Exhibit 2.1
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
Page
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........................................10
1.8 AIM Program
Payment..............................................12
ARTICLE II REPRESENTATIONS AND WARRANTIES
OF SELLERS
2.1 Organization of Certain
Sellers..................................13
2.2
Subsidiaries.....................................................13
2.3 Ownership of Acquired
Interests..................................15
2.4 Authorization,
Etc...............................................15
2.5 Financial
Statements.............................................15
2.6 Absence of Undisclosed
Liabilities...............................16
2.7 No Approvals or
Conflicts........................................16
2.8 Compliance with Law;
Governmental Authorizations.................17
2.9
Litigation.......................................................17
2.10
Personal Property
Assets.........................................17
2.11
Absence of Certain
Changes.......................................18
2.12
Tax
Matters......................................................19
2.13
Employee
Benefits................................................21
2.14
Labor
Relations..................................................22
2.15
Intellectual
Property............................................23
2.16
Contracts........................................................24
2.17
Environmental
Matters............................................26
2.18
Insurance........................................................27
2.19
Real
Property....................................................28
2.20
Product Liability and
Product Warranty...........................29
2.21
No Brokers' or Other
Fees........................................29
2.22
Relations with
Governments.......................................30
2.23
No Other
Representations or Warranties...........................30
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF BUYERS
3.1
Organization.....................................................30
3.2 Authorization,
Etc...............................................30
3.3 No Approvals or
Conflicts........................................31
3.4
Financing........................................................31
3.5 No Brokers' or Other
Fees........................................32
3.6 Unregistered
Equity..............................................32
3.7 No Other Representations or
Warranties...........................32
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ARTICLE IV CONDITIONS TO SELLERS'
OBLIGATION
4.1 Representations and
Warranties...................................32
4.2
Performance......................................................33
4.3 Officer's
Certificate............................................33
4.4 Consents and
Approvals...........................................33
4.5
Injunctions......................................................33
4.6
Guarantees.......................................................33
ARTICLE V CONDITIONS TO BUYERS'
OBLIGATION
5.1 Representations and
Warranties...................................34
5.2
Performance......................................................34
5.3 Officer's
Certificate............................................34
5.4 Consents and
Approvals...........................................34
5.5
Injunctions......................................................34
5.6 Satisfaction and Release of
Encumbrances.........................34
5.7 Material Adverse
Effect..........................................34
5.8 French Offer
Letter..............................................35
5.9 Interim
Financials...............................................35
ARTICLE VI COVENANTS AND AGREEMENTS
6.1 Conduct of Business by
Dresser-Rand Group........................35
6.2 Access to Books and Records;
Cooperation.........................37
6.3 Filings and
Consents.............................................38
6.4 Tax Matters; Cooperation;
Preparation of Returns;
Tax
Elections..................................................38
6.5 Tax
Indemnity....................................................41
6.6 Procedures Relating to
Indemnification for Taxes.................43
6.7 Refunds and Tax
Benefits.........................................44
6.8 Employees; Benefit
Plans.........................................45
6.9 Labor
Matters....................................................52
6.10
Covenant to Satisfy
Conditions...................................52
6.11
Contact With Customers
and Suppliers.............................52
6.12
Projections......................................................53
6.13
No
Hire..........................................................53
6.14
Use of
Names.....................................................53
6.15
Environmental Rights
and Responsibilities After Execution
of
Agreement...................................................54
6.16
Intercompany
Debt................................................61
6.17
Substitute
Guarantees............................................61
6.18 Plaintiff
Actions................................................61
6.19
Financing........................................................62
6.20
Pending Insurance
Claim..........................................63
6.21
Transfers of Non-U.S.
Interests..................................64
6.22
Real Property
Deeds..............................................65
6.23
Estimated Customer
Prepayments Statement.........................65
6.24
Currency
Conversion..............................................65
6.25
Insurance........................................................65
ARTICLE VII TERMINATION
7.1
Termination......................................................66
ii
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7.2 Procedure and Effect of
Termination..............................67
ARTICLE VIII INDEMNIFICATION
8.1
Indemnification..................................................67
ARTICLE IX MISCELLANEOUS
9.1 Fees and Expenses; Transfer
Taxes................................72
9.2 Governing
Law....................................................73
9.3
Amendment........................................................73
9.4 No
Assignment....................................................73
9.5
Waiver...........................................................73
9.6
Notices..........................................................73
9.7 Complete
Agreement...............................................74
9.8
Counterparts.....................................................74
9.9
Publicity........................................................74
9.10
Certain
Definitions..............................................75
9.11
Headings.........................................................76
9.12
Severability.....................................................76
9.13
Third
Parties....................................................76
9.14
CONSENT TO
JURISDICTION..........................................77
9.15
WAIVER OF JURY
TRIAL.............................................77
9.16
Specific
Enforcement.............................................78
9.17
Guarantee of Seller
Obligations..................................78
EXHIBITS FN1
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
--------
1 Exhibits and disclosure
schedules are omitted in accordance with
Item 601(b)(2) of
Regulation S-K. IR will furnish a copy of any omitted
exhibit or disclosure
schedule to the U.S. Securities and Exchange
Commission
supplementally upon request.
iii
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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
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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;
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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
ollowing:
(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
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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
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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.
