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EXHIBIT 10.1
EXECUTION COPY
EQUITY PURCHASE AGREEMENT
Between
FRC ACQUISITIONS LLC
On Behalf of Itself and the other Buyers Named Herein
and
INGERSOLL-RAND COMPANY LIMITED
On Behalf of Itself and the other Sellers Named Herein
dated as of
August 25, 2004
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TABLE OF CONTENTS
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Page
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ARTICLE I PURCHASE AND SALE OF INTERESTS
1.1 Transfers by Sellers of the Acquired
Interests.......................................... 1
1.2
Consideration...........................................................................
2
1.3 The
Closing.............................................................................
3
1.4 Post-Closing Purchase Price
Adjustment.................................................. 6
1.5 Pre-Closing
Inventory...................................................................
10
1.6 Further
Assurances......................................................................
10
1.7 Purchase Price
Allocation...............................................................
11
1.8 AIM Program
Payment.....................................................................
12
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS
2.1 Organization of Certain
Sellers.........................................................
13
2.2
Subsidiaries............................................................................
14
2.3 Ownership of Acquired
Interests.........................................................
15
2.4 Authorization,
Etc......................................................................
16
2.5 Financial
Statements....................................................................
16
2.6 Absence of Undisclosed
Liabilities......................................................
16
2.7 No Approvals or
Conflicts...............................................................
17
2.8 Compliance with Law; Governmental
Authorizations........................................ 18
2.9
Litigation..............................................................................
18
2.10 Personal Property
Assets................................................................
18
2.11 Absence of Certain
Changes..............................................................
19
2.12 Tax
Matters.............................................................................
20
2.13 Employee
Benefits.......................................................................
22
2.14 Labor
Relations.........................................................................
24
2.15 Intellectual
Property...................................................................
24
2.16
Contracts...............................................................................
25
2.17 Environmental
Matters...................................................................
27
2.18
Insurance...............................................................................
29
2.19 Real
Property...........................................................................
29
2.20 Product Liability and Product
Warranty.................................................. 31
2.21 No Brokers' or Other
Fees...............................................................
31
2.22 Relations with
Governments..............................................................
31
2.23 No Other Representations or
Warranties.................................................. 32
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYERS
3.1
Organization............................................................................
32
3.2 Authorization,
Etc......................................................................
32
3.3 No Approvals or
Conflicts...............................................................
32
3.4
Financing...............................................................................
33
3.5 No Brokers' or Other
Fees...............................................................
34
3.6 Unregistered
Equity.....................................................................
34
3.7 No Other Representations or
Warranties.................................................. 34
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ARTICLE IV CONDITIONS TO SELLERS' OBLIGATION
4.1 Representations and
Warranties..........................................................
34
4.2
Performance.............................................................................
35
4.3 Officer's
Certificate...................................................................
35
4.4 Consents and
Approvals..................................................................
35
4.5
Injunctions.............................................................................
35
4.6
Guarantees..............................................................................
35
ARTICLE V CONDITIONS TO BUYERS' OBLIGATION
5.1 Representations and
Warranties..........................................................
36
5.2
Performance.............................................................................
36
5.3 Officer's
Certificate...................................................................
36
5.4 Consents and
Approvals..................................................................
36
5.5
Injunctions.............................................................................
36
5.6 Satisfaction and Release of
Encumbrances................................................ 37
5.7 Material Adverse
Effect.................................................................
37
5.8 French Offer
Letter.....................................................................
37
5.9 Interim
Financials......................................................................
37
ARTICLE VI COVENANTS AND AGREEMENTS
6.1 Conduct of Business by Dresser-Rand
Group............................................... 37
6.2 Access to Books and Records;
Cooperation................................................ 39
6.3 Filings and
Consents....................................................................
40
6.4 Tax Matters; Cooperation; Preparation of Returns; Tax
Elections......................... 41
6.5 Tax
Indemnity...........................................................................
43
6.6 Procedures Relating to Indemnification for
Taxes........................................ 45
6.7 Refunds and Tax
Benefits................................................................
47
6.8 Employees; Benefit
Plans................................................................
47
6.9 Labor
Matters...........................................................................
55
6.10 Covenant to Satisfy
Conditions..........................................................
55
6.11 Contact With Customers and
Suppliers....................................................
55
6.12
Projections.............................................................................
55
6.13 No
Hire.................................................................................
56
6.14 Use of
Names............................................................................
56
6.15 Environmental Rights and Responsibilities After Execution
of Agreement.................. 57
6.16 Intercompany
Debt.......................................................................
64
6.17 Substitute
Guarantees...................................................................
64
6.18 Plaintiff
Actions.......................................................................
65
6.19
Financing...............................................................................
65
6.20 Pending Insurance
Claim.................................................................
67
6.21 Transfers of Non-U.S.
Interests.........................................................
68
6.22 Real Property
Deeds.....................................................................
68
6.23 Estimated Customer Prepayments
Statement................................................ 69
6.24 Currency
Conversion.....................................................................
69
6.25
Insurance...............................................................................
69
ARTICLE VII TERMINATION
7.1
Termination.............................................................................
70
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7.2 Procedure and Effect of
Termination.....................................................
71
ARTICLE VIII INDEMNIFICATION
8.1
Indemnification.........................................................................
71
ARTICLE IX MISCELLANEOUS
9.1 Fees and Expenses; Transfer
Taxes....................................................... 76
9.2 Governing
Law...........................................................................
77
9.3
Amendment...............................................................................
77
9.4 No
Assignment...........................................................................
77
9.5
Waiver..................................................................................
77
9.6
Notices.................................................................................
77
9.7 Complete
Agreement......................................................................
78
9.8
Counterparts............................................................................
79
9.9
Publicity...............................................................................
79
9.10 Certain
Definitions.....................................................................
79
9.11
Headings................................................................................
81
9.12
Severability............................................................................
81
9.13 Third
Parties...........................................................................
81
9.14 CONSENT TO
JURISDICTION.................................................................
81
9.15 WAIVER OF JURY
TRIAL....................................................................
81
9.16 Specific
Enforcement....................................................................
82
9.17 Guarantee of Seller
Obligations.........................................................
82
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EXHIBITS
Exhibit A - Buyers and Sellers
Exhibit B - Dresser-Rand Restructuring Steps
Exhibit C - Form of Transition Services Agreement
Exhibit D - Form of License Agreement
Exhibit E - Environmental Reporting Procedures
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EQUITY PURCHASE AGREEMENT
This Equity Purchase Agreement (this "Agreement"), dated as
of
August 25, 2004, is entered into by and among FRC Acquisitions
LLC, Delaware
limited liability company ("FRC"), on behalf of itself and the
other buyers set
forth on Exhibit A hereto (collectively with FRC, the "Buyers")
and
Ingersoll-Rand Company Limited, a company organized under the
laws of Bermuda
("IR"), on behalf of itself and the other sellers set forth on
Exhibit A hereto
(collectively with IR, the "Sellers").
WHEREAS, IR indirectly owns all of the issued and
outstanding
capital stock or partnership interests of each other Seller;
WHEREAS, the Sellers (other than IR) directly own capital stock
or
other equity interests (the "Acquired Interests") in the
entities which are not
at the time of the Closing a subsidiary of another member of the
Dresser-Rand
Group (as defined in Section 2.2), including as set forth on
Exhibit A hereto;
WHEREAS, the Dresser-Rand Group is in the business of, among
other
things, the design, manufacture, sale, maintenance and repair of
gas and steam
compression equipment (including centrifugal and reciprocating
compressors and
steam and gas turbines), all as currently conducted by the
Dresser-Rand Group
(the "Business"; provided that, the "Business" shall not include
IR and its
subsidiaries' high-capacity hoists and winch business); and
WHEREAS, the Sellers wish to sell, and the Buyers wish to buy,
the
Acquired Interests, upon the terms and subject to the conditions
set forth in
this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the
mutual covenants contained herein, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF INTERESTS
1.1 Transfers by Sellers of the Acquired Interests. On the
Closing
Date (as defined in Section 1.3) and subject to the terms and
conditions set
forth in this Agreement, the Sellers shall sell, assign and
transfer to Buyers
all of the Sellers' right, title and interest in and to the
Acquired Interests
in accordance with the restructuring steps and others
transactions set forth on
Exhibit B hereto, free and clear of all options, pledges,
mortgages, security
interests, liens, restrictions on voting or transfer, or other
encumbrances of
any nature (collectively, "Encumbrances"), other than such as
may be created by
or on behalf of the Buyers; provided, however, that with respect
to entities in
the Dresser-Rand Group incorporated or organized under the laws
of any
jurisdiction outside of the United States ("Non-U.S. Acquired
Interests"), the
purchase and sale thereof shall be effected in accordance with
Section 6.21 to
the extent the parties so
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agree. No transfer of partnership interests pursuant to the
terms of this
Agreement shall cause such partnership to dissolve or
terminate.
1.2 Consideration.
(a) On the Closing Date and subject to the terms and
conditions set forth in this Agreement, in consideration of the
sale, assignment
and transfer of the Acquired Interests, FRC, on behalf of the
Buyers, will pay
to the Sellers cash in the amount of (A) One Billion Two Hundred
Million dollars
($1,200,000,000), plus (B) the Estimated Net Cash Amount (as
defined in Section
1.2(b)), minus (C) the EBITDA Adjustment Amount (as defined in
Section 1.2(d))
(the "Initial Purchase Price", and as further adjusted pursuant
to the
provisions of this Agreement, the "Purchase Price"). The parties
hereto agree
that the Initial Purchase Price in respect of particular
Non-U.S. Acquired
Interests may be paid by the applicable Buyer to the applicable
Seller under a
Local Transfer Agreement (as defined in Section 6.21(b)), if
applicable.
(b) As of a date reasonably proximate (which is intended to
be
the third (3rd) business day preceding the anticipated Closing
Date) to the
Closing Date, IR shall provide Buyers a schedule setting forth
reasonably
estimated Cash (as defined in Section 1.4(f)) of the
Dresser-Rand Group by
entity as of the Closing. No later than three (3) business days
prior to the
anticipated Closing Date, IR shall prepare, or cause to be
prepared, a statement
(the "Estimated Net Cash Statement") containing IR's good faith
estimate of the
Net Cash Amount (the "Estimated Net Cash Amount"), which shall
be prepared in
accordance with the definition of Net Cash Amount in Section
1.4(f) and the
methodologies set forth in Section 1.2(b) of the disclosure
schedule being
delivered by the Sellers to the Buyers simultaneously with the
execution of this
Agreement and forming a part of this Agreement (the "Disclosure
Schedule"). IR
shall provide the Buyers and their accountants' reasonable
access to all
relevant books, records, facilities and employees of the
Dresser-Rand Group and
to any other information reasonably necessary to review and
understand the
Estimated Net Cash Statement. The Estimated Net Cash Statement
prepared in
accordance with this Section 1.2(b) shall be final and not
subject to objection
from Buyers for purposes of calculating the Initial Purchase
Price at the
Closing.
(c) The Buyers shall, following written notice to Sellers,
who
shall have an opportunity to review and understand such notice,
(i) withhold and
deduct from the Purchase Price or any other payment made by the
Buyers pursuant
to this Agreement any and all amounts required to be withheld
and paid over to
any Taxing Authority (as defined in Section 2.12(a)) as a result
of the
transactions contemplated by this Agreement, (ii) pay over to
the applicable
Taxing Authority any amounts required to be so withheld and
(iii) promptly
deliver to the Sellers any withheld amounts remaining thereafter
in Buyer's
custody (including, without limitation, any withheld amounts
subsequently
refunded to Buyer). Such notice shall set forth in reasonable
detail the basis
for such withholding or deduction. Any amounts withheld and paid
over to any
applicable Taxing Authority in accordance with the first
sentence above (other
than Transfer Taxes, which shall be governed by Section 9.1(b))
shall be treated
as having been received by Sellers for all purposes of this
Agreement.
