EXHIBIT 99.2
PURCHASE AGREEMENT
Among
HANOVER COMPRESSOR COMPANY,
HANOVER COMPRESSION INC.,
DRESSER-RAND COMPANY
and
XXXXXXXXX-XXXX COMPANY
dated as of
July 11, 2000
TABLE OF CONTENTS
Page
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ARTICLE I PURCHASE AND SALE OF INTERESTS AND ASSETS; ASSUMPTION OF LIABILITIES..... 7
1.1. Sale and Transfer of Subsidiary Interests.............................. 7
1.2. Transfer of Assets..................................................... 8
1.3. Excluded Assets........................................................ 10
1.4. Instruments of Conveyance and Transfer................................. 11
1.5. Assumed Liabilities.................................................... 11
1.6. Excluded Liabilities................................................... 12
1.7. Consideration.......................................................... 13
1.8. The Closing............................................................ 14
(a) Deliveries by Seller............................................... 14
(b) Deliveries by Buyer................................................ 14
(c) Deliveries by Hanover.............................................. 15
1.9. Purchase Price Allocation.............................................. 15
1.10. Deferred Transfers..................................................... 16
1.11. Purchase Price Adjustment.............................................. 17
1.12. Further Assurances..................................................... 19
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER................................ 19
2.1. Organization........................................................... 19
2.2. Subsidiaries........................................................... 20
2.3. Ownership of Interests................................................. 20
2.4. Authorization, Etc..................................................... 20
2.5. Financial Statements................................................... 21
2.6. Absence of Undisclosed Liabilities..................................... 21
2.7. No Approvals or Conflicts.............................................. 21
2.8. Compliance with Law; Governmental Authorizations....................... 22
2.9. Litigation............................................................. 22
2.10. Personal Property Assets............................................... 22
2.11. Absence of Certain Changes............................................. 23
i
2.12. Tax Matters........................................................... 24
2.13. Employee Benefits..................................................... 26
2.14. Labor Relations....................................................... 27
2.15. Patents, Copyrights, Trademarks and Service Marks, Etc................ 28
2.16. Contracts............................................................. 28
2.17. Environmental Matters................................................. 30
2.18. Insurance............................................................. 31
2.19. Real Property......................................................... 31
(a) Leased Properties................................................. 31
(b) Owned Properties.................................................. 32
2.20. Product Liability..................................................... 32
2.21. Receivables........................................................... 32
2.22. Standby Letter(s) of Credit........................................... 32
2.23. Entire Business....................................................... 33
2.24. No Brokers' or Other Fees............................................. 33
2.25. No Other Representations or Warranties................................ 33
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER AND HANOVER.................... 33
3.1. Organization.......................................................... 33
3.2. Authorization Etc..................................................... 33
3.3. No Approvals or Conflicts............................................. 34
3.4. Hanover SEC Filings; Financial Statements; Absence of Certain Changes. 34
3.5. Capitalization........................................................ 35
3.6. Litigation............................................................ 36
3.7. Conduct of Business; Changes.......................................... 37
3.8. Compliance with Law; Governmental Authorizations...................... 37
3.9. Financing............................................................. 37
3.10. No Brokers' or Other Fees............................................. 37
3.11. No Other Representations or Warranties................................ 37
ARTICLE IV CONDITIONS TO SELLER'S OBLIGATION....................................... 38
4.1. Representations and Warranties........................................ 38
4.2. Performance........................................................... 38
4.3. Officer's Certificates................................................ 38
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4.4. HSR Act................................................................ 38
4.5. Injunctions............................................................ 38
4.6. Consents............................................................... 38
4.7. Standby Letter(s) of Credit............................................ 38
4.8. Assumption Agreement................................................... 39
4.9. Registration Rights Agreement.......................................... 39
4.10. Transition Services Agreement.......................................... 39
4.11. Opinion................................................................ 39
4.12. Average Closing Price.................................................. 39
ARTICLE V CONDITIONS TO BUYER'S OBLIGATION......................................... 39
5.1. Representations and Warranties......................................... 39
5.2. Performance............................................................ 39
5.3. Officer's Certificate.................................................. 39
5.4. Resignations........................................................... 39
5.5. HSR Act................................................................ 40
5.6. Injunctions............................................................ 40
5.7. Consents............................................................... 40
5.8. Transition Services Agreement.......................................... 40
5.9. Opinion................................................................ 40
ARTICLE VI COVENANTS AND AGREEMENTS................................................ 40
6.1. Conduct of Compression Services Business............................... 40
6.2. Access to Books and Records; Cooperation............................... 41
6.3. Filings and Consents................................................... 42
6.4. Tax Matters; Cooperation; Preparation of Returns; Tax Elections........ 42
6.5. Tax Indemnity.......................................................... 45
6.6. Employees; Benefit Plans............................................... 46
(a) Defined Benefit Plans.............................................. 46
(b) Defined Contribution Plans......................................... 46
(c) Welfare Benefit Plans.............................................. 46
(d) Post-Retirement Benefit Plan....................................... 46
(e) Stock Appreciation Right Plan...................................... 47
iii
(f) Continuation of Comparable Benefit Plans........................... 47
(g) Prior Service; Deductibles......................................... 47
(h) Accrued Vacation................................................... 47
(i) Severance Obligations.............................................. 47
(j) Annual Incentive Compensation...................................... 48
(k) Cooperation and Transition Services................................ 48
(l) Foreign Employment Matters......................................... 48
(m) No Right to Employment............................................. 49
6.7. Labor Matters.......................................................... 49
6.8. Covenant to Satisfy Conditions......................................... 50
6.9. Contact With Customers and Suppliers................................... 50
6.10. Projections............................................................ 50
6.11. Competition............................................................ 50
6.12. Asset Returns.......................................................... 51
6.13. Transition Services Agreements......................................... 51
6.14. Guarantees............................................................. 52
6.15. Private Placement...................................................... 52
6.16. Seller Credit Support Instruments...................................... 52
6.17. Use of Name............................................................ 52
6.18. Follow-On Relationship................................................. 52
ARTICLE VII TERMINATION............................................................ 53
7.1. Termination............................................................ 53
7.2. Procedure and Effect of Termination.................................... 53
ARTICLE VIII INDEMNIFICATION....................................................... 54
8.1. Indemnification........................................................ 54
(a) Indemnification by Seller.......................................... 54
(b) Indemnification by Buyer........................................... 55
(c) Indemnification Calculations....................................... 55
(d) Survival of Representations and Warranties......................... 56
iv
(e) Notice and Opportunity to Defend................................... 56
(f) Payment............................................................ 57
(g) Tax Indemnity...................................................... 57
ARTICLE IX MISCELLANEOUS........................................................... 57
9.1. Fees and Expenses...................................................... 57
9.2. Governing Law.......................................................... 57
9.3. Amendment.............................................................. 57
9.4. No Assignment.......................................................... 58
9.5. Waiver................................................................. 58
9.6. Notices................................................................ 58
9.7. Complete Agreement..................................................... 60
9.8. Counterparts........................................................... 61
9.9. Publicity.............................................................. 61
9.10. Headings............................................................... 61
9.11. Severability........................................................... 61
9.12. Third Parties.......................................................... 61
9.13. Bulk Sales Law......................................................... 61
9.14. CONSENT TO JURISDICTION................................................ 61
9.15. WAIVER OF JURY TRIAL................................................... 61
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Exhibits
--------
Exhibit A Subsidiaries
Exhibit B Description of Business
Exhibit C Transferred Subsidiaries
Exhibit D Subsidiary Asset Sellers
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Seller Transition Services Agreement
Exhibit G Form of Buyer Transition Services Agreement
Disclosure Schedule
-------------------
1.2(b) Exceptions to Title
1.2(g) Excluded Contracts
1.2(h) Excluded Licenses, Permits and Franchises
1.3(i) Excluded Assets
1.6(d) Excluded Intercompany Liabilities
1.6(i) Excluded Litigation
2.1 Organization
2.2 Subsidiaries and Subsidiary Interests
2.5 Financial Statements
2.6 Material Undisclosed Liabilities
2.7 Conflicts, Consents and Approvals
2.8 Compliance With Law; Governmental Authorizations
2.9 Litigation
2.10 Personal Property Assets
2.11 Absence of Certain Changes
2.12 Tax Matters
2.13(a) Excluded Employees; Additional Employees
2.13(b) Employee Benefits
2.14 Labor Relations
2.15 Patents, Copyrights, Trademarks and Service Marks
2.16 Contracts
2.17 Environmental Matters
2.18 Insurance
2.19(a) Leased Properties
2.19(b) Owned Properties
2.20 Product Liability Matters
2.22 Standby Letters of Credit
6.1 Conduct of Business
Buyer Disclosure Schedule
-------------------------
3.6 Litigation
3.7 Conduct of Business; Changes
3.8 Compliance With Law; Governmental Authorizations
vi
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement"), dated as of July 11, 2000,
is entered into by and among Hanover Compressor Company, a Delaware corporation
("Hanover"), Hanover Compression Inc., a Delaware corporation and a wholly owned
subsidiary of Hanover (the "Buyer"), Dresser-Rand Company, a New York general
partnership (the "Seller"), and, solely for purposes of Sections 6.11, 6.14 and
6.17 hereof, Xxxxxxxxx-Xxxx Company, a New Jersey corporation (the "Parent").
WHEREAS, Seller and Seller's subsidiaries listed on Exhibit A (the
"Subsidiaries") are engaged, in part, in the compression services business
described on Exhibit B (the "Compression Services Business"); and
WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer the assets (other than assets expressly excluded pursuant to
Section 1.3 hereof), subject to the assumption of certain liabilities as set
forth in Section 1.5 hereof, of the Compression Services Business held by Seller
(the "D-R Assets") upon the terms and subject to the conditions set forth herein
(the "D-R Asset Purchase"); and
WHEREAS, Buyer desires to purchase from Seller and certain of the
Subsidiaries, and Seller desires to sell, and to cause certain of the
Subsidiaries to sell, to Buyer, all of the outstanding shares of capital stock
and other equity interests (collectively, the "Subsidiary Interests") of the
Subsidiaries owned by Seller and such Subsidiaries listed on Exhibit C (the
"Transferred Subsidiaries") upon the terms and subject to the conditions set
forth herein; and
WHEREAS, Buyer desires to purchase from the Subsidiaries listed on
Exhibit D (such Subsidiaries, the "Subsidiary Asset Sellers", and together with
Seller, the "Asset Sellers"), and Seller desires to cause such Subsidiary Asset
Sellers to sell to Buyer, the assets of the Compression Services Business held
by the Subsidiaries other than the Transferred Subsidiaries (other than the
assets expressly excluded pursuant to Section 1.3 hereof), subject to the
assumption of certain liabilities as set forth in Section 1.5 hereof (such
assets, the "Subsidiary Assets", and together with the D-R Assets, the
"Assets"), upon the terms and subject to the conditions set forth herein.
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 AND ASSETS;
ASSUMPTION OF LIABILITIES
1.1. Sale and Transfer of Subsidiary Interests. On the Closing Date
(as defined in Section 1.8) and subject to the terms and conditions set forth in
this Agreement, Seller will sell, assign and transfer to Buyer or, in the case
of Subsidiary Interests held by a Subsidiary,
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cause to be sold, assigned and transferred to Buyer, all of Seller's and the
Subsidiaries' right, title and interest in and to the Subsidiary Interests free
and clear of all options, pledges, mortgages, security interests, liens,
restrictions on voting or transfer or other encumbrances of any nature
("Encumbrances"), other than such as may be created by or on behalf of Buyer or
as described in Section 2.2 of the disclosure schedule being delivered to Buyer
by Seller simultaneously with the execution and delivery of this Agreement (the
"Disclosure Schedule").
1.2. Transfer of Assets. On the Closing Date and subject to the terms
and conditions set forth in this Agreement, and further subject to the
qualifications and limitations herein provided, Seller shall sell, convey,
assign, transfer and deliver to Buyer, or, in the case of Subsidiary Assets,
shall cause the Subsidiary Asset Sellers to sell, convey, assign, transfer and
deliver to Buyer, and Buyer shall purchase and acquire from the Asset Sellers,
all the Asset Sellers' right, title and interest in and to the Assets as the
same shall exist on the Closing Date, free of any Encumbrance other than
Permitted Encumbrances (as defined in Section 2.10), including the following:
(a) Each Asset Seller's right, title and interest in and to the
following exclusively related to the Compression Services Business: (i) the
(1) patents, patent applications, patent or invention disclosures,
provisional patent applications and all related continuation, continuation-
in-part, divisional, reissue, re-examination, utility model, certificate of
invention and design patents, registrations and applications for
registrations, (2) trademarks, service marks, common law trademarks and
service marks, trade dress, logos, trade names and corporate names and
registrations and applications for registration thereof, (3) copyrightable
works, copyrights and registrations and applications for registration
thereof, (4) mask works and registrations and applications for registration
thereof, and (5) trade secrets and confidential business information,
whether patentable or nonpatentable and whether or not reduced to practice,
know-how, manufacturing and product processes and techniques, research and
development information, financial, marketing and business data, pricing
and cost information, business and marketing plans and customer and
supplier lists and information, in the cases of subclauses (1) through (4),
each as set forth on Section 2.15 of the Disclosure Schedule (collectively,
"Intellectual Property"), including all rights in existence on the Closing
Date to initiate or file suit for infringements occurring before or on the
Closing Date; and (ii) all licenses and other agreements to which any Asset
Seller is a party or by which any Asset Seller is bound relating to
Intellectual Property;
(b) The real property and leasehold interests in real property
described in Section 2.19 of the Disclosure Schedule, including all
buildings, structures, fixtures and other improvements situated thereon or
attached thereto (individually, a "Facility" and collectively, the
"Facilities"), and including all the Asset Sellers' right, title and
interest in and to all leases, subleases, franchises, licenses, permits,
easements, privileges, rights-of-way, riparian and other water rights,
lands underlying any adjacent streets or roads and appurtenances pertaining
to or accruing to the benefit of such property, in each case subject to the
Permitted Encumbrances and any other exceptions described on Section 1.2(b)
of the Disclosure Schedule;
(c) Each Asset Seller's right, title and interest in and to the
equipment, furniture, furnishings, fixtures, machinery, vehicles, tools and
other tangible personal property used in the conduct of the Compression
Services Business (collectively, the "Equipment") and
8
all warranties and guarantees, if any, express or implied, existing for the
benefit of the Asset Sellers in connection with the Equipment to the extent
transferable;
(d) The inventories (including raw materials, packaging materials and
work in progress) of the Compression Services Business (the "Inventory");
(e) All management information systems, software and information
systems network connectivity, and related third party servicing
arrangements exclusively related to the Compression Services Business;
(f) All books, records and accounts, correspondence, production
records, technical, accounting, manufacturing and procedural manuals,
customer lists, vendor lists, employment records, research material,
drawings, studies, reports or summaries relating to any environmental
conditions or consequences of any current operation of the Compression
Services Business, as well as all studies, reports or summaries relating to
any environmental aspect or the general condition of the Assets or any
assets of the Transferred Subsidiaries, or otherwise relating to the
Compression Services Business as currently conducted, and any confidential
information which has been reduced to writing relating to the Compression
Services Business as currently conducted; provided that the Asset Sellers
shall retain the originals and Buyer shall receive copies of any such items
which relate primarily to the Excluded Assets or Excluded Liabilities or
other business operations of the Asset Sellers; and provided, further, that
in no event shall the Asset Sellers be obligated to transfer books and
records relating exclusively to Taxes other than real estate, ad valorem,
sales and use taxes (except with respect to Transferred Subsidiaries);
(g) Each Asset Seller's right, title and interest as of the Closing in
and to contracts, maintenance and service agreements, purchase commitments
for materials and other services, advertising and promotional agreements,
leases and other agreements (including but not limited to, any agreements
of the Asset Sellers with suppliers, sales representatives, distributors,
agents, personal property lessors, personal property lessees, licensors,
licensees, consignors and consignees specified therein) (collectively,
"Contracts") attributable to the Compression Services Business, whether or
not entered into in the Ordinary Course of Business (as defined in Section
1.3(h)) and whether or not identified in the Disclosure Schedule, except
for those contracts, agreements and commitments set forth in Section 1.2(g)
of the Disclosure Schedule;
(h) Each Asset Seller's licenses, permits or franchises issued by any
federal, state, municipal or foreign authority relating to the development,
use, maintenance or occupation of the Facilities or related to the current
conduct of the Compression Services Business, to the extent that such
licenses, permits or franchises are transferable, but excluding those items
relating to the corporate existence of any Asset Seller or described in
Section 1.2(h) of the Disclosure Schedule;
(i) Whether or not billed, all accounts receivable and other
receivables of the Asset Sellers to the extent attributable to the
Compression Services Business and in existence on the Closing Date, but
excluding any such receivables to the extent attributable to any Excluded
Assets or Excluded Liabilities;
9
(j) Each Asset Seller's right, title and interest in and to all goods
and services and all other economic benefits to be received subsequent to
the Closing arising out of prepayments and payments by the Asset Sellers
prior to the Closing to the extent attributable to the operation of the
Compression Services Business, but excluding any such benefits to the
extent attributable to any Excluded Assets or Excluded Liabilities; and
(k) Any other asset of the Asset Sellers not referred to in the
foregoing provisions of this Section 1.2 that is required to be included or
reflected in the Closing Statement referred to in Section 1.11 or is
otherwise used primarily in the Compression Services Business.
