Exhibit 2.1
EQUITY PURCHASE AGREEMENT
Between
FRC ACQUISITIONS LLC
On Behalf of Itself and the other Buyers Named Herein
and
XXXXXXXXX-XXXX COMPANY LIMITED
On Behalf of Itself and the other Sellers Named Herein
dated as of
August 25, 2004
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
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
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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.
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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
Xxxxxxxxx-Xxxx 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
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,
Xxxxxxx & Xxxx, 0 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, 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
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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
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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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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.
9
"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 XX Xxxxxx Xxxxx 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
10
substantial changes in book value prior to Closing). The portion of the total
consideration allocated to Dresser Xxxx X.X. 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
(as defined in Section 1313(a) of the Code or any corresponding or similar
provision of state, local or foreign law).
(f) The Buyers and the Sellers shall promptly inform one
another of any challenge by any Taxing Authority to any allocation made
pursuant to this Section 1.7 and agree to consult and keep one another
informed with respect to the status of, and any discussion, proposal or
submission with respect to, such challenge.
1.8 AIM Program Payment. No later than 60 days after the Closing
Date, IR shall prepare, or cause to be prepared, a statement (the "AIM
Calculations Statement") containing IR's determination of (A) the amount (the
"AIM Program Payment Amount") equal to the pro rata portion as of 11:59 P.M.
local time on the Closing Date of the annual bonuses payable to Dresser-Rand
Group Employees (as defined in Section 2.13(a)) pursuant to the Annual
Incentive Management Program for the calendar year 2004 as in effect on the
date hereof (the "AIM Program"), determined in accordance with the terms of
the AIM Program and based upon financial performance and/or results determined
by IR and employee performance determined by the Dresser-Rand Group (which
information Buyer will cause the Dresser-Rand Group to provide as soon as
practicable after the Closing Date) and (B) the federal, state, local and
foreign payroll and other similar Taxes other than Social Security Taxes
payable by the Buyers and the members of the Dresser-Rand Group as a result of
the payment to Dresser-Rand Group Employees of bonuses under the AIM Program
in the amount of AIM Program Payment Amount (the "Payroll Tax Amount"). In
determining the AIM Program Payment Amount, the employee performance portion
provided by the Dresser-Rand Group shall be subject to review and approval by
IR, which shall not be unreasonably withheld. IR and FRC shall each provide
the other party and their accountants reasonable access to all relevant books,
records, facilities and employees of the Dresser-Rand Group and to any other
information reasonably necessary to prepare, review and understand the AIM
Calculations Statement (subject to reasonable restrictions imposed by IR or
FRC, as the case may be, based on confidentiality concerns). Buyer shall have
15 days from receipt to review and comment upon the calculations set forth in
the AIM Calculations Statement. In the event that Buyers, upon completion of
their review of the AIM Calculations Statement, determine that the AIM Program
Payment Amount or the Payroll Tax Amount have not been accurately calculated
or have not been determined on a basis consistent with this Section 1.8,
Buyers and IR shall cooperate in good faith to resolve such dispute. In the
event that Buyers and IR are unable to resolve such dispute, the CPA Firm
dispute resolution provisions of Section 1.4(c) hereof shall apply to resolve
such dispute. Upon final determination of the AIM Program Payment Amount and
the Payroll Tax Amount pursuant to this Section 1.8, but in no event more than
three (3) business days thereafter, IR shall pay by wire transfer of
immediately available funds to an account or accounts which are designated by
Buyers to IR not more than two (2) business days following final determination
thereof, cash in an amount equal to: (a) the AIM Program Payment Amount plus
(b) the Payroll Tax Amount.
12
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) Xxxxxxxxx-Xxxx 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
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
into, or equity security of, any Subsidiary. Complete and correct copies of
the charter documents (or equivalent organizational documents) and all
amendments thereto and the minute books of each of the Subsidiaries have been
made available to the Buyers on or prior to the date of this Agreement.
2.3 Ownership of Acquired Interests. Each Seller is the legal and
beneficial owner of, and has good and marketable title to, the Acquired
Interests being sold by such Seller hereunder, as set forth in Section 2.2 of
the Disclosure Schedule, free and clear of all Encumbrances, and such good and
marketable title may be transferred to the Buyers on the Closing Date free and
clear of all Encumbrances, other than such as may be created by or on behalf
of any of the Buyers.
2.4 Authorization, Etc. Each Seller has full corporate or
partnership power and authority to execute and deliver this Agreement and the
Transaction Agreements to which it is a party and to carry out and consummate
the transactions contemplated hereby to be carried out and consummated by it.
This Agreement has been duly and validly authorized and no other corporate
action or proceeding is necessary to authorize the execution, delivery and
performance of this Agreement by IR or any Seller. This Agreement has been
duly and validly executed by IR and, assuming this Agreement constitutes the
legal, valid and binding agreement of FRC, constitutes a legal, valid and
binding agreement of IR, enforceable against IR in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered
in a proceeding in equity or at law) and an implied covenant of good faith and
fair dealing.
2.5 Financial Statements. Section 2.5 of the Disclosure Schedule
sets forth (i) the audited combined balance sheet of the Dresser-Rand Group
and the Business at December 31, 2003 (the "2003 Balance Sheet") and the
related combined statements of income and cash flows, in each case, including
notes thereto for the year ended December 31, 2003 (collectively, the "Audited
Financial Statements") and (ii) the unaudited combined balance sheet of the
Dresser-Rand Group and the Business as of June 30, 2004 (the "Interim Balance
Sheet") and the related unaudited combined statements of income and cash flows
for the six month period ended June 30, 2004 (collectively, the "Interim
Financial Statements"). Such financial statements have been prepared from the
books and records of the Dresser-Rand Group and the Business in conformity
with GAAP, applied on a consistent basis, as in effect during the periods
indicated, subject in the case of the Interim Financial Statements to the
absence of notes and normal year end adjustments. The foregoing income
statements and statements of cash flows, including notes in respect of the
Audited Financial Statements, present fairly in all material respects the
combined results of operations and cash flows of the Dresser-Rand Group and
the Business for the respective periods covered, and the balance sheets,
including notes in respect of the Audited Financial Statements, present fairly
in all material respects the combined financial position of the Dresser-Rand
Group and the Business, as of their respective dates, prepared in conformity
with GAAP, applied on a consistent basis, as in effect during the periods
indicated.
15
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
Xxxx-Xxxxx Xxxxxx 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
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
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
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
(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
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
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
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 xxxx
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
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
(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
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
26
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
27
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:
28
(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 Xxxxxxxxx & 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.
29
2.22 Relations with Governments. To the Knowledge of the Seller, no
member of the Dresser-Rand Group, nor any director, officer, agent or employee
of the Dresser-Rand Group or any of its subsidiaries, has (a) used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to political activity, (b) made any unlawful payment or unlawfully
offered anything of value to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or (c)
violated any applicable export control, money laundering or anti-terrorism law
or regulation, nor have any of them otherwise taken any action which would
cause the Dresser-Rand Group or any of its subsidiaries to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, any act enforced by the
Office of Foreign Asset Control of the U.S. Department of Treasury, or any
applicable law of similar effect.
2.23 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article II, neither of the
Sellers nor any other Person or entity makes any other express or implied
representation or warranty to Buyers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYERS
The Buyers, jointly and severally, hereby represent and warrant to
the Sellers, as of the date of this Agreement, as follows:
3.1 Organization. Each Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation. Each Buyer has all requisite corporate power and authority
to own its assets and to carry on its business as now being conducted and is
duly qualified or licensed to do business and is in good standing in the
jurisdictions in which the ownership of its property or the conduct of its
business requires such qualification or license, except jurisdictions in which
the failure to be so qualified or licensed would not have or reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on the ability of the Buyers to consummate the transactions contemplated by
this Agreement and the Transaction Agreements to which it is a party.
3.2 Authorization, Etc. Each Buyer has full corporate power and
authority to execute and deliver this Agreement and the Transaction Agreements
to which it is a party and to carry out and consummate the transactions
contemplated hereby to be carried out and consummated by it. This Agreement
and the French Offer Letter have been duly and validly authorized and no other
corporate or other action or proceeding is necessary to authorize the
execution, delivery or performance of this Agreement and the French Offer
Letter by FRC or any Buyer. This Agreement and the French Offer Letter have
been duly and validly executed by FRC and, assuming this Agreement constitute
the legal, valid and binding agreement of IR, constitute a legal, valid and
binding agreement of FRC, enforceable against FRC in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other
30
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"), Xxxxxx Xxxxxxx Senior Funding, Inc. ("Xxxxxx Xxxxxxx"), UBS Loan
Finance LLC and UBS Securities LLC (together, "UBS"), pursuant to which
Citigroup, Xxxxxx Xxxxxxx and UBS have agreed, subject to the conditions set
forth therein, to lend the amount set forth in the Debt Financing Commitment
to the Buyers for the purpose, among other things, of consummating the
transactions contemplated by this Agreement (the "Debt Financing"). Attached
hereto as Section 3.4(b) of the Buyers' Disclosure Schedule are true and
complete copies of the commitment letters, dated as of August 25, 2004,
between Buyer, First Reserve Fund IX, L.P. and First Reserve Fund X, L.P. (the
"Equity Financing Commitment" and, together with the Debt Financing
Commitment, the "Financing Commitments"), pursuant to which First Reserve Fund
IX, L.P. and First Reserve Fund X, L.P. have committed, subject to the
conditions set forth therein, to invest the amount set forth therein to
purchase equity interests in FRC (the "Equity Financing" and, together with
the Debt Financing, the "Financing"). None of the Financing Commitments has
been amended or modified prior to the date of this Agreement, and the
respective commitments contained in the Financing Commitments have not been
withdrawn or rescinded in any respect. The Financing Commitments are in full
force and effect. There are no conditions precedent or other contingencies
related to the funding of the full amount of the Financing, other than as set
forth in or contemplated by the Financing Commitments. Buyers have no reason
as of the date hereof to believe that any of the
31
conditions to the Financing contemplated by the Financing Commitments within
the control of Buyers will not be satisfied or that the Financing will not be
made available to Buyers on the Closing Date.
3.5 No Brokers' or Other Fees. Except as set forth in Section 3.5 of
the Buyers' Disclosure Schedule, the fees and expenses in respect of which
will be paid by the Buyers, no broker, finder or investment banker is entitled
to any fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of the Buyers.
3.6 Unregistered Equity. Each Buyer acknowledges that it has been
advised by the Sellers that the Acquired Interests have not been and will not
be registered under the Securities Act of 1933, as amended (the "Securities
Act"). Each Buyer is an accredited investor as that term is defined in
Regulation D under the Securities Act. The Acquired Interests are being
acquired by each Buyer for its own account for investment and without a view
to resale.
3.7 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article III, neither of the
Buyers nor any other Person or entity makes any other express or implied
representation or warranty to Sellers.
ARTICLE IV
CONDITIONS TO SELLERS' OBLIGATION
The obligation of the Sellers to effect the Closing under this
Agreement is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless validly waived in writing by IR on behalf
of the Sellers.
4.1 Representations and Warranties.
(a) The representations and warranties made by the Buyers in
this Agreement shall be true, complete and correct in all respects (determined
without regard to any materiality or material adverse effect qualifier
therein) as of the Closing Date as though such representations and warranties
were made on such date, except that any representations and warranties that
are made as of a specified date shall be true, complete and correct in all
respects (determined as aforesaid) as of such date, and except for such
breaches of representations or warranties (determined as aforesaid) that would
not have, or reasonably be expected to have, in the aggregate, a material
adverse effect on the ability of the Buyers to consummate the transactions
contemplated by this Agreement.
(b) The representations and warranties made by the Buyers in
the first sentence of Section 3.1 (Organization) and in Section 3.2
(Authorization, Etc.) shall be true, complete and correct in all respects as
of the Closing Date.
32
4.2 Performance. The Buyers shall have performed and complied in all
material respects with all agreements and obligations required by this
Agreement to be so performed or complied with by them prior to the Closing.
4.3 Officer's Certificate. FRC, on behalf of itself and the other
Buyers, shall have delivered to the Sellers a certificate, dated as of the
Closing Date and executed by an executive officer of FRC, certifying to the
fulfillment of the conditions specified in Sections 4.1 and 4.2 hereof.
4.4 Consents and Approvals. Each governmental and other consent,
approval, authorization, waiver, certificate, exemption, order, registration,
declaration, clearance, filing or notice of, with or to any Person, or the
expiration or termination of the waiting period under any
Competition/Investment Law, in each case required to permit the consummation
of any of the transactions contemplated hereby (each, a "Consent"), in each
case listed in Section 4.4 of the Disclosure Schedule, shall have been
obtained and all conditions relating to such Consents shall have been
satisfied, including the completion of any sale, divestiture or disposition of
assets or businesses as may be required under Section 6.3.
4.5 Injunctions. On the Closing Date there shall not be in effect
any Law or any judgment, order, writ, injunction, decree, stipulation,
agreement, determination or award entered or issued by or with any
Governmental Authority (each, a "Governmental Order") which restrains,
prohibits or declares illegal the consummation of the transactions
contemplated by this Agreement and no Governmental Authority of competent
jurisdiction shall have instituted a Proceeding seeking to impose any such
restraint or prohibition.
4.6 Guarantees. The Buyers shall have delivered one or more
substitute standby letters of credit or other guarantees (collectively,
"Guarantees"), in form and substance satisfactory to the respective banks or
other counterparties, to support the obligations of the Sellers under all
standby letters of credit, guarantees, indemnity bonds and other credit
support instruments heretofore issued by the Sellers and their Affiliates on
behalf of any member of the Dresser-Rand Group, outstanding as of the Closing
Date and notified by IR in writing to FRC at least five (5) business days
prior to the Closing Date ("Seller Credit Support Instruments"). Such
Guarantees shall be in an aggregate face amount at least equal to the
aggregate face amount under the Seller Credit Support Instruments in U.S.
dollars determined in accordance with Currency Conversion Rules.
ARTICLE V
CONDITIONS TO BUYERS' OBLIGATION
The obligation of the Buyers to effect the Closing under this
Agreement is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless validly waived in writing by FRC on behalf
of the Buyers.
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5.1 Representations and Warranties.
(a) The representations and warranties made by the Sellers in
this Agreement shall be true, complete and correct (determined without regard
to any materiality or Material Adverse Effect qualifier therein) as of the
Closing Date as though such representations and warranties were made on such
date, except that any representations and warranties that are made as of a
specified date shall be true, complete and correct in all respects (determined
as aforesaid) as of such date, and except for such breaches of representations
and warranties (determined as aforesaid) that would not have, or reasonably be
expected to have, in the aggregate, a Material Adverse Effect.
(b) The representations and warranties made by the Sellers in
Section 2.1 (Organization of Certain Sellers), the first sentence of Section
2.3 (Ownership of Acquired Interests) and Section 2.4 (Authorization, Etc.),
shall be true, complete and correct in all respects as of the Closing Date.
5.2 Performance. The Sellers shall have performed and complied in
all material respects with all agreements and obligations required by this
Agreement to be so performed or complied with by the Sellers at or prior to
the Closing.
5.3 Officer's Certificate. IR, on behalf of itself and the other
Sellers, shall have delivered to the Buyers a certificate, dated as of the
Closing Date and executed by an executive officer of IR, certifying to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 hereof.
5.4 Consents and Approvals. Each governmental and other Consent, in
each case listed in Section 4.4 of the Disclosure Schedule, shall have been
obtained and all conditions relating to such Consents shall have been
satisfied, including the completion of any sale, divestiture or disposition of
assets or businesses as may be required under Section 6.3.
5.5 Injunctions. On the Closing Date there shall not be in effect
any Law or Governmental Order which restrains, prohibits or declares illegal
the consummation of the transactions contemplated by this Agreement and no
Governmental Authority of competent jurisdiction shall have instituted a
Proceeding seeking to impose any such restraint or prohibition.
5.6 Satisfaction and Release of Encumbrances. The Sellers shall have
delivered to the Buyers, in form and substance reasonably satisfactory to the
Buyers, evidence of the release of all Encumbrances on the Acquired Interests
(other than (i) applicable transfer restrictions pursuant to federal, state or
foreign securities or antitrust laws and (ii) those Encumbrances created by
the Buyers) as well as UCC-3 Termination Statements, payoff letters and any
other documentation in form and substance reasonably satisfactory to the
Buyers evidencing the release of all such Encumbrances.
5.7 Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any change, occurrence or development which has had,
or would
34
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
5.8 French Offer Letter. The French Offer Letter shall have been
accepted by the relevant Seller.