Notwithstanding the foregoing, if Buyers
2
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determine that they are required to withhold and deduct any
amounts under this
Section 1.2(c) from payments made under this Agreement, Buyers
shall reasonably
cooperate with Sellers to consider and implement alternative
structures that
would permit such payments to be made without such withholding
or deduction and
otherwise would not, in Buyers' reasonable judgment, alter the
economics or
practicability of the transactions contemplated by this
Agreement. If such
withholding or deduction is nonetheless required, Buyers shall
use reasonable
best efforts to provide Sellers certified copies of receipts (or
other evidence
reasonably satisfactory to Sellers) evidencing payment of such
withheld amounts
as soon as reasonably possible after making such payments.
(d) For purposes of this Agreement, the following terms
shall
have the following meanings:
"Business EBITDA" shall mean operating income plus depreciation
and
amortization of the Dresser-Rand Group and the Business for the
twelve months
ended June 30, 2004, as set forth in the applicable financial
statements of the
Dresser-Rand Group and the Business, calculated in accordance
with the
methodology set forth in Section 1.2(d) of the Disclosure
Schedule.
"EBITDA Adjustment Amount" shall mean an amount, if any, equal
to
eight times the EBITDA Deficiency.
"EBITDA Deficiency" shall mean, only if a positive number,
(1)
Business EBITDA calculated based on the financial statements, as
set forth in
Section 1.2(d) of the Disclosure Schedule, minus (2) Business
EBITDA calculated
based on the SAS Financial Statements and Audited Financial
Statements, minus
(3) $6.6 million.
1.3 The Closing.
(a) Closing. Unless this Agreement shall have been
terminated
and the transactions contemplated herein shall have been
abandoned pursuant to
Article VII, the closing of the transactions contemplated by
this Agreement (the
"Closing") shall take place at the offices of Skadden, Arps,
Slate, Meagher &
Flom, 4 Times Square, New York, NY 10036, on the third business
day following
the satisfaction or waiver of all of the conditions set forth in
Articles IV and
V hereof (the "Closing Date"), or at such other place and time
as may be agreed
upon by the Sellers and the Buyers, and shall be effective as of
11:59 P.M.
local time on the Closing Date. The parties will use
commercially reasonable
efforts to schedule the Closing to occur effective as of 11:59
P.M. local time
on October 31, 2004.
(b) Deliveries by the Sellers. At the Closing, the Sellers
shall deliver or cause to be delivered to the Buyers the
following:
(i) stock certificates (or local legal equivalent)
evidencing those Acquired Interests that are certificated
securities, duly
endorsed in blank, or accompanied by stock powers duly executed
in blank
and with any required stock transfer tax stamps affixed;
3
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(ii) a receipt from IR, on behalf of itself and the
other Sellers, for the Initial Purchase Price paid to the
Sellers;
(iii) IR shall pay by wire transfer of immediately
available funds to an account or accounts, which are designated
by Buyers
to IR not less than two (2) business days prior to the Closing,
cash in
the amount equal to the sum of the following (the "Closing
Payment"): (A)
the Estimated Customer Prepayments Amount (as defined in Section
6.23) as
set forth on the Estimated Customer Prepayments Statement (as
defined in
Section 6.23), plus (B) $17,000,000;
(iv) the Transaction Agreements (as defined below) to
which each Seller is a party, duly executed by each relevant
Seller;
(v) copies of the resolutions (or local equivalent) of
the boards of directors and, where required, the stockholders of
each
Seller, authorizing and approving this Agreement and the
Transaction
Agreements and the transactions contemplated hereby and thereby,
certified
by the respective corporate secretaries (or local equivalent) of
the
applicable Sellers to be true and complete and in full force and
effect
and unmodified as of the Closing Date;
(vi) the Consents listed in Section 2.7 of the
Disclosure Schedule;
(vii) a duly executed certificate of non-foreign status
(a "FIRPTA Certificate") from each of the Sellers in a form and
manner
that complies with Section 1445 of the Code and the Treasury
Regulations
promulgated thereunder, provided, however, that if a FIRPTA
Certificate is
unable to be furnished by a Seller, then such Seller may instead
provide a
certificate (an "Alternate Certificate") pursuant to which such
Seller
certifies under penalties of perjury that it is not disposing of
any
United States real property interest (as defined in Section
897(c) of the
Code and the Treasury Regulations promulgated thereunder).
Notwithstanding
anything to the contrary contained herein, if any Seller fails
to provide
to Buyer a FIRPTA Certificate or Alternate Certificate, Buyer
shall be
entitled to withhold from the Purchase Price or any other
payment made
pursuant to this Agreement the amount required to be withheld
pursuant to
Section 1445 of the Code and the Treasury Regulations
promulgated
thereunder;
(viii) the certificate required by Section 5.3 hereof;
(ix) written resignations, effective as of the Closing
Date, of the directors, officers and the foreign equivalents
of
4
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members of the Dresser-Rand Group that are employed by IR
following the
Closing; and
(x) such other documents and certificates duly executed
as may be reasonably required to be delivered by the Sellers
pursuant to
the terms of this Agreement or as may be reasonably requested by
Buyers
prior to the Closing Date.
For purposes of this Agreement, "Transaction Agreements" shall
mean (a) with
respect to the Acquired Interests, such instruments of sale,
conveyance,
transfer and assignment, and such other agreements or documents,
if any, in each
case in form and substance reasonably satisfactory to IR and the
Buyers, as
shall be necessary in order to transfer all right, title and
interest of the
applicable Sellers in such Acquired Interests in accordance with
the terms
hereof, (b) the Transition Services Agreement substantially in
the form attached
as Exhibit C hereto (the "Transition Services Agreement"), (c)
the License
Agreement substantially in the form attached as Exhibit D hereto
(the "License
Agreement"), (d) the French Offer Letter and (e) any Local
Transfer Agreements.
(c) Deliveries by the Buyers. At the Closing, the Buyers
shall
deliver or cause to be delivered to or for the benefit of the
Sellers the
following:
(i) the Initial Purchase Price by wire transfer of
immediately available funds to an account or accounts, which
are
designated by IR to the Buyers not less than two (2) business
days prior
to the Closing;
(ii) a receipt from FRC, on behalf of itself and the
other Buyers, evidencing receipt of the Acquired Interests and
the Closing
Payment;
(iii) copies of the resolutions of the board of
directors (or comparable governing body) of each Buyer
authorizing and
approving this Agreement and the Transaction Agreements and
the
transactions and agreements contemplated hereby and thereby,
certified by
the corporate secretary of each Buyer to be true and complete
and in full
force and effect and unmodified as of the Closing Date;
(iv) the Transaction Agreements to which each Buyer is a
party, duly executed by such Buyer;
(v) the Consents listed in Section 2.7 of the Disclosure
Schedule;
(vi) the certificate required by Section 4.3 hereof;
(vii) the Guarantees (as defined in Section 4.6)
described in Section 4.6 hereof; and
5
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(viii) such other documents and certificates duly
executed as may be reasonably required to be delivered by the
Buyers
pursuant to the terms of this Agreement or as may be reasonably
requested
by Sellers prior to the Closing Date.
(d) All instruments and documents executed and delivered to
the Buyers pursuant hereto shall be in form and substance, and
shall be executed
in a manner, reasonably satisfactory to the Buyers. All
instruments and
documents executed and delivered to the Sellers pursuant hereto
shall be in form
and substance, and shall be executed in a manner, reasonably
satisfactory to the
Sellers.
1.4 Post-Closing Purchase Price Adjustment.
(a) Within ninety (90) days after the Closing Date, Sellers
will prepare, or cause to be prepared, (i) a statement (the
"Closing Working
Capital Statement") containing calculations of the net working
capital of the
Dresser-Rand Group as of 11:59 P.M. local time on the Closing
Date (the "Closing
Net Working Capital Amount"); (ii) a statement (the "Closing Net
Cash
Statement") containing a calculation of the Net Cash Amount (the
"Closing Net
Cash Amount"), which shall be prepared in accordance with the
definition of Net
Cash Amount in Section 1.4(f) and the methodologies set forth in
Section 1.2(b)
of the Disclosure Schedule; and (iii) a statement (the "Closing
Customer
Prepayments Statement" and, together with the Closing Working
Capital Statement
and the Closing Net Cash Statement, the "Closing Statements")
containing a
calculation of the Customer Prepayments Amount (as defined in
Section 6.23) (the
"Closing Customer Prepayments Amount"), which shall be prepared
in accordance
with the methodologies set forth on Section 6.23 of the
Disclosure Schedule. The
Closing Working Capital Statement shall be prepared on a
combined basis in
conformity with accounting principles generally accepted in the
United States of
America ("GAAP"), applied on a basis consistent with the Audited
Financial
Statements, and shall be prepared on a basis consistent with,
and reflecting all
adjustments reflected on, the statement of net working capital
of the
Dresser-Rand Group as set forth in Section 1.4(a) of the
Disclosure Schedule
(the "Benchmark Net Working Capital Statement"). Buyers will
assist and
cooperate fully with the Sellers in the preparation of the
Closing Statements,
including by providing the Sellers and their accountants
reasonable access to
all relevant books, records, facilities and employees of the
Dresser-Rand Group
and to any other information reasonably necessary to prepare the
Closing
Statements.
(b) The Buyers shall, within thirty (30) days after the
delivery by the Sellers of the Closing Statements, complete
their review of such
statements and the calculation of the Closing Net Working
Capital Amount, the
Closing Net Cash Amount and the Closing Customer Prepayments
Amount. In the
event that the Buyers determine that the Closing Net Working
Capital Amount, the
Closing Net Cash Amount or the Closing Customer Prepayments
Amount have not been
determined on a basis consistent with the requirements of
Section 1.4(a), on or
before the last day of such 30-day period Buyers shall inform
the Sellers in
writing (the "Objection"), setting forth a specific description
of the basis of
the Objection, the adjustments to the Closing Net Working
Capital Amount, the
Closing Net Cash Amount and the Closing Customer Prepayments
6
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Amount which Buyers believe should be made, and Buyers'
calculation of the
Closing Net Working Capital Amount, the Closing Net Cash Amount
and the Closing
Customer Prepayments Amount. Buyers shall be deemed to have
accepted any items
in the Closing Working Capital Statement, the Closing Net Cash
Statement and the
Closing Customer Prepayments Statement and the calculation of
the Closing Net
Working Capital Amount, the Closing Net Cash Amount and the
Closing Customer
Prepayments Amount not specifically disputed in the Objection.
For the avoidance
of doubt, any dispute shall be limited to the dollar amounts of
the Closing Net
Working Capital Amount, the Closing Net Cash Amount and the
Closing Customer
Prepayments Amount identified in the Objection as a subject of
dispute. Failure
to deliver to the Sellers a timely written Objection satisfying
the requirements
of this Section 1.4(b) shall constitute acceptance and approval
of the Sellers'
calculation of the Closing Net Working Capital Amount, the
Closing Net Cash
Amount and the Closing Customer Prepayments Amount.