1.3. Excluded Assets. It is expressly understood and agreed that the
Assets shall not include the following (each, an "Excluded Asset"):
(l) Except to the extent expressly transferred pursuant to the
provisions of Sections 1.2(a) through (k), inclusive, all assets, rights,
properties, claims, contracts and business of any Asset Seller that, after
giving effect to the services to be provided to, and other rights of, Buyer
under the Seller Transition Services Agreement, are not necessary to
conduct the Compression Services Business as currently conducted;
(m) The capital stock and other equity interests of all direct or
indirect subsidiaries and affiliates of Seller other than the Transferred
Subsidiaries;
(n) Cash and cash equivalents or similar type investments, bank
accounts, certificates of deposit, Treasury bills and other marketable
securities of the Asset Sellers;
(o) All real property and leasehold interests in real property of the
Asset Sellers other than the Facilities and the Equipment;
(p) Any refunds or credits with respect to any Taxes (as defined in
Section 2.12) paid or incurred by the Asset Sellers (plus any related
interest received from the relevant Taxing Authority) (as defined in
Section 2.12);
(q) Any Intellectual Property of the Asset Sellers (other than the
Intellectual Property expressly set forth, summarized and/or described in
Section 1.2(a) hereof);
(r) All right, title and interest of any Asset Seller in any insurance
policies relating to the Compression Services Business and all rights of
any Asset Seller to insurance claims and proceeds with respect to or
relating to (i) occurrences prior to the Closing with respect to the
operation of the Compression Services Business and (ii) the Excluded Assets
and Excluded Liabilities;
(s) All rights with respect to intercompany receivables, notes or
loans between any of the Transferred Subsidiaries, on the one hand, and
Seller and its other subsidiaries (excluding Transferred Subsidiaries) and
affiliates, on the other hand, except for trade payables or receivables
relating to the provision of goods and services to or by the Compression
Services Business in the ordinary course of business of the Compression
Services Business consistent with past practice and custom ("Ordinary
Course of Business"); and
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(t) The rights referred to in Section 1.3(i) of the Disclosure
Schedule.
1.4. Instruments of Conveyance and Transfer. At the Closing, the Asset
Sellers shall (a) deliver or cause to be delivered to Buyer such deeds, bills of
sale, endorsements, consents, assignments, and other good and sufficient
instruments of conveyance and assignment as shall be necessary or appropriate or
as may be required by the jurisdiction of organization of each Asset Seller to
vest in Buyer all right, title and interest of the Asset Sellers in and to the
Assets (including such supplemental purchase agreements, consistent with the
provisions of this Agreement, as may be required to be executed and delivered by
Buyer and the Asset Sellers, or any of their respective subsidiaries, pursuant
to the laws of any foreign jurisdiction applicable to any Asset or Asset
Seller), and (b) transfer to Buyer all the contracts, agreements, commitments,
books, records, files and other data (or copies thereof to the extent originals
are not available or to the extent provided in Section 1.2(f)) relating to the
Assets reasonably necessary for the continued operation of the Compression
Services Business by Buyer.
1.5. Assumed Liabilities. On the Closing Date, Buyer shall deliver to
Seller an undertaking in form reasonably satisfactory to Seller (the "Assumption
Agreement") whereby Buyer, on and as of the Closing Date, assumes and agrees to
pay, perform and discharge, upon the terms and subject to the conditions of this
Agreement, and further subject to the qualifications and limitations herein
provided, all liabilities and obligations of the Asset Sellers as of the
Closing, other than Excluded Liabilities, to the extent they are attributable to
the Compression Services Business as conveyed to Buyer on the Closing Date
pursuant to this Agreement, including but not limited to, the following:
(u) all debts, obligations and liabilities, including, without
limitation, liabilities arising under or relating to Environmental Laws (as
defined in Section 2.17), to the extent attributable to the ownership or
operation of the Compression Services Business after the Closing or the
sale of any products after the Closing (other than as a result of any
breach by any Asset Seller of any of its obligations to Buyer pursuant to
this Agreement);
(v) all obligations under the contracts, commitments and agreements
transferred pursuant to Section 1.2(g) (other than obligations resulting
from a breach by the Asset Sellers of any of their obligations to Buyer
pursuant to this Agreement) and all obligations under returns or warranty
claims made after the Closing Date relating the Compression Services
Business;
(w) all liabilities and obligations for post-Closing returns of
Compression Services Business products sold prior to or after the Closing;
(x) all liabilities and obligations under the licenses, permits or
franchises included in the Assets pursuant to Section 1.2(h);
(y) all liabilities and obligations in respect of employees and
employee benefits to the extent Buyer expressly assumes responsibility
pursuant to Sections 6.6 and 6.7 hereof;
(z) all liabilities and obligations for any Taxes and expenses to the
extent Buyer expressly assumes responsibility pursuant to Sections 6.4 and
6.5 hereof;
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(aa) all liabilities for product liability claims with respect to or
relating to occurrences after the Closing with respect to the operation of
the Compression Services Business; and
(bb) any other liability or obligation not referred to in the
foregoing provisions of this Section 1.5 that is required to be included or
reflected in the Closing Statement referred to in Section 1.11.
The liabilities and obligations assumed by Buyer in accordance with
this Section 1.5 are sometimes hereinafter referred to as the "Assumed
Liabilities".
1.6. Excluded Liabilities. It is expressly understood and agreed that,
notwithstanding anything to the contrary in this Agreement, Assumed Liabilities
shall not include the following (collectively, the "Excluded Liabilities"):
(cc) except to the extent expressly assumed pursuant to the provisions
of Sections 1.5(a) through 1.5(h), inclusive, all debts, liabilities or
obligations of the Asset Sellers to the extent they are attributable to the
Asset Sellers' business other than the Compression Services Business as
conveyed to Buyer on the Closing Date pursuant to this Agreement;
(dd) all liabilities or obligations of any Asset Seller in the nature
of Indebtedness, including any obligation or liability under any contract
or agreement relating to the same; as used in this Agreement,
"Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments (or reimbursement obligations with respect thereto), other than
letters of credit incurred by such Person in the Ordinary Course of
Business, (iii) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services, other than trade payables
and accrued expenses incurred in the Ordinary Course of Business, (iv) all
capitalized lease obligations of such Person, and (v) any guarantees of any
of the foregoing (for the purposes of this Agreement, "Person" means any
person or entity, including any individual (in such individual's own
capacity or as trustee, executor, administrator or other legal
representative), sole proprietorship, corporation, limited liability
company, general partnership, limited partnership, trust, unincorporated
organization, syndicate, business association, firm, joint venture,
governmental agency or authority or any similar entity);
(ee) all liabilities and obligations in respect of employees and
employee benefits not expressly assumed by Buyer pursuant to Sections 6.6
and 6.7 hereof;
(ff) all obligations with respect to intercompany receivables, notes
or loans between any of the Transferred Subsidiaries, on the one hand, and
Seller or any of its other subsidiaries (excluding Transferred
Subsidiaries) or affiliates, on the other hand, except as listed in Section
1.6(d) of the Disclosure Schedule and except for trade payables or
receivables relating to the provision of goods or services to or by the
Compression Services Business in the Ordinary Course of Business;
(gg) all liabilities arising out of or relating to the Excluded
Assets;
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(hh) except as otherwise expressly provided herein and except for
Taxes arising out of the ownership of the Assets with respect to Post-
Closing Tax Periods (it being agreed that any such allocation of Taxes to a
Post-Closing Tax Period be made on the same basis as in Sections 6.4 and
6.5), all liabilities and obligations for Taxes of the Asset Sellers in any
jurisdiction for all Tax Periods;
(ii) all liabilities for product liability claims with respect to or
relating to occurrences prior to the Closing with respect to the operation
of the Compression Services Business;
(jj) all liabilities and obligations for which Seller has expressly
assumed responsibility pursuant to this Agreement;
(kk) all liabilities of Seller and the Subsidiaries with respect to
the actions listed on Section 1.6(i) of the Disclosure Schedule; and
(ll) liabilities and obligations under (i) Deferred Items (as defined
in Section 1.10(a)) to the extent Seller does not obtain the consents and
waivers necessary to assign, transfer or sublicense such Deferred Items to
Buyer and Seller does not provide Buyer the benefits of the Deferred Items
pursuant to Section 1.10(a) hereof and (ii) Seller Deferred Items (as
defined in Section 1.10(b)).
1.7. Consideration. Regardless of whether the transfer of any Assets
or Subsidiary Interests has been deferred pursuant to the provisions of Section
1.10 or any analogous provision of any related agreement, in consideration for
the sale and transfer of the Assets and the Subsidiary Interests, and subject to
the terms and conditions set forth in this Agreement, in reliance on the
representations, warranties, covenants and agreements of the parties contained
herein and in consideration of the sale, assignment and transfer of the
Subsidiary Interests and the Assets, Buyer will pay on the Closing Date, ninety-
five million dollars ($95,000,000) in cash to Seller (the "Cash Purchase Price")
and ninety-five million dollars ($95,000,000) in shares of Common Stock, par
value $.001 per share, of Hanover ("Hanover Stock") to Seller or its designee
(the "Stock Purchase Price", together with the Cash Purchase Price, each as
adjusted pursuant to the provisions of this Agreement, the "Purchase Price").
The number of shares of Hanover Stock to which Seller shall be entitled on the
Closing Date shall be as follows: (i) if the Average Closing Price is equal to
or less than $30, a number of shares equal to the quotient of the Stock Purchase
Price divided by $30; (ii) if the Average Closing Price is greater than $30 and
equal to or less than $40, a number of shares equal to the quotient of the Stock
Purchase Price divided by the Average Closing Price; (iii) if the Average
Closing Price is greater than $40 and equal to or less than $50, a number of
shares equal to the quotient of the Stock Purchase Price divided by $40; and
(iv) if the Average Closing Price is greater than $50, a number of shares equal
to the quotient of (x) the product of (A) the Stock Purchase Price multiplied by
(B) 1.25 divided by (y) the Average Closing Price. The "Average Closing Price"
shall mean the average of the closing prices of one share of Hanover Stock on
the New York Stock Exchange as reported in The Wall Street Journal for the most
recent thirty (30) days prior to the Closing Date on which the New York Stock
Exchange is open and available for at least five (5) hours for the trading of
securities.
13
1.8. The Closing. Unless this Agreement shall have been terminated and
the transactions contemplated herein shall have been abandoned pursuant to
Article VII, subject to Articles IV and V, the closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at the offices of
Xxxxxxx Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 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 Seller and Buyer.
(a) Deliveries by Seller. At or prior to the Closing, Seller shall
deliver or cause to be delivered to Buyer the following:
(i) such assignments and other instruments and documents as
shall be effective to vest in Buyer on the Closing Date, good and
marketable title to the Subsidiary Interests, subject, in each case, to
no Encumbrances other than such as may be created by or on behalf of
Buyer or as described in Section 1.2 of the Disclosure Schedule;
(ii) bills of sale and such other instruments as are required to
transfer the Assets to Buyer or to evidence such transfer on the public
records pursuant to Section 1.4;
(iii) executed counterparts of the Transition Services
Agreements;
(iv) resignations from each of the directors and officers of the
Transferred Subsidiaries that Buyer requests at least ten calendar days
prior to the Closing Date;
(v) executed counterparts of a registration rights agreement
("Registration Rights Agreement") between Hanover and Parent (as
designee of Seller) relating to the registration rights of Parent with
respect to the Hanover Stock, a form of which is attached as Exhibit E;
(vi) an opinion of counsel to Seller and Parent in form and
substance reasonably satisfactory to Buyer; and
(vii) all other previously undelivered documents required by
this Agreement to delivered by Seller to Buyer at or prior to the
Closing Date in connection with the transactions contemplated hereby.
(b) Deliveries by Buyer. At or prior to the Closing Date, Buyer shall
deliver or cause to be delivered to or for the benefit of Seller the
following:
(i) the amount in cash specified in Section 1.7, by wire
transfer of immediately available funds to an account or accounts
designated by Seller in writing at least two business days prior to the
Closing Date;
(ii) executed counterparts of the Transition Services
Agreements;
14
(iii) an opinion of counsel to Buyer and Hanover in form and
substance satisfactory to Seller; and
(iv) all other previously undelivered documents required by this
Agreement to be delivered by Buyer to Seller at or prior to the Closing
Date in connection with the transactions contemplated hereby.
(c) Deliveries by Hanover. At or prior to the Closing Date, Hanover
shall deliver to Parent (i) an executed copy of the Registration Rights
Agreement and (ii) certificates evidencing the Hanover Stock.