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<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers, jointly and severally, hereby represent and warrant
to
the Buyers, as of the date of this
Agreement, as follows:
2.1 Organization of Certain Sellers.
(a) IR is a company duly organized, validly existing and in
good standing under the laws of Bermuda. IR
has all requisite corporate power
and authority to own its assets and to
carry on its business as now being
conducted and is duly qualified or licensed
to do business and is in good
standing in the jurisdictions in which the
ownership of its property or the
conduct of its business requires such
qualification or license, except
jurisdictions in which the failure to be so
qualified or licensed would not
have or reasonably be expected to have,
individually or in the aggregate, a
material adverse effect on the abilities of
the Sellers to consummate the
transactions contemplated by this Agreement
and the Transaction Agreements to
which such Seller is a party.
(b) DR Holding Corp. ("DR Holding") is a corporation duly
formed, validly existing and in good
standing under the laws of the State of
Delaware. DR Holding has all requisite
corporate power and authority to own
its assets and to carry on its business as
now being conducted and is duly
qualified or licensed to do business and is
in good standing in the
jurisdictions in which the ownership of its
property or the conduct of its
business requires such qualification or
license, except jurisdictions in which
the failure to be so qualified or licensed
would not have or reasonably be
expected to have, individually or in the
aggregate, a material adverse effect
on the ability of the Sellers to consummate
the transactions contemplated by
this Agreement and the Transaction
Agreements to which such Seller is a party.
(c) Ingersoll-Rand Company ("IRNJ") is a corporation duly
organized, validly existing and in good
standing under the laws of the State
of New Jersey. IRNJ has all requisite
corporate power and authority to own its
assets and to carry on its business as now
being conducted and is duly
qualified or licensed to do business and is
in good standing in the
jurisdictions in which the ownership of its
property or the conduct of its
business requires such qualification or
license, except jurisdictions in which
the failure to be so qualified or licensed
would not have or reasonably be
expected to have, individually or in the
aggregate, a material adverse effect
on the ability of the Sellers to consummate
the transactions contemplated by
this Agreement and the Transaction
Agreements to which such Seller is a party.
2.2 Subsidiaries. Section 2.2(a) of the Disclosure Schedule
sets
forth for Dresser-Rand Company, a New York
general partnership (the
"Partnership"), Dresser-Rand Canada, Inc.,
a corporation organized under the
laws of Canada ("D-R Canada") and each
direct and indirect subsidiary of the
Partnership (together with the Partnership,
D-R Canada and each entity
contemplated to be formed in accordance
with Exhibit B as and when formed, the
"Subsidiaries"; and all of the Subsidiaries
sometimes being
13
<PAGE>
referred to collectively as the
"Dresser-Rand Group"; for clarification, for
purposes of this Article II and Section
6.1, the Dresser-Rand Group shall not
include the entities in which the
Dresser-Rand Group has an equity interest
that are set forth in Section 2.2(b) of the
Disclosure Schedule (the "Minority
Interests")) and for each Minority Interest
(i) its structure (i.e.,
corporation, partnership, limited liability
company, etc.), name and
jurisdiction of incorporation, formation or
organization, as applicable, (ii)
the number of authorized, issued and
outstanding shares of each class of its
capital stock or other authorized, issued
and outstanding equity interests, as
applicable, the names of the holders
thereof, and the number of shares or
percentage interests, as applicable, held
by each such holder and (iii) its
entity classification for United States
federal income Tax purposes. Except as
set forth in Section 2.2(a) of the
Disclosure Schedule, the members of the
Dresser-Rand Group do not own any shares of
any class of capital stock of any
corporation or ownership or other equity
interest in any other Person (other
than their Subsidiaries and Minority
Interests and other than immaterial
investments). Each Subsidiary is duly
formed or organized, validly existing
and, where applicable, in good standing
under the laws of its jurisdiction of
incorporation, formation or organization,
as applicable, has the requisite
corporate or similar power and authority to
own its assets and to carry on its
business as now being conducted, and where
applicable, is duly qualified or
licensed to do business and is in good
standing in the jurisdictions in which
the ownership of its property or the
conduct of its business requires such
qualification or license, except
jurisdictions in which the failure to be so
qualified or licensed would not have or
reasonably be expected to have,
individually or in the aggregate, a
Material Adverse Effect (as defined
below). For purposes of this Agreement, a
"Material Adverse Effect" shall mean
any change, occurrence or development that
has a materially adverse effect on
the business, operations, results of
operations, assets, liabilities (except
to the extent assumed or retained by the
Sellers hereunder) or condition
(financial or otherwise) of the Business,
taken as a whole, except that a
"Material Adverse Effect" does not include
any effect caused by a change,
occurrence or development in (i) events
affecting the United States, European
or global economy or capital or financial
markets generally, (ii) conditions
in the industries in which the Dresser-Rand
Group conducts business, except to
the extent such changes, occurrences or
developments impact the Business in a
materially disproportionate fashion, (iii)
laws, regulations or GAAP, or in
the authoritative interpretations thereof
or in regulatory guidance related
thereto, (iv) earthquakes or similar
catastrophes, or acts of war, sabotage,
terrorism, hostilities, military action or
any escalation or worsening thereof
(other than actual damage or casualty loss
to any member of the Dresser-Rand
Group or their properties or assets) or (v)
this Agreement, the announcement
thereof and the consummation of the
transactions contemplated by this
Agreement. All the outstanding shares of
capital stock or other equity
interests of such Subsidiaries are duly
authorized and validly issued and
outstanding, fully paid and nonassessable
(where applicable), were issued free
of any pre-emptive rights and owned by the
Persons set forth in Section 2.2(a)
of the Disclosure Schedule, free and clear
of all Encumbrances. Except as set
forth in Section 2.2(a) of the Disclosure
Schedule, there are no options,
subscriptions, warrants, calls,
commitments, agreements, contracts,
understandings, restrictions, pre-emptive
rights, arrangements or rights of
any character with respect to the
securities of the Subsidiaries or the
issuance of additional securities of the
Subsidiaries or the conversion or
exchange of any security
14
<PAGE>
into, or equity security of, any
Subsidiary. Complete and correct copies of
the charter documents (or equivalent
organizational documents) and all
amendments thereto and the minute books of
each of the Subsidiaries have been
made available to the Buyers on or prior to
the date of this Agreement.