5.9 Interim Financials. On or about 60 days prior to the Closing
Date, IR shall have delivered to FRC copies of the unaudited combined balance
sheet of the Dresser-Rand Group and the Business as of June 30, 2003 and 2004
and the related unaudited combined statements of income and cash flows for the
six month periods ended June 30, 2003 and 2004 (the "Six-Month Financial
Statements"), in each case which have been subject to SAS 100 Review (as so
modified, the "SAS Financial Statements") by Sellers' independent accountants.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 Conduct of Business by Dresser-Rand Group. Except (i) as
otherwise expressly contemplated by this Agreement or (ii) as provided in
Section 6.1 of the Disclosure Schedule, the Sellers, jointly and severally,
covenant that without the consent of FRC, which consent shall not be
unreasonably withheld or delayed, from and after the date of this Agreement
and until the Closing Date the Sellers shall and shall cause the Dresser-Rand
Group to:
(a) use commercially reasonable efforts consistent with good
business judgment to (i) preserve intact the present business organization of
the members of the Dresser-Rand Group and operate the Business in the ordinary
course of business consistent with past practice and (ii) maintain and
preserve intact the Business and to maintain satisfactory relationships with
licensors, suppliers, creditors, distributors, customers, key employees and
others having business relationships with the Business;
(b) notify the Buyers of any material change in the normal
course of business or operations of the Business and of any governmental
complaints, investigations or hearings of which the Sellers or any member of
the Dresser-Rand Group are notified (or communications received by the Sellers
or any member of the Dresser-Rand Group indicating that the same may be
contemplated), or the institution or settlement of any Proceeding, in each
case involving any member of the Dresser-Rand Group or the Business, and to
keep the Buyers informed of such events; and
(c) not: (i) cause to be issued or sold any debt or equity
securities of any member of the Dresser-Rand Group or issue, grant or enter
into any options, warrants, rights, subscription agreements or commitments of
any kind with respect thereto; (ii) directly or indirectly cause to be
purchased, redeemed or otherwise acquired or disposed of any equity of any
member of the Dresser-Rand Group; (iii) split, combine or reclassify any of
its outstanding capital stock or equity interest of any member of the
Dresser-Rand Group; (iv) adopt a plan of complete or partial liquidation,
dissolution,
35
merger, consolidation, restructuring, recapitalization or other reorganization
with respect to any member of the Dresser-Rand Group; (v) declare, set aside
or pay any dividend (other than cash dividends) or other distribution except
for the distribution, as a capital account reduction, of all amounts owed by
the Sellers to the Dresser-Rand Group; (vi) in the case of any member of the
Dresser-Rand Group, incur, assume or guarantee any Debt Obligations other than
in the ordinary course of business consistent with past practice, (vii)
subject any material assets of the Dresser-Rand Group (real, personal or
mixed, tangible or intangible) to any Encumbrance; (viii) permit or allow the
sale, lease, transfer or disposition of any material assets of the
Dresser-Rand Group (real, personal or mixed, tangible or intangible), other
than sales of inventory in the ordinary course of business; (ix) assume,
guarantee, or otherwise become responsible for the obligations of, or make any
loans or advances to, any other Person (other than other members of the
Dresser-Rand Group); (x) waive or release any rights of material value, or
cancel, compromise, release or assign any material Debt Obligations owed to
any member of the Dresser-Rand Group; (xi) except for capital expenditures not
to exceed two million dollars ($2,000,000) in the aggregate, make any
investment or expenditure of a capital nature either by purchase of stock or
securities, contributions to capital, property transfer or otherwise, or by
the purchase of any property or assets of any other Person; (xii) make or
change any material election relating to Taxes, change an accounting period or
adopt or change any accounting method relating to Taxes, file any material
amended Tax Return, enter into any material closing agreement, settle any
material Tax claim or assessment relating to any member of the Dresser-Rand
Group, surrender any material right to claim a refund, offset or credit of
Taxes, consent to any material extension or waiver of the limitation period
applicable to any Tax claim or assessment relating to any member of the
Dresser-Rand Group, or take any other similar action relating to Taxes; (xiii)
cancel or terminate any insurance policy naming any member of the Dresser-Rand
Group as a beneficiary or a loss payable payee; (xiv) enter into any
collective bargaining agreements, except for renewals or extensions of
existing collective bargaining agreements, and with respect to such renewals
and extensions: (A) the Sellers shall keep the Buyers informed as to the
status of, and shall consult with Buyers as to the strategy for, all such
negotiations and (B) the Sellers shall act prudently and reasonably in such
negotiations (consistent with the Sellers' obligations under applicable law);
(xv) other than in the ordinary course of business, in the case of new hires,
as required by any agreement in effect as of the date hereof (including this
Agreement) or as required by law (A) increase the compensation or fringe
benefits of any officer who is then a current Dresser-Rand Group Employee
(other than pursuant to the Sale Incentive Program) or (B) enter into, adopt
or amend any employment agreement or employee benefit plan with or for the
benefit of any Dresser-Rand Group Employee (other than pursuant to the Sale
Incentive Program, and excluding any such actions that do not affect any
Dresser-Rand Group Employee); (xvi) amend any member of the Dresser-Rand
Group's organization documents; (xvii) make any material change in the
accounting methods or practices followed by the Business (other than such
changes that have been required by Law or GAAP); (xviii) enter into any
contract that restricts in any material respect any member of the Dresser-Rand
Group after the date of this Agreement from engaging in any line of business
in any geographic area or competing with any Person; (xix) enter into any
partnership, limited liability company or joint venture agreement between any
member of the Dresser-Rand Group and any other
36
Person; (xx) terminate or make any material amendment to a Material Contract;
(xxi) compromise, settle, grant any waiver or release relating to or otherwise
adjust any right or claim or Proceeding having a value in the aggregate in
excess of one million dollars ($1,000,000), or that imposes non-monetary
relief that has, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect other than in the ordinary course of
business and other than any Proceeding the liability in respect of which shall
be assumed or retained by the Sellers and their Affiliates following the
Closing; or (xxii) offer, propose, authorize, agree or commit to do any of the
foregoing.
6.2 Access to Books and Records; Cooperation.
(a) The Sellers shall cause the books and records (including
Tax books and records), contracts, documents and other information (in
whatever form) of the members of the Dresser-Rand Group, and the books and
records (including Tax books and records), contracts, documents and other
information (in whatever form) that primarily relate to the Business to be in
the sole possession and control of the members of the Dresser-Rand Group at or
as soon as practicable after the Closing. To the extent that books and records
(including Tax books and records), contracts, documents and other information
of the Sellers relevant to or affecting the Business and necessary to the
operation of the Business after the Closing Date relate partially to the
Sellers or their Affiliates other than the members of the Dresser-Rand Group,
the Sellers shall provide the Buyers with reasonable access to the portions of
such information pertaining to the Business. Except as otherwise provided in
Section 6.4, the Buyers and Sellers, as the case may be, agree that from the
Closing Date and until the seventh anniversary of the Closing Date, during
normal business hours, they shall permit, at no cost to the others and without
disruption of the business of the others or their subsidiaries, such other
parties and their respective counsel, accountants and other authorized
representatives to have reasonable access upon reasonable advance notice, to
the officers, directors, employees, accountants and other advisors and agents,
properties, books, records and contracts of the Dresser-Rand Group, and the
right (at the requesting party's expense) to make copies and extracts from
such books, records and contracts, in each case to the extent necessary to
investigate and defend any threatened or actual litigation relating to the
Dresser-Rand Group prior to the Closing Date.
(b) The Buyers agree not to, and to cause their subsidiaries
not to, destroy at any time any files or records which are subject to Section
6.2(a) without giving written notice to the Sellers, and giving the Sellers
thirty (30) days following receipt of such notice to request in writing that
all or a portion of the records intended to be destroyed be delivered to the
Sellers at the Sellers' expense.
(c) During the period commencing on the date hereof and ending
on the Closing Date, the Sellers will, and will cause the Dresser-Rand Group
to, upon reasonable request, afford to the Buyers and their counsel,
accountants and other authorized representatives access at all reasonable
times upon reasonable advance notice to the officers, directors, employees,
accountants and other advisors and agents, properties, books, records and
contracts, of the Dresser-Rand Group, and the right to make copies and
extracts from such books, records and contracts, and to furnish the
37
Buyers with all financial, operating and other data and information concerning
the Dresser-Rand Group as Buyers and their advisors may reasonably request;
provided that Buyers shall not be allowed to perform any invasive or
destructive sampling or testing of structures or environmental media except in
accordance with the provisions of Section 6.15(b). The parties agree that the
provisions of the Confidentiality Agreement, dated as of April 8, 2004,
between IR and First Reserve Corporation (the "Confidentiality Agreement")
shall continue in full force and effect following the execution and delivery
of this Agreement.
6.3 Filings and Consents. Each of the Sellers and the Dresser-Rand
Group on the one hand, and each of the Buyers on the other hand, shall use
their reasonable best efforts to obtain and to cooperate in obtaining any
governmental approval or other Consent required in connection with the
execution, delivery or performance of this Agreement or the Transaction
Agreements. The parties agree to cause to be made all appropriate filings
under the HSR Act as promptly as practicable following the date of this
Agreement and to diligently pursue termination of the waiting period under
such act. The parties agree to take any and all reasonable steps necessary to
avoid or eliminate each and every impediment under any Competition/Investment
Law that is asserted by any governmental entity with respect to the transfer
of the Acquired Interests so as to enable the transfer of the Acquired
Interests to occur as expeditiously as possible, including but not limited to,
proposing, negotiating, committing to and effecting, by consent decree, hold
separate order or otherwise, the sale, divestiture or disposition of such
assets or businesses (or otherwise taking or committing to take any action
that limits the freedom of action with respect to, or its ability to retain,
any businesses, product lines, or assets) as may be required in order to avoid
the entry of, or to effect the dissolution of, any injunction, temporary
restraining order, or other order in any suit or proceeding, which would
otherwise have the effect of preventing or delaying the consummation of the
transfer of the Acquired Interests. Buyers agree that the obtaining of
required consents and approvals of parties to contracts with members of the
Dresser-Rand Group is primarily the responsibility of Buyers and that Buyers
shall use their commercially reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to obtain any consents and approvals of parties to contracts with
members of the Dresser-Rand Group as are required in connection with the
consummation of the transactions contemplated hereby. Without limiting the
foregoing, promptly following the date of this Agreement, the Sellers and the
Buyers shall use reasonable best efforts to undertake that all Laws are
complied with in respect of informing and consulting Non-U.S. Employees in
respect of the transactions contemplated by this Agreement and the French
Offer Letter.
6.4 Tax Matters; Cooperation; Preparation of Returns; Tax Elections.
(a) The Buyers and the Sellers agree to furnish or cause to be
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Dresser-Rand Group (including,
without limitation, access to books and records, employees, contractors and
representatives) as is reasonably necessary for the filing of all Tax Returns,
the making of any election related to Taxes, the preparation for any audit by
any Taxing Authority, and the prosecution or defense of any
38
claim, suit or proceeding relating to any Tax Return; provided, however, that
if such requested information is contained within a document containing any
unrelated information, only portions pertaining to such relevant information
shall be furnished. The Buyers and the Sellers shall retain all books and
records with respect to Taxes pertaining to the Dresser-Rand Group until the
expiration of all relevant statutes of limitations (and, to the extent
notified by Sellers or Buyers, any extensions thereof). At the end of such
period, each party shall provide the other with at least thirty (30) days
prior written notice before destroying any such books and records, during
which period the party receiving such notice can elect to take possession, at
its own expense, of such books and records.
(b) The Sellers shall prepare, or cause to be prepared, all Tax
Returns in respect of each member of the Dresser-Rand Group (including any
affiliated, consolidated, combined or unitary Tax Returns) in a manner
consistent with past practices (unless required to do otherwise in accordance
with applicable law) for any taxable period ending on or before the Closing
Date. The Sellers shall timely pay to the relevant Taxing Authority all Taxes
due in connection with any such Tax Return; provided, however, that Buyers
shall pay to Sellers any non-income Taxes reflected thereon to the extent such
Taxes are reflected as a liability in the calculation of the Final Net Working
Capital Amount.
(c) The Buyers shall prepare, or cause to be prepared, all Tax
Returns in respect of each member of the Dresser-Rand Group for any taxable
period ending after the Closing Date which began before the Closing Date (a
"Straddle Period") in a manner consistent with past practices (unless required
to do otherwise in accordance with applicable law) and on the basis that the
relevant taxable period ended as of the close of business on the Closing Date
(unless the relevant Taxing Authority will not accept a Tax Return filed on
that basis). The Buyers shall provide IR with a copy of a substantially final
draft of each Straddle Period Tax Return (and such additional information
regarding such Straddle Period Tax Return as may reasonably be requested by
IR) for its review and comment (i) at least fifteen (15) days prior to the
filing of such Tax Return or (ii) in the case of a Tax Return that is required
to be filed within twenty (20) days of the Closing Date, the Buyers shall use
their reasonable best efforts to afford the Sellers a reasonable opportunity
to review such Straddle Period Tax Return prior to filing such Tax Return. The
Buyers shall pay the amount shown to be due on any such Tax Returns. In
advance of the filing of such Tax Returns, the Sellers shall pay to the Buyers
their share of any such Taxes, determined in accordance with Section 6.5. The
Buyers shall timely prepare and file all other Tax Returns in respect of the
members of the Dresser-Rand Group for any taxable period that begins after the
Closing Date, and the Buyers shall timely pay to the relevant Taxing Authority
all Taxes due in connection with any such Tax Returns.
(d) The Buyers shall not (i) file an or cause to be filed an
amended Tax Return or claim for Tax refund, (ii) consent to the waiver or
extension of the statute of limitations relating to Taxes, (iii) take any Tax
position on any Tax Return or (iv) compromise or settle any Tax liability, in
each case with respect to any member of the Dresser-Rand Group if such action
would have the effect of increasing the Tax liability or
39
reducing any Tax assets of the Sellers in respect of any taxable period (or
portion thereof in the case of a Straddle Period) ending on or before the
Closing Date, in each case without the Sellers' written consent (which consent
may not be unreasonably withheld or delayed). The Sellers shall not (i) file
an or cause to be filed an amended Tax Return or claim for Tax refund, (ii)
consent to the waiver or extension of the statute of limitations relating to
Taxes of any member of the Dresser-Rand Group, (iii) take any Tax position on
any Tax Return or (iv) compromise or settle any Tax liability, in each case if
such action would have the effect of increasing the Tax liability or reducing
any Tax assets of the Buyers in respect of any taxable period (or portion
thereof in the case of a Straddle Period) after the Closing Date, in each case
without the Buyers' written consent (which consent may not be unreasonably
withheld or delayed).
(e) Prior to the Closing Date, the Sellers shall terminate any
tax-allocation or tax-sharing agreements between the Sellers (and their
Affiliates) and the members of the Dresser-Rand Group, and no liabilities with
respect thereto will exist as of the Closing.
(f) Section 338 Elections.
(i) The Sellers agree to furnish or cause to be furnished
such information and assistance and take such actions necessary, at the
Buyers' request, to enable the Buyers to make an election under section
338(g) of the Code (or any corresponding or similar provision of state,
local or foreign law) with respect to any Non-U.S. Acquired Interests.
(ii) At Buyers' request, the Sellers agree to join in
making an election under section 338(h)(10) of the Code (or any
corresponding or similar provision of state, local or foreign law) with
respect to any entities in the Dresser-Rand Group for which such an
election is available and shall file IRS Form 8023 and any other Tax
forms or filings necessary to effect such election. In the event that
Sellers do not undertake all of the transactions set forth in steps 2 and
3 of Exhibit B, Sellers covenant and agree that an election under section
338(h)(10) of the Code will be available for each of Dresser-Rand Holding
Company and Dresser-Rand Power, Inc.
(g) The Buyers and Sellers shall be responsible for jointly
preparing and timely filing (and cooperating with one another in preparing and
filing) any Tax Returns required with respect to any sales, use, real property
transfer, real property gains, transfer, stamp, registration, documentary,
recording or similar Taxes, fees and costs, together with any interest
thereon, penalties, fines, costs, fees, additions to tax or additional amounts
with respect thereto incurred in connection with the transactions (other than
the transactions set forth in steps 1, 2, 3 and 4 of Exhibit B) contemplated
by this Agreement ("Transfer Taxes"); provided, however, that the term
Transfer Taxes shall not include any income or franchise Taxes imposed with
respect to income or any withholding Taxes imposed with respect to such income
or franchise Taxes. The Buyer
40
and Sellers shall provide to one another a true copy of each such Tax Return
as filed and evidence of the timely filing thereof.