(d) All instruments and documents executed and delivered to Buyer
pursuant hereto shall be in form and substance, and shall be executed in a
manner, reasonably satisfactory to Buyer. All instruments and documents
executed and delivered to Seller or any of its affiliates pursuant hereto
shall be in form and substance, and shall be executed in a manner,
reasonably satisfactory to Seller.
1.9. Purchase Price Allocation. Seller shall prepare a schedule which
will set forth an allocation of the Purchase Price to each of the Subsidiary
Interests and the aggregate amount of the Assets which will be transferred
pursuant to this Agreement, and Seller and Buyer shall then cooperate in good
faith to revise such schedule to reflect each other's comments on or prior to
the Closing. If the parties are unable to agree upon an allocation prior to the
Closing, the parties shall continue to cooperate in the preparation of, and use
their reasonable best efforts to agree upon, the allocation, provided that any
material issues with respect to the allocation which have not been finally
resolved within 30 days following the Closing shall be referred for resolution
to Ernst & Young LLP or another internationally recognized firm of independent
public accountants as to which Seller and Buyer mutually agree (the "CPA Firm"),
whose determination shall be final and binding upon the parties. The costs of
such CPA Firm shall be shared equally by the parties. As soon as practicable
following the Closing, but in no event later than 90 days prior to the date on
which Internal Revenue Service Form 8594 and, if applicable, Form 8023 (or any
similar forms required by any foreign jurisdiction) is due, Buyer will prepare
an allocation schedule (the "Allocation Schedule") of the Purchase Price and
Assumed Liabilities among the Assets (including classes of assets) and
Subsidiary Interests along with the first draft of Internal Revenue Service Form
8594 and, if applicable, Form 8023 (and any similar forms required by any
foreign jurisdiction). Within thirty (30) days after the receipt of such
Allocation Schedule and Form 8594 and, if applicable, Form 8023 (and similar
forms), Seller shall propose any changes to such Allocation Schedule and Form
8594 and, if applicable, Form 8023 (and similar forms) or shall be deemed to be
in concurrence therewith, which concurrence shall not be unreasonably withheld.
Any subsequent adjustments to the Purchase Price shall be reflected in the
Allocation Schedule in a manner consistent with Section 1060 of the Code or, if
applicable, Section 338 of the Code and the Treasury Regulations and Buyer shall
deliver any changes to the Allocation Schedule to Seller within twenty (20) days
after such changes are made. Seller and Buyer shall endeavor in good faith to
resolve any differences with respect to the Allocation Schedule and Form 8594
and, if applicable, Form 8023 (and similar forms). Seller and Buyer agree to act
in accordance with the computations and allocations contained in the Allocation
Schedule, after giving effect to the foregoing procedures, in any relevant Tax
Returns or filings (including, but not limited to, any forms or reports required
to be filed pursuant to Section 1060
15
of the Code and, if applicable, Section 338 of the Code, the Treasury
Regulations or any provisions of local, state and foreign law) and shall not
take any position contrary thereto unless required to do so pursuant to a
determination (as defined in Section 1313(a) of the Code or any similar
provision of state, local or foreign law), and shall cooperate in the
preparation of any such forms or reports and to file such forms or reports in
the manner required by applicable law.
1.10. Deferred Transfers. (a) Notwithstanding anything to the
contrary contained in this Agreement, to the extent that the sale, assignment,
transfer, conveyance or delivery or attempted sale, assignment, transfer,
conveyance or delivery to Buyer of any Asset or Subsidiary Interest is
prohibited by any applicable federal, national, state, provincial, municipal,
foreign or local law, statute, ordinance, act, rule, regulation, governmental
requirement, directive, decision, order, judgment or decree of any kind in any
country ("Law") or would require any governmental or third-party authorizations,
approvals, consents or waivers (each, an "Approval") and such Approvals shall
not have been obtained prior to the Closing, this Agreement shall not constitute
a sale, assignment, transfer, conveyance or delivery, or any attempted sale,
assignment, transfer, conveyance or delivery, thereof. Following the Closing,
Seller shall use its, and shall cause the Subsidiary Asset Sellers to use their,
reasonable efforts to obtain promptly such Approvals; provided, however, that no
Asset Seller shall be required to pay any consideration therefor, other than
filing, recordation or similar fees payable to any domestic or foreign
government or governmental authority. Pending such Approval, (i) the parties
shall cooperate with each other in any reasonable and lawful arrangements
designed to provide to Buyer the benefits of such Asset or Subsidiary Interest
not sold, assigned, transferred, conveyed or delivered at the Closing (each, a
"Deferred Item") and (ii) Seller shall, or shall cause the applicable Subsidiary
Asset Seller to, enforce, at the reasonable request of Buyer for the account of
Buyer, any rights of the applicable Asset Seller arising from such Deferred
Item. Once such Approval for the sale, assignment, transfer, conveyance or
delivery of a Deferred Item is obtained, Seller shall, or shall cause the
applicable Subsidiary Asset Seller to, promptly assign, transfer, convey and
deliver, or cause to be assigned, transferred, conveyed and delivered, such
Deferred Item to Buyer for no additional consideration. To the extent that any
such Deferred Item cannot be transferred or the full benefits and liabilities of
use of any such Deferred Item cannot be provided to Buyer following the Closing
pursuant to this Section 1.10(a), then Buyer and Seller shall enter into such
arrangements (including subleasing or contracting if permitted) to provide to
Buyer the economic (taking into account Tax costs and benefits) and operational
equivalent of obtaining such Approval and the performance by Buyer of the
obligations thereunder. Nothing in this Section 1.10(a) shall affect Buyer's
rights pursuant to Sections 5.7 and 7.1(b) hereof or its rights to
indemnification pursuant to Section 8.1 hereof.
(b) Notwithstanding anything to the contrary contained in this
Agreement, to the extent that the sale, assignment, transfer, conveyance or
delivery or attempted sale, assignment, transfer, conveyance or delivery to
Seller of any Excluded Assets on the books of any Transferred Subsidiary
(including, without limitation, the Contract For the Purchase of Gas
Compressors and Gas Compression Services between Corpoven, S.A. and
Southwest Industries, Inc., Venezuelan Branch, dated June 1995) or the
assumption by Seller of any Excluded Liabilities on the books of any
Transferred Subsidiary is prohibited by any applicable Law or would require
any Approval and such Approvals shall not have been obtained prior to the
Closing, this Agreement shall not constitute a sale, assignment, transfer,
conveyance, delivery or assumption, or any attempted sale, assignment,
transfer, conveyance, delivery or assumption,
16
thereof. Following the Closing, Buyer and Hanover shall use their, and
shall cause their subsidiaries to use their, reasonable efforts to obtain
promptly such Approvals; provided, however, that none of Hanover or any of
its subsidiaries shall be required to pay any consideration therefor, other
than filing, recordation or similar fees payable to any domestic or foreign
government or governmental authority. Pending such Approval, (i) the
parties shall cooperate with each other in any reasonable and lawful
arrangements designed to allocate to Seller the benefits and burdens of
such asset or liability not sold, assigned, transferred, conveyed or
delivered prior to the Closing (each, a "Seller Deferred Item") and (ii)
Buyer and Hanover shall, or shall cause their subsidiaries to, enforce, at
the reasonable request of Seller for the account of Seller, any rights of
Hanover and its subsidiaries arising from such Seller Deferred Item. Once
such Approval for the sale, assignment, transfer, conveyance, delivery or
assumption of a Seller Deferred Item is obtained, Hanover and Buyer shall,
or shall cause their applicable subsidiary to, promptly assign, transfer,
convey and deliver, or cause to be assigned, transferred, conveyed and
delivered, such Seller Deferred Item to Seller for no consideration and
Seller shall, or shall cause one of its subsidiaries to, effect the
assumption of any Seller Deferred Items constituting an obligation. To the
extent that any such Seller Deferred Item cannot be transferred or the full
benefits and liabilities of use of any such Seller Deferred Item cannot be
provided to Seller following the Closing pursuant to this Section 1.10(b),
then Buyer and Seller shall enter into such arrangements (including
subleasing or contracting if permitted) to provide to Seller the economic
(taking into account Tax costs and benefits) and operational equivalent of
obtaining such Approval and the performance by Seller of the obligations
thereunder. Nothing in this Section 1.10(b) shall affect Buyer's or
Seller's rights to indemnification pursuant to Section 8.1 hereof.
1.11. Purchase Price Adjustment. (a) Within seventy-five (75) days
after the Closing Date, PricewaterhouseCoopers LLP, on behalf of Seller, will
prepare, or cause to be prepared, a statement of net assets (the "Closing
Statement") containing a calculation of the net assets of the Compression
Services Business as of the Closing Date (the "Net Assets Amount"). For the
purposes of the calculation referred to in the immediately preceding sentence,
the net assets of the Compression Services Business shall include, among other
things, cash and marketable securities in the Transferred Subsidiaries, but
shall not include amounts due to and from Seller and its affiliates other than
as a result of trade receivables and trade payables. Buyer will assist and
cooperate with Seller in the preparation of the Closing Statement, including by
providing Seller and its accountants access to the books and records relating to
the Compression Services Business and to any other information necessary to
prepare the Closing Statement. The Closing Statement shall be prepared in
conformity with GAAP (as defined in Section 2.5), applied on a basis consistent
with the 1999 Statement of Net Assets (as defined in Section 2.5).
(b) Buyer shall, within forty-five (45) days after the delivery by
Seller of the Closing Statement and calculation of the Net Assets Amount,
complete its review of the Closing Statement and the calculation of such
Net Assets Amount. In the event that Buyer determines that the Net Assets
Amount has not been determined on a basis consistent with the requirements
of Section 1.11(a), Buyer shall inform Seller in writing (the "Objection"),
setting forth a specific description of the basis of the Objection, the
adjustments to the Net Assets Amount which Buyer believes should be made,
and Buyer's calculation of the Net Assets Amount on or before the last day
of such 45-day period and Buyer shall be deemed to have accepted any items
not disputed in the Objection. Failure to so notify Seller shall constitute
acceptance and approval of Seller's
17
calculation of the Net Assets Amount. Seller shall then have 30 days from
the date it receives the Objection to review and respond to the Objection.
If the Net Assets Amount calculated by Buyer and the Net Assets Amount
calculated by Seller are both less than sixty-nine million eight hundred
eighty-three thousand dollars ($69,883,000) (the "Base Amount"), Seller
shall pay an amount equal to the sum of (x) the amount of the deficiency
between the Base Amount and the Net Assets Amount calculated by Seller plus
(y) interest computed at the rate declared from time to time by The Chase
Manhattan Bank as its "prime rate" (the "Prime Rate") for the period from
the Closing Date to the date of such payment on the deficiency amount, in
immediately available funds or, at the option of Seller, by paying 50% of
such deficiency amount in immediately available funds and 50% of such
deficiency amount by delivering shares of Hanover Stock to Buyer with an
aggregate value (based on the value used in the determination of the Stock
Purchase Price pursuant to Section 1.7) equal to 50% of such deficiency
amount within 3 business days of Seller's receipt of Buyer's Objection. If
the Net Assets Amount calculated by Buyer and the Net Assets Amount
calculated by Seller are both greater than the Base Amount, Buyer shall pay
an amount equal to the sum of (1) the amount of the excess of the Net
Assets Amount calculated by Buyer over the Base Amount plus (2) interest
computed at the Prime Rate for the period from the Closing Date to the date
of such payment on the excess amount, in immediately available funds to
Seller within 3 business days of Seller's receipt of Buyer's Objection.
Seller shall then have 30 days from the date it receives the Objection to
review and respond to the Objection. If Seller and Buyer are unable to
resolve all of their disagreements with respect to the determination of the
foregoing items within 30 days following the completion of Seller's review
of the Objection, after having used their good faith efforts to reach a
resolution, they shall refer their remaining differences to the CPA Firm,
who shall, acting as experts in accounting and not as arbitrators,
determine on a basis consistent with the requirements of Section 1.11(a),
and only with respect to the specific remaining accounting related
differences so submitted, whether and to what extent, if any, the Net
Assets Amount requires adjustment. Seller and Buyer 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 Seller
and Buyer. Seller and Buyer shall make reasonably available to the CPA Firm
all relevant books and records, any work papers (including those of the
parties' respective accountants) and supporting documentation relating to
the Closing Statement, the calculation of the Net Assets Amount and all
other items reasonably requested by the CPA Firm. The applicable Net Assets
Amount (the "Final Net Assets Amount") shall ultimately be equal to (i) the
Net Assets Amount in the event that (x) no Objection is delivered to Seller
during the 45-day period specified above, or (y) Seller and Buyer so agree,
(ii) the applicable Net Assets Amount, adjusted in accordance with the
Objection in the event that Seller does not respond to the Objection within
the 30-day period following receipt by Seller of the Objection, or (iii)
the applicable Net Assets Amount, as adjusted by either (x) the agreement
of Seller and Buyer or (y) the CPA Firm. All fees and disbursements of the
CPA Firm, if any, shall be shared equally by Seller and Buyer.
(c) If the Final Net Assets Amount is less than the Base Amount,
Seller shall pay an amount equal to the difference of (x) the amount of
such deficiency minus (y) any amounts paid by Seller to Buyer pursuant to
Section 1.11(b)(x) (such difference, the "Remaining Deficiency Amount"),
plus (z) interest computed at the Prime Rate for the period from the
Closing Date to the date of such payment on the Remaining Deficiency
Amount, in immediately available funds or, at the option of Seller, by
paying 50% of such Remaining Deficiency Amount
18
in immediately available funds and 50% of such Remaining Deficiency Amount
by delivering shares of Hanover Stock to Buyer with an aggregate value
(based on the value used in the determination of the Stock Purchase Price
pursuant to Section 1.7) equal to such 50% of the Remaining Deficiency
Amount within 3 business days after the ultimate determination of the Final
Net Assets Amount as provided in this Section 1.11. If the Final Net Assets
Amount is greater than the Base Amount, Buyer shall pay an amount equal to
the difference of (1) the amount of such excess minus (2) any amounts paid
by Buyer to Seller pursuant to Section 1.11(b)(1) (such difference, the
"Remaining Excess Amount"), plus (3) interest computed at the Prime Rate
for the period from the Closing Date to the date of such payment on the
Remaining Excess Amount, in immediately available funds to Seller within 3
business days after the ultimate determination of the Final Net Assets
Amount as provided in this Section 1.11.
(rr) Any amount paid pursuant to this Section 1.11 shall be deemed to
be an adjustment to the Purchase Price.
1.12. Further Assurances. 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 (including, without limitation, the
transactions contemplated by Section 1.10) and to vest in Buyer good and valid
title to the Subsidiary Interests and the Assets.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller, on behalf of itself and the Subsidiaries, including, without
limitation, the Transferred Subsidiaries and the Asset Sellers, hereby
represents and warrants to Buyer as follows:
2.1. Organization. Seller is a general partnership duly formed,
validly existing and in good standing under the laws of the State of New York.