2.3
Ownership of Acquired Interests. Each Seller is the legal and
beneficial owner of, and has good and
marketable title to, the Acquired
Interests being sold by such Seller
hereunder, as set forth in Section 2.2 of
the Disclosure Schedule, free and clear of
all Encumbrances, and such good and
marketable title may be transferred to the
Buyers on the Closing Date free and
clear of all Encumbrances, other than such
as may be created by or on behalf
of any of the Buyers.
2.4 Authorization, Etc. Each Seller has full corporate or
partnership power and authority to execute
and deliver this Agreement and the
Transaction Agreements to which it is a
party and to carry out and consummate
the transactions contemplated hereby to be
carried out and consummated by it.
This Agreement has been duly and validly
authorized and no other corporate
action or proceeding is necessary to
authorize the execution, delivery and
performance of this Agreement by IR or any
Seller. This Agreement has been
duly and validly executed by IR and,
assuming this Agreement constitutes the
legal, valid and binding agreement of FRC,
constitutes a legal, valid and
binding agreement of IR, enforceable
against IR in accordance with its terms,
subject to the effects of bankruptcy,
insolvency, fraudulent conveyance,
reorganization, moratorium and other
similar laws relating to or affecting
creditors' rights generally, general
equitable principles (whether considered
in a proceeding in equity or at law) and an
implied covenant of good faith and
fair dealing.
2.5 Financial Statements. Section 2.5 of the Disclosure
Schedule
sets forth (i) the audited combined balance
sheet of the Dresser-Rand Group
and the Business at December 31, 2003 (the
"2003 Balance Sheet") and the
related combined statements of income and
cash flows, in each case, including
notes thereto for the year ended December
31, 2003 (collectively, the "Audited
Financial Statements") and (ii) the
unaudited combined balance sheet of the
Dresser-Rand Group and the Business as of
June 30, 2004 (the "Interim Balance
Sheet") and the related unaudited combined
statements of income and cash flows
for the six month period ended June 30,
2004 (collectively, the "Interim
Financial Statements"). Such financial
statements have been prepared from the
books and records of the Dresser-Rand Group
and the Business in conformity
with GAAP, applied on a consistent basis,
as in effect during the periods
indicated, subject in the case of the
Interim Financial Statements to the
absence of notes and normal year end
adjustments. The foregoing income
statements and statements of cash flows,
including notes in respect of the
Audited Financial Statements, present
fairly in all material respects the
combined results of operations and cash
flows of the Dresser-Rand Group and
the Business for the respective periods
covered, and the balance sheets,
including notes in respect of the Audited
Financial Statements, present fairly
in all material respects the combined
financial position of the Dresser-Rand
Group and the Business, as of their
respective dates, prepared in conformity
with GAAP, applied on a consistent basis,
as in effect during the periods
indicated.
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<PAGE>
2.6 Absence of Undisclosed Liabilities. To the Knowledge of the
Sellers, the Dresser-Rand Group is not
subject to any liabilities or
obligations of any kind whatsoever (whether
absolute, accrued, contingent or
otherwise, and whether due or to become
due), other than liabilities and
obligations (i) reflected in the 2003
Balance Sheet (or disclosed in the notes
thereto) or the Interim Balance Sheet, (ii)
arising after June 30, 2004, in
the ordinary course of business and
consistent with past practices, (iii)
which would not have or reasonably be
expected to have, individually or in the
aggregate, a Material Adverse Effect and
(iv) obligations and liabilities
otherwise expressly disclosed in Section
2.6(a) of the Disclosure Schedule or
recognizable as a potential liability and
disclosed in any other section of
the Disclosure Schedule attached hereto. To
the actual knowledge (without any
duty of inquiry) of the individuals listed
in Section 9.10(e) of the
Disclosure Schedule, (A) except as set
forth in Section 2.6(b) of the
Disclosure Schedule, there are no material
Proceedings pending against any of
the Minority Interests, (B) no change,
occurrence or development in respect of
the Minority Interests exists which would
reasonably be expected to have,
individually or in the aggregate, a
Material Adverse Effect, and (C) none of
the Minority Interests are subject to any
liabilities or obligations of any
kind whatsoever (whether absolute, accrued,
contingent or otherwise, and
whether due or to become due), other than
liabilities and obligations which
would not have or reasonably be expected to
have, individually or in the
aggregate, a Material Adverse Effect.
