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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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<PAGE>
"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.
12
<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
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<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
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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
<PAGE>
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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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,
divestiture or disposit