Seller has all requisite partnership power and authority to own its assets and
to carry on the Compression Services Business as now being conducted by it and
is duly qualified or licensed to conduct the Compression Services Business and
is in good standing in the jurisdictions in which the ownership of its property
or the conduct of the Compression Services Business requires such qualification
or license, except jurisdictions in which the failure to be so qualified or
licensed would not, individually or in the aggregate, have a material adverse
effect on the results of operations, assets, financial condition or business of
the Compression Services Business taken as a whole (hereinafter referred to as a
"Material Adverse Effect"). Except as set forth in Section 2.1 of the Disclosure
Schedule, with respect to the Compression Services Business, Seller does not own
or have any option or right to acquire, directly or indirectly, any capital
stock or other equity securities of, or have any direct or indirect equity or
ownership interest or debt investment in, any corporation, association,
partnership, joint venture or other business.
19
2.2. Subsidiaries. Section 2.2 of the Disclosure Schedule sets forth
for each Subsidiary (i) its structure (i.e., corporation, partnership, limited
liability company, etc.), name and jurisdiction of incorporation, formation or
organization, as applicable, and (ii) the number of issued and outstanding
shares of each class of its capital stock or other 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. 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 the Compression Services Business as
now being conducted by it, 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, individually or in the aggregate, have a
Material Adverse Effect. All the outstanding shares of capital stock or other
equity interests of the Transferred Subsidiaries are duly authorized and validly
issued and outstanding, fully paid and nonassessable (where applicable) and
owned by the persons set forth in Section 2.2 of the Disclosure Schedule. Except
as set forth in Section 2.2 of the Disclosure Schedule, there are no options,
warrants, calls, commitments, agreements, contracts, understandings,
restrictions, arrangements or rights of any character with respect to the
securities of the Transferred Subsidiaries or the issuance of additional
securities of the Subsidiaries. Complete and correct copies of the charter
documents (or equivalent organizational documents) and all amendments thereto
and the minute books of each of the Transferred Subsidiaries have been made
available to Buyer on or prior to the date of this Agreement.
2.3. Ownership of Interests. Good title to the Subsidiary Interests is
owned of record and beneficially solely by Seller or a Subsidiary, free and
clear of all Encumbrances, other than certain nominee shares (the "Nominee
Shares"), as to which Seller and the Subsidiaries have the requisite contractual
authority to convey good title to Buyer as set forth in Section 2.2 of the
Disclosure Schedule, and other than as otherwise set forth in Section 2.2 of the
Disclosure Schedule. Subject only to recording on the books of the respective
Transferred Subsidiaries (for which there is no material impediment), the
transfer of the Subsidiary Interests to Buyer at Closing will vest in Buyer good
title to the Subsidiary Interests, free and clear of all Encumbrances, except
for any Encumbrances resulting from any action taken by or on behalf of Buyer or
as otherwise set forth in Section 2.2 of the Disclosure Schedule.
2.4. Authorization, Etc. Seller has full partnership power and
authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby to be carried out by it, and Seller and each
Subsidiary has full power and authority to execute and deliver any other
agreements or instruments contemplated hereby (to the extent such entity is a
party thereto) and to carry out the transactions contemplated thereby to be
carried out by it. This Agreement has been duly and validly executed by Seller
and, assuming this Agreement constitutes the legal, valid and binding agreement
of Buyer, constitutes a legal, valid and binding agreement of Seller,
enforceable against Seller 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. When executed and
delivered as provided in this Agreement, each other agreement and
20
instrument contemplated hereby to be executed by Seller or any Subsidiary will
be a valid and legally binding obligation of Seller or such Subsidiary (to the
extent a party thereto) enforceable against Seller or such Subsidiary 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. Seller has made available to Buyer the
unaudited pro forma Statement of Net Assets of the Compression Services Business
at December 31, 1999 (the "1999 Statement of Net Assets") and the related
unaudited pro forma statement of income for the twelve-month period then ended.
Except as set forth in Section 2.5 of the Disclosure Schedule, all the foregoing
financial statements have been prepared from the books and records of Seller and
its affiliates in conformity with accounting principles generally accepted in
the United States of America ("GAAP"), as in effect during the period indicated.
Except as set forth in Section 2.5 of the Disclosure Schedule, the foregoing
income statement presents fairly in all material respects the unaudited pro
forma results of operations of the Compression Services Business for the period
covered, and the 1999 Statement of Net Assets presents fairly in all material
respects the unaudited pro forma financial condition of the Compression Services
Business as of the date thereof, in each case in conformity with GAAP (except as
stated above).
2.6. Absence of Undisclosed Liabilities. There are no liabilities of
any kind whatsoever (whether absolute, accrued, contingent or otherwise, and
whether due or to become due) that are required to be reflected in, or disclosed
in the notes to, an unaudited pro forma Statement of Net Assets of the
Compression Services Business prepared in conformity with GAAP, other than
liabilities and obligations (i) reflected in the 1999 Statement of Net Assets
(or disclosed in the notes thereto), (ii) arising after December 31, 1999, in
the Ordinary Course of Business or (iii) disclosed in Section 2.6 of the
Disclosure Schedule.
2.7. No Approvals or Conflicts. Except as set forth in Section 2.7 of
the Disclosure Schedule, the execution, delivery and performance by Seller of
this Agreement and the consummation by Seller and the Subsidiaries of the
transactions contemplated hereby will not (i) violate, conflict with or result
in a breach by Seller or any Subsidiary of any provision of the organizational
documents or the charter (or equivalent) document of Seller or any Subsidiary,
(ii) violate, conflict with or result in a breach of any provision of, or
constitute a default by Seller or any 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 lien, security interest, charge or encumbrance upon any of
the properties of any Seller or any Subsidiary included in the Assets or the
Compression Services Business or on the Subsidiary Interests under, any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit, lease,
contract, agreement or other instrument to which Seller, any Transferred
Subsidiary or any of their respective properties may be bound, (iii) violate or
result in a breach of any order, injunction, judgment, ruling, law or regulation
of any court or governmental authority applicable to 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 as otherwise set forth in Section 2.7 of the Disclosure Schedule,
require any order, consent, approval or authorization of, or notice to, or
declaration,
21
filing, application, qualification or registration with, any governmental or
regulatory authority, except, with respect to the foregoing clauses (ii), (iii)
and (iv) above as they apply to matters that are not, individually or in the
aggregate, material to the conduct of the Compression Services Business, as
would not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of Seller or the Subsidiaries to
consummate the transactions contemplated by this Agreement.
2.8. Compliance with Law; Governmental Authorizations. Except as set
forth in Section 2.8 of the Disclosure Schedule, the Compression Services
Business is not in violation in any material respect of any order, injunction,
judgment, ruling, law or regulation of any court or governmental authority
applicable to the Assets or the Compression Services Business. Seller and the
Subsidiaries have all licenses, permits and other governmental authorizations
necessary to conduct the Compression Services Business as currently conducted
(all of which are valid and in full force and effect), except where the failure
to have such licenses, permits and other governmental authorizations would not
reasonably be expected to have a Material Adverse Effect.
2.9. Litigation. Except as set forth in Section 2.9 of the Disclosure
Schedule, as of the date hereof, there are no suits, actions, proceedings or
investigations pending or, to the knowledge of Seller, threatened against Seller
or any of the Subsidiaries relating to the Compression Services Business or the
transactions contemplated by this Agreement before any arbitrator, court or
governmental or regulatory authority or body, which, if decided unfavorably to
Seller or such Subsidiary, would have a Material Adverse Effect or a material
adverse effect on the ability of Seller or such Subsidiary to consummate the
transactions contemplated by this Agreement. Except as set forth in Section 2.9
of the Disclosure Schedule, neither Seller nor, to the knowledge of Seller, any
other Asset Seller has received any notice that Seller or any of the other Asset
Sellers or any of the Assets is subject to any decree, order or judgment which
would reasonably be expected to have a Material Adverse Effect or a material
adverse effect on the ability of Seller or such other Asset Seller to consummate
the transactions contemplated by this Agreement. Except as set forth on Schedule
2.9 of the Disclosure Schedule, to the knowledge of Seller, as of the date
hereof, no Asset Seller is a plaintiff in any suit, action or proceeding. For
the purposes of this Agreement, references to the "Seller's knowledge" or the
"knowledge" of Seller or words of similar import shall mean actual knowledge
after reasonable inquiry of Xxxxx X. Xxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxxx, Xxxxx
Xxxxxxxx, Xxxxxx X. Xxxxxx, Xxxxx Xxxxxxxxx, Xxxxxx Xxxx and Xxxxx Xxxxxx.
2.10. Personal Property Assets. Except as set forth in Section 2.10 of
the Disclosure Schedule, on December 31, 1999, the Asset Sellers and the
Transferred Subsidiaries had and, except with respect to personal property
assets disposed of or acquired in the Ordinary Course of Business since such
date, the Asset Sellers and the Transferred Subsidiaries now have, good and
valid title to, or hold by valid and existing lease or license, all the personal
property assets reflected as assets of the Compression Services Business on the
1999 Statement of Net Assets or which would have been reflected on the 1999
Statement of Net Assets if acquired prior to such date, free and clear of all
Encumbrances of any nature except for: (i) Encumbrances which secure
indebtedness or obligations which are properly reflected on the 1999 Statement
of Net Assets; (ii) liens for Taxes not yet payable or being contested in good
faith; (iii) liens arising as a matter of law in the Ordinary Course of
Business, provided that the obligations secured by
22
such liens are not delinquent or are being contested in good faith; and (iv)
such imperfections of title and Encumbrances which, individually or in the
aggregate, would not have a Material Adverse Effect (clauses (i) through (iv),
collectively, "Permitted Encumbrances"). Except as set forth in Section 2.10 of
the Disclosure Schedule, the Asset Sellers and the Transferred Subsidiaries
own, or have valid leasehold interests in, all material tangible personal
property assets necessary for the operation or conduct of the Compression
Services Business as currently conducted and all such assets are in reasonably
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 provided herein, since December 31,
1999, (i) the Compression Services Business has been conducted only in the
Ordinary Course of Business in all material respects, and (ii) the Compression
Services Business has not suffered 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 provided herein, since December 31, 1999,
with respect to the Compression Services Business there has not been:
(a) any damage, destruction or loss (whether or not covered by
insurance) materially affecting the Compression Services Business or the
Assets;
(b) any option, subscription, issuance, warrant, call, commitment or
agreement of any character granted or made by any Transferred Subsidiary 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 Transferred Subsidiary, or any
direct or indirect redemption, purchase or other acquisition of any shares
of capital stock or other equity interests of any Transferred Subsidiary;
(d) any strikes, work stoppages or other material labor disputes
involving employees of the Transferred Subsidiaries;
(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 Seller or any Transferred Subsidiary under
any Material Contract or any new Material Contract;
(f) any sale, transfer or other disposition of assets of the
Compression Services Business having an aggregate value exceeding one
million dollars ($1,000,000), excluding sales of assets in the Ordinary
Course of Business;
(g) any (i) general increase in the compensation of employees of the
Transferred Subsidiaries other than in the Ordinary Course of Business,
(ii) increase in any compensation payable to any officer or other member of
senior management of the Transferred Subsidiaries, whether or not in the
Ordinary Course of Business or (iii) loan or commitment therefor made by
any Transferred Subsidiary to any officer or other member of senior
management of the Transferred Subsidiaries or to Seller or any of its
officers, directors or affiliates;
23
(h) any material change in the accounting methods or practices
followed by any Transferred Subsidiary (other than such as have been
required by applicable law or GAAP); or
(i) any agreement or commitment by or on behalf of Seller, any
Transferred Subsidiary or the Compression Services Business to do any of the
foregoing.
2.12. Tax Matters. (a) For purposes of this Agreement, the following
meanings:
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Post-Closing Tax Period" shall mean any Tax period beginning after
the Closing Date and that portion of any Straddle Period beginning after
the Closing Date.
"Pre-Closing Tax Period" shall mean any Tax period ending on or before
the Closing Date and that portion of any Straddle Period ending on the
Closing Date.
Straddle Period" shall mean any taxable period that includes (but does
not end on) the Closing Date.
"Tax" or "Taxes" shall mean 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, transfer,
occupation, premium, 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 Taxing Authority, domestic or foreign.
"Taxing Authority" shall mean, with respect to any Tax, the government
entity (including any quasi-governmental body exercising any taxing
authority) 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, (including information return),
report notice, form, declaration, claim for refund, estimate, election or
information statement or other document relating to any Tax required to be
filed with any Taxing 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.
(b) Except as set forth in Section 2.12 of the Disclosure Schedule:
(i) All Income Tax Returns and all other material Tax Returns
required to be filed by or on behalf of each Transferred Subsidiary have
been or shall be timely filed with the appropriate Taxing Authority
(subject to permitted extensions applicable to such filing) and all such
Tax Returns are complete and
24
accurate in all material respects, and all Income Taxes and all other
material Taxes (whether or not shown as due on such Tax Returns) have
been or shall be timely paid within the prescribed period or any
extension thereof other than Taxes (x) that are being contested in good
faith and which are set forth on Section 2.12 of the Disclosure
Schedule, or (y) for which a reserve (other than any reserve for
deferred Taxes established to reflect timing differences between book
and Tax income) will be provided in the Closing Statement.
(ii) No claim for unpaid Taxes has become a lien against the
Assets of any Asset Seller or any Transferred Subsidiary or is being
asserted against any Asset Seller or any Transferred Subsidiary except
for liens for Taxes not yet due and payable.
(iii) None of the Assets of any Asset Seller or any Transferred
Subsidiary is asset or property that is or will be required to be
treated as described in Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended and as in effect immediately before the enactment of
the Tax Reform Act of 1986, or tax-exempt use property within the
meaning of Section 168(h)(1) of the Code.
(iv) No deficiencies for Taxes have been claimed, proposed or
assessed by any Taxing Authority against any of the Transferred
Subsidiaries. There are no pending or, to the best of Seller's
knowledge, threatened in writing audits, investigations or claims in
writing for or relating to any liability in respect of Taxes. Section
2.12(b)(iv) of the Disclosure Schedule sets forth for each Transferred
Subsidiary the Income Tax Returns and all other material Tax Returns
which have been audited by the relevant Taxing Authorities for each
period set forth on Section 2.12(b)(iv) of the Disclosure Schedule and
none of the Transferred Subsidiaries has been notified in writing by any
Taxing Authority that it intends to audit any Income Tax return or any
other material Tax Return. No power of attorney has been executed by any
of the Transferred Subsidiaries with respect to any matters relating to
any Income Tax or any other material Tax which is currently in force. No
extension or waiver of a statute of limitations relating to any Income
Tax or any other material Taxes is in effect with respect to any of the
Transferred Subsidiaries. No written claim has been made within the last
three years by a Taxing Authority in a jurisdiction where a Transferred
Subsidiary does not file an Income Tax Return or other material Tax
Return that such Transferred Subsidiary is subject to taxation in that
jurisdiction.
(v) There are no Income Tax sharing, indemnity, allocation or
similar agreements in writing in effect as between any of the
Transferred Subsidiaries (or any predecessors thereof) and any other
Person.
(vi) The Transferred Subsidiaries have properly requested,
received and retained all necessary exemption certificates and other
documentation supporting any claimed exemption or waiver of material
Taxes on sales or other transactions as to which the Transferred
Subsidiaries would have been obligated to collect or withhold material
Taxes.