2.7 No Approvals or Conflicts. Except as set forth in Section 2.7
of
the Disclosure Schedule, the execution,
delivery and performance by the
Sellers of this Agreement and the
consummation by the Sellers of the
transactions contemplated hereby will not
(i) violate, conflict with or result
in a breach by any Seller or Subsidiary of
any provision of any partnership
agreement, charter, bylaws or equivalent
formation or governance document of
such Seller or Subsidiary, (ii) violate,
conflict with or result in a breach
of any provision of, or constitute a
default by any Seller or Subsidiary (or
create an event which, with notice or lapse
of time or both, would constitute
such a default) or give rise to any right
of termination, cancellation or
acceleration under, or result in the
creation of any Encumbrance upon any of
the properties of any Subsidiary under, any
material note, bond, mortgage,
indenture, deed of trust, license,
franchise, permit, lease, contract,
agreement or other instrument or
understanding to which any Seller, any
Subsidiary or any of their respective
properties may be bound, (iii) violate
or result in a breach, in any material
respect, of any order, injunction,
judgment, ruling, constitution, treaty,
statute, law, rule or regulation
(each, and collectively, "Law") of any
United States or foreign federal,
state, provincial or local government or
other political subdivision thereof,
any entity, authority or body exercising
executive, legislative, judicial,
regulatory or administrative functions of
any such government or political
subdivision, and any supranational
organization of sovereign states exercising
such functions for such sovereign states
(each, and collectively,
"Governmental Authority") applicable to any
Seller, any Subsidiary or any of
their respective properties or (iv) except
for applicable requirements of the
Hart-Scott Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR
Act"), and any other Law that is designed
or intended to prohibit, restrict or
regulate (a) foreign investment or (b)
antitrust, monopolization, restraint of
trade or competition
("Competition/Investment Law") and in each case as set
forth in Section 2.7 of the Disclosure
Schedule, require any material order,
consent, clearance, approval or
16
<PAGE>
authorization of, or notice to, or
declaration, filing, application,
qualification or registration with, any
Governmental Authority.
2.8 Compliance with Law; Governmental Authorizations. Except as
set
forth in Section 2.8 of the Disclosure
Schedule, to the Knowledge of the
Sellers, the Business has been conducted
since January 1, 2001 in all material
respects in compliance with all Laws.
Except as set forth in Section 2.8 of
the Disclosure Schedule, to the Knowledge
of the Sellers, no member of the
Dresser-Rand Group is in violation of any
order, injunction, judgment, ruling,
Law or regulation of any court or
Governmental Authority applicable to the
property of the Dresser-Rand Group or the
Business. Each member of the
Dresser-Rand Group has all licenses,
Consents, permits and other governmental
authorizations ("Permits") necessary to
conduct its business as currently
conducted (all of which are valid and in
full force and effect), except where
the failure to have such Permits would not
have or reasonably be expected to
have, individually or in the aggregate, a
Material Adverse Effect.
2.9 Litigation. Except as set forth in Section 2.9 of the
Disclosure
Schedule, there are no material suits,
actions, proceedings or investigations
(collectively, "Proceedings") pending or,
to the Knowledge of the Sellers,
threatened against any Seller or any member
of the Dresser-Rand Group before
any arbitrator, court or Governmental
Authority. Except as set forth in
Section 2.9 of the Disclosure Schedule, the
Sellers have not received any
notice that any Seller or any member of the
Dresser-Rand Group or any of their
respective assets are subject to any
decree, order or judgment which would
have or reasonably be expected to have,
individually or in the aggregate, a
Material Adverse Effect or a material
adverse effect on the ability of the
Sellers to consummate the transactions
contemplated by this Agreement or the
Transaction Agreements or materially delay
the consummation of the
transactions contemplated hereby or
thereby.
2.10 Personal Property Assets. Except as set forth in Section
2.10
of the Disclosure Schedule, on June 30,
2004, the Dresser-Rand Group had and,
except with respect to personal property
assets disposed of or acquired in the
ordinary course of business consistent with
past practice since such date, the
Dresser-Rand Group now has, good and valid
title to, or holds by valid and
existing lease or license, all the personal
property assets reflected as
assets of the Dresser-Rand Group on the
Interim Balance Sheet or which would
have been reflected on the Interim Balance
Sheet if acquired prior to such
date, free and clear of all Encumbrances,
except for (i) Encumbrances which
secure indebtedness or obligations which
are properly reflected on the Interim
Balance Sheet; (ii) liens for Taxes (as
defined in Section 2.12) not yet
payable or being contested in good faith by
appropriate proceedings; (iii)
immaterial liens arising as a matter of law
in the ordinary course of
business, provided that the obligations
secured by such liens are not
delinquent or are being contested in good
faith; and (iv) other Encumbrances
which do not adversely affect the use of
the applicable asset as currently
used (collectively, "Permitted
Encumbrances"). Except as set forth in Section
2.10 of the Disclosure Schedule, the
tangible personal property assets owned
by or leased by the Dresser-Rand Group,
together with the rights under the
Transaction Agreements, constitute, all
material tangible personal property
assets used by the Dresser-Rand Group in
the operation or the conduct of the
Business, as currently conducted, and all
such assets are in reasonably
17
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good maintenance, operating condition and
repair, normal wear and tear
excepted, other than machinery and
equipment under repair or out of service in
the ordinary course of business.