6.5 Tax Indemnity.
(a) The Sellers shall, jointly and severally, indemnify the
Buyers and their Affiliates (including the members of the Dresser-Rand Group)
and each of their respective officers, directors, partners, stockholders,
employees, agents and representatives and hold them harmless against (i) all
Tax liabilities of the members of the Dresser-Rand Group (other than
non-income taxes to the extent reflected as a liability in the calculation of
the Final Net Working Capital Amount) for all taxable periods (or portions
thereof in the case of a Straddle Period) ending on and including or before
the Closing Date and (ii) all Tax liabilities of the Sellers and their
Affiliates (other than the Dresser-Rand Group) for all taxable periods (or
portions thereof in the case of a Straddle Period) ending on and including or
before the Closing Date, (iii) all Tax liabilities imposed on any of the
Sellers and their Affiliates (including the Dresser-Rand Group) under Section
1.1502-6 of the Treasury Regulations (or any corresponding or similar
provision of state, local or foreign law) as a result of being a member of any
affiliated, consolidated, combined, unitary or similar group prior to the
Closing or pursuant to any tax-allocation or tax-sharing agreement in
existence prior to the Closing, (iv) all Tax liabilities arising out of or due
to any breach of any covenant, undertaking or other agreement of the Sellers
contained in this Agreement or any certificate delivered pursuant to this
Agreement, (v) all Taxes resulting from or attributable to any reduction in
the Tax basis of the assets of Dresser-Rand Holding Company or Dresser-Rand
Power, Inc. or any of their Subsidiaries (including, without limitation, the
Tax basis in the stock of any such Subsidiaries) pursuant to Section 732(f) of
the Code and the Treasury Regulations promulgated thereunder (or any
corresponding or similar provision of state, local or foreign law) as a result
of the transactions set forth in step 2 of Exhibit B (provided that the
indemnity contained in this subclause (v) shall not apply with respect to the
directly held assets of Dresser-Rand Holding Company and the directly held
assets of Dresser-Rand Power, Inc. to the extent that (A) within the two year
period following the Closing (1) Buyers cause Dresser-Rand Holding Company or
Dresser-Rand Power, Inc. to be taxed as a corporation for U.S. federal income
tax purposes or (2) Buyers cause Dresser-Rand Holding Company or Dresser-Rand
Power, Inc. to transfer any of such directly held assets to a related entity
that is a corporation for U.S. federal income tax purposes and (B) the action
referred to in subclause (A) above results in Buyers' having a basis in such
directly held assets that is less than the basis the Buyers would have had in
such assets in the absence of the action referred to in subclause (A) above),
(vi) any Taxes resulting from or attributable to any insurance recoveries with
respect to the Pending Insurance Claim, and (vii) all reasonable out-of-pocket
expenses (including, without limitation, reasonable fees and expenses of
counsel) arising out of or incidental to the imposition, assessment or
assertion of a Tax described in subclauses (i) through (vi) above. The Tax
indemnity provided under this Section 6.5(a) shall not cover Tax liabilities
resulting from any transaction of a member of the Dresser-Rand Group not in
the ordinary course of business (other than the transactions contemplated
hereunder) that occurs on the Closing Date but after the Closing.
41
(b) The Buyers, jointly and severally, and the members of the
Dresser-Rand Group shall indemnify the Sellers and their Affiliates and each
of their respective officers, directors, employees and agents and hold them
harmless against (i) all Tax liabilities of the members of the Dresser-Rand
Group with respect to any taxable period (or portions thereof in the case of a
Straddle Period) that begins after the Closing Date and that are imposed on or
in respect of a member of the Dresser-Rand Group and (ii) all Tax liabilities
arising out of or due to any breach of any covenant or other agreement of the
Buyers contained in this Agreement.
(c) For purposes of this Section 6.5, in the case of any Taxes
that are imposed on a periodic basis and are payable for a Straddle Period,
the portion of such Tax related to the portion of such Straddle Period ending
on and including the Closing Date shall (i) in the case of any Taxes other
than gross receipts, sales or use taxes and Taxes based upon or related to
income, be deemed to be the amount of such Tax for the entire taxable period
multiplied by a fraction, the numerator of which is the number of days in the
taxable period ending on and including the Closing Date and the denominator of
which is the number of days in the entire taxable period, and (ii) in the case
of any Tax based upon or related to income and gross receipts, sales or use
taxes, be deemed equal to the amount which would be payable if the relevant
taxable period ended on and included the Closing Date. The portion of any
credits relating to the portion of a Straddle Period ending on and including
the Closing Date shall be determined on a per diem basis in accordance with
subclause (i) above. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with the past
practice of the members of the Dresser-Rand Group.
(d) Payment by the indemnitor of any amount due under this
Section 6.5 shall be made within ten (10) business days following written
notice by the indemnitee that payment of such amounts to the appropriate
Taxing Authority or other third party is due, provided that the indemnitor
shall not be required to make any payment earlier than five (5) business days
before it is due to the appropriate Taxing Authority or other third party. In
the case of any written notice by any of the Buyers indicating that Taxes are
due for a Straddle Period Tax Return, such notice shall set forth in
reasonable detail the calculations regarding the Sellers' share of such Taxes,
and if within ten (10) business days after receipt of such notice, the Sellers
notify the Buyers in writing that they disagree with the computation of their
share of such Taxes and pay to the Buyers the portion of the Sellers' share of
such Taxes that is not disputed, the Sellers and the Buyers shall proceed in
good faith to determine the Sellers' share of such Taxes. If the Sellers do
not so notify the Buyers and make payment of such undisputed portion in
accordance with the immediately preceding sentence, the Sellers shall be
deemed to have agreed to the Buyers' calculation of the Sellers' share of such
Taxes. If the Sellers and Buyers cannot agree in good faith on such share
within thirty (30) days after the Sellers' receipt of such notice, the
Sellers' share of such Taxes shall be determined pursuant to Section 6.5(f),
and the Sellers' remaining payment, if any, to the Buyers shall be due three
(3) business days after the amount payable by the Sellers is determined by
agreement between the Sellers and the Buyers or pursuant to Section 6.5(f),
subject to the proviso in the first sentence of this Section 6.5(d). In the
case of a Tax that is contested in accordance with the provisions of Section
6.6 below, payment of the Tax to the
42
appropriate Taxing Authority shall not be considered to be due earlier than
the date a final determination to such effect is made by the appropriate
Taxing Authority or court.
(e) Notwithstanding any provision in this Agreement to the
contrary, the obligations of a party to indemnify and hold harmless another
party pursuant to this Section 6.5 shall terminate at the close of business on
the day following the expiration of the applicable statute of limitations with
respect to the liabilities in question (giving effect to any waiver,
mitigation, tolling or extension thereof); provided, however, that in the
event written notice of any bona fide claim for indemnification pursuant to
this Section 6.5 shall have been given in accordance herewith within the
applicable survival period, the rights and obligations that are the subject of
such claim for indemnification shall survive with respect to such claim until
such time as such claim is fully and finally resolved.
(f) Any disputes between the parties with respect to the Tax
matters shall be resolved by the CPA Firm, whose fees and expenses shall be
shared equally between the Sellers and the Buyers.
6.6 Procedures Relating to Indemnification for Taxes.
(a) If notice of any claim, assessment, or dispute is received
by the Buyers or the Sellers, as the case may be, or any of their Affiliates,
which, if successful, would result in an indemnity payment pursuant to Section
6.5 to the Buyers or the Sellers, as the case may be (a "Tax Claim"), the
Buyers or the Sellers, as the case may be, shall promptly notify the Sellers
or the Buyers, as the case may be, in writing of such Tax Claim stating the
nature and basis of such Tax Claim and the amount thereof, to the extent known
by the Buyers or the Sellers, as the case may be, provided that the Buyers
shall not submit a notification to the Sellers for Tax Claims for any Taxes
that are not imposed on or measured with respect to income (a "Non-Income Tax
Claim") more than one time per calendar year unless the Non-Income Tax Claims
with respect to which no previous claim has been made are in the aggregate
greater than two hundred thousand dollars ($200,000); provided, further, that
the failure to provide prompt notice as provided herein will relieve the
Buyers or Sellers, as the case may be, of their obligations hereunder only to
the extent that such failure prejudices the Buyers or Sellers, as the case
may be.
(b) With respect to any Tax Claim that relates to a taxable
period ending on or before the Closing Date, the Sellers shall control at
their expense all proceedings taken in connection with such Tax Claim
(including selection of counsel) and, without limiting the foregoing, may in
their sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any Taxing Authority with respect
thereto and may, in their sole discretion, either pay the Tax claimed and xxx
for a refund where applicable Law permits such refund suits or contest the Tax
Claim in any permissible manner.
(c) With respect to any Tax Claim that relates to a Straddle
Period (a "Straddle Period Tax Claim"), the Sellers and the Buyers shall
jointly agree on the
43
conduct of any proceedings taken in connection with such Straddle Period Tax
Claim (including selection of counsel) and shall share expenses arising
therefrom. Neither the Sellers nor the Buyers (nor any of their Affiliates)
shall be entitled in any way to compromise, release, waive, settle, modify or
pay any Straddle Period Tax Claim without the prior written consent of such
other party or parties, which consent shall not be unreasonably withheld or
delayed. Notwithstanding anything in the two preceding sentences to the
contrary, with respect to a Straddle Period Tax Claim for a Tax item which
solely relates to the portion of the Straddle Period that is prior to and
including the Closing Date the Sellers shall control at their expense all
proceedings taken in connection with such Straddle Period Tax Claim (including
selection of counsel) and, with respect to a Straddle Period Tax Claim for a
Tax item which solely relates to the portion of the Straddle Period that is
after the Closing Date the Buyers shall control at their expense all
proceedings taken in connection with such Straddle Period Tax Claim (including
selection of counsel).
(d) With respect to any Tax Claim that relates to a taxable
period beginning after the Closing Date, the Buyers shall control at their
expense all proceedings taken in connection with such Tax Claim (including
selection of counsel) and, without limiting the foregoing, may in their sole
discretion pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with any Taxing Authority with respect thereto and
may, in their sole discretion, either pay the Tax claimed and xxx for a refund
where applicable Law permits such refund suits or contest the Tax Claim in any
permissible manner.
6.7 Refunds and Tax Benefits.
(a) Any Tax refunds that are received by the Buyers, or a
member of the Dresser-Rand Group, and any amounts credited against Tax to
which either the Buyers or a member of the Dresser-Rand Group becomes
entitled, that are refunds of Taxes paid with respect to, or credits carried
over from, taxable periods (or portions thereof in the case of a Straddle
Period) ending on or before the Closing Date (except to the extent any such
refund or credit was reflected as an asset in the calculation of the Final Net
Working Capital Amount) shall be for the account of the Sellers, and the
Buyers shall pay over to the Sellers the net amount of any such refund or any
such credit (except to the extent any such refund or credit was reflected as
an asset in the calculation of the Final Net Working Capital Amount) within
fifteen (15) days after such refund or credit is actually realized in
accordance with the principles of Section 8.1(c). The Buyers agree that they
shall not, without the Sellers' consent (which shall not be unreasonably
withheld), cause or permit the members of the Dresser-Rand Group to carry back
to any taxable period ending on or prior to the Closing Date any net operating
loss, loss from operations or other Tax attribute, and further agrees that the
Sellers have no obligation under this Agreement to return or remit any refund
or other Tax benefit attributable to a breach by the Buyers of the foregoing
undertaking. Any refunds of Taxes paid with respect to taxable periods (or
portions thereof in the case of a Straddle Period) ending after the Closing
Date shall be for the account of the Buyers.
44
(b) The Buyers and the Sellers agree to treat any amounts
payable pursuant to this Section 6.7 as an adjustment to the Purchase Price
(unless required to do otherwise pursuant to a determination (as defined in
Section 1313(a) of the Code or any corresponding or similar provision of
state, local or foreign law).
6.8 Employees; Benefit Plans.
(a) Continuation of Comparable Benefit Plans. Commencing as of
the Closing, subject to Section 6.8(e), the Dresser-Rand Group Employees shall
cease to participate in the employee benefit plans, policies, programs and
arrangements of the Sellers. Subject to Sections 6.8(c)(i), (h), (i) and (j),
for not less than two (2) years following the Closing Date, the Buyers shall
maintain, or shall cause the Dresser-Rand Group to maintain, (A) salaries and
bonuses for each active Dresser-Rand Group Employee at levels no less
favorable than the salary and bonus rates in effect immediately prior to the
Closing Date for each such Dresser-Rand Group Employee and (B) employee
benefit plans and arrangements (other than any (x) equity compensation plans
or arrangements and (y) special bonus or incentive arrangements not in the
ordinary course) for Dresser-Rand Group Employees (other than such employees
who are subject to a collective bargaining agreement ("Union Employees"))
that, in the aggregate, are no less favorable than the Dresser-Rand Group
Plans in effect immediately prior to the Closing Date, except for such changes
as may be required by law including, without limitation, any applicable
qualification requirements of Section 401(a) of the Code.
(b) Defined Benefit Plans.
(i) On or prior to the Closing Date, the Dresser-Rand
Group shall assume sponsorship from IRNJ of the Pension Plan for
Employees of Dresser-Rand Company (the "D-R Defined Benefit Plan") and,
with respect to such D-R Defined Benefit Plan, the plan assets,
liabilities and obligations accrued through the Closing Date. On or prior
to the Closing Date, the Sellers shall cause the trustee of the
Xxxxxxxxx-Xxxx Company Collective Trust (the "IR Master Trust") to
transfer the assets of the D-R Defined Benefit Plan (accrued through the
date of transfer) to a stand-alone trust established or designated for
this purpose by the Sellers, and as of the date of such transfer the
Dresser-Rand Group shall cease to participate in the IR Master Trust.
(ii) Except as set forth in Sections 6.8(n) and (o),
commencing as of the Closing Date, the Sellers shall have no liability
whatsoever (under this Agreement or otherwise) and Buyers shall indemnify
and hold the Sellers harmless with respect to liability relating to or
arising out of or in connection with the D-R Defined Benefit Plan.
(iii) The Buyers and the Sellers shall use their
reasonable best efforts to provide the other party with all information
reasonably necessary to ensure the proper administration of the D-R
45
Defined Benefit Plan and the defined benefit pension plans maintained by
Sellers.
(c) Defined Contribution Plans.
(i) On or prior to the Closing Date, the Dresser-Rand
Group shall assume sponsorship from IRNJ of the Dresser-Rand Company
Retirement Savings Plan, the Dresser-Rand Company Retirement Savings
Plan-B and the Dresser-Rand Company 401(k) Plan for Union Employees (the
"D-R Defined Contribution Plans"), and, with respect to such D-R Defined
Contribution Plans, the plan assets, liabilities and obligations accrued
through the Closing Date. From and after the Closing Date, the Buyers
shall, or shall cause the Dresser-Rand Group, to continue to make
contributions in accordance with the "pension equalizer" provisions of
the Dresser-Rand Company Retirement Savings Plan and the Dresser-Rand
Company Retirement Savings Plan-B, or in the event that one or both of
such plans are terminated, any defined contribution plan established for
the benefit of Dresser-Rand Group Employees, with respect to each
employee who prior to the Closing Date is receiving such contributions
("Grandfathered Employees"), in a manner and amount which is at least
equal to the "pension equalizer" contributions such Grandfathered
Employees receive under the Dresser-Rand Company Retirement Savings Plan
and the Dresser-Rand Company Retirement Savings Plan-B prior to the
Closing Date.
(ii) Except as set forth in Section 6.8(o), commencing as
of the Closing Date, the Sellers shall have no liability whatsoever
(under this Agreement or otherwise) and Buyers shall indemnify and hold
the Sellers harmless with respect to liability relating to or arising out
of or in connection with the D R Defined Contribution Plans.
(d) Welfare Benefit Plans.
(i) Commencing as of the Closing, Buyers shall be liable
for and shall indemnify and hold harmless the Sellers for welfare benefit
claims relating to the Dresser-Rand Group Employees and their dependents,
regardless of when incurred, to the extent the Dresser-Rand Group has not
reimbursed the Sellers prior to the Closing for any such claims.
(ii) On or prior to the Closing Date, the Dresser-Rand
Group shall assume sponsorship from IRNJ of the Dresser-Rand Welfare VEBA
Trust (the "D-R VEBA") and, with respect to the D-R VEBA, the assets,
liabilities and obligations accrued through the Closing Date. Except as
set forth in Section 6.8(o), commencing as of the Closing Date, the
Sellers shall have no liability whatsoever (under this Agreement
46
or otherwise) and Buyers shall indemnify and hold the Sellers harmless
with respect to liability relating to or arising out of or in connection
with the D R VEBA.