25
(vii) As of December 31, 1999 and to the Seller's knowledge,
Section of the Disclosure Schedule sets forth with respect to each of
the Transferred Subsidiaries organized in a foreign jurisdiction (A) the
amount of current and accumulated earnings and profits and (B) the
amount of previously taxed income within the meaning of Section 959 of
the Code.
(viii) For tax periods after December 31, 1998, none of the
Transferred has an investment in "United States property" for purposes
of Section 956 of the Code.
(ix) For tax periods after December 31, 1998, each of the
Transferred Subsidiaries organized in a foreign jurisdiction (A) has not
been engaged in a United States trade or business for federal income tax
purposes, (B) has not been a passive foreign investment company within
the meaning of the Code and (C) has not participated in or cooperated
with an international boycott within the meaning of Section 999(b) of
the Code.
(x) None of the Transferred Subsidiaries has been a member of an
affiliated group that has filed a United States federal consolidated Tax
Return or any group that has filed a combined, consolidated, or unitary
foreign, state or local Tax Return.
(xi) None of the Transferred Subsidiaries has filed a consent
pursuant to the collapsible corporation provisions of Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of any asset owned by it.
2.13. Employee Benefits. (a) Section 2.13(b) 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") whether or not subject to the provisions of ERISA), and
each severance, change in control or employment plan, program or agreement, and
incentive, bonus, stock option, stock purchase, and restricted stock plan or
policy sponsored or maintained by Seller and its Subsidiaries, in which present
employees of Seller and any Subsidiaries involved in the Compression Services
Business (all such employees, other than those identified as "Excluded
Employees" on Section 2.13(a) of the Disclosure Schedule, but including all
employees identified as "Additional Employees" on Section 2.13(a) of the
Disclosure Schedule, collectively, the "Business Employees") or former Business
Employees participate (collectively, the "Business Group Plans"). Business Group
Plans which are sponsored or maintained by Seller or any Subsidiary that are
domiciled in the United States of America shall hereinafter be referred to as
"U.S. Business Group Plans" and Business Group Plans which are not U.S. Business
Group Plans shall hereinafter be referred to as "Foreign Business Group Plans".
(b) To the knowledge of Seller, the Business Group Plans are in
compliance with their terms and applicable requirements of ERISA, the Code,
and other applicable laws, except where the failure to so comply would not
have a Material Adverse Effect. Each U.S. Business Group Plan which is
intended to be qualified within the meaning of Section 401 of the
26
Code has received a favorable determination letter as to its qualification,
and to the knowledge of Seller, nothing has occurred that could reasonably
be expected to affect such qualification.
(c) There are no pending or, to the knowledge of Seller, threatened
claims or litigations with respect to any U.S. Business Group Plans, other
than claims for benefits by participants and beneficiaries.
(d) With respect to each Business Group Plan, Seller has made
available to Buyer (to the extent applicable): (i) a complete and accurate
copy of each such plan; and (ii) the most recent copy of its favorable
determination letter.
(e) To the knowledge of Seller, each Foreign Business Group Plan is
and has been established, registered (where required), qualified,
administered, funded (where required) and invested in compliance with the
terms and applicable provisions thereof and all applicable laws, except
where the failure to comply would not have a Material Adverse Effect. To
the knowledge of Seller, no event has occurred with respect to any
registered Foreign Business Group Plan which would result in the revocation
of the registration of such Foreign Business Group Plan, or which would
entitle any person (without the consent of the sponsor of such Foreign
Business Group Plan) to wind up or terminate any such Foreign Business
Group Plan, in whole or in part, or could otherwise reasonably be expected
to have a Material Adverse Effect on the tax status of any such Foreign
Business Group Plan.
(f) To the knowledge of Seller, there are no material going-concern
unfunded actuarial liabilities, past service unfunded liabilities or
solvency deficiencies with respect to any of the Foreign Business Group
Plans, except to the extent permitted by applicable laws. To the knowledge
of Seller, no contribution holidays have been taken under any of the
Foreign Business Group Plans and there have been no withdrawals of assets
or transfers of assets from any Foreign Business Group Plan, except in
accordance with applicable laws.
2.14. Labor Relations. Except as set forth in Section 2.14 of the
Disclosure Schedule, (a) neither Seller nor any Subsidiary is a party to any
collective bargaining agreement applicable to employees of the Compression
Services Business, nor is any such contract or agreement presently being
negotiated; (b) there is no unfair labor practice charge or complaint pending
or, to the knowledge of Seller, threatened against or otherwise affecting any
Transferred Subsidiary or the Compression Services Business which, if adversely
determined, would reasonably be likely to result in a liability having a
Material Adverse Effect; (c) there is no labor strike, slowdown, work stoppage,
or lockout in effect, or, to the knowledge of Seller, threatened against or
otherwise affecting any Transferred Subsidiary or the Compression Services
Business, and no Transferred Subsidiary has experienced any such labor
controversy within the past three years; (d) neither Seller nor any Subsidiary
is a party to, or otherwise bound by, any consent decree with, or citation by,
any governmental authority relating to employees or employment practices of the
Compression Services Business; (e) each Transferred Subsidiary is in compliance
with its obligations pursuant to the Worker Adjustment and Retraining
Notification Act of 1988, as amended ("WARN Act"), and all other notification
and bargaining obligations arising under any collective bargaining agreement,
statute or otherwise; (f) to the knowledge of Seller, there is no effort to
organize employees of the Compression Services Business which is pending or
threatened; (g) to the knowledge of Seller, each Transferred Subsidiary has
complied
27
in all material respects with all laws relating to the hiring or employment of
labor, including those related to wages, hours, collective bargaining,
occupational safety, discrimination, immigration and the payment of social
security and other payroll-related Taxes, and no Transferred Subsidiary has
received any written notice alleging that it has failed to comply with any such
laws, rules or regulations; and (h) to the knowledge of Seller, no Transferred
Subsidiary has laid-off, terminated or instituted any redundancy procedures with
respect to any of its employees at any time within the 12 month period ending on
the Closing Date which could result in a material liability to a Transferred
Subsidiary.
2.15. Patents, Copyrights, Trademarks and Service Marks, Etc. Section
2.15 of the Disclosure Schedule lists all patent, copyright, trademark and
service xxxx registrations or applications owned or held by Seller or any
Subsidiary that are necessary to conduct the Compression Services Business as
currently conducted. Except as would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect or as otherwise set forth in
Section 2.15 of the Disclosure Schedule, to Seller's knowledge, (i) Seller and
the Subsidiaries own all the Intellectual Property necessary to operate the
Compression Services Business in all material respects as currently conducted
("Compression Services Business IP"); (ii) the Compression Services Business IP
does not infringe, and is not being infringed by, the Intellectual Property of
any third party; (iii) no suit, action, proceeding, judgment, order, injunction
or decree is pending or outstanding that challenges the validity of, or any
right of Seller or any Subsidiary to use, any Compression Services Business IP;
and (iv) Seller and the Subsidiaries take reasonable actions to protect and
maintain the Compression Services Business IP.
2.16. Contracts. (a) Section 2.16 of the Disclosure Schedule sets
forth a complete and accurate list of each of the following contracts,
instruments, leases, deeds and agreements relating to the Compression Services
Business to which Seller or any Subsidiary is a party or by which any of them is
bound other than contracts, instruments, leases, deeds and agreements to which
Seller or any Subsidiary are the only parties (collectively, the "Material
Contracts"):
(i) indentures, mortgages, loan agreements, 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 Seller or a Subsidiary, excluding any such
orders or contracts not involving payments to Seller or a Subsidiary
exceeding one million dollars ($1,000,000) in any instance;
(iii) contracts involving the expenditure by Seller or a
Subsidiary of more than five hundred thousand dollars ($500,000) in any
instance for the purchase of material, supplies, equipment or services,
(iv) contracts not otherwise described in this paragraph (a)
that involve the expenditure by Seller or a Subsidiary of more than two
hundred fifty thousand
28
dollars ($250,000), excluding any thereof that are terminable by Seller
or a Subsidiary without penalty on not more than 90 days notice;
(v) guarantees of the obligations of third parties;
(vi) agreements which restrict Seller or a Subsidiary from
competing with any other person or entity or from conducting business in
any geographic area;
(vii) contracts or agreements (other than employment agreements)
with officers or other members of senior management of Seller or a
Subsidiary;
(viii) license agreements (as licensor or licensee) with third
parties (excluding end-user licenses granted to customers of Seller or a
Subsidiary);
(ix) employment agreements with officers or other members of
senior management of Seller or a Subsidiary;
(x) contracts relating to the acquisition of any business
enterprise or the assets thereof;
(xi) contracts relating to both the Compression Services
Business and to other businesses of Seller or a Subsidiary to which any
Asset Seller is a party or by which it is bound and that is required to
be transferred to Buyer to enable Buyer, after giving effect to all of
the transactions contemplated by this Agreement, to conduct the
Compression Services Business as currently conducted (other than as set
forth in Section 1.3(i) of the Disclosure Schedule);
(xii) exclusive distributor, dealer or similar contracts;
(xiii) agreements or contracts of which the primary focus is
indemnification arrangements;
(xiv) any contract with the federal, state or local government
or any agency or thereof;
(xv) commission agreements with any third parties other than
employees and sales agents of any Asset Sellers or Transferred
Subsidiaries; and consulting agreements involving payments in excess of
$100,000 annually.
(b) True and correct copies (or, if oral, written summaries) of each
of the Material Contracts have been made available to Buyer.
(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 Seller or a Subsidiary, as applicable, and (to the
knowledge of Seller) each of the other parties thereto,
29
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 default by (x)
Seller or any Subsidiary party to any Material Contract or (y) to the
knowledge of Seller, any other party to any Material Contract, in each
case, except for defaults which would not reasonably be expected to have a
Material Adverse Effect. Except as set forth in Section 2.16 of the
Disclosure Schedule, as of the date hereof, no party to any Material
Contract has notified any Asset Seller of any dispute with respect to such
Material Contract and, to the Seller's knowledge, all parties to such
Material Contracts have complied in all material respects with the
provisions thereof.
2.17. Environmental Mattersfollowing meanings: (a) For purposes of
this Agreement, the following terms shall have the following meanings:
"Environmental Claim" means any written notice, lien, claim, demand,
action, suit, complaint, or proceeding by any person alleging liability or
potential liability (including, without limitation, liability or potential
liability for investigatory costs, cleanup costs, governmental response
costs, natural resource damages, fines or penalties) under or pursuant to
any Environmental Laws.
"Environmental Laws" means all applicable current foreign, federal,
state and local statutes, regulations, ordinances, orders and decrees
relating to pollution or protection of the environment.
"Hazardous Materials" means all materials defined as "hazardous
substances" or "hazardous wastes," or any other term of similar import
under any Environmental Law.
"Release" shall have the meaning provided in 42 U.S.C. section
9601(22).
(b) Except as set forth in Section 2.17 of the Disclosure Schedule
and except as would not, individually or in the aggregate, have a Material
Adverse Effect:
(i) Each of Seller and the Transferred Subsidiaries is in
compliance with all Environmental Laws;
(ii) Neither Seller nor any Transferred Subsidiary has received
any Environmental Claim or is aware of any threatened Environmental
Claim;
(iii) Neither Seller nor any Transferred Subsidiary has entered
into, has to, or is subject to any decree, order, judgment, lien or
other similar requirement of any governmental authority or quasi-
governmental authority under any Environmental Laws;
(iv) Neither Seller nor any Transferred Subsidiary has Released
or threatened to Release Hazardous Materials into the environment in
violation of
30
Environmental Laws or in a manner that would reasonably be expected to
result in liability under Environmental Laws, and to the knowledge of
Seller, no other person has Released or threatened to Release Hazardous
Materials into the environment at any property currently owned or
operated by Seller or any Transferred Subsidiary in connection with the
Compression Services Business in violation of Environmental Laws or in a
manner that would reasonably be expected to result in liability under
Environmental Laws; and
(v) Neither Seller nor any Transferred Subsidiary is aware of
any (A) underground tank or storage receptacle of Hazardous Substances,
(B) PCBs or (C) asbestos, currently located at any property currently
owned or operated by Seller (and included among the Assets) or any
Transferred Subsidiaries.
2.18 Insurance. Section 2.18 of the Disclosure Schedule lists all
insurance policies held in the names of Seller or the Subsidiaries covering the
Assets, employees or operations of the Compression Services Business as of the
date hereof. All such policies are in full force and effect, all premiums due
thereon have been paid by Seller or the Subsidiaries and the applicable entity
has complied in all material respects with the provisions of such policies and
has not received any notice from any of its insurance brokers or carriers that
such broker or carrier will not be willing or able to renew their existing
coverage. All insurance policies not held in the names of the Transferred
Subsidiaries but which cover the Assets, employees or operations of the
Compression Services Business 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, coverage thereunder will be discontinued with respect to the Assets, the
Transferred Subsidiaries and the Compression Services Business.
2.19 Real Property. (ooo) Leased Properties. Section 2.19(a) of the
Disclosure Schedule lists all real property leased or subleased to a Transferred
Subsidiary or in the conduct of the Compression Services Business to an Asset
Seller. Seller has made available to Buyer correct and complete copies of the
leases and subleases 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:
(i) such lease or sublease is, to the knowledge of Seller,
legal, valid and binding on the lessor, in all respects;
(ii) as of the date hereof, to the knowledge of Seller (A) no
party to the lease or sublease is in default beyond any applicable
notice, grace or cure period and (B) neither Seller nor any Subsidiary
has received a notice of default with respect to such lease or sublease;
(iii) no such lease or sublease has been mortgaged, deeded in
trust or by Seller or a Subsidiary; and
(iv) the Asset Seller party thereto (A) to the knowledge of
Seller possesses good and valid leasehold title with respect to the
property covered by such lease or sublease, (B) is in material
compliance with the terms of such lease
31
or sublease and (C) is the only occupant of the premises covered by such
lease or sublease and no other party has the legal right to occupy such
premises without such Asset Seller's consent, which consent has not been
given.
(b) Owned Properties. Section 2.19(b) of the Disclosure Schedule lists
all material real property owned by an Asset Seller and used in the conduct
of the Compression Services Business or owned by a Transferred Subsidiary
("Owned Property"). With respect to each such parcel of Owned Property
listed in Section 2.19(b) of the Disclosure Schedule and except as
otherwise specified in Section 2.19(b) of the Disclosure Schedule:
(i) the identified owner has good and marketable and insurable
fee simple title to the parcel of Owned Property, free and clear of any
security interest, easement, covenant, option to sell, right of first
refusal or other restriction, except for (A) liens for real estate taxes
not yet due and payable, (B) installments of special assessments not yet
delinquent and (C) easements, covenants, and other restrictions which do
not materially interfere with the operation of the Compression Services
Business;
(ii) there are no pending or, to the knowledge of Seller,
threatened condemnation proceedings or lawsuits;
(iii) there are no leases, subleases, licenses, concessions, or
other binding granting to any party or parties the right of use or
occupancy of any portion of the parcel of Owned Property;
(iv) there are no outstanding options or rights of first refusal
in favor of any other party to purchase any such parcel of Owned
Property or any portion thereof or interest therein; and
(v) there are no parties (other than the Asset Sellers) who are
in possession of or who are using any such parcel of Owned Property.