2.11 Absence of Certain Changes. Except as set forth in Section
2.11
of the Disclosure Schedule or as otherwise
specifically provided herein, since
December 31, 2003, (i) the Business has
been conducted only in the ordinary
course consistent with past practice in all
material respects, and (ii) there
has not been any event, occurrence or
development of a state of circumstances
or facts which has had, or would reasonably
be expected to have, individually
or in the aggregate, a Material Adverse
Effect. Without limiting the
generality of the foregoing, except as set
forth in Section 2.11 of the
Disclosure Schedule or as otherwise
specifically provided herein, and except
for the transactions contemplated hereby,
from June 30, 2004 through the date
of this Agreement, there has not been:
(a) any damage, destruction or loss (whether or not covered by
insurance) materially affecting the
operation of the Business;
(b) any option, sale, purchase, subscription, warrant, call,
commitment contracts, understandings,
restrictions, arrangements, rights or
agreement of any character granted or made
by any member of the Dresser-Rand
Group in respect of its capital stock or
other equity interests;
(c) any issuance, declaration, setting aside or payment of any
dividend or other distribution of cash or
property on any of the capital stock
or other equity interests of any member of
the Dresser-Rand Group (excluding
distributions by Subsidiaries to other
Subsidiaries), or any direct or
indirect redemption, purchase or other
acquisition of any shares of capital
stock or other equity interests of any
member of the Dresser-Rand Group;
(d) any strikes, work stoppages or other material labor
disputes involving employees of the
Dresser-Rand Group;
(e) any amendment, termination, waiver or cancellation of any
material term of any Material Contract (as
defined in Section 2.16), or of any
material right or claim of any member of
the Dresser-Rand Group under any
Material Contract;
(f) any sale, transfer or other disposition of assets of the
Dresser-Rand Group having an aggregate
value exceeding two million dollars
($2,000,000), excluding sales of assets in
the ordinary course of business
consistent with past practice;
(g) any (i) general increase in the compensation of employees
of the Dresser-Rand Group other than in the
ordinary course of business
consistent with past practice, (ii)
increase in any compensation (other than
salary compensation) payable to any officer
or other member of senior
management of the Dresser-Rand Group,
whether or not in the ordinary course of
business consistent with past practice or
(iii) loan or commitment therefor
made by any member of the Dresser-Rand
Group to any officer or
18
<PAGE>
other member of senior management of the
Dresser-Rand Group or to any of the
Sellers or any of their officers, directors
or Affiliates (other than the
Dresser-Rand Group);
(h) any material change in the accounting methods or practices
followed by any member of the Dresser-Rand
Group (other than such as have been
required by applicable law or GAAP);
(i) in each case, with respect to any member of the
Dresser-Rand Group, (i) any material
adoption or change in any election
relating to Taxes, (ii) any material
adoption or change in any accounting
period or any accounting method relating to
Taxes, (iii) any entering into a
material closing agreement, (iv) any
settling of any material Tax claim or
assessment or (v) any other similar action
relating to Taxes; or
(j) any agreement or commitment by or on behalf of the
Dresser-Rand Group to do any of the
foregoing.
2.12
Tax Matters.
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Tax" or "Taxes" shall mean (x) any taxes of any kind, including
but
not limited to those on or measured by or
referred to as income, gross
receipts, capital, sales, use, ad valorem,
franchise, profits, license,
withholding, payroll, employment, excise,
severance, stamp, occupation,
premium, escheat, value added, property or
windfall profits taxes, customs,
duties or similar fees, assessments or
charges of any kind whatsoever,
together with any interest and any
penalties, additions to tax or additional
amounts imposed by any governmental
authority, domestic or foreign; (y) any
liability for the payment of any amounts
described in (x) as a result of being
a member of an affiliated, consolidated,
combined, unitary or similar group or
as a result of transferor or successor
liability, and (z) any liability for
the payment of any amounts as a result of
being a party to any tax-allocation
or tax-sharing agreement or as a result of
any express or implied obligation
to indemnify any other Person with respect
to the payment of any amounts of
the type described in clause (x) or
(y).
"Taxing Authority" shall mean, with respect to any Tax, the
government entity or political subdivision
thereof that imposes such Tax and
the agency (if any) charged with the
collection of such Tax for such entity or
subdivision.
"Tax Return" shall mean any return, report or statement required
to
be filed with any governmental authority
with respect to Taxes, including any
schedule or attachment thereto or amendment
thereof.
"Treasury Regulations" shall mean the Treasury Regulations
promulgated under the Code.
19
<PAGE>
(b) Except as set forth in Section 2.12 of the Disclosure
Schedule:
(i) All material Tax Returns required to be filed prior to
or on the
Closing Date by or on behalf of any member of the Dresser-Rand
Group
(separately or as part of an affiliated, consolidated, combined
or
unitary group)
(A) have been or shall be timely filed (subject to
permitted
extensions applicable to such filing) and (B) are true, correct
and complete in
all material respects; and all Taxes of the members of
the Dresser-Rand
Group shown as due or payable on such Tax Returns have
been or shall be
paid within the prescribed period or any extension
thereof, other
than Taxes that are being contested in good faith for
which adequate
reserves have been established.
