date, to cause each Longhorn Employee to have a fully nonforfeitable right in such Longhorn Employee’s account balance under each such Longhorn 401(k) Plan as of the Closing Date.

 

(iii)         Buyer shall cause to be paid to Longhorn Employees who were age 40 or above with at least five years of service recognized by Longhorn as of December 31, 2010 a “Transition Incentive” pursuant to the terms and conditions of Longhorn’s 2011 Employee Benefits Update dated October 2010 (including the eligibility requirements therein).

 

(iv)         As of the Closing Date, Longhorn Employees shall cease to be eligible for Longhorn’s Voluntary Stock Purchase Plan.

 

(v)          Buyer shall take such steps as are necessary to ensure that each Employee Plan in effect as of the Closing Date may be amended and terminated by Longhorn.

 

(c)           Special Arrangements with Respect to Welfare Benefits.  Following the Closing Date, Buyer shall, pursuant to employee benefit plans and arrangements established or maintained by Buyer (the “Buyer Welfare Plans”) (A) waive all limitations as to pre-existing conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to Longhorn Employees under Buyer Welfare Plans, other than limitations that are already in effect with respect to such employees and that have not been satisfied as of the Closing Date under the corresponding Employee Plan, and (B) provide each Longhorn Employee with credit under Buyer Welfare Plans for any co-payments and deductibles paid under the corresponding Employee Plans prior to the Closing Date in satisfying any applicable deductible or out-of-pocket requirements for the plan year in which the Closing Date occurs.  To the extent not inconsistent with applicable Legal Requirements, for purposes of determining eligibility to participate and vesting (but not benefit accrual) for Longhorn Employees under all Buyer Welfare Plans, Buyer shall recognize service with Longhorn and Seller to the same extent recognized under the corresponding Employee Plans as in effect immediately prior to the Closing Date (“Longhorn Service”).  In addition, Buyer shall recognize Longhorn Service for purposes of determining the rate of vacation accrual and the level of severance benefits, but not for purposes of the rate of benefit accrual or level of benefits for any other benefit.  For the avoidance of doubt, this Section 9.1(c) applies only with respect to Buyer Welfare Plans that cover Longhorn Employees, and nothing in this Section 9.1(c) shall require any Buyer Welfare Plan or other benefit plan or program to cover any Longhorn Employees. Following Closing, Longhorn shall remain liable for the provision of COBRA coverage under Employee Plans to all “M&A qualified beneficiaries” (as such term is defined in Treasury Regulations Section 54.4980B-9) with respect to the sale of the Longhorn Entities, to the extent the provision of COBRA coverage is required by applicable law.

 

(d)           No Third Party Beneficiaries.  Seller and Buyer acknowledge and agree that (i) all provisions contained in this Section 9.1 with respect to employees are included for the sole benefit of the respective Parties and shall not create any right in any other Person, including any employees, former employees, any participant in any plan or arrangement established or maintained by Seller, Buyer, a Longhorn Entity or any of their Affiliates or any beneficiary thereof, or any right to continued employment with Seller, Buyer, a Longhorn Entity or any Affiliate thereof, (ii) nothing in this Section 9.1 shall be construed to establish, amend, or modify an Employee Plan or any other benefit plan, program, agreement or arrangement nor shall require any Longhorn Entity or any Affiliate thereof to continue or amend any particular benefit plan after the consummation of the Transactions contemplated by this Agreement for any employee or former employee of Seller or any Longhorn Entity or any Affiliate thereof, and (iii) any such plan may be amended or terminated in accordance with its terms and applicable Law.

 

Section 9.2            Post-Closing Access.

 

(a)           Without limiting the obligations set forth in Section 8.1, following the Closing, each party hereto agrees that it will cooperate with and make available to the other party, during normal business hours and upon reasonable notice, (i) all books, records and other documents related to the Business or the Longhorn Entities, (ii) information related to the Business or the Longhorn Entities and (iii) Longhorn Employees (without substantial disruption of employment), in each case retained by such party and remaining in existence after the Closing which are necessary or useful in connection with any audit, investigation or dispute, any litigation or investigation or any other matter requiring any such books and records and other documents, information or employees for any reasonable business purpose.  The party requesting any such books and records and other documents, information or employees shall bear all of the out-of-pocket costs and expenses reasonably incurred in connection with providing such books and records and other documents, information or employees or the Longhorn Entities.  All information received pursuant to this Section 9.2 shall be kept confidential by the party obtaining such information, subject to any disclosure that is required to be made by such party in order to comply with applicable Legal Requirements or the rules or regulations of any securities exchange upon which its securities are traded.  Seller also agrees that it will take appropriate measures to ensure that following the Closing its employees no longer have access to Books and Records or to any books and records, and information or documents related to the Business or the Longhorn Entities that are retained by Seller, except to the extent such books, records, documents or information also reasonably relate to the business of Seller and to the extent such access is necessary to perform Seller’s obligations under this Agreement.

 

(b)           Seller shall, and shall use its commercially reasonable efforts to cause its Representatives to, provide customary representations to auditors and any additional financial information and assistance in connection therewith as may be reasonably requested by Buyer or its Affiliates in connection with any filing with the Securities and Exchange Commission undertaken by Buyer or its Affiliates that includes financial statements of the Business.  Seller shall use its commercially reasonable efforts to cause its Representatives to assist and cooperate in good faith with Buyer and its Affiliates in preparing audited financial statements of the Business for the stub period ending on the Closing Date, including, if applicable, providing (a) reasonable access to the auditors, auditor workpapers (to the extent permitted by the auditors preparing same), employees, books and records, and any financial data reasonably requested by Buyer relating to the Business, and (b) customary representation letters to auditors.  Seller's reasonable out of pocket expenses (including auditors fees that are pre-approved by Buyer) in complying with this Section 9.2(b) shall be reimbursed by Buyer promptly following receipt of an invoice therefor.

 

Section 9.3            Publicity.  Except as required by applicable Legal Requirements, without prior written approval of Buyer and Seller, none of Buyer, Seller or their respective Affiliates or Representatives shall issue any press release or make any public statement regarding this Agreement and the Transactions contemplated hereby other than the fact that Buyer acquired the Business; provided that, following the Closing Date, the provisions of this Section 9.3 shall not apply if the information to be released or announced is otherwise publicly available other than as a result of a breach of this Agreement, or (ii) with respect to direct communications with financial analysts or investors so long as such communications are not inconsistent with the parties' prior public disclosures regarding the transactions contemplated hereby.

 

Section 9.4            Confidential Information.  Buyer and Seller acknowledge and agree as follows:

 

(a)           The Parties acknowledge that the Transactions are of a confidential nature and shall not be disclosed except to Representatives and Affiliates, or as required by any applicable Legal Requirements, until such time as the Parties make a public announcement regarding the Transactions as provided in Section 9.3.  Effective upon, and only upon, the Closing, the Confidentiality Agreement, dated as of April 13, 2011, between Seller and Buyer shall terminate with respect to information relating to the Business, Longhorn and the other Longhorn Entities.  Buyer acknowledges that any and all other information provided or made available to it by Seller (or its Representatives) concerning Seller or its Affiliates (other than Longhorn and the other Longhorn Entities) will remain subject to the terms and conditions of such Confidentiality Agreement after the Closing.