2.20. Product Liability. Except as set forth in Section 2.20 of the
Disclosure Schedule and except for matters that would not have a Material
Adverse Effect, neither Seller nor any Subsidiary has received written notice of
any claim that is currently pending or, to the knowledge of Seller, currently
threatened against such entity for product liability in connection with the
Compression Services Business.
2.21. Receivables. All accounts and notes receivable of the
Compression Services Business reflected in the 1999 Statement of Net Assets have
arisen from bona fide transactions and are stated therein net of reserves for
doubtful accounts in accordance with the requirements of GAAP. The Asset Sellers
eliminate intercompany receivables in the Ordinary Course of Business.
2.22. Standby Letter(s) of Credit. Section 2.22 of the Disclosure
Schedule lists all obligations of Seller or Seller's affiliates under standby
letters of credit, guarantees, indemnity bonds and other credit support
instruments heretofore issued by Seller or Seller's
32
affiliates on behalf of Seller and/or the Subsidiaries in connection with the
Compression Services Business and outstanding as of the date hereof.
2.23. Entire Business. Upon consummation of the transactions
contemplated by this Agreement, Buyer will acquire, or will acquire the legally
enforceable right to use, all the properties and assets included in the Assets,
and the properties and assets of the Transferred Subsidiaries and such
properties, assets and the rights acquired by Buyer, together with the Excluded
Assets and the services to be provided to, and other rights of, Buyer under the
Seller Transition Services Agreement, shall be sufficient for Buyer to conduct
the Compression Services Business in the same manner as it is currently
conducted, except as set forth in Section 1.3(i) of the Disclosure Schedule and
except, in each case, as may be affected by circumstances applicable to Buyer
that would not be applicable to any third party purchaser of the Compression
Services Business.
2.24. No Brokers' or Other Fees. Except for Xxxxxxx Lynch, Pierce,
Xxxxxx & Xxxxx Incorporated, whose fees and expenses will be paid by Seller, 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 Seller or any Subsidiary.
2.25. No Other Representations or Warranties. Except for the
representations and warranties contained in this Article II, neither Seller nor
any other person or entity makes any other express or implied representation or
warranty to Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND HANOVER
Each of Hanover and Buyer hereby represents and warrants to Seller as
follows:
3.1. Organization. Each of Hanover and Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of Hanover and 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, individually or in the
aggregate, have a material adverse effect on the results of operations, assets,
financial condition or business of Hanover and its subsidiaries taken as a whole
(a "Buyer Material Adverse Effect") or on the ability of either Buyer or Hanover
to consummate the transactions contemplated by this Agreement.
3.2. Authorization Etc. Each of Hanover and Buyer has full corporate
power and authority to execute and deliver this Agreement and each of the other
agreements contemplated hereby to be entered into by it and to carry out the
transactions contemplated hereby to be carried out by it. The execution,
delivery and performance by each of Buyer and Hanover of this Agreement and each
of the other agreements contemplated hereby and the consummation by each of
Buyer and Hanover of the transactions contemplated hereby and thereby have been
duly
33
and validly authorized by all necessary corporate action and no other corporate
proceedings on the part of either Buyer or Hanover are necessary to authorize
this Agreement or to consummate the transactions so contemplated (including the
approval of the issuance of the Hanover Stock and the performance of Hanover's
obligations under the Registration Rights Agreement). This Agreement and each of
the other agreements contemplated hereby has been duly and validly executed by
each of Hanover and Buyer and, assuming this Agreement constitutes the legal,
valid and binding agreement of Seller, constitutes a legal, valid and binding
agreement of each of Hanover and Buyer, enforceable against each of Hanover and
Buyer 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.
3.3. No Approvals or Conflicts. The execution, delivery and
performance by each of Hanover and Buyer of this Agreement and any other
agreements contemplated hereby to be entered into by either Hanover or Buyer,
the consummation by each of Hanover and Buyer of the transactions contemplated
hereby and thereby and the issuance of Hanover Stock by Hanover will not (i)
violate, conflict with or result in a breach by either Hanover or Buyer of any
provision of the certificates of incorporation or by-laws of either Hanover or
Buyer, (ii) violate, conflict with or result in a breach of any provision of, or
constitute a default by either Hanover or Buyer (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 lien, security interest, charge or encumbrance upon any of
Hanover's or Buyer's properties under, any note, bond, mortgage, indenture, deed
of trust, license, franchise, permit, lease, contract, agreement or other
instrument to which Hanover, Buyer or any of their respective properties may be
bound, (iii) violate or result in a breach of any order, injunction, judgment,
ruling, law or regulation of any court or governmental authority applicable to
Hanover, Buyer or any of their respective properties, or (iv) except for
applicable requirements of the HSR Act and as otherwise set forth in Section 2.7
of the Disclosure Schedule, require any order, consent, approval or
authorization of, or notice to, or declaration, filing, application,
qualification or registration with, any governmental or regulatory authority,
except, with respect to the foregoing clauses (ii), (iii) and (iv) above as they
apply to matters that are not material to the conduct of the business of Hanover
and its subsidiaries taken as a whole, as would not, individually or in the
aggregate, reasonably be likely to have a material adverse effect on the ability
of either Hanover or Buyer to consummate the transactions contemplated hereby.
3.4. Hanover SEC Filings; Financial Statements; Absence of Certain
Changes. (a) Hanover and, to the extent applicable, each of its then
subsidiaries, has timely filed all forms, reports, statements and documents
required to be filed with the Securities and Exchange Commission (the "SEC")
since July 1, 1997 (collectively, the "Hanover SEC Reports"), each of which
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder, or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder, each as in effect on the date so filed. Hanover has heretofore
delivered or made available to Seller or (in the case of any such document not
yet filed with the SEC) promptly will deliver or make available to Seller, in
the form filed with the SEC (including any amendments thereto), true and
complete copies of the Hanover SEC Reports.
34
None of such Hanover SEC Reports (including but not limited to any financial
statements or schedules included or incorporated by reference therein)
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Except to the extent
revised or superseded by a subsequent filing with the SEC (a copy of which has
been provided or made available to Seller prior to the date hereof), none of the
Hanover SEC Reports filed by Hanover since July 1, 1997 and prior to the date
hereof, contains any untrue statement of a material fact or omits to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the audited and unaudited financial statements of
Hanover (including any related notes thereto) included in the Hanover SEC
Reports, complies or, if not yet filed, will comply as to form in all
material respects with all applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto; has been
or, if not yet filed, will have been prepared in accordance with GAAP
(except, in the case of unaudited quarterly statements, as permitted by
Form 10-Q under the Exchange Act) applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto) and
fairly presents or, if not yet filed, will fairly present the consolidated
financial position of Hanover at the respective date thereof and the
consolidated results of its operations and changes in cash flows for the
periods indicated (subject, in the case of unaudited quarterly statements,
to normal year-end audit adjustments).
(c) Except as and to the extent set forth on the consolidated
balance sheet of Hanover at December 31, 1999, including the notes thereto,
included in Hanover's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, or on the consolidated balance sheet of Hanover at March
31, 2000, including the notes thereto, included in Hanover's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2000, Hanover
and its subsidiaries have no liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) which would be
required to be reflected on a balance sheet or in the notes thereto
prepared in accordance with GAAP, except for liabilities or obligations
incurred in the ordinary course of business since March 31, 2000, which
would not, individually or in the aggregate, have or reasonably be expected
to have a Buyer Material Adverse Effect or a material adverse effect on the
ability of Hanover or Buyer to consummate the transactions contemplated by
this Agreement.
3.5. Capitalization. (a) Hanover has authorized under its
certificate of incorporation 100,000,000 shares of Hanover Stock and 3,000,000
shares of preferred stock, par value $.01 per share, of which, as of June 1,
2000, 30,226,715 (60,477 in treasury) shares of Hanover Stock (such number of
shares is prior to a 2-for-1 stock split that was effected on June 14, 2000,
references in this Section 3.5 to "pre-split" or "post-split" referring to dates
before or following such 2-for-1 split, respectively) and no shares of preferred
stock were issued and outstanding; and Hanover has requested that its
stockholders increase the number of authorized shares of Hanover Stock to
200,000,000, which approval may be obtained prior to the Closing Date. Hanover
has no other stock authorized, issued or outstanding. Since June 1, 2000, no
shares of Hanover Stock or preferred stock of Hanover have been issued or
authorized for
35
issuance except that (i) Hanover issued 1.15 million shares (pre-split) of
Hanover Stock to the stockholders of Applied Process Solutions, Inc. and
1,000,000 (post-split) in a private placement for cash; (ii) Hanover has
authorized or may authorize for issuance approximately 1.6 million shares of
Hanover Stock to the stockholders of OEC Compression Corporation and may issue
such shares prior to the Closing Date; (iii) Hanover has authorized or may
authorize for issuance up to 6.0 million shares (post-split) of Hanover Stock,
but only if such shares are issued in transactions that management reasonably
believes, based on reasonable assumptions, will be immediately accretive to
Hanover's earnings per share and Hanover may issue any such Hanover Stock prior
to the Closing Date; and (iv) Hanover effected a 2-for-1 stock split on June 14,
2000.
(b) As of June 1, 2000, there were options to purchase 4,267,109
shares (pre-split) of Hanover Stock granted under stock option, performance
unit or similar plans of Hanover (the "Hanover Stock Plans") (together with
options to purchase not in excess of 4.0 million shares (post-split) of
Hanover Stock that may be granted and exercised under Hanover Stock Plans
after June 1, 2000, and prior to the Closing Date, the "Hanover Stock
Options").
(c) Except for (i) the Hanover Stock Options, (ii) 2,412,585 shares
(pre-split) of Hanover Stock issuable upon conversion of the 7 1/4%
Convertible Preferred Securities issued by Hanover Compressor Capital Trust
and (iii) approximately 1,746 (pre-split) shares of Hanover Stock issuable
upon exercise of outstanding warrants for 1,746 shares of Hanover Stock
(pre-split) , there are no outstanding options, warrants, convertible
securities or rights of any kind to purchase or otherwise acquire any
shares of capital stock or other securities of Hanover. Except as set forth
in subsections (a), (b) or (c) of this Section 3.5, no shares of capital
stock of Hanover are reserved for issuance.
(d) All outstanding shares of Hanover Stock issued or to be issued
upon exercise of any of the Hanover Stock Options or any outstanding
warrants or conversion of the Convertible Preferred Securities are or will
be validly issued, fully paid and non-assessable and not subject to any
preemptive rights created by statute, Hanover's certificate of
incorporation or bylaws or any contract.
(e) There is no outstanding vote, plan or pending proposal for any
redemption of stock of Hanover or any merger or consolidation of Hanover
with or into any other entity.
(f) The Hanover Stock to be issued pursuant to the terms of this
Agreement has been duly authorized and, when issued in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable.
(g) All of the outstanding shares of Buyer are owned by Hanover, and
all such shares are validly issued, fully paid and non-assessable.
3.6. Litigation. Except as set forth on Section 3.6 of the disclosure
schedule being delivered to Seller by Buyer simultaneously with the execution of
this Agreement (the "Buyer Disclosure Schedule") or as disclosed on the Hanover
SEC Reports filed and publicly available prior to the date of this Agreement,
there are no suits, actions, proceedings or investigations pending or, to the
knowledge of each of Buyer and Hanover, threatened against Hanover or any of its
subsidiaries or relating to the transactions contemplated by this Agreement
before any arbitrator, court or governmental or regulatory authority or body,
which, if decided
36
unfavorably to Hanover or any of its subsidiaries, would have a Buyer Material
Adverse Effect or a material adverse effect on the ability of Buyer or Hanover
to consummate the transactions contemplated by this Agreement. Neither Hanover
nor, to the knowledge of each of Buyer and Hanover, any of its subsidiaries has
received any notice that Hanover or any of its subsidiaries or any of their
assets is subject to any decree, order or judgment which would reasonably be
expected to have a Buyer Material Adverse Effect or a material adverse effect on
the ability of Hanover or Buyer to consummate the transactions contemplated by
this Agreement. To the knowledge of each of Buyer and Hanover, as of the date
hereof, neither Hanover nor any of its subsidiaries is a plaintiff in any suit,
action or proceeding, nor is any action or proceeding threatened. For the
purposes of this Agreement, references to "Buyer's knowledge", "Hanover's
knowledge", the "knowledge" of Buyer or Hanover or words of similar import shall
mean actual knowledge after reasonable inquiry of Xxxxxxx X. X'Xxxxxx, Xxxxxxx
X. XxXxxx, Xxxxxxx X. Xxxxxxxx, Xxxxxx Xxxxxxx, Xxxxxxx X. Xxxxx and Xxxxxxx X.
Xxxxxx.
3.7. Conduct of Business; Changes. Except as reflected in Section 3.7
of the Buyer Disclosure Schedule or otherwise contemplated by or disclosed in
this Agreement, the Buyer Disclosure Schedule or the Exhibits hereto or
otherwise disclosed in the Hanover SEC Reports filed and publicly available
prior to the date of this Agreement, since March 31, 2000, Hanover and its
subsidiaries have conducted their businesses in all material respects in the
ordinary course consistent with past practice, and there has not occurred or
arisen any material adverse changes in or any condition, event or occurrence
which, individually or in the aggregate, would cause, or would reasonably be
expected to cause, a Buyer Material Adverse Effect.
3.8. Compliance with Law; Governmental Authorizations. Except as
described on Section 3.8 of the Buyer Disclosure Schedule, each of Hanover and
its subsidiaries is not in violation in any material respect of any order,
injunction, judgment, ruling, law or regulation of any court or governmental
authority applicable to it. Each of Hanover and its subsidiaries has all
licenses, permits and other governmental authorizations necessary to conduct the
business of Hanover and its subsidiaries as currently conducted (all of which
are valid and in full force and effect), except where the failure to have such
licenses, permits and other governmental authorizations would not reasonably be
expected to have a Buyer Material Adverse Effect.
3.9. Financing. Buyer has and will have on the Closing Date sufficient
funds available to it to pay the cash Purchase Price and all contemplated fees
and expenses of Buyer related to the transactions contemplated hereby.
3.10. No Brokers' or Other Fees. 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 Buyer.
3.11. No Other Representations or Warranties. Except for the
representations and warranties contained in this Article III, neither Buyer nor
any other person or entity makes any other express or implied representation or
warranty to Seller.
37
ARTICLE IV
CONDITIONS TO SELLER'S OBLIGATION
The obligation of Seller 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 Seller.
4.1. Representations and Warranties. The representations and
warranties made by Buyer and Hanover in this Agreement shall be true (in all
material respects, in the case of those representations and warranties which are
not by their express terms qualified by reference to materiality) on and 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 (in all material respects, in the case of those
representations and warranties which are not by their express terms qualified by
reference to materiality) as of such date.