(e) Post-Retirement Benefit Plan. With respect to Dresser-Rand
Group Employees who retire or retired pursuant to the terms of IRNJ's or the
Dresser-Rand Group's retiree welfare programs (the "Retiree Welfare Plans") on
or prior to the Closing Date, or are eligible to retire pursuant to the terms
of the Retiree Welfare Plans as of the Closing Date, the Sellers shall retain
liability for benefits under the Retiree Welfare Plans in accordance with
their terms (as such terms exist as of the Closing Date or as otherwise
approved by Sellers). On and after the Closing Date the Sellers shall have no
liability for retiree welfare benefits with respect to any Dresser-Rand Group
Employee who becomes eligible to retire pursuant to the terms of the Retiree
Welfare Plans after the Closing Date (the "Post-Closing Retirees"), and the
Buyers shall indemnify and hold the Sellers harmless with respect to retiree
welfare liability relating to or arising out of or in connection with such
Post-Closing Retirees.
(f) Prior Service; Deductibles. The Buyers shall recognize each
Dresser-Rand Group Employee's service with the Sellers or the Dresser-Rand
Group as of the Closing Date as service with Buyers for all purposes, as
applicable, in the Buyers' employee welfare benefit plans, employee pension
plans, vacation, disability, severance and other employee benefit plans or
policies, but only to the extent that such service was recognized by the
Sellers or the Dresser-Rand Group under the Dresser-Rand Group Plans, except
where such crediting would result in an unintended duplication of benefits. In
addition, the Buyers shall, or shall cause the Dresser-Rand Group to, waive
any pre-existing condition limitations and eligibility waiting periods under
the employee benefit plans applicable to Dresser-Rand Group Employees or their
respective dependents to the extent such pre-existing limitations and
eligibility waiting periods were satisfied or did not exist or apply under the
comparable Dresser-Rand Group Plans prior to the Closing. Buyers shall, or
shall cause the Dresser-Rand Group to recognize (or cause to be recognized)
the dollar amount of all expenses incurred by Dresser-Rand Group Employees and
their respective dependents during the calendar year in which the Closing Date
occurs for purposes of satisfying the deductibles and co-payment or out-
of-pocket limitations for such calendar year under the relevant employee
welfare benefit plans of the Buyers to the extent such expenses were
recognized by the comparable Dresser-Rand Group Plan prior to the Closing.
(g) Accrued Vacation. The Buyers shall, or shall cause the
Dresser-Rand Group to, credit each current Dresser-Rand Group Employee (and,
to the extent any such amount is owing to any former Dresser-Rand Group
Employee, each such former Dresser-Rand Group Employee) with the accrued and
unused vacation days and any personal and sickness days accrued in accordance
with the vacation and personnel policies and labor agreements of the Sellers
or the Dresser-Rand Group in effect as of the Closing Date.
(h) Severance Obligations. The Sellers and the Buyers agree
that the transactions contemplated hereby shall not constitute a severance of
employment of
47
any Dresser-Rand Group Employee, and that such employees will be deemed for
all purposes to have continuous and uninterrupted employment before and
immediately after the Closing Date. Except as required by law or an applicable
collective bargaining agreement, the Buyers shall provide severance and other
separation benefits to each Dresser-Rand Group Employee terminated by the
Buyers or the Dresser-Rand Group within two (2) years following the Closing
Date (or, in the case of Dresser-Rand Group Employees who are subject to a
collective bargaining agreement, the period required therein, if greater) upon
terms and conditions that are no less favorable than those applicable to such
Dresser-Rand Group Employees under the severance and other separation benefits
provided by the Sellers and their Affiliates in effect on the date of this
Agreement. The Buyers shall be responsible for any claim made on or after the
Closing Date by any Dresser-Rand Group Employee who is an active employee as
of the Closing Date for severance or other separation benefits including,
without limitation, in connection with the consummation of the transaction
contemplated hereby, for any contractual, statutory or other claims arising
out of or in connection with any termination of employment on or after the
Closing Date.
(i) Annual Incentive Compensation. Effective as of the Closing
Date through December 31, 2004, the Buyers shall, or shall cause the
Dresser-Rand Group to, maintain the annual incentive compensation plans in
which any of the Dresser-Rand Group Employees participate immediately prior to
the Closing Date without change. In addition, the Buyers shall, or shall cause
the Dresser-Rand Group to, pay any bonuses payable according to the terms of
such incentive compensation plans to any Dresser-Rand Group Employees in
respect of calendar year 2004 no later than March 31, 2005; provided, that if
any Dresser-Rand Group Employee is terminated other than for cause by Buyers
or the Dresser-Rand Group on or after the Closing Date but prior to payment of
such bonus, such Dresser-Rand Group Employee shall receive, at the same time
as bonuses are paid to active employees, a prorated portion of such bonus
based on the portion of calendar year 2004 that has elapsed prior to the date
of termination of employment.
(j) Flexible Benefits. To the extent any Dresser-Rand Group
Employee contributed to a dependent care or medical expense reimbursement
account under a Dresser-Rand Group Plan ("IR's Flexible Account Plan") during
the plan year that includes the Closing Date, the Sellers shall, on or as soon
as reasonably practicable after the Closing Date, transfer the account
balances for such plan year, if any, of each such Dresser-Rand Group Employee
to a dependent care or medical expense reimbursement account, as applicable,
maintained by the Buyers for the benefit of such Dresser-Rand Group Employees
(the "Buyer's Flexible Account Plan"), and the Buyers shall provide benefits
under the Buyer's Flexible Account Plan that are no less favorable than those
provided under IR's Flexible Account Plan to such Transferred Employees at
least through the end of the plan year in effect as of the Closing. The Buyers
shall be responsible for all liability for and administration of reimbursement
claims that have not been received by the Sellers as of the date the Sellers
transfer assets to the Buyers from IR's Flexible Account Plan, regardless of
when the claim was incurred.
48
(k) Collective Bargaining Agreement(s). The Buyers shall cause
each member of the Dresser-Rand Group to continue in full force and effect the
collective bargaining agreement(s) set forth in Section 2.14 of the Disclosure
Schedule to which each such member of the Dresser-Rand Group is a party on the
Closing Date with respect to Union Employees and shall further cause each such
member of the Dresser-Rand Group to continue the employment of all Union
Employees covered by said agreements in accordance with the terms of such
collective bargaining agreements. The Sellers shall use their commercially
reasonable efforts to furnish or cause to be furnished such information and
assistance relating to the obligations under the collective bargaining
agreements pursuant to the preceding clause as the Buyers shall reasonably
request.
(l) Non-U.S. Employment Matters.
(i) Employment. Without limiting the generality of the
foregoing, as of the Closing Date, the Buyers shall, or shall cause the
Dresser-Rand Group to, assume or retain and be responsible for the
employment (including any employment contracts) of the Dresser-Rand Group
Employees who are employed outside the United States (the "Non-U.S.
Employees"), and the Buyers shall, or shall cause the Dresser-Rand Group
to, take any and all commercially reasonable actions necessary or
appropriate (if any) to continue the employment of such Non-U.S.
Employees and assume or retain all obligations and liabilities relating
to their employment (including, but not limited to, any employment
contracts) under applicable laws and practices without the Sellers or any
of their Affiliates having any liability to any such employees for
severance, redundancy, termination, payment in lieu of notice, indemnity
or other payments to any of such employees by reason of, or as a result
of, the actions contemplated by this Agreement.
(ii) Employee Benefit Plans for Non-U.S. Employees.
Without limiting the generality of Section 6.8(a), effective as of the
Closing Date, the Buyers shall, or shall cause the Dresser-Rand Group to,
maintain, establish and/or qualify or register with applicable regulatory
authorities employee benefit plans for, or shall extend existing Non-U.S.
Dresser-Rand Group Plans to, the Non-U.S. Employees to the extent
required by applicable law and, for not less than two (2) years following
the Closing Date, provide benefits to the Non-U.S. Employees on terms and
conditions which are no less favorable in the aggregate, to those
provided to Non-U.S. Employees by the Sellers, the Dresser-Rand Group, or
their respective subsidiaries immediately prior to the Closing Date.
(m) No Right to Employment. Nothing herein expressed or implied
shall confer upon any of the employees of the Sellers, the Buyers, or any of
their Affiliates, any additional rights or remedies, including, without
limitation, any additional right to employment, or continued employment for
any specified period, of any nature or kind whatsoever under or by reason of
this Agreement.
49
(n) Post-Closing Determination of Pension Deficiency Amount.
(i) Prior to the Closing Date, Sellers shall be permitted
to make such contributions to the Funded Pension Plans as Seller deems
appropriate; provided that Sellers shall use reasonable best efforts not
to create a Pension Surplus Amount (as defined below) with any such
discretionary contributions. As promptly as practical following the
Closing Date, Xxxxxx Xxxxx & Company (the "Designated Actuary") shall
calculate the Pension Deficiency (as defined below) (and will calculate
Pension Deficiency Amounts, Pension Surplus Amounts, Pension Assets and
Pension Liabilities with respect to each Funded Pension Plan (as those
terms are defined below)). The "Pension Deficiency" shall equal the
aggregate Pension Deficiency Amounts of all Funded Pension Plans minus
the aggregate Pension Surplus Amounts of all Funded Pension Plans.
"Funded Pension Plans" shall mean all Dresser-Rand Group Plans which are
defined benefit pension plans or are otherwise set forth in Section
6.8(n) of the Disclosure Schedule, that are required to be funded by the
Sellers or the Dresser-Rand Group and which, commencing as of the Closing
Date, shall constitute liabilities or obligations of the Buyers or the
Dresser-Rand Group. Section 6.8(n) of the Disclosure Schedule sets forth
a complete and accurate list of all Funded Pension Plans. "Pension
Deficiency Amount" shall, with respect to any Funded Pension Plan, be an
amount (in no case less than zero), if any, equal to (A) the "Pension
Liabilities" of such plan minus (B) the "Pension Assets" of such plan.
The "Pension Surplus Amount" shall, with respect to any Funded Pension
Plan, be an amount (in no case less than zero), if any, equal to (I) the
Pension Assets of such plan minus (II) the Pension Liabilities of such
plan; provided that with respect to the D-R Defined Benefit Plan, the
Pension Surplus Amount shall not take into account Pension Assets in
excess of 103% of Pension Liabilities.
(ii) The Designated Actuary's calculation of the Pension
Deficiency shall be provided in a written report to the Sellers and the
Buyers no later than sixty (60) calendar days following the Closing Date.
Such report shall include a reasonable level of detail to support the
Designated Actuary's calculation, and the Designated Actuary shall use
good faith efforts to promptly provide the Sellers and the Buyers with
such written supporting materials as either party shall request following
delivery of the report. The Sellers and the Buyers shall have a period of
not more than twenty (20) calendar days following delivery of such report
to notify the other party that it believes the calculation of the Pension
Deficiency contains mathematical errors, is based on actuarial or other
assumptions inconsistent with the principles and definitions set forth in
this Section 6.8, or otherwise was not performed in accordance with the
principles and definitions set forth in this Section 6.8. If neither
party notifies the other of any such dispute within the applicable time
period, then such report and calculation of the Pension Deficiency shall
be final
50
and conclusive for purposes hereof. If either party notifies the other of
any such dispute during the applicable time period the Designated Actuary
shall resolve such dispute within twenty (20) calendar days following
such notice, and in any event not later than ninety (90) calendar days
following the Closing Date, in its sole discretion, applying the
principles and definitions set forth in this Section 6.8. Within three
(3) business days of the final resolution by the Designated Actuary of
the amount of the Pension Deficiency (including resolution by the
Designated Actuary of any dispute in respect thereof), Sellers shall pay
to Buyers in cash the amount of such Pension Deficiency. Promptly
following receipt of such payment, Buyers agree to promptly fund, subject
to applicable Law, the amount of such Pension Deficiency into each Funded
Pension Plan for which a Pension Deficiency Amount exists, in the
proportion that each such Funded Pension Plan's Pension Deficiency Amount
bears to the aggregate Pension Deficiency Amounts for all such Funded
Pension Plans with Pension Deficiency Amounts.
(iii) The fees and expenses of the Designated Actuary
shall be paid equally by the Buyers and the Sellers.
(iv) "Pension Assets" shall mean, as of the Closing Date,
the aggregate fair market value of the assets of the applicable Funded
Pension Plan and "Pension Liabilities" shall mean, as of the Closing
Date, the accumulated benefit obligations (as defined under FAS No. 87)
under the applicable Funded Pension Plan, which, in each case, shall be
determined on the basis of the methodologies and assumptions with respect
to the applicable Funded Pension Plan utilized in Audited Financial
Statements as set forth in Section 6.8(n)(iv) of the Disclosure Schedule,
provided that (x) the exchange rate, to the extent applicable, will be
determined as of the Closing Date in accordance with the Currency
Conversion Rules, (y) the participant census information shall be actual
census information with respect to the applicable Funded Pension Plan as
of the Closing Date, and (z) creditable service will be that performed on
or before the Closing Date.
(o) Non-Dresser-Rand Group Employees. The Buyers shall have no
liability whatsoever (under this Agreement or otherwise) and the Sellers shall
indemnify and hold the Buyers harmless with respect to liability (in excess of
any assets received by Buyers allocable to such liability) relating to or
arising out of or in connection with the Dresser-Rand Group Plans that relates
to any participant thereunder who is not a Dresser-Rand Group Employee.
(p) Sale Incentive Program. IR shall be responsible for and
shall pay to Dresser-Rand Group Employees any amounts owed to such
Dresser-Rand Group Employees under the Sale Incentive Program in connection
with the consummation of the transactions contemplated by this Agreement and
IR shall indemnify and hold the Buyers harmless with respect to liability
relating to or arising out of or in connection with any
51
such amounts owed to Dresser-Rand Group Employees under the Sale Incentive
Program.
(q) AIM Bonuses. Subject to Section 6.8(i), on the later of the
applicable payment date under the AIM Program and the date that the AIM
Program Payment Amount is paid to Buyer, Buyers agree to pay each Dresser-Rand
Group Employee who is an active employee as of the applicable payment date
under the AIM Program the AIM Program bonus awarded to such Dresser-Rand Group
Employee for calendar year 2004 in accordance with the terms of the AIM
Program; provided that the aggregate of such payments shall not be less than
the AIM Program Payment Amount.
6.9 Labor Matters.
(a) The Buyers shall not, at any time during the sixty (60)
days following the Closing Date, effectuate a "plant closing" or "mass
layoff," as those terms are defined in the WARN Act, affecting in whole or in
part any site of employment, facility, operating unit or employee of any
Seller, without notifying IR in advance and without complying with the notice
requirements and other provisions of the WARN Act. The Buyers agree that from
and after the Closing Date the Dresser-Rand Group shall be responsible for any
notification required under the WARN Act with respect to the Dresser-Rand
Group members. The Sellers agree that between the date hereof and the Closing
Date, they will cause the Dresser-Rand Group not to effect or permit a "plant
closing" or "mass layoff" as these terms are defined in the WARN Act with
respect to any member of the Dresser-Rand Group without (i) notifying the
Buyers in advance, (ii) obtaining the Buyers' prior written approval and (iii)
complying with the notice requirements and all other provisions of the WARN
Act. The Sellers will also notify FRC, prior to the Closing, of all layoffs
and terminations at any "single site of employment" or "facility or operating
unit within a single site of employment" that occur within ninety (90) days
prior to the Closing.
(b) The Buyers and the Sellers shall cooperate in connection
with any required notification to, or any required consultation with, the
employees, employee representatives, work councils, unions, labor boards and
relevant government agencies concerning the transactions contemplated by this
Agreement with respect to the Non-U.S. Employees of any member of the
Dresser-Rand Group.
6.10 Covenant to Satisfy Conditions. Each party hereto agrees to use
all commercially reasonable efforts to ensure that the conditions set forth in
Article IV and Article V hereof are satisfied and the transactions
contemplated hereby are consummated as promptly as practicable insofar as such
matters are within the control of such party.
6.11 Contact With Customers and Suppliers. Prior to Closing, the
Buyers and their representatives shall contact and communicate with the
employees, customers, suppliers and licensors of the Dresser-Rand Group in
connection with the transactions contemplated hereby only with the prior
written consent of the Sellers, which consent may be conditioned upon a
designee of the Sellers being present at any such meeting or conference.
52
6.12 Projections. In connection with the Buyers' investigation of
the Dresser-Rand Group and its businesses, the Buyers may have received, or
may receive, from the Sellers, the Dresser-Rand Group and/or their respective
representatives certain projections and other forecasts for the Dresser-Rand
Group and certain business plan and budget information. The Buyers acknowledge
that (i) there are uncertainties inherent in attempting to make such
projections, forecasts, plans and budgets, (ii) the Buyers are familiar with
such uncertainties, (iii) the Buyers are taking full responsibility for making
their own evaluation of the adequacy and accuracy of all estimates,
projections, forecasts, plans and budgets so furnished to them, and (iv)
Sellers make no representations or warranties as to such information and the
Buyers will not assert any claim against the Sellers, the Dresser-Rand Group
or any of their respective directors, officers, employees, Affiliates or
representatives, or hold the Sellers, the Dresser-Rand Group or any such
persons liable, with respect thereto.