 

(b)           Seller acknowledges that it and its Affiliates and Representatives have had and, subject to the terms and conditions hereof, will have access to confidential and proprietary information related to Buyer and the Longhorn Entities and the Business, in each case, potentially including technical, manufacturing or marketing information, ideas, methods, developments, inventions, improvements, business plans, trade secrets, scientific or statistical data, diagrams, drawings, specifications or other proprietary information related thereto, together with all analyses, compilations, studies or other documents, records or data prepared by Seller, the Longhorn Entities or their respective Representatives or Affiliates, which contain or otherwise reflect or are generated from such information (“Confidential Information”).  The term “Confidential Information” does not include information which is or becomes generally available to the public other than as a result of a disclosure by Seller or its Affiliates.

 

(c)           Seller shall treat all Confidential Information as confidential, preserve the confidentiality thereof and not disclose any such Confidential Information, except to their Representatives and Affiliates who need to know such Confidential Information in connection with the Transactions.  Seller shall cause its Representatives to treat all such Confidential Information as confidential, preserve the confidentiality thereof and not disclose any such Confidential Information.  Seller shall be responsible for any breach of this Agreement by any of their Representatives.  If, however, Confidential Information is disclosed, Seller shall immediately notify Buyer in writing and take all reasonable steps required to prevent further disclosure.

 

(d)           If Seller or any of its respective Representatives or Affiliates is requested or required (by oral questions, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other similar process) or is required by operation of law to disclose any Confidential Information, Seller shall provide Buyer with prompt written notice of such request or requirement, which notice shall, if practicable, be at least 48 hours prior to making such disclosure, so that Buyer may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement.  If, in the absence of a protective order or other remedy or the receipt of such a waiver, Seller or any of their respective Representatives are nonetheless, in the opinion of counsel, legally compelled to disclose Confidential Information, then Seller may disclose that portion of the Confidential Information which such counsel advises is legally required to be disclosed, provided that such party uses its reasonable efforts to preserve the confidentiality of the Confidential Information, whereupon such disclosure shall not constitute a breach of this Agreement.

 

Section 9.5            Further Assurances.

 

(a)           From and after the Closing Date, the Parties shall cooperate reasonably with each other in connection with any steps required to be taken in order for the Parties to carry out the intent of this Agreement.  Neither Seller, on the one hand, nor Buyer, on the other hand, shall, without the prior written consent of the other party, take any action or refrain from taking any action the intended result of which is to prevent or materially impede, interfere with or unreasonably delay, the Transactions contemplated by this Agreement. In furtherance of the foregoing, from time to time after the Closing Date, the Parties hereto agree to (i) furnish upon request to each other such further assurances, information, documents and instruments of transfer or assignment and (ii) do such things and promptly execute, acknowledge, and deliver any such further assurances, documents and instruments of transfer or assignment, in each case that the other party may reasonably request for the purpose of carrying out the intent of this Agreement, including taking such steps as are necessary to convey the Longhorn Stock to Buyer.  As promptly as possible after the Closing Date, Seller and each of their Subsidiaries shall make any filings and/or give any notices required by applicable Legal Requirements to be made or given by them in order to consummate the Transactions that were not made or given prior to the Closing; and shall use commercially reasonable efforts to obtain all required Consents not obtained prior to the Closing.

 

Section 9.6            Non-Competition.

 

(a)           From the Closing Date until the fourth anniversary of the Closing Date (the “Restricted Period”), without Buyer’s consent, Seller shall not, and shall cause each of its Subsidiaries (Seller and its Subsidiaries, the “Restricted Party”) not to, directly or indirectly (including by means of management, advisory, operating, or similar agreements or arrangements or by any record or beneficial equity interest, either as a principal, trustee, stockholder, partner, joint venture or otherwise, in any Person), engage in a business that competes with the Business, for their own account or for any other Person, in any country or other geographic location in which the Longhorn Entities operate the Business or otherwise had sales immediately prior to the Closing or any other country or geographic location in which the Longhorn Entities planned to operate the Business as of the Closing Date (the “Restricted Business”); provided, however, that nothing in this Agreement or in the definition of Restricted Business shall prohibit or in any way restrict the Restricted Party’s ability to:

 

 

(i)           engage in the Restricted Business to the extent necessary to perform its duties under this Agreement;

 

(ii)          make or maintain passive investments of less than five percent of the outstanding equity securities in any entity engaged in the Restricted Businesses listed for trading on any recognized securities exchange or in the over-the-counter markets;

 

(iii)         own an equity interest of any other Person engaged in the Restricted Business acquired as a creditor in bankruptcy other than by a voluntary investment decision; or

 

(iv)         acquire the assets or capital stock or other equity interests of any other Person engaged in the Restricted Business, provided, however, that the net sales attributable to the Restricted Business conducted by such person accounts for less than 25% of the net sales of such person for its most recently completed fiscal year.

 

(b)           The Parties agree that this covenant is personal to Buyer and Buyer may not assign or otherwise transfer this covenant, in whole or in part, to any Person other than to other Affiliates of Buyer.  During the Restricted Period, Seller shall not, and shall cause each of its Subsidiaries not to, without the prior written consent of Buyer, directly or indirectly, induce or attempt to induce any customer, reseller, retailer, distributor, supplier, licensee or other Person to cease doing business with Buyer or the Longhorn Entities or in any way interfere with the relationship between any such customer, reseller, retailer, distributor, supplier, licensee or other Person and Buyer or the Longhorn Entities.

 

(c)           Seller agrees that any remedy at law for any breach by it or its Affiliates of Section 9.6(a) or (b) would be inadequate, and Buyer shall be entitled to injunctive or other equitable relief in such case in addition to any other right Buyer may have, whether at law or in equity.  Each party intends that the provisions of this Section 9.6 be enforced under the laws applied in each jurisdiction in which enforcement is sought.  If any provision of this Section 9.6 shall be held by a court of competent jurisdiction to be invalid or unenforceable, this Section 9.6 shall be amended to revise the scope of such provision to make it enforceable, if possible, or, if not possible, to delete such provision, in either case, without affecting the other or remaining provisions of this Section 9.6 or this Agreement.  Any invalidity or unenforceability of any provision of this Section 9.6 in a jurisdiction will not affect the validity or enforceability of that provision in any other jurisdiction.

 

 

Section 9.7            Non-Solicitation.

 

(a)           Seller shall not, and shall cause its Affiliates not to, directly or indirectly, during the period from the Closing Date until the second anniversary of the Closing Date, contact, approach or solicit for the purpose of offering employment to or hiring (whether as an employee, consultant, agent, independent contractor or otherwise), or hire, any person employed by Buyer (with respect to the Business) or the Longhorn Entities (or their respective Affiliates or successors-in-interest to the extent related to the Business) (other than employees whose annual base compensation is less than $75,000).