(c) The Sellers shall have thirty (30) days from the date
they
receive the Objection to review and respond to the Objection. If
the Sellers and
Buyers are unable to resolve all of their disagreements with
respect to the
determination of the disputed items within thirty (30) days
following the
completion of the Sellers' review of the Objection, after having
used their good
faith efforts to reach a resolution, they shall refer their
remaining
differences to Deloitte & Touche LLP or another
internationally recognized firm
of independent public accountants as to which the Sellers and
Buyers mutually
agree (the "CPA Firm"), who shall, acting as experts in
accounting and not as
arbitrators, determine on a basis consistent with the
requirements of Section
1.4(a), and only with respect to the specific remaining
accounting related
differences so submitted, whether and to what extent, if any,
the Closing Net
Working Capital Amount, the Closing Net Cash Amount or the
Closing Customer
Prepayments Amount require adjustment. In resolving any
remaining accounting
related differences, the CPA Firm may not assign a value to any
disputed item
greater than the greatest value for such item claimed by either
party or less
than the lowest value for such item claimed by either party. The
Sellers and
Buyers shall request the CPA Firm to use its best efforts to
render its
determination within 45 days. The CPA Firm's determination shall
be conclusive
and binding upon the Sellers and Buyers. The Sellers and Buyers
shall make
reasonably available to the CPA Firm all relevant books and
records, any work
papers (including those of the parties' respective accountants,
subject to any
customary agreements or documentation required by such
accounting firms) and
supporting documentation relating to the Closing Statements, the
calculation of
the Closing Net Working Capital Amount, the calculation of the
Closing Net Cash
Amount, the calculation of the Closing Customer Prepayments
Amount and all other
items reasonably requested by the CPA Firm. The "Final Net
Working Capital
Amount" shall ultimately be equal to (i) the Closing Net Working
Capital Amount
as shown on the Closing Working Capital Statement in the event
that (x) no
Objection is delivered to the Sellers during the initial 30-day
period specified
above, (y) the Objection delivered to the Sellers does not set
forth any dispute
with respect to the Closing Net Working Capital Amount or (z)
the Sellers and
Buyers so agree, (ii) the Closing Net Working Capital Amount as
adjusted in
accordance with the Objection, in the event that (x) the Sellers
do not respond
to the Objection within the specified 30-day period following
receipt by the
Sellers of the Objection or (y) the Sellers and Buyers so agree,
or (iii) the
Closing Net Working Capital Amount as adjusted by either (x)
the
7
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agreement of the Sellers and Buyers or (y) the CPA Firm. The
"Final Net Cash
Amount" shall ultimately be equal to (i) the Closing Net Cash
Amount as shown on
the Closing Net Cash Statement in the event that (x) no
Objection is delivered
to the Sellers during the initial 30-day period specified above,
(y) the
Objection delivered to the Sellers does not set forth any
dispute with respect
to the Closing Net Cash Amount or (z) the Sellers and Buyers so
agree, (ii) the
Closing Net Cash Amount as adjusted in accordance with the
Objection, in the
event that (x) the Sellers do not respond to the Objection
within the specified
30-day period following receipt by the Sellers of the Objection
or (y) the
Sellers and Buyers so agree, or (iii) the Closing Net Cash
Amount as adjusted by
either (x) the agreement of the Sellers and Buyers or (y) the
CPA Firm. The
"Final Customer Prepayments Amount" shall ultimately be equal to
(i) the Closing
Customer Prepayments Amount as shown on the Closing Customer
Prepayments
Statement in the event that (x) no Objection is delivered to the
Sellers during
the initial 30-day period specified above, (y) the Objection
delivered to the
Sellers does not set forth any dispute with respect to the
Closing Customer
Prepayments Amount or (z) the Sellers and Buyers so agree, (ii)
the Closing
Customer Prepayments Amount as adjusted in accordance with the
Objection, in the
event that (x) the Sellers do not respond to the Objection
within the specified
30-day period following receipt by the Sellers of the Objection
or (y) the
Sellers and Buyers so agree, or (iii) the Closing Customer
Prepayments Amount as
adjusted by either (x) the agreement of the Sellers and Buyers
or (y) the CPA
Firm. All fees and disbursements of the CPA Firm, if any, shall
be shared
equally by the Sellers, on the one hand, and the Buyers, on the
other hand.
(d) (i) If the Final Net Working Capital Amount is less than
One Hundred Forty-Nine Million Six Hundred Seventy-Seven
Thousand dollars
($149,677,000) (the "Base Amount"), the Sellers shall pay an
amount equal to (x)
the amount of such deficiency, plus (y) interest computed at the
Prime Rate (as
defined in Section 1.4(f)) for the period from the Closing Date
to the date of
such payment of such deficiency amount. Such payment shall be
made in
immediately available funds to the Buyers within three (3)
business days after
the ultimate determination of the Final Net Working Capital
Amount as provided
in this Section 1.4. If the Final Net Working Capital Amount is
greater than the
Base Amount, the Buyers shall pay to the Sellers an amount equal
to (x) the
amount of such excess, plus (y) interest computed at the Prime
Rate for the
period from the Closing Date to the date of such payment of such
excess amount.
Such payment shall be made in immediately available funds to the
Sellers within
three (3) business days after the ultimate determination of the
Final Net
Working Capital Amount as provided in this Section 1.4.
(ii) If the Final Net Cash Amount is greater than the
Estimated Net Cash Amount, the Buyers shall pay to the Sellers
an amount
equal to (x) the amount of such excess, plus (y) interest
computed at the
Prime Rate for the period from the Closing Date to the date of
such
payment of such excess amount. Such payment shall be made in
immediately
available funds to the Sellers within three (3) business days
after the
ultimate determination of the Final Net Cash Amount as provided
in this
Section 1.4. If the Final Net Cash Amount is less than the
Estimated Net
Cash Amount, the Sellers shall pay to the Buyers an
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<PAGE>
amount equal to (x) the amount of such deficiency, plus (y)
interest
computed at the Prime Rate for the period from the Closing Date
to the
date of such payment of such deficiency amount. Such payment
shall be made
in immediately available funds to the Buyers within three (3)
business
days after the ultimate determination of the Final Net Cash
Amount as
provided in this Section 1.4.
(iii) If the Final Customer Prepayments Amount is less
than the Estimated Customer Prepayments Amount, the Buyers shall
pay to
the Sellers an amount equal to (x) the amount of such
deficiency, plus (y)
interest computed at the Prime Rate for the period from the
Closing Date
to the date of such payment of such deficiency amount. Such
payment shall
be made in immediately available funds to the Sellers within
three (3)
business days after the ultimate determination of the Final
Customer
Prepayments Amount as provided in this Section 1.4. If the Final
Customer
Prepayments Amount is greater than the Estimated Customer
Prepayments
Amount, the Sellers shall pay to the Buyers an amount equal to
(x) the
amount of such excess, plus (y) interest computed at the Prime
Rate for
the period from the Closing Date to the date of such payment of
such
excess amount. Such payment shall be made in immediately
available funds
to the Buyers within three (3) business days after the
ultimate
determination of the Final Customer Prepayments Amount as
provided in this
Section 1.4.
(e) Any amount paid pursuant to this Section 1.4, Section
1.3,
Section 1.8, or Section 6.8(n)(ii) shall be deemed to be an
adjustment to the
Purchase Price.
(f) For purposes of this Agreement, the following terms
shall
have the following meanings:
"Cash" shall mean the sum of cash, cash equivalents and
liquid
investments, plus all deposited but uncleared bank deposits and
less all
outstanding checks of the Dresser-Rand Group, in each case with
foreign currency
converted in accordance with the Currency Conversion Rules.
"Debt Obligations" shall, as applied to any Person, mean,
without
duplication, (a) all indebtedness for borrowed money, (b) all
obligations
evidenced by a note, bond, debenture or similar instrument, (c)
that portion of
obligations with respect to capital leases that is properly
classified as a
liability on a balance sheet in conformity with GAAP, applied on
a consistent
basis with the Audited Financial Statements and (d) any
obligation owed for all
or any part of the deferred purchase price for the purchase of a
business, in
each case with foreign currency converted in accordance with the
Currency
Conversion Rules. For clarification, it is understood that
letters of credit and
similar credit support obligations shall not constitute "Debt
Obligations"
hereunder.
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"Net Cash Amount" shall mean an amount, positive or negative,
equal
to (A) Cash minus (B) the sum of (x) aggregate Debt Obligations
and (y)
$20,000,000, in each case as of 11:59 P.M. local time on the
Closing Date,
determined on a combined basis in accordance with GAAP, applied
on a basis
consistent with the Audited Financial Statements (except that
foreign currency
will be converted in accordance with the Currency Conversion
Rules).
"Prime Rate" means the rate of interest declared from time to
time
by JP Morgan Chase Bank as its "base rate."
1.5 Pre-Closing Inventory. Within thirty (30) calendar days
prior to
the Closing Date, unless the Buyers and Sellers agree otherwise,
representatives
of the Buyers and the Sellers shall jointly conduct a physical
count of the
inventory of the Dresser-Rand Group (such physical count to be
performed on a
basis consistent with the past practices of the Dresser-Rand
Group).
1.6 Further Assurances.
(a) After the Closing, each party hereto shall from time to
time, at the request of another party, execute and deliver such
other
instruments of conveyance and transfer and take such other
actions as such other
party may reasonably request in order to more effectively
consummate the
transactions contemplated hereby and to vest in the Buyers good
and valid title
to the Acquired Interests.
(b) Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement to
sell, convey,
assign, sublease or transfer any asset, contract or agreement if
any attempted
sale, conveyance, assignment, sublease or transfer of such
asset, contract or
agreement, without the Consent of another Person to such
transfer, would
constitute a breach by the Sellers or the Buyers with respect to
such asset.
Except with respect to the Consents required to be delivered at
the Closing
pursuant to Section 1.3(b)(vi), in the event that any required
Consent is not
obtained on or prior to the Closing, IR and the applicable
Seller will use their
commercially reasonable efforts to (i) provide to the applicable
Buyer the
benefits of the applicable asset, contract or agreement, (ii)
cooperate in any
reasonable and lawful arrangement designed to provide such
benefits to the
applicable Buyer and (iii) enforce at the request of the
applicable Buyer and
for the account of the applicable Buyer any rights of the
applicable Seller
arising from any such contract or agreement (including the right
to elect to
terminate such contract or agreement in accordance with the
terms thereof upon
the request of the applicable Buyer).
1.7 Purchase Price Allocation.
(a) The Buyers and the Sellers agree that the portion of the
total consideration (including, for all purposes of this Section
1.7, any
liabilities that are treated as having been assumed for Tax
purposes) that is
attributable to the Acquired Interests in any acquired entity
shall not be less
than the book value represented by such Acquired Interests as of
June 30, 2004
(to be adjusted as appropriate to reflect any
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<PAGE>
substantial changes in book value prior to Closing). The portion
of the total
consideration allocated to Dresser Rand S.A. is set forth on
Section 1.7 of the
Disclosure Schedule.
(b) The Buyers and the Sellers shall endeavor in good faith
to
agree, prior to the Closing, on an allocation of the total
consideration among
the Acquired Interests of each acquired entity, which allocation
shall
incorporate, reflect and be consistent with Section 1.7(a) (the
"Entity-Level
Purchase Price Allocation"). If the Buyers and the Sellers are
unable to agree
on such Entity-Level Purchase Price Allocation by September 30,
2004, the matter
shall be submitted to the CPA Firm whose determination shall be
binding on the
parties. The costs of such arbitration shall be shared
equally.
(c) With respect to the Acquired Interests in each acquired
entity that is disregarded for U.S. federal income Tax purposes
or for which an
election is made pursuant to Section 338(h)(10) of the Code or
any subsidiary of
such an acquired entity that is subject to similar treatment for
Tax purposes,
the Buyers and the Sellers shall endeavor in good faith to
agree, prior to the
Closing, to the extent possible, and in any event within 75 days
after the
Closing Date (or, if longer, within 75 days after the CPA Firm
determines the
Entity-Level Purchase Price Allocation), on a further allocation
among the
assets held by such entity, which allocation shall incorporate,
reflect and be
consistent with Section 1.7(a) and the Entity-Level Purchase
Price Allocation
(the "Asset-Level Purchase Price Allocation"). If the Buyers and
the Sellers are
unable to agree on such Asset-Level Purchase Price Allocation
within such time
period, the matter shall be submitted to the CPA Firm whose
determination shall
be binding on the parties. The costs of such arbitration shall
be shared
equally.