6.13 No Hire. IR agrees that until the first anniversary of the
Closing, it will not, and will cause its subsidiaries not to, without the
prior written consent of FRC, cause or seek to cause any employees of the
Business to leave the employ of the Business; provided, however, that the
foregoing provision will not prevent IR and its Affiliates from soliciting or
hiring through a general solicitation or advertisement, or from hiring (i) any
secretarial, clerical or other non-managerial employee (other than
professionals or sales employees) or (ii) any employee of the Business whose
employment has been terminated by any company within the Dresser-Rand Group.
6.14 Use of Names. IR hereby covenants and agrees that,
notwithstanding anything in Section 3.8 of the Organization Agreement, dated
as of December 31, 1986, by and between Dresser Industries, Inc. and IR (as
amended, the "Organization Agreement"), or any other prior agreement between
the parties, to the contrary, neither IR nor any of its Affiliates will
revoke, rescind, terminate, cancel, decrease or limit the rights of the
members of the Dresser-Rand Group to use the term "Rand" as part of the
combined name "Dresser-Rand" used as a trade name, corporate name, domain
name, trademark or service xxxx, or take, or assist any third party to take,
any action that challenges, or is inconsistent with the Dresser-Rand Group's
right to so use the same, except as provided in this Section 6.14.
Specifically, if IR reasonably determines that the Dresser-Rand Group has
taken any action or, with respect to the Dresser-Rand Group's own use of such
name or xxxx, failed to take any action which is causing material destruction,
decrease or diminution of the "Rand" name or the reputation or goodwill
thereof or of the Xxxxxxxxx-Xxxx Marks, then IR shall provide written notice
of such alleged default in reasonable detail to FRC (it being understood that
the foregoing shall not be the case so long as Buyers conduct the Business in
the ordinary course of business consistent with past practice). If the
Dresser-Rand Group fails to remedy such alleged default within sixty (60) days
after receiving such notice from IR, then IR shall have the right to
immediately terminate the usage of the name "Rand" as granted in this Section
6.14 (subject to the Buyer's and Dresser-Rand Group's right to phase-out use
of such portion of the name as soon as reasonably practicable following such
termination, but in any event within six months following such termination).
The Dresser-Rand Group may use the term "Rand" as a source-identifier as
described herein only as part of the combined term "Dresser-Rand". Following
the
53
Closing, (i) Buyers and the Dresser-Rand Group shall not use or license the
use of the Dresser-Xxxx Xxxxx as a source-identifier in conjunction with
INGERSOLL or any Xxxx confusingly similar to INGERSOLL, and shall not use or
license the Xxxxxxxxx-Xxxx Marks as a source identifier (subject to the
Buyer's and Dresser-Rand Group's right to phase-out any such use of the
Xxxxxxxxx-Xxxx Xxxx that it is making as of the Closing as soon as reasonably
practicable following the Closing, but in any event within six months
following the Closing Date), and (ii) Sellers shall not use or license the use
of the Xxxxxxxxx-Xxxx Marks as a source-identifier in conjunction with DRESSER
or any Xxxx confusingly similar to DRESSER, and shall not use or license (and
are not as of the Closing using or licensing) the Dresser-Xxxx Xxxxx as a
source identifier. Any and all provisions concerning the license by Sellers to
the Dresser-Rand Group in and to the name "Rand" or Xxxxxxxxx-Xxxx Marks,
including without limitation the license contained in Section 3.8 of the
Organization Agreement, are hereby terminated and of no further force and
effect. As used in this Section 6.14, (i) the "Dresser-Xxxx Xxxxx" shall mean,
collectively, all worldwide right, title, and interest in the names,
trademarks, service marks, trade-names, domain names, logos and trade dress
("Marks") consisting of or incorporating the term DRESSER-RAND and any
formatives or derivatives thereof, including "D-R" and the "D-R" logotype, and
all goodwill relating to the foregoing and (ii) the "Xxxxxxxxx-Xxxx Marks"
shall mean, collectively, all worldwide right, title and interest in the Marks
consisting of or incorporating the term XXXXXXXXX-XXXX and any formatives or
derivatives thereof, including "IR" and the "IR" logotype, and all goodwill
relating to the foregoing. Sellers agree that the Dresser-Rand Group may
register the Dresser-Xxxx Xxxxx, and Sellers acknowledge that as between the
parties the Dresser-Rand Group is the owner of said marks, worldwide, subject
to IR's right of termination with respect to the "Rand" name in "Dresser-Rand"
pursuant to this Section 6.14, and except in all cases the name "Rand" alone,
and Buyers acknowledge that Sellers own all worldwide right, title and
interest in the Xxxxxxxxx-Xxxx Marks. In the event that Sellers at any time
terminate the Dresser-Rand Group's right to use "Rand" pursuant to this
Section 6.14, the Dresser-Rand Group shall promptly cancel any registrations
that it owns worldwide for such xxxx at the Dresser-Rand Group's expense, or
otherwise deal with such xxxx as reasonably requested by and at the
out-of-pocket expense of Sellers. The right to use "Rand" as part of the
combined term "Dresser-Rand" granted in this Section 6.14 is personal to the
Business and may not, except in connection with the assignment or other
transfer of all or substantially all of the business or assets of the
Business, be assigned or otherwise transferred, in whole or in part, by the
Dresser-Rand Group without IR's prior written authorization, which may be
withheld in IR's sole discretion.
6.15 Environmental Rights and Responsibilities After Execution of
Agreement.
(a) "Identified Environmental Liability" means (i) any matter
identified in Section 2.17 of the Disclosure Schedule or (ii) any matter that
is placed on the "Environmental Remediation and Compliance Schedule" by the
mutual agreement of IR and FRC prior to the Closing (pursuant to the process
set forth in Sections 6.15(b) and 6.15(c) below), to which Sellers retain
liability to the extent provided in this Section 6.15, and as to which Sellers
shall indemnify Buyers Indemnified Persons, subject to the
54
limitations set forth in this Section 6.15 and in Article VIII. The matters
that will be placed on the Environmental Remediation and Compliance Schedule
will be matters that are determined, pursuant to the process set forth in this
Section 6.15, to constitute either (A) violations of Environmental Law (as in
effect as of the Closing Date), or (B) Releases of any Hazardous Material into
the environment, including Releases relating to the treatment, disposal or
arranging for disposal of Hazardous Materials on or prior to the Closing Date
by or on behalf of a member of the Dresser-Rand Group at any Leased Real
Property or Owned Real Property ("On-site Contamination"), or at any location
not owned or leased by a member of the Dresser-Rand Group ("Off-site
Contamination"), and which, in either case (A) or (B), (1) require any
response action (including investigation, monitoring, cleanup, remediation, or
related activities (each, a "Response Action")) under Environmental Law (as in
effect as of the Closing Date), (2) are the subject of a Response Action
required by a Governmental Authority pursuant to any Environmental Law (as in
effect as of the Closing Date), or (3) if known to the Governmental Authority
with jurisdiction over the matter, would be matters with respect to which such
Governmental Authority would be expected to require Response Action pursuant
to any Environmental Law (as in effect as of the Closing Date). Immaterial
inaccuracies in the description of any such matter shall not constitute a
defense to any indemnification claim therefor by Indemnified Persons against
Sellers as provided herein.
(b) Prior to the date of this Agreement, at Buyers' sole
expense, the Buyers' environmental consultants have completed site visits and
interviews of the sort conducted to carry out Phase I environmental site
assessments. Based on this and other information available to Buyers and
Sellers, the parties have set forth on Section 6.15 of the Disclosure Schedule
a list of matters which may potentially constitute an Identified Environmental
Liability, a list of all environmental documents that Buyers have requested
which have not been provided by Sellers and a list of all Real Property
locations at which Phase II investigations may be conducted pursuant to this
Section 6.15 and a brief description of the scope and nature of such
investigation at each Real Property location on such list. Buyers' consultants
may continue their record review after the date of this Agreement but for each
applicable site shall complete and make available to Sellers the full and
final reports of the Phase I environmental site assessments ("Phase I
Environmental Assessment Reports") for such site within the later of thirty
(30) days after the date of this Agreement or thirty (30) days after Buyers
receive substantially all environmental documents identified on Section 6.15
of the Disclosure Schedule with respect to such site; provided, that, with
respect to each such site, Buyers shall notify Sellers of any matters that
satisfy the requirements specified in Section 6.15(a) for inclusion on the
Environmental Remediation and Compliance Schedule (based on their review of
the applicable documents identified on Section 6.15 of the Disclosure
Schedule) within the later of ten (10) days after the date of this Agreement
and ten (10) days after Buyers receive substantially all such documents,
unless using commercially reasonable efforts Buyers are unable to identify
such matters within such ten (10) day period, in which case Buyers shall have
twenty (20) days. Buyers shall have the right but not the obligation, prior to
Closing and pursuant to the terms of the Access Agreement, dated as of the
date hereof (the "Access Agreement"), to prepare a work plan for Phase II
environmental investigations of the Real Property identified on Section 6.15
of the Disclosure Schedule setting forth, in tabular form, the proposed
locations for testing, the
55
media being tested, the testing parameters and the initial testing schedule
for Phase II environmental investigations (the "Phase II Work Plan"), and to
conduct such investigations, which shall be of a scope and nature as set forth
in Section 6.15 of the Disclosure Schedule, all at Buyers' sole expense;
provided that such investigations shall not unreasonably disrupt operations
at, or cause damage to, any of the Real Property. Within seven (7) days
following the date of this Agreement, Buyers shall provide the Phase II Work
Plan to Sellers and upon receipt thereof, Sellers shall have the right to
review and request changes to the Phase II Work Plan (and Buyers' will use
best efforts to cause their environmental consultants to be available and
cooperate for such purpose), and Buyers shall not unreasonably withhold
consent to any such requested changes. Within six (6) days of receipt thereof,
Sellers shall approve the Phase II Work Plan and provide access to the
applicable Real Property to Buyers' environmental consultants for purposes of
conducting the investigations set forth thereon. Buyer shall use best efforts
to complete any such Phase II environmental investigation, and provide to
Sellers any report relating to such investigation ("Phase II Environmental
Assessment Reports"), within thirty (30) days of the date on which the Phase
II Work Plan provided to Sellers has been approved by Sellers and Buyers have
obtained access to each relevant site; provided, that, if Buyers shall have
used best efforts and are unable to complete and deliver any report within
such thirty (30) day period, Buyers may extend such period up to an additional
ten (10) days for such report. At Sellers' request, Buyers shall split all
samples taken in connection with the environmental site assessments authorized
pursuant to this Section 6.15(b). Sellers shall be solely responsible for any
additional reasonable expense incurred as a result of any split sampling
requested by Sellers. Buyers and Sellers agree that any investigation
performed pursuant to this Section 6.15(b) shall be undertaken by ENVIRON
International Corporation, or a subcontractor thereof ("Environ"). Sellers and
their representatives shall be entitled to accompany and observe Buyers and
their representatives (including Environ) in the course of performing the
Phase II environmental investigations. Within 5 (five) days after the
completion of each site's Phase II investigation, Buyers shall identify to
Sellers in writing those matters set forth on Section 6.15 of the Disclosure
Schedule, identified in the Phase II investigations, or in documents provided
to Buyers after the date of this Agreement and identified on Section 6.15 of
the Disclosure Schedule and that Buyers propose for placement on the
Environmental Remediation and Compliance Schedule. Based on the Phase I
Environmental Assessment Reports and the Phase II Environmental Assessment
Reports, prior to the Closing Date, Buyers and Sellers shall use commercially
reasonable efforts, in good faith, to agree which matters, if any, will be
placed on the Environmental Remediation and Compliance Schedule under the
terms specified in Section 6.15(a). All matters and issues identified in the
Phase II investigations shall be eligible for placement on the Environmental
Remediation and Compliance Schedule. In the event that Sellers are unable to
provide Buyers reasonable access to perform Phase II investigation of a Leased
Real Property, the Sellers and Buyers agree that any Release of Hazardous
Substances into the environment existing as of the Closing Date at those areas
of concern to be addressed in the work plan for the Phase II investigation for
the relevant Leased Real Property, to the extent that such work plan was
previously agreed to by Sellers in accordance with the procedure outlined
above, shall be deemed to be included on the Environmental Remediation and
Compliance Schedule if such Release either (1) requires
56
any Response Action under Environmental Law (as in effect as of the Closing
Date), (2) is the subject of a Response Action required by a Governmental
Authority pursuant to any Environmental Law (as in effect as of the Closing
Date), or (3) if known to the Governmental Authority with jurisdiction over
the matter, would be a matter with respect to which such Governmental
Authority would be expected to require Response Action pursuant to any
Environmental Law (as in effect as of the Closing Date). With regard to each
area of contamination identified in the Phase II investigations which the
parties agree should be placed on the Environmental Remediation and Compliance
Schedule, the specific locations where contamination was found will be listed
and Seller shall be responsible for all Response Actions ordered or agreed to
with a Governmental Authority that relate to or result from investigation of
the identified area of contamination, and if the Response Action is conducted
in the absence of a governmental order, Seller shall be responsible for all
Response Actions relating to the plume within which the contamination was
identified and the sources of contamination of the plume and with respect to
soil contamination, all Response Actions relating to the contamination or the
source of the contamination. If Buyers and Sellers are unable to agree on the
matters to be placed on the Environmental Remediation and Compliance Schedule,
such disagreement will be resolved pursuant to the process described in
Section 6.15(h).
(c) Subject to the terms set forth in this Section 6.15, the
Sellers agree to use commercially reasonable efforts to correct prior to the
Closing all matters identified on the Environmental Remediation and Compliance
Schedule that are violations of Environmental Law and diligently perform any
reasonably required Response Action with respect to all other Identified
Environmental Liabilities; provided, that to the extent Sellers are unable,
prior to the Closing, to correct all matters identified on the Environmental
Remediation and Compliance Schedule that are violations of Environmental Law,
Sellers will use commercially reasonable efforts to correct any such
violations as soon as practicable following the Closing Date (it being
understood that in any case Sellers' obligation to correct violations under
this Section 6.15 shall not require Sellers to implement measures to comply
with any Environmental Laws other than those in effect as of the Closing Date,
or for operations other than as conducted as of the Closing Date). Without
affecting the indemnity obligations under this Agreement, Sellers shall have
no obligation under this Section 6.15(c) to perform any Response Action with
respect to Identified Environmental Liabilities (i) resulting from a Release
at a Leased Property to the extent caused by an entity other than a member of
the Dresser Rand Group or any of their respective predecessors, agents or
invitees or (ii) at any Real Property with respect to any Releases to the
extent originating at a location other than the Real Property, unless in each
case any Seller or any member of the Dresser-Rand Group has been ordered to
implement such Response Action by a Governmental Authority with jurisdiction
over the matter. In connection with any Response Action which Sellers perform
with respect to any Identified Environmental Liability, Buyers hereby assign
to Sellers all right, title and interest of Buyers and the members of the
Dresser Rand Group in and to any actual or potential claims or causes of
action against third parties relating to the contamination that is the subject
matter of such Response Action. To the extent Sellers decide to contest any
governmental orders or third-party complaints filed with respect to any
Identified Environmental Liability, they shall do so at their own expense,
provided that Buyers shall reasonably cooperate with Sellers (including
without
57
limitation making available any documents, employees or consultants and
providing access to any properties relevant to such governmental orders or
third-party complaints) so that Sellers may evaluate and contest such matters
if Sellers so decide. To the extent Sellers fail to resolve any such
Identified Environmental Liability required to be resolved by Sellers under
this Section 6.15(c) such that it is no longer an Identified Environmental
Liability, Buyers may resolve such Identified Environmental Liability and
Sellers shall reimburse any expense reasonably incurred by any Buyers
Indemnified Persons to do so, provided, however, that Buyers first notify
Sellers in writing of Buyers' intention to resolve such Identified
Environmental Liability and that Sellers do not, within twenty (20) days from
receipt of such notice, notify Buyers in writing that they agree to resolve
such Identified Environmental Liability (it being understood that the
foregoing proviso shall not apply with respect to any action by Buyers where
complying with the proviso would result in a substantial risk of harm to
health or the environment or a substantial risk of otherwise significantly
compromising Buyers' ability to mitigate Losses with respect to the Identified
Environmental Liability involved, and Buyers provide written notice of their
action to Sellers as soon as practicable and afford Sellers the opportunity to
take up the resolution of such matter if Sellers indicate in writing their
agreement to do so). Buyers agree that any Response Action which Sellers are
obligated to perform with respect to any Identified Environmental Liability
shall: (i) be the least costly alternative acceptable to Governmental
Authorities; (ii) be based upon non-residential (as opposed to residential)
standards, if applicable and acceptable to Governmental Authorities; (iii) not
exceed any applicable requirements of Environmental Laws in effect on the date
of such Response Action; and (iv) not have resulted from, or relate to, any
change in use, reconfiguration, alteration or development of any relevant
property after the Closing Date. Buyers shall not unreasonably withhold
consent to the imposition of reasonable deed restrictions, engineering
controls or environmental land use restrictions on such locations as
necessary, at the Sellers' discretion, to implement such Response Action;
provided that such deed restrictions, engineering controls or environmental
land use restrictions do not restrict the use of such properties to uses that
are more restrictive than their use as of the Closing Date or any
substantially similar use. Buyers agree that they shall cooperate with Sellers
regarding Sellers' obligations under this Section 6.15, including without
limitation reasonably cooperating to avoid or minimize expense to Sellers, and
Buyers further agree that they and any of their representatives or successors
(and after the Closing Date, any member of the Dresser-Rand Group and any of
their representatives or successors) (the "Buyer Parties") shall not directly
or indirectly solicit or importune any Person to seek or require any Response
Action and shall not otherwise directly or indirectly report information
concerning any Identified Environmental Liability to any Person, except in
accordance with the procedures set forth in Exhibit E hereto. Buyers agree
that they shall, in good faith, agree to enter, when reasonably consistent
with their obligations under this Section 6.15, an agreement with the
government entity having jurisdiction over the Response Action to use the
least costly method and least stringent standard in connection with such
Response Action; provided that such method and standard are acceptable to such
government entity and will not restrict the use of such properties to uses
that are more restrictive than their use as of the Closing Date or any
substantially similar use. Sellers shall solely control and perform any
Response Action with respect to the Identified Environmental Liabilities
(including
58
any negotiation with governmental authorities regarding the Response Action)
using all commercially reasonable efforts to avoid any material interference
with operations at the relevant property. The Buyers and their Affiliates
shall provide the Sellers reasonable access to any relevant property and shall
otherwise reasonably cooperate with the Sellers regarding the Sellers'
performance of any such Response Action. The Sellers agree to provide to
Buyers, reasonably in advance of any filing in order to afford Buyers the
opportunity to review, copies of all material filings and submissions to
Governmental Authorities (or to any other Persons who have made a claim
regarding any Identified Environmental Liabilities) relating to the Response
Actions taken with respect to the Identified Environmental Liabilities, unless
the applicable requirements make such opportunity for Buyers to review in
advance impracticable, in which case Sellers shall provide such materials to
Buyers promptly after filing or submission.