 

(b)           Buyer shall not, and shall cause its Affiliates not to, directly or indirectly, during the period from the Closing Date until the second anniversary of the Closing Date, contact, approach or solicit for the purpose of offering employment to or hiring (whether as an employee, consultant, agent, independent contractor or otherwise), or hire, any person employed by Seller (or its Affiliates or successors-in-interest), in either case for a position with Buyer or any of its Affiliates related to the Business (other than employees whose annual base compensation is less than $75,000).

 

(c)           Notwithstanding the foregoing, the Parties agree that the provisions of Section 9.7(a) and Section 9.7(b) shall not prohibit (i) the hiring of a person whose employment was terminated by his or her respective employer (or its Affiliates) and who was not solicited by the other party (or its Affiliates in violation of Section 9.7(a) or (b), as applicable, or (ii) solicitation by way of general advertising, including general solicitations in any local, regional or national newspapers or other publications or circulars or on internet sites or any search firm engagement which is not directed or focused on employees of Buyer, or Seller or their respective Affiliates as applicable.

 

(d)           The Parties agree that the restraints created by the covenants in this Section 9.7 are no greater than necessary to protect the Parties’ respective legitimate interests, that damages would be an inadequate remedy and that a Person seeking to enforce this Section 9.7 shall be entitled to seek specific performance and injunctive relief as remedies for any breach hereof.  Furthermore, the Parties agree that such covenants do not hinder, or otherwise cause hardship to, any party or its Affiliates with respect to finding other employees or any party’s or its Affiliates’ employees with respect to finding employment elsewhere.  Similarly, the Parties agree that no party’s need for the protection afforded by the covenants of this Section 9.7 is outweighed by either the hardship to any other party or its Affiliates or any public interest.  The existence of any claim or cause of action of a party against another party, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by a party of the covenants contained in this Section 9.7.  Should any portion of the covenants in this Section 9.7 be held to be wholly or partially invalid or unenforceable because such portion is held to be overly broad or unreasonable in scope, such holding shall not invalidate or void the remainder of this Section 9.7 or this Agreement, and the portions held to be overly broad or unreasonable in scope shall be revised and reduced in scope so as to be valid and enforceable, and shall be enforced as so reformed, to the maximum extent permitted by law.

 

 

Section 9.9           Insurance.  Upon the reasonable request of Buyer, Seller shall, and shall cause its Affiliates to, use commercially reasonable efforts to assist the Longhorn Entities or their transferee(s) or assignee(s) in tendering claims for any loss, Liability, claim, damage or expense of any Longhorn Entities or their transferee(s) or assignee(s) (including products and current and former employees and directors thereof) or of any of their respective predecessors and arising out of occurrences prior to the Closing Date (a “Longhorn Insured Loss”) to the applicable insurers under any insurance policies covering, prior to the Closing Date, the assets, businesses, operations, employees, officers or directors of any of the Longhorn Entities or their predecessors, including but not limited to the Insurance Policies, and to provide Longhorn or its transferee(s) or assignee(s) with the proceeds of claims made by or with respect to such Longhorn Insured Losses subject to the self-insured limits and deductibles under the applicable policy, which shall be for the account of Buyer.  Subsequent to the Closing, Buyer or its transferee(s) or assignee(s) shall assume responsibility for the administration and adjustment of all Longhorn Insured Losses and Seller shall, and shall cause its Affiliates to, use commercially reasonable efforts to assist the Longhorn Entities or their transferee(s) or assignee(s) in such administration and adjustment when Seller’s involvement is required by an insurer or a particular insurance policy.  Buyer shall reimburse Seller for its reasonable out-of-pocket expenses incurred in providing such assistance in the tendering, administration or adjustment of any claims.  It is understood that upon Closing, future coverage under any Insurance Policies that are then currently in effect, except those policies exclusively in the name of any Longhorn Entities as set forth in Schedule 3.18(b), will not provide coverage with respect to all Longhorn Entities (past, current and future) and their respective businesses.  Seller agrees that it will not object to any future transfer or assignment that Buyer or any Longhorn Entity may choose to make of any insurance-related choses in action arising under insurance policies (or other insurance arrangements or contracts for the transfer or sharing of insurance risks) covering the assets, businesses, operations, employees, officers or directors of any of the Longhorn Entities or their predecessors.  In the event any such insurance policies have coverage triggers other than occurrence (such as claims made or occurrences as reported) and events unknown to Seller or any Longhorn Entity have occurred prior to the Closing Date that could not have been reported to underwriters prior to the Closing Date, it may not be possible for Buyer or any Longhorn Entity or their respective transferees or assignees to access such policies.  Further, Seller and its Affiliates make no representation or warranty that such insurance policies will respond to Buyer or any Longhorn Entity or their respective transferees or assignees in the event claims are made subsequent to the Closing Date.

 

Section 9.10         Warranty.  From and after the Closing Date, the parties agree that Seller shall not, and shall cause its Affiliates not to, submit product warranty claims to any Longhorn Entity for products delivered or commissioned for delivery from any Longhorn Entity prior to the Closing Date, and for the products to be delivered under the Contract referred to in Section 2.3(h), in an aggregate amount in excess of approximately $2.7 million (which amount shall be updated by Seller in good faith at the Closing by written notice to Buyer), and any such warranty claims in excess thereof shall be released and discharged.

Section 9.11         LeTourneau Trademark, Name and Class.  Seller shall, at all times during the life of any Longhorn drilling rigs it owns (whether now or in the future), prominently display the “LeTourneau” name and class designation on such rigs (the “Rig Names”) and identify it as a Longhorn design and class.  Seller may also use the Rig Names in its marketing or other written or electronic materials to identify the Rigs.  Nothing herein shall be construed to grant any right or license to any of the trademarks or the class designations of any Longhorn Entity except the right to use as expressly described in this Section 9.11 the “LeTourneau” name and class designation, and nothing in this Agreement shall be construed in any way to limit the use of any such trademarks or class designations by the Longhorn Entities.