(d) In the event the total consideration is adjusted
hereunder
subsequent to the Closing, the Buyers and the Sellers agree to
allocate the
adjustment in the revised Entity-Level Purchase Price Allocation
and the
Asset-Level Purchase Price Allocation (collectively, the
"Purchase Price
Allocation") based upon the item or entity to which such
adjustment is
attributable, and, to the extent consistent with Sections 338
and 1060 of the
Code and the rules and Treasury Regulations promulgated
thereunder, any
adjustment that is not identified as attributable to a
particular item or entity
shall be allocated entirely among the Acquired Interests of
entities
incorporated or organized under the laws of the United States or
any state
thereof or the District of Columbia.
(e) The Buyers and the Sellers shall report the Tax
consequences of the transactions contemplated by this Agreement
in a manner
consistent with the Purchase Price Allocation, as may be revised
from time to
time in accordance with Section 1.7(d), and shall not take any
position
inconsistent therewith in preparing any Tax Returns, IRS Forms
8594 and any
other Tax forms or filings, as well as in preparing any
published financial
statements in accordance with GAAP, applied on a consistent
basis with the
Audited Financial Statements, and neither the Buyers nor the
Sellers shall take
any position inconsistent therewith upon examination of any Tax
Return, in any
Tax refund claim, or in any Tax litigation, investigation or
other proceeding,
without the prior written consent of the other party or unless
required to do so
pursuant to a determination
11
<PAGE>
(as defined in Section 1313(a) of the Code or any corresponding
or similar
provision of state, local or foreign law).
(f) The Buyers and the Sellers shall promptly inform one
another of any challenge by any Taxing Authority to any
allocation made pursuant
to this Section 1.7 and agree to consult and keep one another
informed with
respect to the status of, and any discussion, proposal or
submission with
respect to, such challenge.
1.8 AIM Program Payment. No later than 60 days after the
Closing
Date, IR shall prepare, or cause to be prepared, a statement
(the "AIM
Calculations Statement") containing IR's determination of (A)
the amount (the
"AIM Program Payment Amount") equal to the pro rata portion as
of 11:59 P.M.
local time on the Closing Date of the annual bonuses payable to
Dresser-Rand
Group Employees (as defined in Section 2.13(a)) pursuant to the
Annual Incentive
Management Program for the calendar year 2004 as in effect on
the date hereof
(the "AIM Program"), determined in accordance with the terms of
the AIM Program
and based upon financial performance and/or results determined
by IR and
employee performance determined by the Dresser-Rand Group (which
information
Buyer will cause the Dresser-Rand Group to provide as soon as
practicable after
the Closing Date) and (B) the federal, state, local and foreign
payroll and
other similar Taxes other than Social Security Taxes payable by
the Buyers and
the members of the Dresser-Rand Group as a result of the payment
to Dresser-Rand
Group Employees of bonuses under the AIM Program in the amount
of AIM Program
Payment Amount (the "Payroll Tax Amount"). In determining the
AIM Program
Payment Amount, the employee performance portion provided by the
Dresser-Rand
Group shall be subject to review and approval by IR, which shall
not be
unreasonably withheld. IR and FRC shall each provide the other
party and their
accountants reasonable access to all relevant books, records,
facilities and
employees of the Dresser-Rand Group and to any other information
reasonably
necessary to prepare, review and understand the AIM Calculations
Statement
(subject to reasonable restrictions imposed by IR or FRC, as the
case may be,
based on confidentiality concerns). Buyer shall have 15 days
from receipt to
review and comment upon the calculations set forth in the AIM
Calculations
Statement. In the event that Buyers, upon completion of their
review of the AIM
Calculations Statement, determine that the AIM Program Payment
Amount or the
Payroll Tax Amount have not been accurately calculated or have
not been
determined on a basis consistent with this Section 1.8, Buyers
and IR shall
cooperate in good faith to resolve such dispute. In the event
that Buyers and IR
are unable to resolve such dispute, the CPA Firm dispute
resolution provisions
of Section 1.4(c) hereof shall apply to resolve such dispute.
Upon final
determination of the AIM Program Payment Amount and the Payroll
Tax Amount
pursuant to this Section 1.8, but in no event more than three
(3) business days
thereafter, IR shall pay by wire transfer of immediately
available funds to an
account or accounts which are designated by Buyers to IR not
more than two (2)
business days following final determination thereof, cash in an
amount equal to:
(a) the AIM Program Payment Amount plus (b) the Payroll Tax
Amount.
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<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers, jointly and severally, hereby represent and warrant
to
the Buyers, as of the date of this Agreement, as follows:
2.1 Organization of Certain Sellers.
(a) IR is a company duly organized, validly existing and in
good standing under the laws of Bermuda. IR has all requisite
corporate power
and authority to own its assets and to carry on its business as
now being
conducted and is duly qualified or licensed to do business and
is in good
standing in the jurisdictions in which the ownership of its
property or the
conduct of its business requires such qualification or license,
except
jurisdictions in which the failure to be so qualified or
licensed would not have
or reasonably be expected to have, individually or in the
aggregate, a material
adverse effect on the abilities of the Sellers to consummate the
transactions
contemplated by this Agreement and the Transaction Agreements to
which such
Seller is a party.
(b) DR Holding Corp. ("DR Holding") is a corporation duly
formed, validly existing and in good standing under the laws of
the State of
Delaware. DR Holding has all requisite corporate power and
authority to own its
assets and to carry on its business as now being conducted and
is duly qualified
or licensed to do business and is in good standing in the
jurisdictions in which
the ownership of its property or the conduct of its business
requires such
qualification or license, except jurisdictions in which the
failure to be so
qualified or licensed would not have or reasonably be expected
to have,
individually or in the aggregate, a material adverse effect on
the ability of
the Sellers to consummate the transactions contemplated by this
Agreement and
the Transaction Agreements to which such Seller is a party.
(c) Ingersoll-Rand Company ("IRNJ") is a corporation duly
organized, validly existing and in good standing under the laws
of the State of
New Jersey. IRNJ has all requisite corporate power and authority
to own its
assets and to carry on its business as now being conducted and
is duly qualified
or licensed to do business and is in good standing in the
jurisdictions in which
the ownership of its property or the conduct of its business
requires such
qualification or license, except jurisdictions in which the
failure to be so
qualified or licensed would not have or reasonably be expected
to have,
individually or in the aggregate, a material adverse effect on
the ability of
the Sellers to consummate the transactions contemplated by this
Agreement and
the Transaction Agreements to which such Seller is a party.
2.2 Subsidiaries. Section 2.2(a) of the Disclosure Schedule
sets
forth for Dresser-Rand Company, a New York general partnership
(the
"Partnership"), Dresser-Rand Canada, Inc., a corporation
organized under the
laws of Canada ("D-R Canada") and each direct and indirect
subsidiary of the
Partnership (together with the Partnership, D-R Canada and each
entity
contemplated to be formed in accordance with Exhibit B as and
when formed, the
"Subsidiaries"; and all of the Subsidiaries sometimes being
13
<PAGE>
referred to collectively as the "Dresser-Rand Group"; for
clarification, for
purposes of this Article II and Section 6.1, the Dresser-Rand
Group shall not
include the entities in which the Dresser-Rand Group has an
equity interest that
are set forth in Section 2.2(b) of the Disclosure Schedule (the
"Minority
Interests")) and for each Minority Interest (i) its structure
(i.e.,
corporation, partnership, limited liability company, etc.), name
and
jurisdiction of incorporation, formation or organization, as
applicable, (ii)
the number of authorized, issued and outstanding shares of each
class of its
capital stock or other authorized, issued and outstanding equity
interests, as
applicable, the names of the holders thereof, and the number of
shares or
percentage interests, as applicable, held by each such holder
and (iii) its
entity classification for United States federal income Tax
purposes. Except as
set forth in Section 2.2(a) of the Disclosure Schedule, the
members of the
Dresser-Rand Group do not own any shares of any class of capital
stock of any
corporation or ownership or other equity interest in any other
Person (other
than their Subsidiaries and Minority Interests and other than
immaterial
investments). Each Subsidiary is duly formed or organized,
validly existing and,
where applicable, in good standing under the laws of its
jurisdiction of
incorporation, formation or organization, as applicable, has the
requisite
corporate or similar power and authority to own its assets and
to carry on its
business as now being conducted, and where applicable, is duly
qualified or
licensed to do business and is in good standing in the
jurisdictions in which
the ownership of its property or the conduct of its business
requires such
qualification or license, except jurisdictions in which the
failure to be so
qualified or licensed would not have or reasonably be expected
to have,
individually or in the aggregate, a Material Adverse Effect (as
defined below).
For purposes of this Agreement, a "Material Adverse Effect"
shall mean any
change, occurrence or development that has a materially adverse
effect on the
business, operations, results of operations, assets, liabilities
(except to the
extent assumed or retained by the Sellers hereunder) or
condition (financial or
otherwise) of the Business, taken as a whole, except that a
"Material Adverse
Effect" does not include any effect caused by a change,
occurrence or
development in (i) events affecting the United States, European
or global
economy or capital or financial markets generally, (ii)
conditions in the
industries in which the Dresser-Rand Group conducts business,
except to the
extent such changes, occurrences or developments impact the
Business in a
materially disproportionate fashion, (iii) laws, regulations or
GAAP, or in the
authoritative interpretations thereof or in regulatory guidance
related thereto,
(iv) earthquakes or similar catastrophes, or acts of war,
sabotage, terrorism,
hostilities, military action or any escalation or worsening
thereof (other than
actual damage or casualty loss to any member of the Dresser-Rand
Group or their
properties or assets) or (v) this Agreement, the announcement
thereof and the
consummation of the transactions contemplated by this Agreement.
All the
outstanding shares of capital stock or other equity interests of
such
Subsidiaries are duly authorized and validly issued and
outstanding, fully paid
and nonassessable (where applicable), were issued free of any
pre-emptive rights
and owned by the Persons set forth in Section 2.2(a) of the
Disclosure Schedule,
free and clear of all Encumbrances. Except as set forth in
Section 2.2(a) of the
Disclosure Schedule, there are no options, subscriptions,
warrants, calls,
commitments, agreements, contracts, understandings,
restrictions, pre-emptive
rights, arrangements or rights of any character with respect to
the securities
of the Subsidiaries or the issuance of additional securities of
the Subsidiaries
or the conversion or exchange of any security
14
<PAGE>
into, or equity security of, any Subsidiary. Complete and
correct copies of the
charter documents (or equivalent organizational documents) and
all amendments
thereto and the minute books of each of the Subsidiaries have
been made
available to the Buyers on or prior to the date of this
Agreement.
2.3 Ownership of Acquired Interests. Each Seller is the legal
and
beneficial owner of, and has good and marketable title to, the
Acquired
Interests being sold by such Seller hereunder, as set forth in
Section 2.2 of
the Disclosure Schedule, free and clear of all Encumbrances, and
such good and
marketable title may be transferred to the Buyers on the Closing
Date free and
clear of all Encumbrances, other than such as may be created by
or on behalf of
any of the Buyers.
2.4 Authorization, Etc. Each Seller has full corporate or
partnership power and authority to execute and deliver this
Agreement and the
Transaction Agreements to which it is a party and to carry out
and consummate
the transactions contemplated hereby to be carried out and
consummated by it.
This Agreement has been duly and validly authorized and no other
corporate
action or proceeding is necessary to authorize the execution,
delivery and
performance of this Agreement by IR or any Seller. This
Agreement has been duly
and validly executed by IR and, assuming this Agreement
constitutes the legal,
valid and binding agreement of FRC, constitutes a legal, valid
and binding
agreement of IR, enforceable against IR in accordance with its
terms, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights
generally, general equitable principles (whether considered in a
proceeding in
equity or at law) and an implied covenant of good faith and fair
dealing.