(ii) No claim for unpaid Taxes has become a lien against
the assets or
any property of any member of the Dresser-Rand Group or is
being asserted
against any member of the Dresser-Rand Group except for
liens for Taxes
not yet due and payable for which adequate reserves have
been
established.
(iii) There are no (w) examinations, audits, actions,
proceedings,
investigations or disputes pending, (x) claims asserted in
writing for
Taxes, (y) waivers or extensions of statutes of limitation
with respect to
Taxes currently in effect or (z) closing agreements, or
similar
agreements entered into or issued by any Taxing Authority, in
each case, with
respect to any member of the Dresser-Rand Group that may,
in each case,
increase any material Taxes of any member of the
Dresser-Rand
Group.
(iv) No member of the Dresser-Rand Group has been a member
of an
affiliated, consolidated, combined or unitary group as set forth
in
Section 1504 of
the Code or any corresponding or similar provision of
state, local or
foreign law other than a group the common parent of which
is IRNJ, DR
Holding or Dresser-Rand Company. No member of the
Dresser-Rand
Group is liable for Taxes of any taxpayer other than IR and
its Affiliates
under Treasury Regulation Section 1.1502-6 (or any
corresponding or
similar provision of state, local or foreign law), as a
transferee or
successor, by contract, or otherwise.
(v) No member of the Dresser-Rand Group (A) is a party to
any material
tax-allocation or tax-sharing agreement or (B) to the
Knowledge of the
Sellers, is a party to any other tax-allocation or
tax-sharing
agreement.
(vi) No member of the Dresser-Rand Group has reported any
"reportable
transaction" as defined in Treasury Regulation 1.6011-4 or
any transaction
that is required to be reported to any Taxing
20
<PAGE>
Authority
pursuant to any corresponding or similar provision of state,
local or foreign
law.
(vii) No member of the Dresser-Rand Group has been a
"distributing
corporation" or a "controlled corporation" in a transaction
pursuant to
Section 355 of the Code within the last three years.
2.13 Employee Benefits.
(a) Section 2.13(a) of the Disclosure Schedule sets forth a
list of each material "employee benefit
plan" (within the meaning of Section
3(3) of the Employee Retirement Income
Security Act of 1974, as amended
("ERISA")), and each severance, change in
control or employment plan, program
or agreement, and vacation, incentive,
bonus, stock option, stock purchase,
and restricted stock plan or policy
sponsored or maintained by each member of
the Dresser-Rand Group or by IRNJ, in which
present or former employees of any
member of the Dresser-Rand Group (the
"Dresser-Rand Group Employees")
participate (excluding any IRNJ plan or
policy under which no Dresser-Rand
Group Employee is currently accruing or has
any right to accrue benefits)
(collectively, the "Dresser-Rand Group
Plans"). Dresser-Rand Group Plans which
are sponsored or maintained by IRNJ or
members of the Dresser-Rand Group that
are domiciled in the United States of
America shall hereinafter be referred to
as "U.S. Dresser-Rand Group Plans" and
Dresser-Rand Group Plans which are not
U.S. Dresser-Rand Group Plans shall
hereinafter be referred to as "Non-U.S.
Dresser-Rand Group Plans".
(b) The Dresser-Rand Group Plans are in compliance in all
material respects with their terms and
applicable requirements of ERISA, the
Code, and other applicable laws. Each U.S.
Dresser-Rand Group Plan which is
intended to be qualified within the meaning
of Section 401 of the Code has
received a favorable determination letter
as to its qualification, and to the
Knowledge of the Sellers, nothing has
occurred that could reasonably be
expected to affect such qualification.
(c) No liability under Title IV of ERISA or Section 412 of the
Code (including any liability relating to
an "accumulated funding deficiency")
has been incurred by any member of the
Dresser-Rand Group or by any other
trade or business, whether or not
incorporated, that together with any member
of the Dresser-Rand Group would be deemed a
"single employer" for purposes of
Sections 414(b), (c), (m) or (o) of the
Code (a "Dresser-Rand ERISA
Affiliate"), that, if due and payable, has
not been satisfied in full, and, to
the Knowledge of the Sellers, as of the
Closing Date no member of the
Dresser-Rand Group is reasonably likely to
incur material liability on or
after the Closing Date under Title IV of
ERISA or Section 412 of the Code for
the Dresser-Rand Group Plans or, by reason
of their membership in a controlled
group under Section 414 (b), (c), (m) or
(o) of the Code, for the plans of any
Dresser-Rand ERISA Affiliate, in any case,
other than liability for premiums
due to the Pension Benefit Guaranty
Corporation.
(d) No member of the Dresser-Rand Group has incurred, directly
or indirectly, any liability in respect of
any multiemployer plan (as defined
in Section
21
<PAGE>
3(37) of ERISA or Section 414(f) of the
Code (a "Multiemployer Plan")) on
account of any "withdrawal", "partial
withdrawal", "Reorganization" or
"Insolvency" (all such terms within the
meaning of Title IV of ERISA), which
remain unsatisfied and would have, or
reasonably be expected to have,
individually or in the aggregate, a
Material Adverse Effect. With respect to
all Dresser-Rand Group Plans that are
Multiemployer Plans to which the
Dresser-Rand Group makes contributions, the
aggregate withdrawal liability of
the Dresser-Rand Group computed as if a
complete withdrawal by all members of
the Dresser-Rand Group had occurred under
each such Multiemployer Plans on the
date hereof, would not have, or reasonably
be expected to have, individually
or in the aggregate, a Material Adverse
Effect.