 

 

Section 10.1          Termination Events.  This Agreement and the Transactions may, by notice given prior to or at the Closing, be terminated:

 

(a)           by mutual agreement of Buyer and Seller;

 

(b)          by Buyer, on the one hand, or Seller, on the other hand, if the Closing has not occurred (other than as a result of the failure of any party seeking to terminate this Agreement to comply with its obligations under this Agreement) on or before (i) November 13, 2012 or (ii) such later date as the Parties may agree upon in writing (such applicable date specified in the preceding clauses (i) and (ii) being referred to herein as the “Outside Date”);

 

(c)          by Seller, on the one hand, or by Buyer, on the other hand, if a material breach of this Agreement has been committed by the other party and such material breach has not been cured within 30 days after notice thereof to such other party or expressly waived in writing;

 

(d)          (i) by Buyer if satisfaction of any of the conditions in Section 6.1 becomes impossible prior to the Outside Date (other than as a result of the failure of Buyer to comply with its obligations under this Agreement) and Buyer has not expressly waived such condition in writing on or before termination of this Agreement; or (ii) by Seller, if satisfaction of any of the conditions in Section 6.2 becomes impossible prior to the Outside Date (other than as a result of the failure of Seller to comply with its obligations under this Agreement) and Seller has not expressly waived such condition in writing on or before termination of this Agreement; or

 

(e)          by either Buyer or Seller if there shall be any Legal Requirement that makes consummation of the Transactions contemplated by this Agreement illegal or otherwise prohibited or if consummation of the Transactions contemplated by this Agreement would violate any non-appealable Order of any Governmental Entity having competent jurisdiction.

Section 10.2         Effect of Termination.  The Parties’ termination rights under Section 10.1 are in addition to any other rights they may have under this Agreement or otherwise, and the exercise of a right of termination hereunder will not be an election of remedies.  If this Agreement is terminated pursuant to Section 10.1, all further obligations of the Parties under this Agreement will terminate; provided, however, that if this Agreement is terminated by Buyer, on the one hand, or Seller, on the other hand, because of the willful breach of this Agreement by the other or because one or more of the conditions to the terminating Parties’ obligations under this Agreement is not satisfied as a result of the other Parties’ failure to comply with any of their obligations under this Agreement, the terminating Parties’ right to pursue all legal remedies will survive such termination unimpaired; provided further, that the provisions of Section 9.4, this Section 10.2, and Article 11 shall survive any termination of this Agreement.

 

MISCELLANEOUS

 

 

 

“338(h)(10) Entity” shall have the meaning set forth in Section 8.10(a).

 

“Accountant” shall have the meaning set forth in Section 1.3(c).

 

“Affiliate” of a Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned Person.  For purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through ownership of voting securities or by contract or otherwise, and the terms “controlling” and “controlled by” have meanings correlative to the foregoing.

 

“Agreement” shall mean this Stock Purchase Agreement.

 

“Antitrust Approvals” shall mean the expiration or termination of the waiting period under the HSR Act.

 

“Antitrust Laws” shall mean the HSR Act and any other applicable antitrust or competition Legal Requirement.

 

“Asset Allocation” shall have the meaning set forth in Section 8.10(c).

 

“Balance Sheet” shall have the meaning set forth in Section 3.4.

 

“Balance Sheet Date” shall mean December 31, 2010.

“Books and Records” shall mean all books, records and other documents in the possession or control of the Longhorn Entities or that otherwise relate to the Business or the Longhorn Entities.  Notwithstanding the foregoing, “Books and Records” shall not include (A) the corporate income Tax Returns (including any group filings to which the Longhorn are party) of entities other than Longhorn, (B) information (other than information that is in the possession or control of a Longhorn Entity or is subject to a common interest, joint defense or similar arrangement) the disclosure of which would reasonably be expected to jeopardize applicable attorney/client privilege or work product protections of Seller, or (C) information relating to Seller’s review, evaluation or negotiation of this Agreement and the transactions related thereto.

 

“Business” shall have the meaning set forth in the Recitals.

 

“Business Day” shall mean any day other than a Saturday, Sunday or day on which banks are permitted to close in Houston, Texas.

 

“Buyer” shall have the meaning set forth in the first paragraph of this Agreement.

 

“Buyer Indemnified Parties” shall have the meaning set forth in Section 7.2(b).

 

“Buyer Welfare Plans” shall have the meaning set forth in Section 9.1(c).

 

“Cap” shall have the meaning set forth in Section 7.2(f)(iii).

 

“Cash” shall mean cash, cash equivalents convertible to cash within 60 days, bank notes and marketable securities.

 

“CERCLA” shall mean the United States Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., as amended.

 

“Claim” shall have the meaning set forth in Section 7.2(c).

 

“Claim Notice” shall have the meaning set forth in Section 7.2(c).

 

“Cleanup” shall mean any investigation, cleanup, removal, containment or other remediation or response actions of or relating to Hazardous Materials under applicable Environmental Law.

 

“Closing” shall have the meaning set forth in Section 2.1.

 

“Closing Date” shall mean the date on which the Closing occurs, which shall be five Business Days following the date on which all conditions set forth in Article 6 shall have been satisfied or waived (other than any such conditions which by their terms are not capable of being satisfied until the Closing).

 

“Closing Payment” shall have the meaning set forth in Section 1.2.

 

 “COBRA” shall mean health insurance coverage required to be provided under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Compensatory Award Consideration” shall have the meaning set forth in Section 1.4(a).

 

“Confidential Information” shall have the meaning set forth in Section 9.4(b).

 

“Consent” shall mean any approval, consent, ratification, clearance, exemption, waiver, or other authorization from any Person (including any Governmental Authorization).

 

“Contract” shall mean any agreement, contract, note, loan, evidence of indebtedness, letter of credit, indenture, security or pledge agreement, covenant not to compete, license, lease, instrument, commitment, consensual obligation, commercial relationship evidenced by a course of dealing (whether or not legally binding), promise or undertaking (whether written or oral and whether express or implied) (other than purchase orders in the Ordinary Course Of Business).

 

“Damages” shall have the meaning set forth in Section 7.2(a).

 

“Deductible” shall have the meaning set forth in Section 7.2(f)(ii).

 

“Default” means (i) a breach of or default under any Contract, (ii) the occurrence of an event that with the passage of time or the giving of notice or both would constitute a breach of or default under any Contract or (iii) the occurrence of an event that with or without the passage of time or the giving of notice or both would give rise to a right of termination, renegotiation or acceleration, or a loss of benefit, under any Contract.

 

“Determination Date” shall have the meaning set forth in Section 1.3(e).

 

“Disclosure Letter” shall mean the disclosure letter prepared and delivered by Seller for and to Buyer and dated as of the date of this Agreement which sets forth the exceptions to the representations and warranties contained herein and certain other information called for by this Agreement.  Unless otherwise specified, each reference in this Agreement to any numbered schedule is a reference to that numbered schedule which is included in the Disclosure Letter.

 

“Discretionary Award Compensation” shall have the meaning set forth in Section 1.4(a).

 

“Employee Plan” shall mean (a) all “employee benefit plans,” as defined in Section 3(3) of ERISA, (b) all other material severance pay, salary continuation, bonus, incentive, stock option or other equity-based, retirement, pension, profit sharing, deferred compensation, employment, vacation, supplemental retirement, fringe benefit, retention, change of control, medical, life insurance, disability plans, programs, agreements, policies, contracts, funds or arrangements of any kind, and (c) all other material employee benefit plans, contracts, programs, agreements, policies, contracts, funds or arrangements of any kind and any trust, escrow, or similar agreement related thereto, in each case, that are contributed to, sponsored or maintained by Longhorn or any of its Subsidiaries or with respect to which Longhorn or any of its Subsidiaries has any liability, contingent or otherwise, as of the date hereof and that are for the benefit of any present or former employee, director, officer or consultant of Longhorn or any of its Subsidiaries (or any of their dependents, survivors or beneficiaries).