2.5 Financial Statements. Section 2.5 of the Disclosure
Schedule
sets forth (i) the audited combined balance sheet of the
Dresser-Rand Group and
the Business at December 31, 2003 (the "2003 Balance Sheet") and
the related
combined statements of income and cash flows, in each case,
including notes
thereto for the year ended December 31, 2003 (collectively, the
"Audited
Financial Statements") and (ii) the unaudited combined balance
sheet of the
Dresser-Rand Group and the Business as of June 30, 2004 (the
"Interim Balance
Sheet") and the related unaudited combined statements of income
and cash flows
for the six month period ended June 30, 2004 (collectively, the
"Interim
Financial Statements"). Such financial statements have been
prepared from the
books and records of the Dresser-Rand Group and the Business in
conformity with
GAAP, applied on a consistent basis, as in effect during the
periods indicated,
subject in the case of the Interim Financial Statements to the
absence of notes
and normal year end adjustments. The foregoing income statements
and statements
of cash flows, including notes in respect of the Audited
Financial Statements,
present fairly in all material respects the combined results of
operations and
cash flows of the Dresser-Rand Group and the Business for the
respective periods
covered, and the balance sheets, including notes in respect of
the Audited
Financial Statements, present fairly in all material respects
the combined
financial position of the Dresser-Rand Group and the Business,
as of their
respective dates, prepared in conformity with GAAP, applied on a
consistent
basis, as in effect during the periods indicated.
15
<PAGE>
2.6 Absence of Undisclosed Liabilities. To the Knowledge of
the
Sellers, the Dresser-Rand Group is not subject to any
liabilities or obligations
of any kind whatsoever (whether absolute, accrued, contingent or
otherwise, and
whether due or to become due), other than liabilities and
obligations (i)
reflected in the 2003 Balance Sheet (or disclosed in the notes
thereto) or the
Interim Balance Sheet, (ii) arising after June 30, 2004, in the
ordinary course
of business and consistent with past practices, (iii) which
would not have or
reasonably be expected to have, individually or in the
aggregate, a Material
Adverse Effect and (iv) obligations and liabilities otherwise
expressly
disclosed in Section 2.6(a) of the Disclosure Schedule or
recognizable as a
potential liability and disclosed in any other section of the
Disclosure
Schedule attached hereto. To the actual knowledge (without any
duty of inquiry)
of the individuals listed in Section 9.10(e) of the Disclosure
Schedule, (A)
except as set forth in Section 2.6(b) of the Disclosure
Schedule, there are no
material Proceedings pending against any of the Minority
Interests, (B) no
change, occurrence or development in respect of the Minority
Interests exists
which would reasonably be expected to have, individually or in
the aggregate, a
Material Adverse Effect, and (C) none of the Minority Interests
are subject to
any liabilities or obligations of any kind whatsoever (whether
absolute,
accrued, contingent or otherwise, and whether due or to become
due), other than
liabilities and obligations which would not have or reasonably
be expected to
have, individually or in the aggregate, a Material Adverse
Effect.
2.7 No Approvals or Conflicts. Except as set forth in Section
2.7 of
the Disclosure Schedule, the execution, delivery and performance
by the Sellers
of this Agreement and the consummation by the Sellers of the
transactions
contemplated hereby will not (i) violate, conflict with or
result in a breach by
any Seller or Subsidiary of any provision of any partnership
agreement, charter,
bylaws or equivalent formation or governance document of such
Seller or
Subsidiary, (ii) violate, conflict with or result in a breach of
any provision
of, or constitute a default by any Seller or Subsidiary (or
create an event
which, with notice or lapse of time or both, would constitute
such a default) or
give rise to any right of termination, cancellation or
acceleration under, or
result in the creation of any Encumbrance upon any of the
properties of any
Subsidiary under, any material note, bond, mortgage, indenture,
deed of trust,
license, franchise, permit, lease, contract, agreement or other
instrument or
understanding to which any Seller, any Subsidiary or any of
their respective
properties may be bound, (iii) violate or result in a breach, in
any material
respect, of any order, injunction, judgment, ruling,
constitution, treaty,
statute, law, rule or regulation (each, and collectively, "Law")
of any United
States or foreign federal, state, provincial or local government
or other
political subdivision thereof, any entity, authority or body
exercising
executive, legislative, judicial, regulatory or administrative
functions of any
such government or political subdivision, and any supranational
organization of
sovereign states exercising such functions for such sovereign
states (each, and
collectively, "Governmental Authority") applicable to any
Seller, any Subsidiary
or any of their respective properties or (iv) except for
applicable requirements
of the Hart-Scott Rodino Antitrust Improvements Act of 1976, as
amended (the
"HSR Act"), and any other Law that is designed or intended to
prohibit, restrict
or regulate (a) foreign investment or (b) antitrust,
monopolization, restraint
of trade or competition ("Competition/Investment Law") and in
each case as set
forth in Section 2.7 of the Disclosure Schedule, require any
material order,
consent, clearance, approval or
16
<PAGE>
authorization of, or notice to, or declaration, filing,
application,
qualification or registration with, any Governmental
Authority.
2.8 Compliance with Law; Governmental Authorizations. Except as
set
forth in Section 2.8 of the Disclosure Schedule, to the
Knowledge of the
Sellers, the Business has been conducted since January 1, 2001
in all material
respects in compliance with all Laws. Except as set forth in
Section 2.8 of the
Disclosure Schedule, to the Knowledge of the Sellers, no member
of the
Dresser-Rand Group is in violation of any order, injunction,
judgment, ruling,
Law or regulation of any court or Governmental Authority
applicable to the
property of the Dresser-Rand Group or the Business. Each member
of the
Dresser-Rand Group has all licenses, Consents, permits and other
governmental
authorizations ("Permits") necessary to conduct its business as
currently
conducted (all of which are valid and in full force and effect),
except where
the failure to have such Permits would not have or reasonably be
expected to
have, individually or in the aggregate, a Material Adverse
Effect.
2.9 Litigation. Except as set forth in Section 2.9 of the
Disclosure
Schedule, there are no material suits, actions, proceedings or
investigations
(collectively, "Proceedings") pending or, to the Knowledge of
the Sellers,
threatened against any Seller or any member of the Dresser-Rand
Group before any
arbitrator, court or Governmental Authority. Except as set forth
in Section 2.9
of the Disclosure Schedule, the Sellers have not received any
notice that any
Seller or any member of the Dresser-Rand Group or any of their
respective assets
are subject to any decree, order or judgment which would have or
reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect or
a material adverse effect on the ability of the Sellers to
consummate the
transactions contemplated by this Agreement or the Transaction
Agreements or
materially delay the consummation of the transactions
contemplated hereby or
thereby.
2.10 Personal Property Assets. Except as set forth in Section
2.10
of the Disclosure Schedule, on June 30, 2004, the Dresser-Rand
Group had and,
except with respect to personal property assets disposed of or
acquired in the
ordinary course of business consistent with past practice since
such date, the
Dresser-Rand Group now has, good and valid title to, or holds by
valid and
existing lease or license, all the personal property assets
reflected as assets
of the Dresser-Rand Group on the Interim Balance Sheet or which
would have been
reflected on the Interim Balance Sheet if acquired prior to such
date, free and
clear of all Encumbrances, except for (i) Encumbrances which
secure indebtedness
or obligations which are properly reflected on the Interim
Balance Sheet; (ii)
liens for Taxes (as defined in Section 2.12) not yet payable or
being contested
in good faith by appropriate proceedings; (iii) immaterial liens
arising as a
matter of law in the ordinary course of business, provided that
the obligations
secured by such liens are not delinquent or are being contested
in good faith;
and (iv) other Encumbrances which do not adversely affect the
use of the
applicable asset as currently used (collectively, "Permitted
Encumbrances").
Except as set forth in Section 2.10 of the Disclosure Schedule,
the tangible
personal property assets owned by or leased by the Dresser-Rand
Group, together
with the rights under the Transaction Agreements, constitute,
all material
tangible personal property assets used by the Dresser-Rand Group
in the
operation or the conduct of the Business, as currently
conducted, and all such
assets are in reasonably
17
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good maintenance, operating condition and repair, normal wear
and tear excepted,
other than machinery and equipment under repair or out of
service in the
ordinary course of business.
2.11 Absence of Certain Changes. Except as set forth in Section
2.11
of the Disclosure Schedule or as otherwise specifically provided
herein, since
December 31, 2003, (i) the Business has been conducted only in
the ordinary
course consistent with past practice in all material respects,
and (ii) there
has not been any event, occurrence or development of a state of
circumstances or
facts which has had, or would reasonably be expected to have,
individually or in
the aggregate, a Material Adverse Effect. Without limiting the
generality of the
foregoing, except as set forth in Section 2.11 of the Disclosure
Schedule or as
otherwise specifically provided herein, and except for the
transactions
contemplated hereby, from June 30, 2004 through the date of this
Agreement,
there has not been:
(a) any damage, destruction or loss (whether or not covered
by
insurance) materially affecting the operation of the
Business;
(b) any option, sale, purchase, subscription, warrant, call,
commitment contracts, understandings, restrictions,
arrangements, rights or
agreement of any character granted or made by any member of the
Dresser-Rand
Group in respect of its capital stock or other equity
interests;
(c) any issuance, declaration, setting aside or payment of
any
dividend or other distribution of cash or property on any of the
capital stock
or other equity interests of any member of the Dresser-Rand
Group (excluding
distributions by Subsidiaries to other Subsidiaries), or any
direct or indirect
redemption, purchase or other acquisition of any shares of
capital stock or
other equity interests of any member of the Dresser-Rand
Group;
(d) any strikes, work stoppages or other material labor
disputes involving employees of the Dresser-Rand Group;
(e) any amendment, termination, waiver or cancellation of
any
material term of any Material Contract (as defined in Section
2.16), or of any
material right or claim of any member of the Dresser-Rand Group
under any
Material Contract;
(f) any sale, transfer or other disposition of assets of the
Dresser-Rand Group having an aggregate value exceeding two
million dollars
($2,000,000), excluding sales of assets in the ordinary course
of business
consistent with past practice;
(g) any (i) general increase in the compensation of
employees
of the Dresser-Rand Group other than in the ordinary course of
business
consistent with past practice, (ii) increase in any compensation
(other than
salary compensation) payable to any officer or other member of
senior management
of the Dresser-Rand Group, whether or not in the ordinary course
of business
consistent with past practice or (iii) loan or commitment
therefor made by any
member of the Dresser-Rand Group to any officer or
18
<PAGE>
other member of senior management of the Dresser-Rand Group or
to any of the
Sellers or any of their officers, directors or Affiliates (other
than the
Dresser-Rand Group);
(h) any material change in the accounting methods or
practices
followed by any member of the Dresser-Rand Group (other than
such as have been
required by applicable law or GAAP);
(i) in each case, with respect to any member of the
Dresser-Rand Group, (i) any material adoption or change in any
election relating
to Taxes, (ii) any material adoption or change in any accounting
period or any
accounting method relating to Taxes, (iii) any entering into a
material closing
agreement, (iv) any settling of any material Tax claim or
assessment or (v) any
other similar action relating to Taxes; or
(j) any agreement or commitment by or on behalf of the
Dresser-Rand Group to do any of the foregoing.
2.12 Tax Matters.
(a) For purposes of this Agreement, the following terms
shall
have the following meanings:
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Tax" or "Taxes" shall mean (x) any taxes of any kind, including
but
not limited to those on or measured by or referred to as income,
gross receipts,
capital, sales, use, ad valorem, franchise, profits, license,
withholding,
payroll, employment, excise, severance, stamp, occupation,
premium, escheat,
value added, property or windfall profits taxes, customs, duties
or similar
fees, assessments or charges of any kind whatsoever, together
with any interest
and any penalties, additions to tax or additional amounts
imposed by any
governmental authority, domestic or foreign; (y) any liability
for the payment
of any amounts described in (x) as a result of being a member of
an affiliated,
consolidated, combined, unitary or similar group or as a result
of transferor or
successor liability, and (z) any liability for the payment of
any amounts as a
result of being a party to any tax-allocation or tax-sharing
agreement or as a
result of any express or implied obligation to indemnify any
other Person with
respect to the payment of any amounts of the type described in
clause (x) or
(y).