(e) Except as set forth in Section 2.13(e) of the Disclosure
Schedule, no Dresser-Rand Group Employee is
a party to, or entitled to the
benefit of, any U.S. Dresser-Rand Group
Plan which would provide such employee
any payment or benefit (or accelerated
payment or vesting thereof) upon the
consummation of the transactions
contemplated hereby or, following such
consummation, upon the occurrence of some
other event, whether or not subject
to Section 280G of the Code. The
transactions contemplated by this Agreement
constitute a transfer of less than
one-third of the total gross fair market
value of all of the assets of Sellers and
all members of Seller's affiliated
group (as defined in Section 1504 of the
Code, determined without regard to
Section 1504(b) of the Code), immediately
prior to the Closing.
(f) There are no pending or, to the Knowledge of the Sellers,
threatened claims or litigations with
respect to any U.S. Dresser-Rand Group
Plans, other than claims for benefits by
participants and beneficiaries,
except as set forth in Section 2.13(f) of
the Disclosure Schedule.
(g) With respect to each Dresser-Rand Group Plan, the Sellers
have made available to the Buyers (to the
extent applicable, and with respect
to the Non-U.S. Dresser-Rand Group Plans to
the Knowledge of the Sellers) (i)
a complete and accurate copy of each such
plan (including the most recent
summary plan description prepared with
respect to such plan); (ii) the most
recent copy of the annual report form (Form
5500 Series) of each such plan for
which such form is required (including any
schedules thereto); (iii) the most
recent actuarial report for each such plan,
and (iv) the most recent copy of
its favorable determination letter.
(h) To the Knowledge of the Sellers, (i) each of the Non-U.S.
Dresser-Rand Group Plans has been granted a
Tax-favorable status by the
applicable Taxing Authority, to the extent
required under local Law, (ii) such
Tax treatment to the extent granted has not
been withdrawn by the applicable
Taxing Authority, and (iii) no fact exists
that would reasonably be expected
to result in the withdrawal of such Tax
treatment.
2.14 Labor Relations. Except as set forth in Section 2.14 of
the
Disclosure Schedule, (i) no member of the
Dresser-Rand Group is a party to any
collective bargaining agreement, work rules
or practices, or any other
labor-related agreements or arrangements
with any labor union, labor
organization or works council
22
<PAGE>
applicable to employees of any member of
the Dresser-Rand Group, nor is any
such contract or work rules or practices,
or any other labor related agreement
presently being negotiated; (ii) there is
no unfair labor practice charge or
complaint pending or, to the Knowledge of
the Sellers, threatened against or
otherwise affecting any member of the
Dresser-Rand Group; (iii) there is no
material grievance, arbitration hearing, or
arbitration award pending or, to
the Knowledge of the Sellers, threatened
against or otherwise affecting any
member of the Dresser-Rand Group; (iv) to
the Knowledge of the Sellers, none
of the members of the Dresser-Rand Group is
in breach of any collective
bargaining agreement; (v) there is no labor
strike, slowdown, work stoppage,
or lockout in effect, or, to the Knowledge
of the Sellers, threatened against
or otherwise affecting any member of the
Dresser-Rand Group, and no member of
the Dresser-Rand Group has experienced any
such labor controversy within the
past three years; (vi) no member of the
Dresser-Rand Group is a party to, or
otherwise bound by, any consent decree
with, or citation by, any governmental
authority relating to employees or
employment practices; and (vii) each member
of the Dresser-Rand Group is in compliance
with its obligations pursuant to
the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN Act"),
and all other notification and bargaining
obligations arising under any
collective bargaining agreement, statute or
otherwise. To the Knowledge of the
Sellers, there is no effort to organize
employees of any member of the
Dresser-Rand Group which is pending or
threatened.
2.15 Intellectual Property. "Intellectual Property" shall mean
all
(i) patents; (ii) inventions, discoveries,
technology, processes, formulae,
designs, models, industrial designs,
know-how, confidential information,
proprietary information and trade secrets,
whether or not patented or
patentable; (iii) trademarks, service
marks, trade names, brand names, trade
dress, slogans, logos and internet domain
names; (iv) copyrights and other
copyrightable works and works in progress,
data, databases and software; (v)
all other intellectual property rights and
foreign equivalent or counterpart
rights and forms of protection of a similar
or analogous nature or having
similar effect in any jurisdiction
throughout the world; (vi) any renewals,
extensions, continuations, divisionals,
reexaminations or reissues or
equivalent or counterpart of any of the
foregoing in any jurisdiction
throughout the world; and (vii) all
registrations and applications for
registration of any of the foregoing.