“Encumbrance” shall mean any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, deed of trust, mortgage, right-of-way, easement, encroachment, servitude, right of first option, right of first refusal or similar restriction, including any restriction on use, voting (in the case of any security or equity interest), transfer, receipt of income or exercise of any other attribute of ownership.

 

“Environment” shall mean soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins and wetlands), groundwater, drinking water supply, stream sediments, ambient air, plant and animal life and any other environmental medium or natural resource.

 

“Environmental Claim” means any investigation, hearing, claim, action, suit, litigation or proceeding by any Person relating to liability or potential liability (including liability or potential liability for enforcement, investigatory costs, cleanup costs, governmental response costs, property damage, natural resource damages or assessment costs, personal injury, fines or penalties) arising out of, based on or resulting from (i) the discharge, emission, Release of any Hazardous Materials, (ii) circumstances forming the basis of any violation of any Environmental Laws or Environmental Permits, or (iii) otherwise relating to obligations or liabilities under any Environmental Law.

 

“Environmental Law” shall mean all federal, state, provincial, regional, district, local and foreign laws, all rules or regulations promulgated thereunder, ordinances, codes, common law and all orders, consent orders, judgments, rulings, notices, notice requirements and licenses, or permits issued, promulgated or entered pursuant thereto, relating to pollution, protection, preservation, or conservation of the Environment and natural resources, including without limitation (i) laws relating to Releases of Hazardous Materials, (ii) laws relating to the identification, generation, manufacture, processing, distribution, use, treatment, storage, disposal, recovery, transport or other handling of Hazardous Materials and (iii) laws relating to worker health and safety, or public health, each as they relate to exposure to Hazardous Materials.  Environmental Laws shall include, without limitation, CERCLA, the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), as amended, the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Safe Drinking Water Act (21 U.S.C. § 349, 42 U.S.C. §§ 201, 300f et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Emergency Planning and Community Right to Know Act (42 U.S.C. § 11001 et seq.), the Atomic Energy Act (42 U.S.C. § 2014 et seq.); the Occupational Safety and Health Act (29 U.S.C. §651 et seq.), or any other similar federal, state, provincial, regional, district, local or foreign law of similar effect, each as amended.

 

“Environmental Permits” shall mean all licenses, permits, approvals, registrations, notifications, authorizations, consents or orders of, or filings with, any Governmental Entity required for the operation of the Business under Environmental Laws.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974 or any successor law, and regulations and rules issued pursuant to that Act or any successor law.

 

“ERISA Affiliate” shall mean any Person which is (or at any relevant time was) a member of a “controlled group of corporations” with or under “common control” with Seller and its Subsidiaries as defined in Section 414(b) or (c) of the Code or which is otherwise (or at any relevant time was) required to be treated, together with Seller and its Subsidiaries, or as the case may be, as a single employer under Sections 414(m) or (o).

 

“Facilities” shall mean all plants, offices, manufacturing facilities, stores, warehouses, improvements, administration buildings, and all real property and related facilities and real property used or held for use in the Business.

 

“Final Net Working Capital” shall have the meaning set forth in Section 1.3(e).

 

“Final Net Working Capital Statement” shall have the meaning set forth in Section 1.3(e).

 

“Financial Statements” shall have the meaning set forth in Section 3.4.

 

“Foreign Benefit Plan” shall have the meaning set forth in Section 3.10(c).

 

 “Fundamental Reps” shall have the meaning set forth in Section 7.1.

 

“GAAP” shall mean United States generally accepted accounting principles and practices applied on a consistent basis.

 

“Good Standing” with respect to a company or corporation means that such company or corporation is current in all required filings with any Governmental Entity in its incorporating jurisdiction or jurisdiction(s) where it carries on business, as applicable, and in all payments of governmental fees or Taxes in such applicable jurisdiction(s), where the failure to make such filings or payments would make it liable to cease to exist under the laws of the incorporating jurisdiction or jurisdiction(s) where it carries on business, as applicable.

“Governmental Authorization” shall mean any approval, Consent, entitlement, registration, franchise, certificate, exemption, variance, license, permit (including any Environmental Permit), waiver or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Entity or pursuant to any Legal Requirement.

 

“Governmental Entity” shall mean any:

 

(a)           nation, state, province, county, city, town, village, district or other jurisdiction of any nature;

 

(b)          federal, state, provincial, district, local, municipal, foreign or other government;

(c)          governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official or entity, any court or other tribunal); or

 

(d)          body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature.

 

“Governmental Prohibition” shall have the meaning set forth in Section 6.1(c).

 

“Hazardous Materials” shall mean any and all materials (including wastes,  substances, pollutants, and contaminants) whether solids, liquids or gases, including any mixture or solution thereof, that are prohibited, limited, regulated or potentially regulated by any applicable Environmental Law, including any materials that are listed, defined, designated or classified as, or otherwise determined to be, hazardous, radioactive infectious, reactive, corrosive, ignitable, flammable or toxic, or whose presence at some quantity is capable of causing harm or injury to human health or the Environment, or requires notification, or Cleanup, or could give rise to Liability, under any Environmental Law, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor, polychlorinated biphenyls, radon gas, lead-based paint, urea formaldehyde and asbestos or asbestos-containing materials.

 

“HSR Act” shall have the meaning set forth in Section 5.3(b).

 

“Indebtedness” of any Person shall mean, without duplication, (i) all indebtedness of such Person for borrowed money; (ii) all capital lease obligations of such Person and (iii) guarantees by such Person of Indebtedness of others.

 

“Insurance Policies” shall have the meaning set forth in Section 3.18(a).

 

“Intellectual Property” shall mean: (a) inventions and discoveries (whether or not patentable and whether or not reduced to practice), improvements thereto, and patents, patent applications, invention disclosures, and other rights of invention, worldwide, including without limitation any reissues, divisions, continuations and continuations-in-part, provisionals, non-provisionals, PCTs, reexamined patents or other applications or patents claiming priority to or the benefit of the filing date of any such application or patent; (b) trademarks, service marks, trade names, trade dress, logos, Internet domain names, product names and slogans, including any common law rights, registrations, and applications for registration for any of the foregoing, and the goodwill associated with all of the foregoing, worldwide; (c) copyrightable works, all rights in copyrights, including moral rights, copyrights, website content, packaging design and art work, and other rights of authorship and exploitation, and any applications, registrations and renewals in connection therewith, worldwide; (d) confidential and proprietary information, including without limitation customer and supplier lists and related information, pricing and cost information, business and marketing plans, research and development, advertising statistics, any other financial, marketing and business data, technical data, specifications, designs, drawings, methods, schematics and know-how (collectively, “Trade Secrets”); (e) to the extent not covered by subsections (a) through (d), above, software and websites (including all related computer code and content); (f) all claims, causes of action and rights to sue for past, present and future infringement, misappropriation or unconsented use of any of the Intellectual Property, the right to file applications and obtain registrations, and all products, proceeds and revenues arising from or relating to any and all of the foregoing, throughout the world; and (g) any other proprietary, intellectual property and other rights relating to any or all of the foregoing anywhere in the world.