4.2. Performance. Buyer and Hanover 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 Certificates. Each of Hanover and Buyer shall have
delivered to Seller a certificate, dated as of the Closing Date and executed by
an executive officer of Buyer, certifying to the fulfillment of the conditions
specified in Sections 4.1 and 4.2 hereof.
4.4. HSR Act. All applicable waiting periods under the HSR Act with
respect to the transactions contemplated hereby shall have expired or been
terminated.
4.5. Injunctions. On the Closing Date there shall be no injunction,
writ, preliminary restraining order or other order in effect of any nature
issued by a court or governmental authority of competent jurisdiction that is in
effect that restrains or prohibits the consummation of the purchase of the
Subsidiary Interests or the transfer to Buyer by the Asset Sellers of any
Assets, except for transfer of any Assets or Subsidiary Interests the failure of
which to transfer, individually or in the aggregate with all other Assets and
Subsidiary Interests not being transferred on the Closing Date, would not (after
giving effect to the interim management provisions of Section 1.10) be material
to the operations of the Compression Services Business.
4.6. Consents. All orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations identified in Section 2.7 of the Disclosure Schedule and necessary
to effect the Closing shall have been obtained.
4.7. Standby Letter(s) of Credit. Buyer shall have delivered one or
more standby letters of credit to support obligations of Seller or Seller's
affiliates under standby letters of credit, guarantees, indemnity bonds and
other credit support instruments heretofore issued by Seller or Seller's
affiliates on behalf of Seller and/or the Subsidiaries in connection with the
Compression Services Business and outstanding as of the Closing Date ("Seller
Credit Support Instruments"). Such standby letters of credit shall be in form
and substance satisfactory to Seller
38
and shall be in an aggregate face amount representing the aggregate amount under
Seller Credit Support Instruments.
4.8. Assumption Agreement. Buyer shall have executed and delivered to
Seller the Assumption Agreement.
4.9. Registration Rights Agreement. Hanover shall have executed and
delivered to Parent the Registration Rights Agreement.
4.10. Transition Services Agreement. Buyer shall have executed and
delivered to Seller the Buyer Transition Services Agreement.
4.11. Opinion. A favorable opinion of counsel to Buyer and Hanover in
form and substance reasonable satisfactory to Seller shall have been delivered
to Seller.
4.12. Average Closing Price. The Average Closing Price shall not be
less than $25.00.
ARTICLE V
CONDITIONS TO BUYER'S OBLIGATION
The obligation of Buyer 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 Buyer.
5.1. Representations and Warranties. The representations and
warranties made by Seller in this Agreement shall be true (in all material
respects, in the case of those representations and warranties which are not by
their express terms qualified by reference to materiality) on and 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 (in all material respects, in the case of those
representations and warranties which are not by their express terms qualified by
reference to materiality) as of such date.
5.2. Performance. Seller 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 Seller prior to the Closing.
5.3. Officer's Certificate. Seller shall have delivered to Buyer a
certificate, dated as of the Closing Date and executed by an executive officer
of Seller, certifying to the fulfillment of the conditions specified in Sections
5.1 and 5.2 hereof.
5.4. Resignations. Seller shall have delivered to Buyer written
resignations from each of the directors and officers of the Transferred
Subsidiaries that Buyer requests at least ten calendar days prior to the Closing
Date, such resignations to be effective as of the Closing Date.
39
5.5. HSR Act. All applicable waiting periods under the HSR Act with
respect to the transactions contemplated hereby shall have expired or been
terminated.
5.6. Injunctions. On the Closing Date there shall be no injunction,
writ, preliminary restraining order or other order in effect of any nature
issued by a court or governmental authority of competent jurisdiction that is in
effect that restrains or prohibits the consummation of the purchase of the
Subsidiary Interests or the transfer to Buyer by the Asset Sellers of any
Assets, except for transfer of any Assets or Subsidiary Interests the failure of
which to transfer, individually or in the aggregate with all other Assets and
Subsidiary Interests not being transferred on the Closing Date, would not (after
giving effect to the interim management provisions of Section 1.10) be material
to the operations of the Compression Services Business.
5.7. Consents. All orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations identified in Section 2.7 of the Disclosure Schedule and necessary
to effect the Closing shall have been obtained.
5.8. Transition Services Agreement. Seller shall have executed and
delivered to Buyer the Seller Transition Services Agreement.
5.9. Opinion. A favorable opinion of counsel to Seller and Parent in
form and substance reasonable satisfactory to Buyer shall have been delivered to
Buyer.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1. Conduct of Compression Services Business. Seller covenants that
without the consent of Buyer, which consent shall not be unreasonably withheld
or delayed, except (i) as otherwise expressly contemplated by this Agreement or
(ii) as disclosed in Section 6.1 of the Disclosure Schedule, from and after the
date of this Agreement and until the Closing Date Seller shall, and shall cause
the Subsidiaries to, with respect to the Compression Services Business:
(a) use reasonable efforts consistent with good business judgment to
(i) preserve intact the present business organization of the Compression
Services Business and operate the Compression Services Business in the
Ordinary Course of Business; (ii) keep available the services of the
Compression Services Business' officers and employees; and (iii) maintain
satisfactory relationships with licensors, suppliers, creditors,
distributors, customers and others having material business relationships
with the Compression Services Business;
(b) notify Buyer of any material change in the normal course of
business or operations of the Compression Services Business and of any
governmental complaints, investigations or hearings of which Seller or any
Subsidiary are notified (or communications received by Seller or any
Subsidiary indicating that the same may be contemplated), or the
institution or settlement of litigation, in each case involving the
Compression Services Business, and to keep Buyer informed of such events;
and
40
(c) not (i) cause to be issued or sold any debt or equity
securities of any Transferred Subsidiary 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 Transferred
Subsidiary; (iii) permit or allow any Transferred Subsidiary to declare, set
aside or pay any dividend or other distribution except for the distribution of
all amounts owed by Seller's affiliates (other than the Transferred
Subsidiaries) to Seller; (iv) permit or allow any Transferred Subsidiary to
borrow or agree to borrow any funds or incur, whether directly or by way of
guarantee, any obligation for borrowed money, other than in the Ordinary Course
of Business; (v) subject any of the Assets to any Encumbrance or otherwise
permit or allow the sale, lease, transfer or disposition of any Assets, other
than in the Ordinary Course of Business; (vi) permit or allow any Transferred
Subsidiary to assume, guarantee, or otherwise become responsible for the
obligations of, or make any loans or advances to, any other individual, firm or
corporation (other than another Transferred Subsidiary); (vii) waive or release
any rights of material value, or cancel, compromise, release or assign any
material indebtedness owed to any Transferred Subsidiary or any material claims
held by any Transferred Subsidiary; (viii) except for (A) purchases of rental
fleet and related parts and equipment to fulfill purchase orders in the Ordinary
Course of Business and (B) other capital expenditures in the Ordinary Course of
Business not to exceed ten million dollars ($10,000,000) 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 individual, firm or corporation;
(ix) enter into any closing agreement or settle or agree to settle any claim or
assessment for any material Taxes or surrender any right to claim a refund of
material Taxes or otherwise offset or reduce any material Tax liability; (x)
make or change any election with respect to any material Taxes; (xi) other than
in the Ordinary Course of Business or in the case of new hires or as required by
any agreement in effect as of the date hereof or as required by law, permit or
allow any Transferred Subsidiary to (A) increase the compensation or fringe
benefits of any of its officers or (B) enter into, adopt or amend any employment
agreement or employee benefit plan with or for the benefit of any of its
employees; (xii) amend any Transferred Subsidiary's organization documents
(other than in connection with the change of any names of any of the Transferred
Subsidiaries or the Asset Sellers which is hereby expressly permitted under the
terms of this Agreement); (xiii) change any of its material accounting methods
or procedures except as required by GAAP; or (xiv) agree to do any of the
foregoing.
6.2. Access to Books and Records; Cooperation.
(a) Except as otherwise provided in Section 6.4, Buyer agrees that
from the Closing Date and until the fifth anniversary of the Closing Date,
during normal business hours, it shall permit, at no cost to Seller and
without disruption of the business of Buyer, Seller and its counsel,
accountants and other authorized representatives to have access to the
officers, directors, employees, accountants and other advisors and agents,
properties, books, records and contracts relating to the Compression
Services Business, and the right (at Seller'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
involving Seller and/or the Subsidiaries.
41
(b) Buyer agrees not to, and to cause its subsidiaries not to,
destroy at any time any files or records which are subject to Section
6.2(a) without giving written notice to Seller, and giving Seller 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 Seller at
Seller's expense.
(c) During the period commencing on the date hereof and ending on
the Closing Date, Seller will, and Seller will cause the Subsidiaries to,
upon reasonable request afford to Buyer and its 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 Seller and the Subsidiaries relating to the Compression
Services Business, and the right to make copies and extracts from such
books, records and contracts, and to furnish Buyer with all financial,
operating and other data and information concerning the Compression
Services Business as Buyer and its advisors may reasonably request,
including, without limitation, assisting Buyer (at Buyer's expense) with
the preparation of audited financial statements for the Compression
Services Business for inclusion in Hanover's Form 8-K filing with the
Securities Exchange Commission and the execution by employees and officers
of Seller or Parent of representation letters as may be requested by
PricewaterhouseCoopers LLP in accordance with customary audit practices for
the issuance of an unqualified audit opinion. The parties agree that the
provisions of the Confidentiality Agreement dated as of March 23, 2000,
between Buyer and Parent (the "Confidentiality Agreement") shall continue
in full force and effect following the execution and delivery of this
Agreement.
(d) Notwithstanding Section 6.2(c) and the information provided to
Buyer after the date hereof, Buyer hereby acknowledges that it has made its
own determinations with respect to the Compression Services Business, the
Assets, the Subsidiary Interests and the Assumed Liabilities, and
acknowledges and agrees that Seller and its affiliates have made and make
no representations or warranties, express or implied, at common law, by
statute or otherwise, except as specifically set forth in this Agreement,
and Seller, on behalf of itself and its affiliates, hereby disclaims all
implied warranties, including warranties of merchantability or fitness for
a particular purpose.
6.3. Filings and Consents. Each of Seller and the Subsidiaries on the
one hand, and each of Buyer and Hanover on the other hand, shall use all
reasonable efforts to obtain and to cooperate in obtaining any consent,
approval, authorization or order of, and in making any registration or filing
with, any governmental agency or body or other third party required in
connection with the execution, delivery or performance of this Agreement. The
parties agree to cause to be made all appropriate filings under the HSR Act
within five business days of 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 antitrust, competition or trade regulation law that is
asserted by any governmental entity with respect to the purchase of the
Compression Services Business so as to enable such purchase to occur as
expeditiously as possible.
6.4. Tax Matters; Cooperation; Preparation of Returns; Tax Elections.
(a) Buyer and Seller agree to furnish or cause to be furnished to each other,
upon request, as promptly as practicable, such information and assistance
relating to the Asset Sellers and the
42
Transferred Subsidiaries (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 claim, suit or proceeding relating to any Tax Return. Buyer and
Seller shall retain all books and records with respect to Taxes pertaining to
the Asset Sellers and the Transferred Subsidiaries until the expiration of all
relevant statutes of limitations (and, to the extent notified by Seller or
Buyer, any extensions thereof). At the end of such period, each party shall
provide the other with at least ten 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) Buyer shall prepare, or cause to be prepared, all Tax Returns
in respect of each Transferred Subsidiary (other than a Transferred
Subsidiary that is a member of an affiliated group that files a United
States federal consolidated Tax Return or any group that files a combined,
consolidated, or unitary foreign, state or local Tax Return) for any Pre-
Closing or Straddle Tax Periods which must be filed after the Closing Date
in accordance with past practice and custom unless a contrary position is
required by law. Buyer shall provide Seller 30 days prior to the due date
of filing such Tax Returns for review and comment and Buyer shall
incorporate all such reasonable comments into the Tax Return. Buyer shall
timely pay to the relevant Taxing Authority all Taxes due in connection
with any such Tax Return and Seller shall reimburse Buyer in accordance
with procedures provided in Section 6.5(d). For any taxable period of the
Transferred Subsidiaries that ends on or before the Closing Date, Seller
and its affiliates shall timely prepare, consistent with past practice and
custom to the extent any position taken may materially adversely affect the
Taxes of any of the Transferred Subsidiaries after the Closing Date (unless
a contrary position is required by law), and file with the appropriate Tax
Authority all consolidated, combined or unitary Tax Returns that include
any of the Transferred Subsidiaries required to be filed (and shall
promptly provide, as reasonably requested by, Buyer with copies of the
portion of such Tax Returns that relate to the Transferred Subsidiaries).
(c) Seller shall deliver to Buyer at the Closing all necessary
forms and certificates complying with applicable law, duly executed and
acknowledged, certifying that the transactions contemplated hereby are
exempt from withholding under Code Section 1445.
(d) After the Closing Date, each of Seller and Buyer shall promptly
notify the other parties in writing upon receipt of written notice of the
commencement of any Tax audit or administrative or judicial proceeding or
of any demand or claim on any Asset Seller, any Transferred Subsidiary or
Buyer which, if determined adversely to the taxpayer or after the lapse of
time, would be grounds for indemnification by the other party under Section
6.5 of this Agreement. In the case of an audit or administrative or
judicial proceeding that relates to a Pre-Closing Tax Period of a
Transferred Subsidiary, Seller shall have the sole right, at its expense,
to control the conduct of such audit or proceeding; provided, however, that
Seller shall not be entitled to settle any Tax, without Buyer's consent,
which consent shall not be unreasonably withheld, if the resolution of such
Tax issues would have a material adverse effect on the Tax liability of the
Transferred Subsidiary after the Closing Date. If Seller chooses to control
the audit or proceeding, Buyer shall execute or cause to be executed powers
of attorney or other documents necessary to enable Seller to take all
actions desired by Seller with respect to such proceeding. In the case of
an audit or administrative or judicial proceeding that relates to a
43
Straddle Period of a Transferred Subsidiary, Buyer shall have the right, at
its expense, to control the conduct of such audit or proceeding, provided,
however, that (i) Seller shall have the right, at its expense, to
participate in such proceeding and (ii) Buyer will act upon all reasonable
recommendations made by Seller and (iii) Buyer will not settle or refuse to
settle any such proceeding without Seller's consent if the terms of such
settlement will have a material adverse effect on the amount of Seller's
indemnification obligation under Section 6.5, which consent will not be
unreasonably withheld. In the case that Seller gives written notice that it
wishes to settle an item based on an offer from a Taxing Authority which
relates solely to the pre-Closing portion of such Straddle Period, but
Buyer does not settle such item, then Seller's liability for Taxes and
related costs and expenses relating to such an item shall not exceed the
amount that Seller's liability for such Taxes and related costs and
expenses would have been if the item had been settled on the terms and at
such time offered by such Taxing Authority. The parties shall promptly
notify the others if such party decides not to control the defense or
settlement of any proceeding which they are entitled to control pursuant to
this Agreement and the other parties thereupon shall be permitted to defend
and settle such proceeding.