(d) With respect to any Identified Environmental Liability, any
Buyers Indemnified Person's sole right to pursue recovery for any such Losses
shall be under this Section 6.15 regardless of any other provisions of this
Agreement to the contrary.
(e) Sellers shall, at their sole expense, obtain, with the
reasonable cooperation of Buyers, any required, transaction-triggered approval
for the consummation of this transaction or the transfer of any real property
pursuant thereto required by any Environmental Law. To the extent any such law
or approval shall require any party to this Agreement to agree or enter a
consent order or the like to undertake investigation or remediation of any
environmental matter relating to such property, Sellers shall agree to be such
party undertaking such obligation and shall remain responsible for performing
its obligations under such agreement or order only to the extent the foregoing
relates to an Identified Environmental Liability.
(f) Notwithstanding any other provision of this Agreement, to
the extent any Identified Environmental Liability:
(i) involves Off-site Contamination, Sellers shall have no
obligation with respect to such Off-site Contamination unless and until
such Off-site Contamination is the subject of an Environmental Claim
against the Dresser-Rand Group, and only if Buyers deliver written notice
to Sellers of such Environmental Claim pursuant to Section 8.1(e) of this
Agreement prior to the date three (3) years after the Closing Date;
provided, however, that the foregoing three (3) year limitation shall not
apply to Environmental Claims against any member of the Dresser-Rand
Group for response costs at sites that are on the National Priorities
List pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. ss 9601 et seq., regardless of whether
such sites are identified on Section 6.15 of the Disclosure Schedule; or
(ii) gives rise to any exposure or alleged exposure of any
person (other than any claim for workers' compensation)
59
to any Hazardous Substance or any other harmful or deleterious substance
or condition (other than any "Asbestos Liability" as such term is defined
in Section 9.10(b)) that affects or allegedly affects such person's
health, Sellers shall have no obligation with respect to such exposure or
alleged exposure unless and until it gives rise to an Environmental Claim
against any member of the Dresser-Rand Group, and only if Buyers deliver
written notice to Sellers of such Environmental Claim pursuant to Section
8.1(e) of this Agreement prior to the date three (3) years after the
Closing Date (it being understood that with respect to any claim for
workers' compensation and with respect to any Asbestos Liability, Sellers
have no obligations under this Section 6.15).
(g) Buyers and Sellers agree that any matters relating to the
removal of friable asbestos in connection with Identified Environmental
Liabilities shall be governed by this Section 6.15 (it being understood that
any asbestos matter that is an "Asbestos Liability" as such term is defined in
Section 9.10(b) shall be subject to the indemnification provisions set forth
in Section 8.1(a) and not governed by the provisions of this Section 6.15,
including any restrictions set forth herein).
(h) In the event that Buyers and Sellers are unable to resolve,
prior to Closing, any disagreements as to what matters shall be included on
the Environmental Remediation and Compliance Schedule (and how such matters
should be described on such schedule), Buyers and Sellers shall attempt in
good faith to agree upon a neutral environmental attorney with significant
experience in environmental transactional matters, to resolve such
disagreement. In the event that Buyers and Sellers are unable to identify such
neutral environmental attorney, Sellers shall select such an attorney from a
list of five candidates provided by Buyers, each candidate from a different
nationally recognized law firm with experience in transactions involving
environmental matters and not currently engaged (and having no material
history or immediate prospects of significant engagement) by, either Buyers or
Sellers, or counsel for Buyers or Sellers. Such neutral attorney shall issue a
written decision indicating simply whether the matter at issue meets the
standard for being listed on the Environmental Remediation and Compliance
Schedule (and how such matters should be described on such schedule) within
the meaning of Section 6.15 of this Agreement, within thirty (30) days after
being selected, and any matter determined by such neutral attorney to meet
such standard shall be placed on the Environmental Remediation and Compliance
Schedule. Such neutral attorney shall resolve the disagreement based on a
review of the Phase I Environmental Assessment Reports and the Phase II
Environmental Assessment Reports, and written submissions by the parties
setting forth their positions and the reasons in support thereof, after
meeting with the parties. In such attorney's reasonable discretion, such
attorney may also enlist the assistance of an environmental attorney or
environmental consultant (acceptable to and approved by both Buyers and
Sellers) located or with significant experience in the jurisdiction in which
the environmental condition at issue is located. The decision of such neutral
attorney shall be binding upon the parties. Such attorney's costs and fees,
and the costs and fees of any environmental attorney or consultant retained by
such attorney in accordance with this Section 6.15(h), shall be borne equally
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by Buyers and Sellers. It is understood that the completion of the resolution
of any dispute pursuant to this Section 6.15(h) shall not be required prior to
the Closing.
6.16 Intercompany Debt. To the extent reasonably practicable and
permissible under applicable Laws, on or prior to the day before the Closing,
(a) each member of the Dresser-Rand Group that has positive "Net Intercompany
Receivables" shall distribute such Net Intercompany Receivables to its
shareholders and (b) the Sellers shall, and shall cause their Affiliates to,
eliminate any Net Intercompany Receivables of each member of the Dresser-Rand
Group that has negative Net Intercompany Receivables and such elimination
shall be treated as a contribution of capital to each such member of the
Dresser-Rand Group by its parent with the result that there will be no
intercompany receivables or intercompany payables between the members of the
Dresser-Rand Group, on the one hand, and the Sellers or their Affiliates
(other than the members of the Dresser-Rand Group), on the other hand, at the
Closing Date; provided, that, to the extent any Net Intercompany Receivables
are not distributed or eliminated pursuant to (a) or (b) above, they will
otherwise be eliminated or cancelled prior to the Closing Date. For the
avoidance of doubt, any intercompany receivables or payables between members
of the Dresser-Rand Group shall remain in place and not be cancelled. As used
herein, "Net Intercompany Receivables" means with respect to each member of
the Dresser-Rand Group (i) all intercompany receivables due or other
intercompany amounts accrued, prepaid, due or payable to such member of the
Dresser-Rand Group from the Sellers and their Affiliates (other than the
members of the Dresser-Rand Group), less (ii) all intercompany payables of or
other intercompany amounts accrued, prepaid, due or payable by such member of
the Dresser-Rand Group to the Sellers and their Affiliates (other than the
members of the Dresser-Rand Group).
6.17 Substitute Guarantees. On or prior to the Closing Date, Buyers
agree to provide the Guarantees in accordance with the requirements of Section
4.6 above, in form and substance satisfactory to the respective banks or other
counterparties, and, both prior to and following the Closing Date, Buyers and
Sellers shall cooperate to obtain a release in form and substance reasonably
satisfactory to Buyer and IR with respect to all Seller Credit Support
Instruments. As of a date approximately five (5) business days prior to the
Closing Date, IR shall provide FRC its good faith calculation of the total
amount of Seller Credit Support Instruments outstanding as of such date, in
U.S. dollars determined in accordance with Currency Conversion Rules.
6.18 Plaintiff Actions. After the Closing, the Buyers will, or they
will cause the applicable member of the Dresser-Rand Group to, pursue
diligently the actions and proceedings set forth in Section 6.18 of the
Disclosure Schedule (the "Plaintiff Actions"). The Buyers acknowledge that the
Sellers shall retain the benefits of any recoveries, awards, settlements or
judgments with respect to the Plaintiff Actions and the Buyers agree to pay or
deliver to the Sellers the full amount of cash or other assets received by any
Buyer in connection with any such recoveries, awards, settlements or
judgments. Except as set forth below, the Sellers agree to reimburse the
Buyers for all reasonable out-of-pocket expenses incurred by the Buyers or
their Affiliates in connection with pursuing the Plaintiff Actions. The
Sellers shall be entitled to assume and direct the prosecution of the
Plaintiff Actions, with counsel selected by the Sellers
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and, after notice from the Sellers to the Buyers of such election to assume
the prosecution thereof, the Sellers shall not be liable to the Buyers for any
fees or expenses of other counsel or any other expenses subsequently incurred
by the Buyers in connection with the prosecution thereof. The Sellers and the
Buyers agree to cooperate fully with each other and their respective counsel
in connection with the prosecution, negotiation or settlement of the Plaintiff
Actions. The Buyers shall have the right to participate at their own expense
in the prosecution of the Plaintiff Actions. If the Sellers assume the
prosecution of a Plaintiff Action, (i) no settlement or compromise thereof may
be effected: (A) by the Sellers without the written consent of FRC (which
consent shall not be unreasonably withheld or delayed) unless there is (1) no
finding or admission of any violation of law or any violation of the rights of
any Person by any Buyer or any member of the Dresser-Rand Group, (2) no net
settlement payment or similar liability to be paid by any Buyer or any member
of the Dresser-Rand Group, and (3) no adverse effect (other than immaterial
effects) on any Buyer or any member of the Dresser-Rand Group or the Business;
or (B) by any Buyer or any member of the Dresser-Rand Group without the
consent of IR, and (ii) the Buyers may subsequently assume the prosecution of
such Plaintiff Action if a court of competent jurisdiction determines that the
Sellers are not vigorously prosecuting such action.
6.19 Financing.
(a) Buyers shall use their reasonable best efforts to (x)
maintain in effect the Financing Commitments and to satisfy the conditions to
obtaining the Financing set forth therein (including, without limitation, by
funding the equity contemplated by the Equity Financing Commitment), (y) enter
into definitive financing agreements with respect to the Debt Financing (the
"Debt Financing Agreement") so that the Debt Financing Agreement is in effect
as soon as reasonably practicable but in any event no later than the Closing
Date and (z) consummate the Financing at or prior to Closing. Subject to the
satisfaction or waiver of the conditions to Closing in Article V of this
Agreement, Buyers agree to use the bridge facility contemplated by the
Financing Commitments to cause the Closing to occur effective as of no later
than October 31, 2004. Buyers shall keep IR reasonably informed of the status
of the financing process relating thereto. IR shall cause the Sellers and its
and their respective officers and employees to provide such cooperation as may
be reasonably requested by Buyers in connection with the Debt Financing and
any offering of debt securities privately or in a registered offering,
including in connection with the preparation of "bank books", offering
materials and similar documents and all other necessary cooperation in
connection with the arrangement of any financing to be consummated
contemporaneous with or at or after the Closing in respect of the transactions
contemplated by this Agreement, including without limitation, participation in
good faith in meetings, due diligence sessions, road shows, the preparation of
offering memoranda, registration statements or other appropriate disclosure
documents and the execution and delivery of underwriting, placement or similar
agreements, whose effectiveness shall be conditioned on the closing of the
transactions contemplated by this Agreement. If necessary in connection with
the Debt Financing, in the event that Closing has not occurred due solely to
the failure of one or more of the conditions to Closing in Article V to be
satisfied or capable of being satisfied, and the Debt Financing shall not have
been consummated, by
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November 9, 2004, IR shall provide to the Buyers on or prior to such date with
an unaudited balance sheet of the Dresser-Rand Group and the Business as of
September 30, 2004 and the related unaudited statements of income and cash
flows for the nine-month period ended September 30, 2004 (the "September
Financial Statements").
(b) As reasonably requested by Buyers and necessary to the
consummation of the Debt Financing, IR shall use commercially reasonable
efforts to (i) to ensure that PWC will conduct a review of the Six-Month
Financial Statements and the September Financial Statements, as the case may
be, in accordance with SAS 100, and in a manner reasonably satisfactory to IR
(the "SAS 100 Review") as soon as practicable following the delivery thereof,
(ii) cooperate and assist Buyers in the preparation of data (including
selected financial data and management discussion and analysis of financial
statements) that the Securities and Exchange Commission would require in a
registered offering in connection with the offering of securities of the type
contemplated by the Debt Financing, (iii) obtain from PricewaterhouseCoopers
LLP "comfort" letters and updates thereof in customary form and covering the
matters of the type customarily covered in "comfort" letters in connection
with offerings of securities of the type contemplated by the Debt Financing
and (iv) provide Buyers with documents reasonably requested by Buyers in order
for Buyers to obtain title insurance and a current survey with respect to
material Owned Real Property. All reasonable out-of-pocket costs and expenses
incurred by IR or Sellers (including, without limitation, the fees and
expenses of Sellers' accountants, which shall be paid directly by Buyers)
pursuant to this paragraph and in connection with any other Debt Financing
matters shall be borne by Buyers, and shall be paid by Buyers to the party
incurring such costs and expenses at least one (1) business day prior to the
Closing so long as such party has provided reasonable documentation for such
expenses at least five (5) days prior to the Closing.
(c) If, notwithstanding the use of reasonable best efforts by
Buyers to satisfy its obligations under Section 6.19(a) and (b), any of the
Financing Commitments or the Debt Financing Agreement expire or are terminated
prior to the Closing, in whole or in part, for any reason, Buyers shall (i)
promptly notify IR of such expiration or termination and the reasons therefor
and (ii) use its reasonable efforts promptly to arrange for alternative
financing to replace the financing contemplated by such expired or terminated
commitments or agreements, sufficient to consummate the transactions
contemplated by this Agreement. The Buyers shall keep IR reasonably apprised
of the status of all matters relating to the Financing and shall give IR
prompt written notice of (i) any material breach by any party of the Financing
Commitments (or any definitive agreements entered into pursuant thereto) or
(ii) any condition to the funding under any such Financing Commitment becoming
incapable of being satisfied.
6.20 Pending Insurance Claim.
(a) The Buyers and Sellers acknowledge that any ultimate
recovery of the Buyers or the Dresser-Rand Group from insurance claims made
prior to the date of this Agreement by the Sellers or the Dresser-Rand Group
in respect of a fire at a Port Harcourt, Nigeria warehouse that destroyed
inventory of the Business (the "Pending Insurance Claim") shall be for IR's
account and sole benefit. For no further
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consideration, effective as of the Closing, Buyers hereby assign and transfer
to IR any right, title and interest to which Buyers or any member of the
Dresser-Rand Group may be or become entitled at or following the Closing in
respect of the Pending Insurance Claim. In all events, the Buyers agree to
immediately pay over to IR any such insurance recoveries actually received by
them or any member of the Dresser-Rand Group in respect of the Pending
Insurance Claim, or to cause the applicable recovery to be paid directly to
IR, without setoff or reduction; provided, however, that Buyers shall be
entitled to withhold from any such payments an amount equal to any Taxes of
Buyers and their Affiliates that Buyers reasonably determine (based on a
"will" level tax opinion from nationally recognized tax counsel) to result
from the receipt of any insurance recoveries with respect to the Pending
Insurance Claim.