“Intellectual Property Assets” shall mean all Intellectual Property owned by or licensed to Longhorn or its Subsidiaries.

 

“Intercompany Arrangements” shall mean all Contracts of any type between Seller or any of its Affiliates (other than the Longhorn Entities), on the one hand, and Longhorn or its Subsidiaries with respect to the Business, on the other hand.

 

“Knowledge” shall mean, with respect to Seller, the actual knowledge of any and all officers of Seller and any and all officers of Longhorn.

 

“Leased Real Property” shall have the meaning set forth in Section 3.7(c).

 

“Legal Proceeding” shall mean any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Entity or arbitrator.

 

“Legal Requirement” shall mean any federal, state, provincial, local, municipal, foreign, international, multinational or other administrative order, constitution, law, ordinance, code, rule, regulation, principle of common law, Order, regulation, statute or treaty, including any Governmental Authorization.

 

“Liability” shall mean any direct or indirect liability, indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person of any type, whether known, unknown, accrued, absolute, contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued and whether due or to become due, regardless of when asserted.

 

 “Longhorn 401(K) Plan” shall have the meaning set forth in Section 9.1(b)(ii).

 

“Longhorn Compensatory Award” shall have the meaning set forth in Section 1.4(a).

 

“Longhorn Employees” shall have the meaning set forth in Section 9.1(a).

 

“Longhorn” shall have the meaning set forth in the Recitals.

 

“Longhorn Entities” shall mean Longhorn and its direct and indirect Subsidiaries.

 

“Longhorn Insurance Policies” shall have the meaning set forth in Section 3.18(b).

 

“Longhorn Service” shall have the meaning set forth in Section 9.1(c).

“Longhorn Stock” shall have the meaning set forth in the Recitals.

 

 “Material Adverse Effect” shall mean any change, effect, event, circumstance, occurrence, state of facts or development that, individually or in the aggregate with all other changes, effects, events, circumstances, occurrences, states of facts or developments, has, or is reasonably likely to have, a material adverse effect on the condition (financial or other), business, results of operations, Liabilities, assets, operations of the Business and the Longhorn Entities, taken as a whole, other than any change, effect, event, circumstance, occurrence, state of facts or development to the extent resulting from the following: (i) general economic, financial market, regulatory or political conditions, any outbreak of hostilities or war, acts of terrorism, natural disasters or other force majeure events, in each case in the United States or elsewhere; (ii) changes in or events or conditions generally affecting the industries or segments in which the Business operates; (iii) changes in commodity prices; (iv) any change in Legal Requirements or changes to GAAP or interpretations thereof; (v) the negotiation, execution, announcement or pendency of this Agreement, any actions taken in compliance with this Agreement or the consummation of the transactions contemplated hereby; (vi) the loss of any employees, suppliers, distributors, dealers or customers, other than as a result of a breach of Section 5.2; (vii) the filing, defense or settlement of any legal proceedings made or brought by any of the current or former stockholders of Buyer or Seller (on their own behalf or on behalf of Buyer or Seller) arising out of or related to this Agreement or the transactions contemplated hereby; (viii) the failure to take action as a result of any restrictions or prohibitions set forth in Section 5.2 with respect to which Buyer has refused, following Seller’s written request, to provide a waiver in a timely manner or at all; or (ix) the failure of Longhorn or any of its Subsidiaries to meet any internal industry analyst projections or forecasts or estimates of revenues or earnings for any period, except that clause (ix) shall not prevent any underlying causes of such failure from being considered in determining whether a Material Adverse Effect has occurred and except, in the case of clauses (i) (other than with respect to the flooding described in the force majeure letters described in Schedule 3.8), (ii), (iii) and (iv), to the extent that such changes, effects, events, circumstances, occurrences, states of facts or developments referred to therein have a materially disproportionate impact on the Business and the Longhorn Entities taken as a whole relative to other Persons operating in the mining and drilling products industries.

 

“Multiemployer Plan” shall mean any “multiemployer plan,” as defined in Section 4001(a)(3) of ERISA, whether or not subject to ERISA.

 

“Net Proceeds” shall have the meaning set forth in Section 7.2(f)(vi).

 

 “Net Working Capital” means, as of the close of business on the Closing Date, (i) the sum of Longhorn’s total consolidated current assets, net of applicable allowances and reserves, minus (ii) the sum of Longhorn’s total consolidated current liabilities; provided, however, that the calculation of Net Working Capital shall exclude, whether as a current asset or current liability, the following items: Cash, deferred income tax assets and liabilities and all current income tax receivables and payables, amounts paid or payable under Section 1.4 and all payments due to or from the Longhorn Entities, Seller or its Subsidiaries in respect of any Intercompany Arrangements.  Net Working Capital shall be calculated in U.S. Dollars.

“Net Working Capital Resolution Period” shall have the meaning set forth in Section 1.5(b).

 

“Net Working Capital Statement” shall have the meaning set forth in Section 1.5(a).

 

“Order” shall mean any award, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made or rendered by any court, administrative agency or other Governmental Entity or by any arbitrator.

 

“Ordinary Course of Business” shall describe any action taken by a Person if:

 

(a)          such action is consistent in manner and amount with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; and

 

(b)          such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority) and is not required to be authorized by the parent company (if any) of such Person.

 

“Organizational Documents” shall mean (a) the articles or certificate of incorporation, all certificates of determination and designation, and the bylaws of a corporation; (b) the partnership agreement and any statement of partnership of a general partnership; (c) the limited partnership agreement and the certificate or articles or declaration of limited partnership of a limited partnership; (d) the operating agreement, limited liability company agreement and the certificate or articles of organization or formation of a limited liability company; (e) the declaration of trust or similar document of any trust; (f) any charter or similar document adopted or filed in connection with the creation, formation or organization of a Person; and (g) any amendment to any of the foregoing.

 

“Outside Date” shall have the meaning set forth in Section 10.1(b).

 

“Owned Real Property” shall have the meaning set forth in Section 3.7(a).

 

“Parties” shall mean the parties to this Agreement.

 

“PBGC” shall mean the Pension Benefits Guaranty Corporation or any successor organization.

 

“Pension Plan” shall mean any “employee pension benefit plan” as defined in Section 3(2) of ERISA, whether or not subject to ERISA (other than a Multiemployer Plan), exclusive of any such plan that is required by any Legal Requirements.