Section 2.15 of the Disclosure Schedule
lists all patent, copyright, domain names,
trademark and service mark
registrations or applications for such
registrations owned by the members of
the Dresser-Rand Group. Except as would not
have or reasonably be expected to
have, individually or in the aggregate, a
Material Adverse Effect, or as
otherwise set forth in Section 2.15 of the
Disclosure Schedule, (i) the
members of the Dresser-Rand Group own or
have the sole and exclusive right to
use all Intellectual Property necessary to
operate the Business as currently
conducted ("Dresser-Rand Group Intellectual
Property") free and clear of all
Encumbrances, other than Permitted
Encumbrances; (ii) to the Knowledge of the
Sellers, the Dresser-Rand Group
Intellectual Property, and the use thereof,
does not infringe, and is not being
infringed by, the Intellectual Property of
any Person (including IR and its
Affiliates); (iii) no suit, action,
proceeding, judgment, order, injunction,
stipulation or decree is pending,
outstanding or threatened in writing that
(a) challenges the validity or sole
ownership of, or any right of any member of
the Dresser-Rand Group to use, any
Dresser-Rand Group Intellectual Property,
(b) asserts that any aspect of the
Business
23
<PAGE>
infringes or has otherwise violated any
third party's Intellectual Property
rights, or (c) asserts that any third party
is infringing or otherwise
violating the Dresser-Rand Group
Intellectual Property; and (iv) the
Dresser-Rand Group takes commercially
reasonable actions to protect and
maintain the Dresser-Rand Group
Intellectual Property.
2.16 Contracts.
(a) Section 2.16 of the Disclosure Schedule sets forth, as of
the date of this Agreement (or the date
noted in Section 2.16 of the
Disclosure Schedule, as applicable), a
complete list of each of the following
contracts, instruments, leases, deeds and
agreements to which any member of
the Dresser-Rand Group is a party or by
which any of them is bound other than
contracts, instruments, leases, deeds and
agreements to which other members of
the Dresser-Rand Group are the only other
parties (collectively, including the
real property leases described on Section
2.19(a) of the Disclosure Schedule,
the "Material Contracts"):
(i) indentures, mortgages, loan agreements, letters of
credit, surety
bonds and foreign exchange forward contracts, in each case
with a face
amount in excess of two million dollars ($2,000,000), capital
leases, security
agreements or other agreements or commitments for the
borrowing of
money or the deferred purchase price of assets;
(ii) purchase or sales orders and other contracts for the
sales of goods
and services by the Dresser-Rand Group, excluding any such
orders or
contracts not involving payments to the Dresser-Rand Group
exceeding an
aggregate of five million dollars ($5,000,000) in any
instance;
(iii) contracts involving the expenditure by the
Dresser-Rand
Group of more than three million dollars ($3,000,000) in any
instance for the
purchase of material, supplies, equipment or services;
excluding any
thereof that are terminable by such member of the
Dresser-Rand
Group without penalty on not more than ninety (90) days
notice or are
related to owned or leased real property;
(iv) contracts not otherwise described in this paragraph
(a) that involve
the expenditure by the Dresser-Rand Group of more than
one million
dollars ($1,000,000), excluding any thereof that are
terminable by
the Dresser-Rand Group without penalty on not more than
ninety (90) days
notice or are related to owned or leased real property;
(v) guarantees of the obligations of third parties,
excluding
guarantees involving the potential expenditure by the
Dresser-Rand
Group of less than two hundred thousand dollars ($200,000)
in any instance
and one million dollars ($1,000,000) in the aggregate;
24
<PAGE>
(vi) agreements which restrict the Dresser-Rand Group from
competing with
any other specific Person or entity or from conducting its
business in any
geographic area;
(vii) contracts or agreements (other than employment
agreements or
other Dresser-Rand Group Plans) with officers or other
members of the
executive leadership team of the Dresser-Rand Group;
(viii) material license agreements (as licensor or
licensee) with
third parties (excluding end-user licenses granted to
customers of the
Dresser-Rand Group),
(ix) agreements under which any member of the Dresser-Rand
Group has
licensed material Intellectual Property to or from any other
Person
(including Affiliates of the Dresser-Rand Group);
(x) partnership, limited liability company, joint venture
agreements or
other agreements involving a sharing of profits or expenses
by the
Dresser-Rand Group;
(xi) contracts relating to the acquisition of any business
enterprise or
the assets thereof since January 1, 2001; and
(xii) exclusive distributor, dealer, sales representative
or similar
contracts.
(b) True and correct copies (or, if oral, written summaries) of
each of the Material Contracts (or, in
respect of distributor, dealer and
sales representative contracts, the
applicable standard form therefor) and the
Partnership's standard form of product
warranty have been made available to
the Buyers.
(c) Except as set forth in Section 2.16 of the Disclosure
Schedule, each Material Contract is in full
force and effect, and is a valid
and binding agreement of the applicable
member or members of the Dresser-Rand
Group, enforceable against them in
accordance with its terms, subject to the
effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization,
moratorium and other similar laws relating
to or affecting creditors' rights
generally, general equitable principles
(whether considered in a proceeding in
equity or at law) and an implied covenant
of good faith and fair dealing.
Except as set forth in Section 2.16 of the
Disclosure Schedule, no condition
exists or event has occurred that (whether
with or without notice or lapse of
time or both) would constitute a material
default by any member of the
Dresser-Rand Group to any Material
Contract.
(d) As of the date hereof, except as set forth in Section
2.16(d) of the Disclosure Schedule (which
guarantees shall be released
(without any further obligation or
liability) on or prior to the Closing
Date), there are no outstanding guarantees
made by any member of the
Dresser-Rand Group of any liabilities
25
<PAGE>
or 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
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<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 A