(b) In the event that the assignment contemplated by Section
6.20(a) is for any reason ineffective under applicable Law to transfer all
right, title and interest in the Pending Insurance Claim to IR, then:
(i) the Buyers (and following the Closing, the
Dresser-Rand Group) shall collect and remit all such amounts received by
them in respect of the Pending Insurance Claim solely as custodian and
collection agent for and on behalf of IR and not as a principal, partner
or joint venturer; and
(ii) if any such recovery is received by the Buyers, the
Buyers may commingle such amounts collected by them with their own funds,
pending remittance to IR, to the extent necessary to avoid undue
administrative expense, but shall not otherwise exercise any dominion or
control over such amounts, hold themselves out to any third party as
their owner, or hold the amounts under claim of right. Consistent with
the Buyers' status as IR's custodian and collection agent, IR and the
Buyers shall report all such amounts collected by the Buyers and remitted
to IR for tax and financial reporting purposes as having been received
directly by IR (unless otherwise required under Law).
(c) The Buyers agree to take any reasonable action in respect
of recovery in respect of the Pending Insurance Claim as is reasonably
requested by IR, all at the reasonable expense of IR.
6.21 Transfers of Non-U.S. Interests.
(a) IR shall cause the relevant Sellers to accept the French
Offer Letter and to complete the sale of the French Shares in France pursuant
to the French Offer Letter subject to: (i) the completion by the applicable
Sellers and the applicable Buyers (with the cooperation of the other party) of
all requisite employee consultation procedures (provided that IR shall cause
such consultation to occur as promptly as practicable following the date
hereof); and (ii) all other conditions to the Closing set forth in Article IV
and Article V having been satisfied or waived. It is the intention of the
parties that the purchase and sale of the French Shares contemplated by the
French Offer
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Letter shall be consummated on the Closing Date. Each of the parties shall
take such actions as may be necessary to ensure that no purchase and sale
contemplated under the French Offer Letter occurs prior to the Closing.
(b) Sellers and Buyers agree to cooperate with each other with
respect to the transfer of other Non-U.S. Acquired Interests on the Closing
Date. If mutually agreed by IR and FRC, the parties shall transfer such
Non-U.S. Acquired Interests at the Closing in such manner as they may mutually
agree pursuant to local transfer agreements in each applicable jurisdiction
that are mutually acceptable to each of IR and FRC (such agreements, the
"Local Transfer Agreements"). If requested by Sellers, the transfer of
Non-U.S. Acquired Interests pursuant to Local Transfer Agreements will take
place in the jurisdiction in which each relevant entity is organized or
incorporated. Notwithstanding anything else to the contrary contained herein,
if requested by Buyers, the transfer of the Non-U.S. Acquired Interests listed
on Section 6.21(b) of the Disclosure Schedule will occur on the Closing Date
by way of a direct purchase of such equity interests by Buyers and/or their
Affiliates; provided, however, that any such direct purchase will take place
in the jurisdiction in which the relevant entity is organized or incorporated.
6.22 Real Property Deeds. As soon as reasonably practicable
following the date hereof, the Sellers agree to use their reasonable best
efforts to provide to Buyers true and correct copies of all existing deeds,
mortgages, deeds of trust, and, to the extent reasonably available, most
recent available title insurance policies and surveys, in each case relating
to each material parcel of Owned Real Property.
6.23 Estimated Customer Prepayments Statement. 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 Customer Prepayments
Statement") containing IR's good faith estimate (the "Estimated Customer
Prepayments Amount") of the customer prepayments of the Dresser-Rand Group,
determined in accordance with the methodologies set forth on Section 6.23 of
the Disclosure Schedule, as of 11:59 P.M. local time on the Closing Date,
which have not been converted to work in progress, finished inventory or
supplier prepayments (the "Customer Prepayments Amount"). 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
Customer Prepayments Statement. The Estimated Customer Prepayments Statement
prepared in accordance with this Section 6.23 shall be final and not subject
to objection from Buyers for purposes of calculating the Closing Payment at
the Closing.
6.24 Currency Conversion. Any monetary conversion from the currency
of a foreign country in which the Business is conducted and products are sold
into U.S. Dollars shall be calculated in accordance with the methods set forth
on Section 6.24 of the Disclosure Schedule (the "Currency Conversion Rules").
6.25 Insurance. Subject to Section 6.20, from and after the Closing
Date, members of the Dresser Rand Group will have the right to assert,
prosecute and
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recover proceeds in respect of claims (and IR and its Affiliates, as
applicable, will use commercially reasonable efforts to assist members of the
Dresser Rand Group in asserting or prosecuting claims and, if necessary, shall
assert and prosecute such claims on behalf of members of the Dresser Rand
Group and remit to the applicable member of the Dresser Rand Group any
proceeds relating thereto) for any Loss with respect to the Business under
insurance coverage of the Business under all insurance policies and insurance
contracts of any kind with third-party insurers that as of the date of this
Agreement are owned or maintained by IR or its Affiliates and cover, in whole
or in part, the assets, employees, operations or businesses of the Dresser
Rand Group (collectively, "IR Insurance Policies") arising out of insured
incidents occurring from the date of coverage first commenced thereunder until
the Closing Date to the extent that the terms and conditions of any such IR
Insurance Policies and agreements relating thereto so allow. IR and its
Affiliates' obligation to use commercially reasonable efforts to assist
members of the Dresser Rand Group in asserting claims under will include using
commercially reasonable efforts in assisting members of the Dresser Rand Group
to establish its right to coverage. None of IR or its Affiliates will bear any
liability for the failure of an insurer to pay any claim under any IR
Insurance Policy. Nothing in this Section 6.25 shall constitute a
representation or warranty by Sellers that coverage is available to any member
of the Dresser-Rand Group under any insurance policy or contract for any
specific claim. Neither this Section 6.25 nor any provision hereof shall be
read in a manner that violates or conflicts with any provision of any
applicable insurance policy or contract. To the extent that this Section 6.25
or any provision hereof violates or conflicts with any provision of any
applicable insurance policy or contract or would cause a cancellation or loss
of rights under any applicable insurance policy or contract, the parties agree
that this Section 6.25 shall be amended or construed with respect only to such
applicable insurance policy or contract and to the minimum extent necessary to
cure or avoid such conflict, inconsistency, violation, cancellation or loss of
rights; provided, however, that this provision shall not constitute a
representation or warranty that any such conflict, purported assignment,
inconsistency or violation may be avoided or cured.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual written consent of the Sellers and the
Buyers;
(b) by the Buyers if the Closing has not occurred on or before
December 31, 2004 (the "Outside Date"), unless the failure of such
consummation shall be due to the failure of the Buyers to comply in all
material respects with the representations, warranties, agreements and
covenants contained herein to be performed by the Buyers on or before Outside
Date;
66
(c) by the Sellers if the Closing has not occurred on or before
the Outside Date, unless the failure of such consummation shall be due to the
failure of the Sellers to comply in all material respects with the
representations, warranties, agreements and covenants contained herein to be
performed by the Sellers on or before the Outside Date;
(d) by either the Sellers or the Buyers within 10 days
following the delivery to FRC of the SAS Financial Statements if the EBITDA
Deficiency exceeds $6.6 million; or
(e) by either the Sellers or the Buyers if any court or
Governmental Authority of competent jurisdiction shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and such order, decree or
ruling or other action shall have become final and nonappealable.
7.2 Procedure and Effect of Termination. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby by the Sellers or the Buyers pursuant to Section 7.1
hereof, written notice thereof shall forthwith be given to the other parties.
If this Agreement is terminated and the transactions contemplated by this
Agreement are abandoned as provided herein:
(a) Each party will redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) The provisions of the Confidentiality Agreement shall
continue in full force and effect; and
(c) No party to this Agreement will have any liability under
this Agreement to any other and the French Offer Letter or any Local Transfer
Agreement entered into prior to the Closing Date shall automatically terminate
and be of no further force or effect, except (i) that nothing herein shall
relieve any party from any liability for any breach of any of the
representations, warranties, covenants and agreements set forth in this
Agreement and (ii) as contemplated by paragraph (b) above and by Sections 9.1,
9.2, 9.14 and 9.15.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification.
(a) Indemnification by the Sellers. Subject to the limits set
forth in this Section 8.1, the Sellers agree, jointly and severally, to
indemnify, defend and hold the Buyers and their Affiliates (including, after
the Closing Date, the Dresser-Rand Group) and their respective officers,
directors, partners, stockholders, employees, agents and representatives (the
"Buyers Indemnified Persons") harmless from and in respect of
67
any and all losses, claims, liabilities, damages, fines, penalties, costs (in
each case including reasonable out-of-pocket expenses (including, without
limitation, reasonable fees and expenses of counsel) (collectively, "Losses"),
that they may incur arising out of, relating to, or due to any (i) breach or
inaccuracy as of the date of this Agreement or as of the Closing Date of any
representation or warranty (in the case of each representation and warranty
(other than in Section 2.5, Section 2.6, Section 2.7, the first sentence of
Section 2.8, the first sentence of Section 2.9, the second sentence of Section
2.10, the first sentence and clauses (a) and (e) of Section 2.11, Section
2.13(a), Section 2.13(b), the second sentence of Section 2.13(d), clause (iii)
of Section 2.14, Section 2.16(a) and the first sentence of Section 2.19(a))
without regard to qualification with respect to materiality or Material
Adverse Effect, but in all cases giving effect to any dollar limitations or
thresholds) of the Sellers set forth in this Agreement (other than the
representations and warranties set forth in Section 2.12), (ii) breach or
nonperformance of any covenant, undertaking or other agreement of the Sellers
contained in this Agreement, (iii) Asbestos Liabilities and (iv) Products
Liabilities Losses. Anything to the contrary contained herein notwithstanding,
(x) none of the Buyers Indemnified Persons shall be entitled to recover from
the Sellers for any claims for indemnity or damages with respect to Losses
arising under Section 8.1(a)(i) (except for Unlimited Representations (as
defined in Section 8.1(d))) or Section 8.1(a)(ii) above unless and until the
total of all such claims in respect of such Losses exceeds $18,000,000 (the
"Basket"); provided that, in calculating whether the Basket has been obtained,
only Losses in excess of $50,000 (the "Minimum Claim Amount") shall be
considered and after the Basket has been obtained Sellers shall not be liable
for any Losses under Section 8.1(a)(i) (except for Unlimited Representations)
or Section 8.1(a)(ii) unless the Losses exceed the Minimum Claim Amount; and
(y) the Buyers Indemnified Parties shall not be entitled to recover from the
Sellers nor shall Sellers be responsible to pay more than an aggregate of 33
1/3% of the Purchase Price (the "Cap") for any claims for indemnity in respect
of Losses or other amounts paid pursuant to Section 6.15 (except for Asbestos
Liabilities), Section 8.1(a)(i) (except for Unlimited Representations) and
Section 8.1(a)(ii); provided, however, that neither the Basket nor the Cap
shall apply with respect to any Losses resulting from or relating to Asbestos
Liabilities, Products Liabilities, Unlimited Representations; provided,
further, that none of the Basket, the Cap or the Minimum Claim Amount shall
apply with respect to the indemnities provided in Section 6.5 or with respect
to any Losses resulting from or relating to any breaches of Sections 6.8(n),
6.8(o) or 6.8(p) or any amounts payable pursuant to Article I. Notwithstanding
any provision of this Article VIII to the contrary, other than as relating to
Asbestos Liabilities, Section 6.15 constitutes the sole remedy of the Buyers
Indemnified Persons against the Sellers regarding Losses relating to
Environmental Laws or Hazardous Materials and the Buyers Indemnified Persons
hereby waive all other rights or causes of action against the Sellers under or
relating to Environmental Laws or Hazardous Materials. Notwithstanding
anything to the contrary, no indemnification shall be available for any Losses
to the extent such Losses are included in the calculation of Net Cash Amount
or Closing Net Working Capital Amount.
(b) Indemnification by the Buyers. Subject to the limits set
forth in this Section 8.1, the Buyers jointly and severally agree to
indemnify, defend and hold the Sellers and their respective agents and
representatives (the "Sellers Indemnified
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Persons") harmless from and in respect of any and all Losses that they may
incur arising (i) out of or due to any inaccuracy of any representation or the
breach of any warranty, covenant, undertaking or other agreement of the Buyers
contained in this Agreement; (ii) as a result of the conduct of business of
any member of the Dresser-Rand Group after the Closing Date; (iii) from a
third party claim under the Partnership's Amended and Restated Partnership
Agreement, dated as of October 1, 1992 or the partnership law of the State of
New York as a result of the status of the Sellers as partners of the
Partnership prior to the Closing but only to the extent related to the
business now or previously conducted by the Dresser-Rand Group or its
predecessors (other than with respect to matters contemplated to be the
responsibility of the Sellers or as to which Sellers are obligated to
indemnify pursuant to this Agreement); and (iv) under any guarantees, standby
letters of credit or other forms of credit support provided by any of the
Sellers or any of their Affiliates to third parties in respect of obligations
of any members of the Dresser-Rand Group. Anything to the contrary contained
herein notwithstanding, (x) none of the Sellers Indemnified Persons shall be
entitled to recover from the Buyers for any Losses indemnifiable under Section
8.1(b)(i) and Section 8.1(b)(ii) above unless and until the total amount of
all such claims in respect of Losses pursuant to Section 8.1(b)(i) and Section
8.1(b)(ii) exceeds the Basket; provided that in calculating whether the Basket
has been obtained, only Losses in excess of the Minimum Claim Amount shall be
considered and after the Basket has been obtained Buyers shall not be liable
for any Losses under Section 8.1(b)(i) or Section 8.1(b)(ii) unless the Losses
exceed the Minimum Claim Amount; and (y) the Sellers Indemnified Parties shall
not be entitled to recover more than the Cap from the Buyers pursuant to
Section 8.1(b)(i) and Section 8.1(b)(ii); provided, however, that neither the
Basket nor the Cap shall apply with respect to any Losses resulting from or
relating to Section 8.1(b)(iii) and Section 8.1(b)(iv). Notwithstanding
anything to the contrary in this Section 8.1(b), the Buyers hereby waive any
and all claims which they have or may have against the Sellers under the
Partnership's Amended and Restated Partnership Agreement, dated as of October
1, 1992 or the partnership law of the State of New York as a result of the
status of the Sellers as partners of the Partnership prior to the Closing but
only to the extent related to the business now or previously conducted by the
Dresser-Rand Group or its predecessors (other than with respect to matters
contemplated to be the responsibility of the Sellers or as to which Sellers
are obligated to indemnify pursuant to this Agreement).
(c) Indemnification Calculations.
(i) The amount of any Losses for which indemnification is
provided under this Article VIII and under Sections 6.5 and 6.15 shall be
computed net of any third-party insurance proceeds and recoveries in
respect of third party indemnification obligations actually received by
the indemnified party in connection with such Losses. The indemnified
party agrees to use its reasonable best efforts to obtain recovery in
respect of any Losses from any third party indemnity which is available
in respect of such Losses. If an indemnified party receives such
insurance proceeds or indemnification recoveries in connection with
Losses for which it has received indemnification, such party shall refund
to the indemnifying party the amount of such insurance proceeds when
69
received, up to the amount of indemnification received. An indemnified
party shall use commercially reasonable efforts to pursue third-party
insurance claims with respect to any Losses. If the amount with respect
to which any claim is made under this Article VIII or under Sections 6.5
or 6.15 (an "Indemnity Claim") gives rise to an actually realized Tax
Benefit to the party that made the claim, such party shall refund to the
indemnifying party the amount of such Tax Benefit when, as and if
actually realized; provided, however, that such obligation of the
indemnified party to refund to the indemnifying party the amount of any
Tax Benefit shall only apply to the extent that such Tax Benefit is
actually realized within three (3) years following the Closing Date. For
purposes of this Section 8.1(c), a "Tax Benefit" to a party means an
amount by which the Tax liability of such party (or group of Affiliates
including such party) is actually reduced (including, without limitation,
by deduction, reduction of income by virtue of increased tax basis or
otherwise, entitlement to refund, credit or otherwise) as such amount may
actually be reduced by, but not below zero, any increase in such party's
Tax liability as a result of its receipt of payment for such Indemnity
Claim plus any related interest received from the relevant Taxing
Authority. Where a party has other losses, deductions, credits or items
available to it, the Tax Benefit from any losses, deductions, credits or
items relating to the Indemnity Claim shall be deemed to be utilized
after all other losses, deductions, credits or items have been completely
utilized (i.e., a Tax Benefit is not actually realized until the relevant
party actually pays less in Taxes than it otherwise would have paid
without the supposed Tax Benefit). In the event that there should be a
determination disallowing the Tax Benefit, the indemnifying party shall
be liable to the indemnified party for any Taxes or Losses resulting from
such disallowance.