 

“Permits” shall mean all licenses, permits, franchises, approvals, registrations, authorizations, certificates, easements, variances, exemptions, or similar rights, Consents or orders of, or filings with, any Governmental Entity, or any other Person, necessary for the present conduct of, or related to the operation of the Business under any Legal Requirements including without limitation any Environmental Permits.

“Permitted Encumbrances” shall mean (i) Encumbrances consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of real property or irregularities in title thereto which do not materially detract from the value of, or materially impair the use of, such property as it is presently used in connection with the Business, (ii) Encumbrances for current Taxes, assessments or governmental charges or levies on property not yet delinquent or Encumbrances for Taxes, assessments or governmental charges or levies being contested in good faith in appropriate proceedings, and for which adequate reserves with respect thereto are maintained on the books of the applicable Longhorn Entity in conformity with GAAP, (iii) mechanic’s, materialmen’s and similar liens arising in the Ordinary Course of Business or by operation of law and (iv) any conditions that are legibly shown on surveys for real property previously delivered to Buyer which do not materially impair the use of such property as it is presently used in connection with the Business.

 

“Person” shall mean any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, estate, trust, association, organization, labor union or other entity or Governmental Entity.

 

“Post-Closing Tax Period” shall mean any Tax period beginning after the Closing Date and the portion of any Straddle Period beginning after the Closing Date.

 

“Pre-Closing Tax Period” shall mean any Tax period ending on or before the Closing Date and the portion of any Straddle Period ending on the Closing Date.

 

“Purchase Consideration” shall have the meaning set forth in Section 1.2(a).

 

“Real Property” shall have the meaning set forth in Section 3.7(c).

 

“Real Property Leases” shall have the meaning set forth in Section 3.7(b).

 

“Release” shall mean any spilling, leaking, pumping, pouring, injecting, emitting, discharging, dispersal, depositing, escaping, migration, leaching, dumping, disposal or other releasing into the Environment, whether intentional or unintentional, and as otherwise defined in any Environmental Law.

 

“Representative” shall mean any officer, director, principal, legal counsel, agent, employee or other representative.

 

“Restricted Business” shall have the meaning set forth in Section 9.6(a).

 

“Restricted Party” shall have the meaning set forth in Section 9.6(a).

 

“Restricted Period” shall have the meaning set forth in Section 9.6(a).

 

“Section 338(h)(10) Election” shall have the meaning set forth in Section 8.10(a).

 

“Section 338 Election Forms” shall have the meaning set forth in Section 8.10(b).

 

“Seller” shall have the meaning set forth in the first paragraph of this Agreement.

“Seller Indemnified Parties” shall have the meaning set forth in Section 7.2(a).

 

“Straddle Period” shall mean any Tax period beginning on or before and ending after the Closing Date.

 

“Subsidiary” shall mean, with respect to Seller, any corporation or other Person that holds any assets related to or used in connection with the Business, of which securities or other interests having the power to elect a majority of that corporation’s or other Person’s board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held or controlled, directly or indirectly, by Seller.

 

 “Target Net Working Capital” shall mean an amount of Net Working Capital as of 5:00 pm Central time on the Closing Date equal to $281,765,000.

 

 “Tax” or “Taxes” shall mean any federal, state, provincial, local or foreign income, gross receipts, license, payroll, employment-related, excise, goods and services, harmonized sales, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, escheat liability, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto.

 

“Tax Benefit” means any credit or refund of Taxes or reduction in the amount of Taxes which otherwise would be owed by the indemnitee, as applicable, in each case computed at the highest marginal tax rates applicable to the recipient of such benefit.

 

“Tax Contest” means any audit, other administrative proceeding or inquiry or judicial proceeding involving Taxes.

 

“Tax Return” means any return, declaration, report, claim for refund, or information return or statement related to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

“Threatened” shall describe any claim, Legal Proceeding, dispute, action or other matter if (i) any demand has been made (orally or in writing) with respect to such claim, Legal Proceeding, dispute, action or other matter, or (ii) any notice has been given (orally or in writing) with respect thereto.

 

“Trade Secrets” shall have the meaning set forth in the definition of Intellectual Property.

 

“Transactions” shall mean the acquisition of the Longhorn Stock and the other transactions contemplated by this Agreement.

 

“Transfer Taxes” shall have the meaning set forth in Section 8.7.

“Treasury Regulations” shall mean the Treasury Regulations promulgated under the Code.

 

“U.S. Benefit Plan” shall have the meaning set forth in Section 3.10(b).

 

“Vale Prepayment Amount” shall mean the good faith estimate of Seller at the Closing of the remaining amount of Longhorn’s Vale prepayment liability (which, as of March 31, 2011, is $69,059,000).

 

Section 11.2          Notices.  All notices, requests, demands, Claims and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy, electronic or digital transmission method (but not electronic mail); the day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (e.g., Federal Express); and five Business Days after the date mailed by certified or registered mail, postage prepaid, if sent by certified or registered mail, return receipt requested.  In each case notice shall be sent to:

 

If to Seller, addressed to:

Rowan Companies, Inc.

2800 Post Oak Boulevard, Suite 5450

Houston, Texas 77056-6189

Attn: John L. Buvens, Jr.,

Telephone: (713) 621-7800

Fax: (713) 960-7509

Latham & Watkins LLP

717 Texas Street, Suite 1600

Houston, Texas 77002

Attn:       William N. Finnegan IV, Esq.

 Sean T. Wheeler, Esq.

Telephone:   ###-###-####

Fax:   ###-###-####

If to Buyer, addressed to:

Joy Global Inc.

100 East Wisconsin Avenue, Suite 2780

Milwaukee, Wisconsin 53202

Attn:  Sean D. Major, Esq.,

Telephone:   ###-###-####

Fax:   ###-###-####

Covington & Burling LLP

1201 Pennsylvania Avenue, NW

Washington, DC 20004-2401

Attn: W. Andrew Jack, Esq.

Telephone: (202) 662-6000

Fax: (202) 662-6291

or to such other place and with such other copies as either party may designate as to itself by written notice to the others.

 

Section 11.3          Titles.  The titles, captions or headings of the Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

 

Section 11.4          Entire Agreement.  This Agreement, including the Exhibits hereto, the Disclosure Letter and the other agreements, documents and written understandings referred to herein or otherwise entered into or delivered by the Parties hereto on the date of this Agreement, constitute the entire agreement and understanding and supersede all other prior covenants, agreements, undertakings, obligations, promises, arrangements, communications, representations and warranties, whether oral or written, by any party hereto or by any director, officer, employee, agent, Affiliate or Representative of any party hereto.  There are no covenants, agreements, undertakings or obligations with respect to the subject matter of this Agreement other than those expressly set forth or referred to herein or in other agreements, documents and written understandings entered into or delivered by the Parties hereto on the date of this Agreement, and no representations or warranties of any kind or nature whatsoever, express or implied, including any implied warranties of merchantability or fitness for a particular purpose, are made or shall be deemed to be made herein by the Parties hereto except those expressly made herein.