"Taxing Authority" shall mean, with respect to any Tax, the
government entity or political subdivision thereof that imposes
such Tax and the
agency (if any) charged with the collection of such Tax for such
entity or
subdivision.
"Tax Return" shall mean any return, report or statement required
to
be filed with any governmental authority with respect to Taxes,
including any
schedule or attachment thereto or amendment thereof.
"Treasury Regulations" shall mean the Treasury Regulations
promulgated under the Code.
19
<PAGE>
(b) Except as set forth in Section 2.12 of the Disclosure
Schedule:
(i) All material Tax Returns required to be filed prior
to or on the Closing Date by or on behalf of any member of
the
Dresser-Rand Group (separately or as part of an affiliated,
consolidated,
combined or unitary group) (A) have been or shall be timely
filed (subject
to permitted extensions applicable to such filing) and (B) are
true,
correct and complete in all material respects; and all Taxes of
the
members of the Dresser-Rand Group shown as due or payable on
such Tax
Returns have been or shall be paid within the prescribed period
or any
extension thereof, other than Taxes that are being contested in
good faith
for which adequate reserves have been established.
(ii) No claim for unpaid Taxes has become a lien against
the assets or any property of any member of the Dresser-Rand
Group or is
being asserted against any member of the Dresser-Rand Group
except for
liens for Taxes not yet due and payable for which adequate
reserves have
been established.
(iii) There are no (w) examinations, audits, actions,
proceedings, investigations or disputes pending, (x) claims
asserted in
writing for Taxes, (y) waivers or extensions of statutes of
limitation
with respect to Taxes currently in effect or (z) closing
agreements, or
similar agreements entered into or issued by any Taxing
Authority, in each
case, with respect to any member of the Dresser-Rand Group that
may, in
each case, increase any material Taxes of any member of the
Dresser-Rand
Group.
(iv) No member of the Dresser-Rand Group has been a
member of an affiliated, consolidated, combined or unitary group
as set
forth in Section 1504 of the Code or any corresponding or
similar
provision of state, local or foreign law other than a group the
common
parent of which is IRNJ, DR Holding or Dresser-Rand Company. No
member of
the Dresser-Rand Group is liable for Taxes of any taxpayer other
than IR
and its Affiliates under Treasury Regulation Section 1.1502-6
(or any
corresponding or similar provision of state, local or foreign
law), as a
transferee or successor, by contract, or otherwise.
(v) No member of the Dresser-Rand Group (A) is a party
to any material tax-allocation or tax-sharing agreement or (B)
to the
Knowledge of the Sellers, is a party to any other tax-allocation
or
tax-sharing agreement.
(vi) No member of the Dresser-Rand Group has reported
any "reportable transaction" as defined in Treasury Regulation
1.6011-4 or
any transaction that is required to be reported to any
Taxing
20
<PAGE>
Authority pursuant to any corresponding or similar provision of
state,
local or foreign law.
(vii) No member of the Dresser-Rand Group has been a
"distributing corporation" or a "controlled corporation" in a
transaction
pursuant to Section 355 of the Code within the last three
years.
2.13 Employee Benefits.
(a) Section 2.13(a) of the Disclosure Schedule sets forth a
list of each material "employee benefit plan" (within the
meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended
("ERISA")), and each severance, change in control or employment
plan, program or
agreement, and vacation, incentive, bonus, stock option, stock
purchase, and
restricted stock plan or policy sponsored or maintained by each
member of the
Dresser-Rand Group or by IRNJ, in which present or former
employees of any
member of the Dresser-Rand Group (the "Dresser-Rand Group
Employees")
participate (excluding any IRNJ plan or policy under which no
Dresser-Rand Group
Employee is currently accruing or has any right to accrue
benefits)
(collectively, the "Dresser-Rand Group Plans"). Dresser-Rand
Group Plans which
are sponsored or maintained by IRNJ or members of the
Dresser-Rand Group that
are domiciled in the United States of America shall hereinafter
be referred to
as "U.S. Dresser-Rand Group Plans" and Dresser-Rand Group Plans
which are not
U.S. Dresser-Rand Group Plans shall hereinafter be referred to
as "Non-U.S.
Dresser-Rand Group Plans".
(b) The Dresser-Rand Group Plans are in compliance in all
material respects with their terms and applicable requirements
of ERISA, the
Code, and other applicable laws. Each U.S. Dresser-Rand Group
Plan which is
intended to be qualified within the meaning of Section 401 of
the Code has
received a favorable determination letter as to its
qualification, and to the
Knowledge of the Sellers, nothing has occurred that could
reasonably be expected
to affect such qualification.
(c) No liability under Title IV of ERISA or Section 412 of
the
Code (including any liability relating to an "accumulated
funding deficiency")
has been incurred by any member of the Dresser-Rand Group or by
any other trade
or business, whether or not incorporated, that together with any
member of the
Dresser-Rand Group would be deemed a "single employer" for
purposes of Sections
414(b), (c), (m) or (o) of the Code (a "Dresser-Rand ERISA
Affiliate"), that, if
due and payable, has not been satisfied in full, and, to the
Knowledge of the
Sellers, as of the Closing Date no member of the Dresser-Rand
Group is
reasonably likely to incur material liability on or after the
Closing Date under
Title IV of ERISA or Section 412 of the Code for the
Dresser-Rand Group Plans
or, by reason of their membership in a controlled group under
Section 414 (b),
(c), (m) or (o) of the Code, for the plans of any Dresser-Rand
ERISA Affiliate,
in any case, other than liability for premiums due to the
Pension Benefit
Guaranty Corporation.
(d) No member of the Dresser-Rand Group has incurred,
directly
or indirectly, any liability in respect of any multiemployer
plan (as defined in
Section
21
<PAGE>
3(37) of ERISA or Section 414(f) of the Code (a "Multiemployer
Plan")) on
account of any "withdrawal", "partial withdrawal",
"Reorganization" or
"Insolvency" (all such terms within the meaning of Title IV of
ERISA), which
remain unsatisfied and would have, or reasonably be expected to
have,
individually or in the aggregate, a Material Adverse Effect.
With respect to all
Dresser-Rand Group Plans that are Multiemployer Plans to which
the Dresser-Rand
Group makes contributions, the aggregate withdrawal liability of
the
Dresser-Rand Group computed as if a complete withdrawal by all
members of the
Dresser-Rand Group had occurred under each such Multiemployer
Plans on the date
hereof, would not have, or reasonably be expected to have,
individually or in
the aggregate, a Material Adverse Effect.
(e) Except as set forth in Section 2.13(e) of the Disclosure
Schedule, no Dresser-Rand Group Employee is a party to, or
entitled to the
benefit of, any U.S. Dresser-Rand Group Plan which would provide
such employee
any payment or benefit (or accelerated payment or vesting
thereof) upon the
consummation of the transactions contemplated hereby or,
following such
consummation, upon the occurrence of some other event, whether
or not subject to
Section 280G of the Code. The transactions contemplated by this
Agreement
constitute a transfer of less than one-third of the total gross
fair market
value of all of the assets of Sellers and all members of
Seller's affiliated
group (as defined in Section 1504 of the Code, determined
without regard to
Section 1504(b) of the Code), immediately prior to the
Closing.
(f) There are no pending or, to the Knowledge of the
Sellers,
threatened claims or litigations with respect to any U.S.
Dresser-Rand Group
Plans, other than claims for benefits by participants and
beneficiaries, except
as set forth in Section 2.13(f) of the Disclosure Schedule.
(g) With respect to each Dresser-Rand Group Plan, the
Sellers
have made available to the Buyers (to the extent applicable, and
with respect to
the Non-U.S. Dresser-Rand Group Plans to the Knowledge of the
Sellers) (i) a
complete and accurate copy of each such plan (including the most
recent summary
plan description prepared with respect to such plan); (ii) the
most recent copy
of the annual report form (Form 5500 Series) of each such plan
for which such
form is required (including any schedules thereto); (iii) the
most recent
actuarial report for each such plan, and (iv) the most recent
copy of its
favorable determination letter.
(h) To the Knowledge of the Sellers, (i) each of the
Non-U.S.
Dresser-Rand Group Plans has been granted a Tax-favorable status
by the
applicable Taxing Authority, to the extent required under local
Law, (ii) such
Tax treatment to the extent granted has not been withdrawn by
the applicable
Taxing Authority, and (iii) no fact exists that would reasonably
be expected to
result in the withdrawal of such Tax treatment.
2.14 Labor Relations. Except as set forth in Section 2.14 of
the
Disclosure Schedule, (i) no member of the Dresser-Rand Group is
a party to any
collective bargaining agreement, work rules or practices, or any
other
labor-related agreements or arrangements with any labor union,
labor
organization or works council
22
<PAGE>
applicable to employees of any member of the Dresser-Rand Group,
nor is any such
contract or work rules or practices, or any other labor related
agreement
presently being negotiated; (ii) there is no unfair labor
practice charge or
complaint pending or, to the Knowledge of the Sellers,
threatened against or
otherwise affecting any member of the Dresser-Rand Group; (iii)
there is no
material grievance, arbitration hearing, or arbitration award
pending or, to the
Knowledge of the Sellers, threatened against or otherwise
affecting any member
of the Dresser-Rand Group; (iv) to the Knowledge of the Sellers,
none of the
members of the Dresser-Rand Group is in breach of any collective
bargaining
agreement; (v) there is no labor strike, slowdown, work
stoppage, or lockout in
effect, or, to the Knowledge of the Sellers, threatened against
or otherwise
affecting any member of the Dresser-Rand Group, and no member of
the
Dresser-Rand Group has experienced any such labor controversy
within the past
three years; (vi) no member of the Dresser-Rand Group is a party
to, or
otherwise bound by, any consent decree with, or citation by, any
governmental
authority relating to employees or employment practices; and
(vii) each member
of the Dresser-Rand Group is in compliance with its obligations
pursuant to the
Worker Adjustment and Retraining Notification Act of 1988 ("WARN
Act"), and all
other notification and bargaining obligations arising under any
collective
bargaining agreement, statute or otherwise. To the Knowledge of
the Sellers,
there is no effort to organize employees of any member of the
Dresser-Rand Group
which is pending or threatened.
2.15 Intellectual Property. "Intellectual Property" shall mean
all
(i) patents; (ii) inventions, discoveries, technology,
processes, formulae,
designs, models, industrial designs, know-how, confidential
information,
proprietary information and trade secrets, whether or not
patented or
patentable; (iii) trademarks, service marks, trade names, brand
names, trade
dress, slogans, logos and internet domain names; (iv) copyrights
and other
copyrightable works and works in progress, data, databases and
software; (v) all
other intellectual property rights and foreign equivalent or
counterpart rights
and forms of protection of a similar or analogous nature or
having similar
effect in any jurisdiction throughout the world; (vi) any
renewals, extensions,
continuations, divisionals, reexaminations or reissues or
equivalent or
counterpart of any of the foregoing in any jurisdiction
throughout the world;
and (vii) all registrations and applications for registration of
any of the
foregoing. Section 2.15 of the Disclosure Schedule lists all
patent, copyright,
domain names, trademark and service mark registrations or
applications for such
registrations owned by the members of the Dresser-Rand Group.