(ii) The parties agree that any indemnification payments
made pursuant to this Agreement shall be treated for Tax purposes as an
adjustment to the Purchase Price, unless otherwise required by applicable
law.
(iii) Each indemnified party shall take all reasonable
steps to mitigate any Loss in respect of which a claim could be made
under this Article VIII or any other provision of this Agreement.
(iv) No party shall be entitled to recover more than the
full amount of any Loss under the provisions of this Agreement in respect
of any such Loss.
(d) Survival of Representations and Warranties. The
representations and warranties of the parties contained in this Agreement or
in any instrument delivered pursuant hereto will survive the Closing Date and
will remain in full force and effect thereafter until the date that is 18
months after the Closing Date, provided that (i) the representations and
warranties set forth in Section 2.12 (Tax Matters)
70
and Section 2.17 (Environmental Matters) shall terminate and expire on the
Closing Date and (ii) representations and warranties contained in Section 2.1
(Organization of Certain Sellers), the first two sentences of Section 2.2
(Subsidiaries), Section 2.3 (Ownership of Acquired Interests), Section 2.4
(Authorization, Etc.), and Section 2.21 (No Brokers' or Other Fees)
(collectively, the "Unlimited Representations") shall survive the Closing
without limitations; provided, further, that such representations or
warranties shall survive (if at all) beyond such period with respect to any
inaccuracy therein or breach thereof, written notice of which shall have been
duly given within such applicable period in accordance with Section 8.1(e)
hereof.
(e) Notice and Opportunity to Defend. If there occurs an event
which a party asserts is an indemnifiable event pursuant to Sections 8.1(a),
8.1(b) or 6.15, the party or parties seeking indemnification (the "Indemnified
Party") shall notify the other party or parties obligated to provide
indemnification (the "Indemnifying Party") promptly. If such event involves
(i) any claim or (ii) the commencement of any action or proceeding by a third
person, the party seeking indemnification will give such Indemnifying Party
prompt written notice of such claim or the commencement of such action or
proceeding; provided, however, that the failure to provide prompt notice as
provided herein will relieve the Indemnifying Party of its obligations
hereunder only to the extent that such failure materially prejudices the
Indemnifying Party hereunder. In case any such action shall be brought against
any party seeking indemnification and it shall notify the Indemnifying Party
of the commencement thereof, the Indemnifying Party shall be entitled to
participate therein and to assume the defense thereof, with counsel selected
by the Indemnifying Party and, after notice from the Indemnifying Party to
such party or parties seeking indemnification of such election so to assume
the defense thereof, the Indemnifying Party shall not be liable to the party
or parties seeking indemnification hereunder for any legal expenses of other
counsel or any other expenses subsequently incurred by such party or parties
in connection with the defense thereof; provided, however, that Sellers shall
assume the defense of all Asbestos Liabilities. The Indemnifying Party and the
Indemnified Party shall cooperate in the defense of such third party claims.
The Indemnifying Party and the party seeking indemnification agree to
cooperate fully with each other and their respective counsel in connection
with the defense, negotiation or settlement of any such action or asserted
liability. The party or parties seeking indemnification shall have the right
to participate at their own expense in the defense of such action or asserted
liability; and if requested by the Indemnified Party in respect of any action
or asserted liability that would reasonably be expected to exceed the
applicable Cap or have a material adverse effect on the Indemnified Party's
business, the Indemnifying Party shall not make any material decision
(procedural or otherwise) in respect of material aspects of the defense of
such action without the participation and prior written consent (such consent
not to be unreasonably withheld or delayed) of the Indemnified Party. If the
Indemnifying Party assumes the defense of an action (A) no settlement or
compromise thereof may be effected (i) by the Indemnifying Party without the
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed) unless (x) there is no finding or admission
of any violation of law or any violation of the rights of any Person by any
Indemnified Party and no adverse effect on any other claims that may be made
against any Indemnified Party, (y) all relief provided is paid or satisfied in
full by the Indemnifying Party and (z) such settlement or
71
compromise would not have a material adverse effect upon the Indemnified Party
or (ii) by the Indemnified Party without the consent of the Indemnifying
Party; and (B) the Indemnified Party may subsequently assume the defense of
such action if a court of competent jurisdiction determines that the
Indemnifying Party is not vigorously defending such action. If the
Indemnifying Party fails to assume the defense of a third party claim, the
Indemnified Party may assume the defense of any such claim with counsel
selected by the Indemnified Party. In no event shall an Indemnifying Party be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld or delayed). To the extent that there is
any conflict between the procedures set forth in this Section 8.1(e) and those
set forth in Section 6.15, the procedures set forth in Section 6.15 shall
govern.
(f) Payment. On each occasion that any Indemnified Party shall
be entitled to indemnification or reimbursement under this Article VIII,
Section 6.5 or Section 6.15, the Indemnifying Party shall, at each such time,
promptly pay the amount of such indemnification or reimbursement. If any
Indemnified Party shall be entitled to indemnification under this Article
VIII, Section 6.5 or Section 6.15 the Indemnifying Party shall pay the
Indemnified Party's costs and expenses arising as a result of a proceeding
directly relating to an indemnifiable Loss (including, without limitation, any
reasonable fees paid to witnesses), periodically as incurred.
(g) Special Damages. No Indemnified Party will be entitled to
indemnification pursuant to this Agreement for punitive damages or for lost
profits, diminution in value, consequential, exemplary or special damages.
(h) Exclusive Remedy. Except as otherwise provided below, the
indemnification provided for in this Section 8.1 and in Section 6.15, subject
to the limitations set forth herein or therein, shall be the exclusive
post-Closing remedy available to any party in connection with any Losses
arising out of the matters set forth in this Agreement or the transactions
contemplated hereunder; provided, however, that nothing herein will limit in
any way any such party's remedies in respect of fraud by the other party in
connection herewith or the transactions contemplated hereby.
(i) Tax Indemnity. Notwithstanding anything to the contrary in
this Article VIII (other than as specifically set forth in Sections 8.1(c),
(d), (f) and (g)), indemnification with respect to Taxes for which
indemnification is provided in Section 6.5 shall be governed solely by Section
6.5 and Section 6.6.
ARTICLE IX
MISCELLANEOUS
9.1 Fees and Expenses; Transfer Taxes.
(a) Except as otherwise provided in this Agreement, the Sellers
shall bear their own expenses and the expenses of their respective Affiliates
and the Buyers shall bear their own expenses in connection with the
preparation and negotiation
72
of this Agreement and the consummation of the transactions contemplated by
this Agreement. Each of the Sellers and the Buyers shall bear the fees and
expenses of any broker or finder retained by such party or parties and its
respective Affiliates in connection with the transactions contemplated herein.
(b) Notwithstanding anything to the contrary in Section 6.4(b)
or Section 6.5, the Sellers on the one hand, and the Buyers on the other hand,
each shall bear one half of any Transfer Taxes.
9.2 Governing Law. This Agreement shall be construed under and
governed by the laws of the State of New York without giving effect to any
choice or conflict of laws provisions or rules that would cause the
application of laws of any jurisdiction other than the State of New York.
9.3 Amendment. This Agreement may not be amended, modified or
supplemented except upon the execution and delivery of a written agreement
executed by the Buyers and the Sellers.
9.4 No Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the Buyers, in the case of assignment by
any Seller, and the Sellers, in the case of any assignment by any Buyer;
provided that Buyer may transfer or assign, in whole or in part from time to
time, its rights or obligations hereunder to any one or more of its Affiliates
or pledge its rights as security to any of its financing sources without the
prior written consent of the other parties hereto; provided, further, that no
such assignment by Buyer shall relieve Buyer of its obligations hereunder.
9.5 Waiver. Any of the terms or conditions of this Agreement which
may be lawfully waived may be waived in writing at any time by each party
which is entitled to the benefits thereof. Any waiver of any of the provisions
of this Agreement by any party hereto shall be binding only if set forth in an
instrument in writing signed on behalf of such party. No failure to enforce
any provision of this Agreement shall be deemed to or shall constitute a
waiver of such provision and no waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
9.6 Notices. Any notice, demand, or communication required or
permitted to be given by any provision of this Agreement shall be deemed to
have been sufficiently given or served for all purposes if (a) personally
delivered, (b) mailed by registered or certified first class mail, prepaid
with return receipt requested, (c) sent by a nationally recognized overnight
courier service, to the recipient at the address below indicated or (d)
delivered by facsimile which is confirmed in writing by sending a copy of such
facsimile to the recipient thereof pursuant to clause (a) or (c) above:
If to any Buyer:
c/o First Reserve Corporation
Xxx Xxxxxxxxx Xxxxx
00
Xxxxxxxxx, XX 00000
Attention: Xxx Xxxxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
With a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
If to any Seller:
c/o Xxxxxxxxx-Xxxx Company
000 Xxxxxxxx Xxxxx Xxxx
Xxxxxxxxx Xxxx, XX 00000
Attention: Deputy General Counsel - Transactions
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
With a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
9.7 Complete Agreement. This Agreement, the Confidentiality
Agreement, the Transaction Agreements and the other documents and writings
referred to herein or delivered pursuant hereto contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof and
thereof. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
9.8 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
9.9 Publicity. The Sellers and the Buyers will consult with each
other and will mutually agree upon any publication or press release of any
nature with respect to
74
this Agreement or the transactions contemplated hereby and shall not issue any
such publication or press release prior to such consultation and agreement
except as may be required by applicable law or by obligations pursuant to any
listing agreement with any securities exchange or any securities exchange
regulation, in which case the party proposing to issue such publication or
press release shall make all reasonable efforts to consult in good faith with
the other party or parties before issuing any such publication or press
release and shall provide a copy thereof to the other party or parties prior
to such issuance.
9.10 Certain Definitions. For purposes of this Agreement:
(a) "Affiliate" shall mean, with respect to any specified
Person, any other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such specified Person.
(b) "Asbestos Liability" (and collectively "Asbestos
Liabilities") means, to the extent related to the period prior to the Closing,
(i) any claim or Proceeding against Dresser-Rand Group or any of its
Subsidiaries or any of their respective predecessors or against any Person or
entity whose liability for any such claim Sellers, Dresser-Rand Group or any
of its Subsidiaries or any of their respective predecessors, has or allegedly
has retained or assumed either contractually or by operation of Law, related
to or arising from the sale or use of any Product containing asbestos, or (ii)
any claim or litigation by any Person based on personal injury caused by the
presence of asbestos containing material in any form or condition at any
location formerly owned, leased, or operated by the Dresser-Rand Group or any
of its Subsidiaries, or any subsidiary, Affiliate, or predecessor thereof, or
at any location at which Dresser-Rand Group or any of its Subsidiaries, or any
subsidiary, Affiliate, or predecessor thereof has or is alleged to have
disposed or arranged for the disposal of any actual or alleged asbestos
containing material.
(c) "French Offer Letter" shall mean the offer letter dated as
of the date hereof addressed by FRC to Dresser-Rand Company, relating to FRC's
offer to purchase the French Shares.
(d) "French Shares" shall mean all of the issued and
outstanding shares of Dresser-Xxxx X.X., a company organized under the laws of
France and a member of the Dresser-Rand Group.
(e) "Knowledge of the Sellers" shall mean the actual knowledge
(after reasonable inquiry) of the individuals listed in Section 9.10(e) of the
Disclosure Schedule.
(f) "Person" shall mean any individual, partnership, firm,
corporation, association, trust, unincorporated organization, joint venture,
limited liability company, governmental or regulatory authority or other
entity.
(g) "Products Liability" (and collectively "Products
Liabilities") means, to the extent related to Products shipped prior to the
Closing Date and except to
75
the extent based on acts or omissions (excluding omissions in respect of an
alleged failure to warn based solely on events, activities or occurrences
prior to the Closing) following the Closing, any claim or Proceeding of a
third party against Dresser-Rand Group or any of its Subsidiaries or any of
their respective predecessors or against any Person or entity whose liability
for any such claim Sellers, Dresser-Rand Group or any of its Subsidiaries or
any of their respective predecessors, has or allegedly has retained or assumed
either contractually or by operation of Law, to the extent such claim or
Proceeding alleges personal injury or property damage (other than damage to
the Products) related to or 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.
(h) "subsidiary" shall mean with respect to any Person, any
corporation, limited liability company, partnership, association, or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other subsidiaries of that Person or a
combination thereof or (ii) if a limited liability company, partnership,
association, or other business entity (other than a corporation), a majority
of partnership or other similar ownership interests thereof having the power
to govern or elect members of the applicable governing body of such entity is
at the time owned or controlled, directly or indirectly, by that Person or one
or more subsidiaries of that Person or a combination thereof; and the term
"subsidiary" shall include all subsidiaries of such subsidiary.
(i) Where any Seller that is not a party to this Agreement
agrees to, or not to, take any action, IR shall be deemed to have agreed to
cause such Seller to, or not to, take such action. Where any Buyer that is not
a party to this Agreement and agrees to, or not to, take any action, FRC shall
be deemed to have agreed to cause such Buyer to, or not to, take such action.
(j) All references herein to dollars or "$" shall mean U.S.
dollars, unless otherwise noted.
9.11 Headings. The headings contained in this Agreement are for
reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
9.12 Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this
Agreement invalid, illegal or unenforceable in any other jurisdiction.
9.13 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or
76
give to any Person or corporation, other than the parties hereto, the other
Sellers and Buyers set forth on Exhibit A hereto, and their respective
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement.
9.14 CONSENT TO JURISDICTION. THE PARTIES HERETO HEREBY CONSENT TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE AREA
ENCOMPASSED BY THE SOUTHERN DISTRICT OF THE STATE OF NEW YORK AND IRREVOCABLY
AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. THE PARTIES HERETO EACH ACCEPT
FOR ITSELF AND IN CONNECTION WITH ITS RESPECTIVE PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION AND VENUE OF THE AFORESAID COURTS
AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREE TO BE
BOUND BY ANY NON APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT.
9.15 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW,
THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE
PARTIES HERETO ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH
MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE PARTIES
HERETO ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING
INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS. THE PARTIES HERETO FURTHER WARRANT AND REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED
HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
77
9.16 Specific Enforcement. Each party acknowledges and agrees that,
prior to Closing, the other party would be irreparably damaged if any of the
provisions of this Agreement are not performed in accordance with their
specific terms and that any breach of this Agreement by a Seller or a Buyer
could not be adequately compensated in all cases by monetary damages alone.
Accordingly, in addition to any other right or remedy to which any party may
be entitled at law or in equity, prior to Closing it shall be entitled to
enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to prevent
breaches or threatened breaches of any of the provisions of this Agreement,
without posting any bond or other undertaking.
9.17 Guarantee of Seller Obligations. Prior to the Closing, each of
First Reserve Fund IX, L.P., a Delaware limited partnership, and First Reserve
Fund X, L.P., a Delaware limited partnership (collectively, the "Funds"),
hereby jointly and severally, irrevocably, absolutely and unconditionally
guarantees to the Sellers, as and for its own debt and without any setoff or
requirement of presentment, the due, punctual and complete payment and
performance of each and all of the Buyers' obligations and liabilities under
this Agreement, in each case as and when the same shall become due and payable
and/or performable. The Sellers shall be entitled to enforce directly against
the Funds any of the foregoing obligations, and the Funds' obligations
hereunder are in no way conditioned or contingent upon any attempt to collect
from or enforce performance or compliance by the Buyers or upon any other
event or condition whatsoever. Each of the Funds agrees to make capital calls
(not in excess of $900 million in the aggregate) on its limited partners and
take such other actions as are necessary to perform its obligations under this
Section 9.17.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by its duly authorized officer, in each case as of the day and year
first above written.
FRC ACQUISITIONS LLC
By: First Reserve GP IX, L.P., as Manager
By: First Reserve GP IX, Inc., its general
partner
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Director
By: First Reserve GP X, L.P., as Manager
By: First Reserve GP X, Inc., its general
partner
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Director
XXXXXXXXX-XXXX COMPANY LIMITED
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chairman, President and Chief
Executive Officer
FIRST RESERVE FUND IX, L.P.
By: First Reserve GP IX, L.P., its general
partner
By: First Reserve GP IX, Inc., its general
partner
(solely in respect of Section 9.17 hereof)
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Director
FIRST RESERVE FUND X, L.P.
By: First Reserve GP X, L.P., its general
partner
By: First Reserve GP X, Inc., its general
partner
(solely in respect of Section 9.17 hereof)
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Director