 

Section 11.5          Assignment.  Neither this Agreement nor any of the rights or obligations hereunder may be assigned by Seller without the prior written consent of Buyer or by Buyer without the prior written consent of Seller; provided, however, that (without the consent of Seller) Buyer may assign this Agreement in whole or in part to any of its Affiliates (including, without limitation, Buyer’s right to acquire the Longhorn Stock); provided further that no such assignment shall release the assignor from any of its obligations hereunder.

 

Section 11.6          Amendment or Modification.  This Agreement may not be amended except in an instrument in writing signed on behalf of each of the Parties hereto.  No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby.

Section 11.7          Waiver.  Except where a specific period for action or inaction is provided herein, neither the failure nor any delay on the part of any party in exercising any right, power or privilege under this Agreement or the documents referred to in this Agreement shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.  The failure of a party to exercise any right conferred herein within the time required shall cause such right to terminate with respect to the transaction or circumstances giving rise to such right, but not to any such right arising as a result of any other transactions or circumstances.

 

Section 11.8          Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms or other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the Transactions are fulfilled to the greatest extent possible.

 

Section 11.9          Burden and Benefit.  This Agreement shall be binding upon and shall inure to the benefit of, the Parties hereto and their respective successors and permitted assigns.  This Agreement and all of its conditions and provisions are for the sole and exclusive benefit of the Parties hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to confer upon any Person other than the Parties hereto any rights or remedies of any nature whatsoever under or by reason of this Agreement or any provision hereof; provided, however, that any Person that is not a party to this Agreement but, by the terms of Section 7.2, is entitled to indemnification, of the indemnification provisions set forth herein shall be considered a third-party beneficiary of this Agreement, with full rights of enforcement of the indemnification provisions set forth herein as though such Person was a signatory to this Agreement.

 

Section 11.10        Governing Law.  This Agreement (and any claim or controversy arising out of or relating to this Agreement) shall be governed by the law of the State of Delaware without regard to conflict of law principles that would result in the application of any law other than the law of the State of Delaware.

 

Section 11.11       Waiver of Trial by Jury.  EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.11.

Section 11.12        Consent to Jurisdiction.  Each party to this Agreement hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Delaware Chancery Court, any other Delaware state court, and any Federal court of the United States of America, sitting in Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the Transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the Parties hereby irrevocably and unconditionally (A) agrees not to commence any such action or proceeding except in such courts, (B) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware Chancery Court, any other Delaware State court or, to the extent permitted by law, in such Federal court, (C) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware Chancery Court or other Delaware State or Federal court, and (D) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Delaware Chancery Court or other Delaware State or Federal court.  Each of the Parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 11.2.  Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

 

Section 11.13        Legal Fees.  If any party to this Agreement brings an action to enforce its rights under this Agreement, the prevailing party shall be entitled to recover its costs and expenses, including without limitation reasonable legal fees, incurred in connection with such action, including any appeal of such action.

 

Section 11.14        Specific Performance.  Each of the Parties hereto acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with its specific terms or otherwise are breached.  Accordingly, each of the Parties hereto agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity.

 

Section 11.15        Cumulative Remedies.  Except as expressly provided otherwise in this Agreement, all rights and remedies of either party hereto are cumulative of each other and of every other right or remedy such party may otherwise have at law or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies.

Section 11.16        Expenses.  Except as otherwise expressly provided herein, whether or not the Transactions are consummated, all costs and expenses incurred in connection with this Agreement and the Transactions shall be paid by the party incurring such expenses.  Notwithstanding the foregoing, without limitation, Seller shall be responsible for the payment of all fees of legal counsel to Seller and Buyer shall be responsible for the payment of all fees of legal counsel to Buyer directly related to the Transactions.

 

Section 11.17        Representation by Counsel.  Each party hereto represents and agrees with each other that it has been represented by or had the opportunity to be represented by, independent counsel of its own choosing, and that it has had the full right and opportunity to consult with its respective attorney(s), that to the extent, if any, that it desired, it availed itself of this right and opportunity, that it or its authorized officers (as the case may be) have carefully read and fully understand this Agreement in its entirety and have had it fully explained to them by such party’s respective counsel, that each is fully aware of the contents thereof and its meaning, intent and legal effect, and that it or its authorized officer (as the case may be) is competent to execute this Agreement and has executed this Agreement free from coercion, duress or undue influence.

 

Section 11.18        Execution and Counterparts.  This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed an original and all of which together shall constitute one and the same instrument.  The Parties agree that this Agreement shall be legally binding upon the electronic transmission, including by facsimile or email, by each party of a signed signature page to this Agreement to the other party.

 

Section 11.19        Limitation of Liability.  Notwithstanding anything to the contrary in this Agreement, in no event shall any party hereto be liable for any punitive damages arising from a claim brought by another party hereto occasioned by any failure to perform or the breach of any obligation under this Agreement.

 

Section 11.20        Currency References; Interpretation.  All references to dollars in this Agreement shall be deemed to refer to such amounts in United States Dollars.  For purposes of this Agreement: (i) the table of contents and headings contained in this Agreement are for reference purposes only and shall in no way modify or restrict any of the terms or provisions hereof, (ii) except as expressly provided herein, the terms “include,” “includes” or “including” are not limiting and “or” and “either” are not exclusive, (iii) the words “hereof” and “herein” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, (iv) article, section, paragraph, exhibit, annex and schedule references are to the articles, sections, paragraphs, exhibits, annexes and schedules of this Agreement unless otherwise specified, (v) the meaning assigned to each term defined herein shall be equally applicable to both the singular and the plural forms of such term, and words denoting any gender shall include all genders, (vi) a reference to any party to this Agreement or any other agreement or document shall include such party's successors and permitted assigns, (vii) a reference to any Legal Requirement or other legislation or to any provision of any Legal Requirement or legislation shall include any amendment to, and any modification or re-enactment thereof, any provision substituted therefor and all regulations and statutory instruments issued thereunder or pursuant thereto, (viii) capitalized terms used and not defined in the exhibits, annexes and schedules attached to this Agreement shall have the respective meanings set forth in this Agreement, and (ix) for purposes of this Agreement and the Disclosure Letter (including the schedules hereto), the phrases “has made available to Buyer,” “previously made available to Buyer” or “previously provided” and similar expressions in respect of any document or information will be construed for all purposes of this Agreement and the Disclosure Letter (including the schedules hereto) as meaning that a copy of such document or information was filed at least two Business Days prior to the date hereof in an electronic data room to which Buyer has access.

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed on their respective behalf, by their respective officers thereunto duly authorized, all as of the day and year first above written.

 

BUYER
JOY GLOBAL INC.
/s/ Sean D. Major
By:	Sean D. Major
Its:	Executive Vice President, General
	Counsel and Secretary
SELLER
ROWAN COMPANIES, INC.
/s/ J. Kevin Bartol
By:	J. Kevin Bartol
Its:	Senior Vice President, Corporate
	Development