Except as would
not have or reasonably be expected to have, individually or in
the aggregate, a
Material Adverse Effect, or as otherwise set forth in Section
2.15 of the
Disclosure Schedule, (i) the members of the Dresser-Rand Group
own or have the
sole and exclusive right to use all Intellectual Property
necessary to operate
the Business as currently conducted ("Dresser-Rand Group
Intellectual Property")
free and clear of all Encumbrances, other than Permitted
Encumbrances; (ii) to
the Knowledge of the Sellers, the Dresser-Rand Group
Intellectual Property, and
the use thereof, does not infringe, and is not being infringed
by, the
Intellectual Property of any Person (including IR and its
Affiliates); (iii) no
suit, action, proceeding, judgment, order, injunction,
stipulation or decree is
pending, outstanding or threatened in writing that (a)
challenges the validity
or sole ownership of, or any right of any member of the
Dresser-Rand Group to
use, any Dresser-Rand Group Intellectual Property, (b) asserts
that any aspect
of the Business
23
<PAGE>
infringes or has otherwise violated any third party's
Intellectual Property
rights, or (c) asserts that any third party is infringing or
otherwise violating
the Dresser-Rand Group Intellectual Property; and (iv) the
Dresser-Rand Group
takes commercially reasonable actions to protect and maintain
the Dresser-Rand
Group Intellectual Property.
2.16 Contracts.
(a) Section 2.16 of the Disclosure Schedule sets forth, as
of
the date of this Agreement (or the date noted in Section 2.16 of
the Disclosure
Schedule, as applicable), a complete list of each of the
following contracts,
instruments, leases, deeds and agreements to which any member of
the
Dresser-Rand Group is a party or by which any of them is bound
other than
contracts, instruments, leases, deeds and agreements to which
other members of
the Dresser-Rand Group are the only other parties (collectively,
including the
real property leases described on Section 2.19(a) of the
Disclosure Schedule,
the "Material Contracts"):
(i) indentures, mortgages, loan agreements, letters of
credit, surety bonds and foreign exchange forward contracts, in
each case
with a face amount in excess of two million dollars
($2,000,000), capital
leases, security agreements or other agreements or commitments
for the
borrowing of money or the deferred purchase price of assets;
(ii) purchase or sales orders and other contracts for
the sales of goods and services by the Dresser-Rand Group,
excluding any
such orders or contracts not involving payments to the
Dresser-Rand Group
exceeding an aggregate of five million dollars ($5,000,000) in
any
instance;
(iii) contracts involving the expenditure by the
Dresser-Rand Group of more than three million dollars
($3,000,000) in any
instance for the purchase of material, supplies, equipment or
services;
excluding any thereof that are terminable by such member of
the
Dresser-Rand Group without penalty on not more than ninety (90)
days
notice or are related to owned or leased real property;
(iv) contracts not otherwise described in this paragraph
(a) that involve the expenditure by the Dresser-Rand Group of
more than
one million dollars ($1,000,000), excluding any thereof that
are
terminable by the Dresser-Rand Group without penalty on not more
than
ninety (90) days notice or are related to owned or leased real
property;
(v) guarantees of the obligations of third parties,
excluding guarantees involving the potential expenditure by
the
Dresser-Rand Group of less than two hundred thousand dollars
($200,000) in
any instance and one million dollars ($1,000,000) in the
aggregate;
24
<PAGE>
(vi) agreements which restrict the Dresser-Rand Group
from competing with any other specific Person or entity or from
conducting
its business in any geographic area;
(vii) contracts or agreements (other than employment
agreements or other Dresser-Rand Group Plans) with officers or
other
members of the executive leadership team of the Dresser-Rand
Group;
(viii) material license agreements (as licensor or
licensee) with third parties (excluding end-user licenses
granted to
customers of the Dresser-Rand Group),
(ix) agreements under which any member of the
Dresser-Rand Group has licensed material Intellectual Property
to or from
any other Person (including Affiliates of the Dresser-Rand
Group);
(x) partnership, limited liability company, joint
venture agreements or other agreements involving a sharing of
profits or
expenses by the Dresser-Rand Group;
(xi) contracts relating to the acquisition of any
business enterprise or the assets thereof since January 1, 2001;
and
(xii) exclusive distributor, dealer, sales
representative or similar contracts.
(b) True and correct copies (or, if oral, written summaries)
of each of the Material Contracts (or, in respect of
distributor, dealer and
sales representative contracts, the applicable standard form
therefor) and the
Partnership's standard form of product warranty have been made
available to the
Buyers.
(c) Except as set forth in Section 2.16 of the Disclosure
Schedule, each Material Contract is in full force and effect,
and is a valid and
binding agreement of the applicable member or members of the
Dresser-Rand Group,
enforceable against them in accordance with its terms, subject
to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and
other similar laws relating to or affecting creditors' rights
generally, general
equitable principles (whether considered in a proceeding in
equity or at law)
and an implied covenant of good faith and fair dealing. Except
as set forth in
Section 2.16 of the Disclosure Schedule, no condition exists or
event has
occurred that (whether with or without notice or lapse of time
or both) would
constitute a material default by any member of the Dresser-Rand
Group to any
Material Contract.
(d) As of the date hereof, except as set forth in Section
2.16(d) of the Disclosure Schedule (which guarantees shall be
released (without
any further obligation or liability) on or prior to the Closing
Date), there are
no outstanding guarantees made by any member of the Dresser-Rand
Group of any
liabilities or
25
<PAGE>
obligations of IR or any of its Affiliates (other than members
of the
Dresser-Rand Group).
2.17 Environmental Matters.
(a) For purposes of this Agreement, the following terms
shall
have the following meanings:
"Environmental Claim" means any written notice, claim,
demand,
action, suit, complaint or proceeding by any Person, or
investigation by any
Governmental Authority, alleging liability or potential
liability (including,
without limitation, liability or potential liability for
investigative costs,
cleanup costs, governmental response costs, natural resource
damages, property
damages, personal injury, fines or penalties) under any
Environmental Laws
arising out of, based on or resulting from (a) the presence, or
Release into the
environment, of any Hazardous Material at any location, whether
or not owned or
operated by Dresser-Rand Group or any of its Subsidiaries or (b)
circumstances
forming the basis of any violation, or alleged violation, of any
Environmental
Law.
"Environmental Laws" means all applicable foreign, federal,
state,
interstate, and local statutes, common law, regulations,
ordinances, orders and
decrees as in effect on the Closing Date relating to pollution
or protection of
human health or safety (to the extent relating to exposure to
Hazardous
Materials) or the environment (including, without limitation,
ambient air,
surface water, ground water, land surface or subsurface strata),
including,
without limitation, such laws and regulations relating to
emissions, discharges,
Releases or threatened Releases of Hazardous Materials, or
otherwise relating to
the manufacture, distribution, use, treatment, storage,
disposal, or transport
of Hazardous Materials, or the transfer of real property or
other assets (as to
such transfers, only with respect to environmental investigation
or
environmental remediation).
"Hazardous Materials" means all materials defined or regulated
as
"hazardous substances" or "hazardous wastes," pollutants,
contaminants, wastes,
or any other term of similar import under any Environmental Law,
including,
without limitation, petroleum (including crude oil or any
fraction thereof),
friable asbestos, and polychlorinated biphenyls.
"Release" shall have the meaning provided in 42 U.S.C.
section
9601(22), including threats thereof. "Release" shall also
include the matters
excluded from the definition thereof in 42 U.S.C. sections
9601(22)(A), (B), (C)
and (D).
(b) Except as set forth in Section 2.17 of the Disclosure
Schedule, to the Knowledge of the Sellers as of the date of this
Agreement (it
being understood that, for purposes of this Section 2.17, such
knowledge shall
not include any knowledge based on documents or other
information in Sellers'
possession solely as a result of Buyers' due diligence):
(i) The Business conducts, and since January 1, 2001
(other than noncompliance in the conduct of its operations that
has
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been fully resolved) has, in all material respects, conducted
its
operations in compliance with all Environmental Laws;
(ii) No member of the Dresser-Rand Group has received
any Environmental Claim which remains unresolved or any
unresolved written
threat of an Environmental Claim, in each case against any
member of the
Dresser-Rand Group or against any person or entity whose
liability for any
Environmental Claim the Dresser Rand Group has or is asserted to
have
retained or assumed either contractually or by operation of
law;
(iii) No member of the Dresser-Rand Group has entered
into, has agreed to, or is subject to any decree or order or
other similar
requirement of any governmental authority under any
Environmental Laws;
(iv) No member of the Dresser-Rand Group has Released
Hazardous Materials into the environment in violation of
Environmental
Laws or in a manner that would reasonably be expected to result
in
liability under Environmental Laws, and no other Person has
Released
Hazardous Materials into the environment at any property
currently owned
or operated by any member of the Dresser-Rand Group in violation
of
Environmental Laws or in a manner that would reasonably be
expected to
result in liability under Environmental Laws;
(v) No disposal or arranging for disposal of any
Hazardous Materials has occurred at any offsite location in a
manner and
under circumstances that would reasonably be expected to result
in an
Environmental Claim against any member of the Dresser Rand Group
or
against any person or entity whose liability for any
Environmental Claim
Sellers, Dresser Rand Group or any of its Subsidiaries, has or
is asserted
to have retained or assumed either contractually or by operation
of law;
and
(vi) The representations and warranties included in this
Section 2.17 shall constitute the sole and exclusive
representations and
warranties of Sellers relating to any Environmental Laws or
Hazardous
Materials.
2.18 Insurance. Section 2.18 of the Disclosure Schedule lists
all
insurance policies held in the names of the members of the
Dresser-Rand Group
covering the assets, employees, operations or businesses of the
Dresser-Rand
Group as of the date hereof, specifying the insurer, amount of
coverage and type
of insurance. All such policies are in full force and effect,
all premiums due
thereon have been paid by the Dresser-Rand Group and the
applicable member(s) of
the Dresser-Rand Group have complied in all material respects
with the
provisions of such policies and have not received any notice
from any of their
insurance brokers or carriers that such broker or carrier has
cancelled or
terminated coverage or will not be willing or able to renew
their
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existing coverage. All insurance policies not held in the names
of the members
of the Dresser-Rand Group but which cover the assets, employees
and operations
of the Dresser-Rand Group as of the date hereof are in full
force and effect and
will remain in full force and effect until the Closing Date, at
which time,
subject to Section 6.25, coverage thereunder will be
discontinued with respect
to the Dresser-Rand Group.
2.19 Real Property.
(a) Leased Properties. Section 2.19(a) of the Disclosure
Schedule sets forth a complete list and the location of all
material real
property leased or subleased by any member of the Dresser-Rand
Group (the
"Leased Real Property"). The Sellers have made available to the
Buyers correct
and complete copies of the leases and subleases (and all
amendments,
supplements, side letters, and other written agreements related
thereto)
covering the properties listed in Section 2.19(a) of the
Disclosure Schedule (as
amended to the date of this Agreement). With respect to each
lease and sublease
and except as otherwise specified in Section 2.19(a) of the
Disclosure Schedule
or where the failure of any of the following to be true and
correct would not
have, or reasonably be expected to have, individually or in the
aggregate, a
Material Adverse Effect:
(i) (A) no member of the Dresser-Rand Group is in
default beyond any applicable notice, grace or cure period and
(B) no
member of the Dresser-Rand Group has received a notice of
default with
respect to such lease or sublease;
(ii) no member of the Dresser-Rand Group owes any
brokerage commissions or finder's fees with respect to any lease
or
sublease, other than as is reflected in the calculation of
Closing Net
Working Capital Amount;
(iii) a member of the Dresser-Rand Group has a valid and
subsisting leasehold estate in and the right to quiet enjoyment
of the
Leased Real Property; and
(iv) no such lease or sublease has been assigned,
sublet, mortgaged, deeded in trust or otherwise encumbered by
the
Dresser-Rand Group.
(b) Owned Properties. Section 2.19(b) of the Disclosure
Schedule lists all real property owned by any member of the
Dresser-Rand Group
(the "Owned Real Property", and together with Leased Real
Property, the "Real
Property"). With respect to each such parcel of Owned Real
Property listed in
Section 2.19(b) of the Disclosure Schedule, except as otherwise
specified in
Section 2.19(b) of the Disclosure Schedule and except where the
failure of any
the following to be true and correct would not have, or
reasonably be expected
to have, individually or in the aggregate, a Material Adverse
Effect:
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(i) the identified owner has good and marketable title
to the parcel of real property, free and clear of any
Encumbrances, except
for (A) liens for real estate taxes not yet due and payable,
(B)
installments of special assessments not yet delinquent, (C)
easements,
covenants, rights-of-way, claims, restrictions and other
encumbrances of
record, including, without limitation, the exceptions to title
set forth
in the title insurance commitments for the Owned Real Properties
delivered
by Sellers, (D) any state of facts which would be shown on a
current,
accurate survey or physical inspection of the Owned Real
Properties and
(E) zoning, building and other similar restrictions;
(ii) there are no pending or, to the Knowledge of the
Sellers, threatened condemnation or other proceedings, disputes
or
lawsuits that would be reasonably expected to curtail or
interfere with
the use of the Owned Real Property; and
(iii) there are no leases, subleases, licenses,
concessions, or other agreements, granting to any party or
parties the
right of use or occupancy of any Owned Real Property or any
portion
thereof.
2.20 Product Liability and Product Warranty.
(a) Except as set forth in Section 2.20(a) of the Disclosure
Schedule, no member of the Dresser-Rand Group has received
written notice of any
material pending claim against such member of the Dresser-Rand
Group or any
predecessor thereof, or involving the Business concerning
personal injury or
property damage (other than damage to the Products) arising from
an alleged
defect in design, manufacture, materials or workmanship, an
alleged failure to
exercise reasonable care in repair, service or maintenance, an
alleged failure
to warn, an alleged failure to provide adequate warnings or an
alleged
noncompliance with applicable Laws, in each case in respect of
any Products (as
defined below) shipped prior to the Closing Date. As used in
this Agreement,
"Products" means any and all products shipped by any member of
the Dresser-Rand
Group or any predecessor thereof.
(b) The reserve for product warranty claims set forth in the
Interim Balance Sheet was calculated in conformity with GAAP
applied on a
consistent basis with the 2003 Balance Sheet. Section 2.20(b) of
the Disclosure
Schedule sets forth the estimated aggregate annual cost to the
Dresser-Rand
Group of performing warranty obligations for customers for each
of the three (3)
preceding fiscal years and the current fiscal year through June
30, 2004.
2.21 No Brokers' or Other Fees. Except for Greenhill & Co.,
LLC,
whose fees and expenses will be paid by the Sellers, no broker,
finder or
investment banker is entitled to any fee or commission in
connection with the
transactions contemplated hereby based upon arrangements made by
or on behalf of
the Sellers or any member of the Dresser-Rand Group.
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<PAGE>
2.22 Relations with Governments. To the Knowledge of the Seller,
no
member of the Dresser-Rand Group, nor any director, officer,
agent or employee
of the Dresser-Rand Group or any of its subsidiaries, has (a)
used any funds for
unlawful contributions, gifts, entertainment or other unlawful
expenses related
to political activity, (b) made any unlawful payment or
unlawfully offered
anything of value to foreign or domestic government officials or
employees or to
foreign or domestic political parties or campaigns or (c)
violated any
applicable export control, money laundering or anti-terrorism
law or regulation,
nor have any of them otherwise taken any action which would
cause the
Dresser-Rand Group or any of its subsidiaries to be in violation
of the Foreign
Corrupt Practices Act of 1977, as amended, any act enforced by
the Office of
Foreign Asset Control of the U.S. Department of Treasury, or any
applicable law
of similar effect.
2.23 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article II,
neither of the
Sellers nor any other Person or entity makes any other express
or implied
representation or warranty to Buyers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYERS
The Buyers, jointly and severally, hereby represent and warrant
to
the Sellers, as of the date of this Agreement, as follows:
3.1 Organization. Each Buyer is a corporation duly
organized,
validly existing and in good standing under the laws of the
jurisdiction of its
incorporation. Each Buyer has all requisite corporate power and
authority to own
its assets and to carry on its business as now being conducted
and is duly
qualified or licensed to do business and is in good standing in
the
jurisdictions in which the ownership of its property or the
conduct of its
business requires such qualification or license, except
jurisdictions in which
the failure to be so qualified or licensed would not have or
reasonably be
expected to have, individually or in the aggregate, a material
adverse effect on
the ability of the Buyers to consummate the transactions
contemplated by this
Agreement and the Transaction Agreements to which it is a
party.
3.2 Authorization, Etc. Each Buyer has full corporate power
and
authority to execute and deliver this Agreement and the
Transaction Agreements
to which it is a party and to carry out and consummate the
transactions
contemplated hereby to be carried out and consummated by it.
This Agreement and
the French Offer Letter have been duly and validly authorized
and no other
corporate or other action or proceeding is necessary to
authorize the execution,
delivery or performance of this Agreement and the French Offer
Letter by FRC or
any Buyer. This Agreement and the French Offer Letter have been
duly and validly
executed by FRC and, assuming this Agreement constitute the
legal, valid and
binding agreement of IR, constitute a legal, valid and binding
agreement of FRC,
enforceable against FRC in accordance with its terms, subject to
the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and
other
30
<PAGE>
similar laws relating to or affecting creditors' rights
generally, general
equitable principles (whether considered in a proceeding in
equity or at law)
and an implied covenant of good faith and fair dealing.
3.3 No Approvals or Conflicts. The execution, delivery and
performance by the Buyers of this Agreement and the French Offer
Letter and the
consummation by the Buyers of the transactions contemplated
hereby will not (i)
violate, conflict with or result in a breach by the Buyers of
any provision of
the certificates of incorporation or by laws of the Buyers, (ii)
violate,
conflict with or result in a breach of any provision of, or
constitute a default
by the Buyers (or create an event which, with notice or lapse of
time or both,
would constitute a default) or give rise to any right of
termination,
cancellation or acceleration under, or result in the creation of
any Encumbrance
upon any of the Buyers' properties under, any material note,
bond, mortgage,
indenture, deed of trust, license, franchise, permit, lease,
contract, agreement
or other instrument or understanding to which the Buyers or any
of their
properties may be bound, (iii) violate or result in a breach in
any material
respect of any Law applicable to any Buyer or any of their
respective
properties, or (iv) except for applicable requirements of the
HSR Act or any
other Competition/Investment Law and, in each case, as set forth
in Section 3.3
of the disclosure schedule being delivered by the Buyers to the
Sellers
simultaneously with the execution of this Agreement and forming
a part of this
Agreement (the "Buyers' Disclosure Schedule"), require any
material order,
consent, clearance, approval or authorization of, or notice to,
or declaration,
filing, application, qualification or registration with, any
Governmental
Authority.
3.4 Financing. Attached hereto as Section 3.4(a) of the
Buyers'
Disclosure Schedule is a true and complete copy of the
commitment letter, dated
as of August 25, 2004 (the "Debt Financing Commitment"), between
Buyer and
Citicorp North America, Inc., Citigroup Global Markets Inc.
(together
"Citigroup"), Morgan Stanley Senior Funding, Inc. ("Morgan
Stanley"), UBS Loan
Finance LLC and UBS Securities LLC (together, "UBS"), pursuant
to which
Citigroup, Morgan Stanley and UBS have agreed, subject to the
conditions set
forth therein, to lend the amount set forth in the Debt
Financing Commitment to
the Buyers for the purpose, among other things, of consummating
the transactions
contemplated by this Agreement (the "Debt Financing"). Attached
hereto as
Section 3.4(b) of the Buyers' Disclosure Schedule are true and
complete copies
of the commitment letters, dated as of August 25, 2004, between
Buyer, First
Reserve Fund IX, L.P. and First Reserve Fund X, L.P. (the
"Equity Financing
Commitment" and, together with the Debt Financing Commitment,
the "Financing
Commitments"), pursuant to which First Reserve Fund IX, L.P. and
First Reserve
Fund X, L.P. have committed, subject to the conditions set forth
therein, to
invest the amount set forth therein to purchase equity interests
in FRC (the
"Equity Financing" and, together with the Debt Financing, the
"Financing"). None
of the Financing Commitments has been amended or modified prior
to the date of
this Agreement, and the respective commitments contained in the
Financing
Commitments have not been withdrawn or rescinded in any respect.
The Financing
Commitments are in full force and effect. There are no
conditions precedent or
other contingencies related to the funding of the full amount of
the Financing,
other than as set forth in or contemplated by the Financing
Commitments. Buyers
have no reason as of the date hereof to believe that any of
the
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<PAGE>
conditions to the Financing contemplated by the Financing
Commitments within the
control of Buyers will not be satisfied or that the Financing
will not be made
available to Buyers on the Closing Date.
3.5 No Brokers' or Other Fees. Except as set forth in Section
3.5 of
the Buyers' Disclosure Schedule, the fees and expenses in
respect of which will
be paid by the Buyers, no broker, finder or investment banker is
entitled to any
fee or commission in connection with the transactions
contemplated hereby based
upon arrangements made by or on behalf of the Buyers.
3.6 Unregistered Equity. Each Buyer acknowledges that it has
been
advised by the Sellers that the Acquired Interests have not been
and will not be
registered under the Securities Act of 1933, as amended (the
"Securities Act").
Each Buyer is an accredited investor as that term is defined in
Regulation D
under the Securities Act. The Acquired Interests are being
acquired by each
Buyer for its own account for investment and without a view to
resale.
3.7 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article III,
neither of the
Buyers nor any other Person or entity makes any other express or
implied
representation or warranty to Sellers.
ARTICLE IV
CONDITIONS TO SELLERS' OBLIGATION
The obligation of the Sellers to effect the Closing under
this
Agreement is subject to the satisfaction, at or prior to the
Closing, of each of
the following conditions, unless validly waived in writing by IR
on behalf of
the Sellers.
4.1 Representations and Warranties.
(a) The representations and warranties made by the Buyers in
this Agreement shall be true, complete and correct in all
respects (determined
without regard to any materiality or material adverse effect
qualifier therein)
as of the Closing Date as though such representations and
warranties were made
on such date, except that any representations and warranties
that are made as of
a specified date shall be true, complete and correct in all
respects (determined
as aforesaid) as of such date, and except for such breaches of
representations
or warranties (determined as aforesaid) that would not have, or
reasonably be
expected to have, in the aggregate, a material adverse effect on
the ability of
the Buyers to consummate the transactions contemplated by this
Agreement.
(b) The representations and warranties made by the Buyers in
the first sentence of Section 3.1 (Organization) and in Section
3.2
(Authorization, Etc.) shall be true, complete and correct in all
respects as of
the Closing Date.
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4.2 Performance. The Buyers shall have performed and complied in
all
material respects with all agreements and obligations required
by this Agreement
to be so performed or complied with by them prior to the
Closing.
4.3 Officer's Certificate. FRC, on behalf of itself and the
other
Buyers, shall have delivered to the Sellers a certificate, dated
as of the
Closing Date and executed by an executive officer of FRC,
certifying to the
fulfillment of the conditions specified in Sections 4.1 and 4.2
hereof.
4.4 Consents and Approvals. Each governmental and other
consent,
approval, authorization, waiver, certificate, exemption, order,
registration,
declaration, clearance, filing or notice of, with or to any
Person, or the
expiration or termination of the waiting period under any
Competition/Investment
Law, in each case required to permit the consummation of any of
the transactions
contemplated hereby (each, a "Consent"), in each case listed in
Section 4.4 of
the Disclosure Schedule, shall have been obtained and all
conditions relating to
such Consents shall have been satisfied, including the
completion of any sale,
di
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