(e) Seller and Buyer shall cooperate with one another and use their
reasonable best efforts to develop a plan to enable Seller and the
Transferred Subsidiaries to undertake a restructuring of their businesses
if requested by Seller prior to the Closing Date including any
restructuring if an election under Section 338(h)(10) is not made under
Section 6.4(f) of this Agreement ("Restructuring Transaction"). On or prior
to the Closing Date, Buyer and Seller shall enter into, or cause to be
entered into, such agreements as are necessary to implement any such plans
for a Restructuring Transaction which are reasonably requested by Seller.
Seller shall be liable for and pay all Taxes and related costs and
expenses, including any additional transfer taxes related to the
transactions under this Agreement, incurred as a result of any actions
taken pursuant to this Section 6.4(e).
(f) The parties agree to make an election under Section 338(h)(10)
of the Code with respect to the acquisition of stock of any United States
Transferred Subsidiary, provided that if Buyer provides written notice to
Seller no later than twenty (20) days prior to the Closing Date that such
election would have an adverse tax effect on Buyer and provided, further,
Seller decides to make such election, then Seller shall be liable for any
incremental tax liability (solely as a result of lost Tax basis in assets
subject to allowance for depreciation or amortization) to Buyer as a result
of such election, provided that such indemnification shall be made in
accordance with and subject to Sections 6.5 and 8.1(c) and (d) of this
Agreement. Seller will furnish to Buyer the necessary information
reasonably requested by Buyer to allow Buyer to provide the notice
contemplated under this Section 6.4(f).
(g) Buyer shall not, and shall cause any Transferred Subsidiary not
to, carry back any net operating loss or other Tax attribute to a Pre-
Closing Tax Period of such Transferred Subsidiary if such Transferred
Subsidiary were included as part of a United States federal consolidated
Tax Return or any group that files a combined, consolidated, or unitary
foreign, state or local Tax Return. In all other cases, Buyer shall not
carry back such loss or other Tax attribute without Seller's consent, which
consent shall not be unreasonably withheld (except for a material loss or
material Tax attribute if such carry back is required by the relevant Tax
law). Except for refunds resulting from carry backs pursuant to the
preceding sentence, all other Tax refunds relating to a Pre-Closing Tax
Period shall be for the benefit of Seller. For
44
purposes of Section 6.5(a), Taxes shall include the amount of Taxes which
would have been paid but for the application of any credit or net operating
loss or capital loss deduction attributable to Post-Closing Tax Periods.
6.5. Tax Indemnity. (a) Subject to Sections 8.1(c) and (d) of this
Agreement, Seller agrees to indemnify Buyer and its affiliates (including, after
the Closing Date, the Transferred Subsidiaries) and the Buyer Indemnified
Persons (as defined in Section 8.1(a)) and hold them harmless from any Losses
(as defined in Section 8.1(a)) that they may incur arising out of or due to (i)
Taxes of each of the Transferred Subsidiaries for all Pre-Closing Tax Periods,
(ii) Taxes of any other entity which is or has been an affiliate of one or more
of the Transferred Subsidiaries (other than any of the Transferred Subsidiaries)
as a result of Treasury Regulation Section 1.1502-6(a) or otherwise, (iii) any
breach by Seller or any of its affiliates of any covenant contained in Sections
6.1(c)(ix)-(x), 6.4 or 6.5, (iv) any breach of any representation or warranty
made by Seller or any of its affiliates in Section 2.12 (including any related
Disclosure Schedule) without regard to any qualification contained therein as to
materiality, except to the extent that any such Losses are otherwise indemnified
pursuant to the foregoing clauses (i) through (iii), and (v) Excluded
Liabilities as it relates to Taxes; provided, however, that the amount of Taxes
and other Losses determined pursuant to this Section shall be reduced by the
reserve for Taxes on the Closing Statement (other than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income).
(b) Subject to Sections 8.1(c) and (d) of this Agreement, Buyer and
each Transferred Subsidiary shall indemnify Seller and its affiliates
against all Taxes imposed on any (i) Transferred Subsidiaries for a Post-
Closing Tax Period and (ii) Asset Sellers with respect to Taxes arising out
of the ownership of the Assets with respect to a Post-Closing Tax Period.
(c) In the case of any Straddle Period:
(i) real, personal and intangible property Taxes ("Property
Taxes") of the Transferred Subsidiaries for a Pre-Closing Tax Period
shall be equal to the amount of such Property Taxes for the entire
Straddle Period multiplied by a fraction, the numerator of which is the
number of days during the Straddle Period that are in the Pre-Closing
Tax Period and the denominator of which is the total number of days in
the Straddle Period; and
(ii) the Taxes of the Transferred Subsidiaries (other than
Property Taxes) for any Pre-Closing Tax Period shall be computed as if
such taxable period ended as of the close of business on the Closing
Date.
(d) Payment by the indemnitor of any amount due under this Section
6.5 shall be made within ten days following written notice by the
indemnitee that payment of such amounts to the appropriate Taxing Authority
is due, provided that the indemnitor shall not be required to make any
payment earlier than two days before it is due to the appropriate Taxing
Authority. In the case of a Tax that is contested in accordance with the
provisions of Section 6.4(d) above, payment of the Tax to the 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.
45
(rrrr) Buyer and Seller shall share in the ratio of 50/50 all U.S. or
foreign transfer, documentary, sales, use, excise, stamp, motor vehicle,
registration, value added or similar Taxes (including all applicable real
estate transfer or gains Taxes) and notary, filing or recording expenses or
fees, if any, required to be paid in connection with this Agreement and the
transactions contemplated hereby, including any interest charge, penalty or
addition to tax with respect thereto. Each party shall be entitled to pay
any such amounts on behalf of the other party, and the non-paying party
shall promptly reimburse the paying party for any amounts so paid. Seller
and Buyer shall timely cooperate in filing all Tax Returns as may be
required to comply with the provisions of such Tax laws. Seller shall
deliver to Buyer all necessary forms and certificates complying with
applicable law, duly executed and acknowledged, certifying that the
transactions contemplated hereby are exempt from withholding under the Tax
laws.
6.6. Employees; Benefit Plans.
(a) Defined Benefit Plans. Seller shall remain the sponsoring employer
of the Pension Plan for Employees of Dresser-Rand Company and shall as
sponsoring employer thereunder have any and all rights with respect to the
plan assets, liabilities and obligations accrued through the Closing Date
with respect to the plan.
(b) Defined Contribution Plans. As soon as practicable after the
Closing Date, Seller shall (A) cause the account balance of each Business
Employee in all defined contribution plans in which the Business Employees
participated (the "Seller 401(k) Plans") immediately prior to the Closing
Date to fully vest, (B) cause the participation of each Business Employee
who was participating in the Seller 401(k) Plans to cease as of the Closing
Date and (C) to the extent permitted by applicable law, take such action as
is reasonably necessary to treat such Business Employees as terminated and
entitled to a distribution of their account balances under the Seller
401(k) Plans. To the extent Buyer provides evidence reasonably satisfactory
to Seller that it maintains a defined contribution plan, qualified under
Sections 401(a) and 401(k) of the Code, to which Business Employees can
rollover their vested account balances and in the event such Business
Employees elect to do so, Seller will cooperate with Buyer to effectuate
such rollovers.
(c) Welfare Benefit Plans. (i) As of the Closing Date, Seller shall
retain or assume sponsorship of the Voluntary Employees' Benefit
Association and will continue to be responsible for any and all liabilities
and obligations incurred prior to the Closing Date.
(ii) As of the Closing Date Seller shall be responsible for
satisfying all liabilities and obligations with respect to any Business
Employee who, as of the Closing Date, is receiving benefits pursuant to
the Seller's long term disability program.
(d) Post-Retirement Benefit Plan. (i) Seller shall retain the
liability in respect of any Business Employee who retires or otherwise
terminates employment with Seller prior to the Closing Date and is entitled
to post-retirement welfare benefits from Seller on or after the Closing
Date.
(ii) With respect to any Business Employee who has not retired
prior to the Closing Date and who becomes employed by Buyer or the
Transferred
46
Subsidiaries on or after the Closing Date, Buyer shall be responsible
for providing post-retirement welfare benefits if and only to the extent
that it adopts any plan to provide such post-retirement benefits to any
such employees. Nothing contained herein shall require Buyer to adopt,
establish or maintain any post-retirement welfare benefits.
(e) Stock Appreciation Right Plan. Seller shall retain the Dresser-
Rand Company Stock Appreciation Right Plan (the "SARP") and shall be solely
and entirely responsible for satisfying any and all obligations and
liabilities with respect to the SARP.
(f) Continuation of Comparable Benefit Plans. Until December 31, 2000,
Buyer shall, or shall cause the Transferred Subsidiaries to, maintain, (A)
salaries and bonuses for Business Employees at levels no less favorable
than the salary and bonus rates in effect immediately prior to the Closing
Date for such Business Employees and (B) employee benefit plans and
arrangements (other than any special bonus or incentive arrangements not in
the Ordinary Course of Business and other than any benefit plans described
in Sections 6.6(b) and 6.6(d)) for Business Employees that, in the
aggregate, are no less favorable than the Business 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. Thereafter, Buyer shall, or
shall cause the Transferred Subsidiaries to, provide employee benefit plans
and arrangements that are no less favorable in the aggregate than those
provided to similarly situated employees of Buyer for the Business
Employees who continue their employment with Buyer or the Transferred
Subsidiaries.
(g) Prior Service; Deductibles. Buyer shall recognize each Business
Employee's service with Seller or any Subsidiary as of the Closing Date as
service with Buyer for all purposes, including eligibility, vesting and
benefit levels, as applicable in Buyer's 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 Seller or any Subsidiary under the applicable Business Group
Plans. In addition, Buyer shall, or shall cause the Transferred
Subsidiaries to, waive any pre-existing condition limitations and
eligibility waiting periods under the employee welfare benefit plans
applicable to Business Employees or their respective dependents, but only
to the extent that such service was recognized under such plans for such
purposes. Buyer shall recognize (or cause to be recognized) the dollar
amount of all expenses incurred by Business 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 Buyer.
(h) Accrued Vacation. Buyer shall, or shall cause the Transferred
Subsidiaries to, credit each current Business 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
Seller or any Subsidiary in effect as of the Closing Date.
(i) Severance Obligations. Seller and Buyer agree that the
transactions contemplated hereby shall not constitute a severance of
employment of any Business Employee prior to the consummation of the
transactions contemplated hereby, and that such employees will
47
be deemed for all purposes to have continuous and uninterrupted employment
before and immediately after the Closing Date. Except as required by law,
Buyer shall provide severance and other separation benefits to each
Business Employee terminated by Buyer within one year following the Closing
Date upon terms and conditions that are no less favorable to the severance
and other separation benefits provided by Seller and its affiliates in
effect on the date of this Agreement. Buyer shall be responsible for any
claim made on or after the Closing Date by any Business Employee 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.
(j) Annual Incentive Compensation. Effective as of the Closing Date
through December 31, 2000, Buyer shall, or shall cause the Transferred
Subsidiaries to, maintain the annual incentive compensation plans in which
any of the Business Employees participate immediately prior to the Closing
Date. In addition, Buyer shall, or shall cause the Transferred Subsidiaries
to, pay all bonuses payable under such incentive compensation plans to any
Business Employees in respect of calendar year 2000 no later than March 31,
2001; provided, however, that Seller shall remain liable for payment of any
retention or stay bonus to which a Business Employee becomes entitled after
the Closing Date under an agreement or arrangement established by Seller
prior to the Closing Date and set forth on Schedule 2.16(ix) of the
Disclosure Schedule.
(k) Cooperation and Transition Services. The parties agree to furnish
each other with such information concerning employees and employee benefit
plans, and to take all such other action, as is necessary and appropriate
to effect the transactions contemplated hereby. From and after the Closing
Date until the earlier of (x) the date of the last payroll for the Covered
Employees (as defined below) covering December 31, 2000 or (y) sixty (60)
days following written notice from Seller to Buyer of the sale of Seller or
substantially all of Seller's assets (the "Transition Period"), (i) Seller
shall, on behalf of Buyer, perform payroll services for Buyer for United
States Business Employees (the "Covered Employees") and (ii) Buyer shall
provide health, life, dental, disability and other employee welfare
benefits to the Covered Employees pursuant to, and the Covered Employees
shall continue to be eligible for and participate in, Seller's health
(other than retiree health), life, dental, disability and other employee
welfare benefit plans maintained for active employees of Seller ("Seller's
Welfare Plans"). Seller shall continue to administer on behalf of Buyer,
Seller's Welfare Plans for the benefit of the Covered Employees and shall
provide Buyer with reasonable claim detail with respect to claims incurred
by the Covered Employees during the Transition Period. Buyer shall
reimburse Seller for all claims, premiums and additional costs paid or
otherwise incurred by Seller (including reasonable internal administrative
costs) as a result of the Covered Employees' continuation in Seller's
Welfare Plans during the Transition Period.
(l) Foreign Employment Matters. (i) Employment. Without limiting the
generality of Sections 6.6(f), 6.6(g), 6.6(h) and 6.6(j), as of the Closing
Date, Buyer shall, or shall cause the Transferred Subsidiaries to, assume
or retain and be responsible for the employment (including any employment
contracts) of the Business Employees who are employed outside the United
States (the "Foreign Employees"), and Buyer shall, or shall cause the
Transferred Subsidiaries to, take any and all actions necessary or
appropriate (if any) to
48
continue the employment of such Foreign 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 Seller or any of its 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 Foreign Employees. Without
limiting the generality of Sections 6.6(a), 6.6(b), 6.6(d) and 6.6(f),
effective as of the Closing Date, Buyer shall, or shall cause the
Transferred Subsidiaries to, maintain, establish and/or qualify or
register with applicable regulatory authorities employee benefit plans
for, or shall extend existing Foreign Business Group Plans to, the
Foreign Employees to the extent required by applicable law and, for not
less than one year following the Closing Date, provide benefits to the
Foreign Employees on terms and conditions which are no less favorable in
the aggregate, to those provided to Foreign Employees by Seller, any
Subsidiary, 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 Seller, Buyer, 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.
6.7. Labor Matters. (a) Buyer and Seller agree that for purposes of
the WARN Act, the Closing Date shall be the "effective date" as such term is
used in the WARN Act. Buyer acknowledges and represents that it has no present
intent to engage in or permit a "mass layoff" or "plant closing" with respect to
Seller or any Subsidiary as defined in the WARN Act. Buyer shall not, at any
time prior to 90 days after the Closing Date, effectuate a "mass layoff" or
"plant closing" affecting in whole or in part with respect to Seller or any
Subsidiary or as defined in the WARN Act, without notifying Seller in advance
and without complying with the notice requirements and other provisions of WARN.
In addition, Buyer shall provide a full defense to, and indemnify Seller for any
loss, liability, claim, damage or expense (including attorney's fees and other
costs of defense) which Seller may incur in connection with, any suit or claim
of violation brought against Seller under WARN for any actions taken by Buyer
with respect to Seller or any Subsidiary or any employee affected by this
Agreement. Seller agrees that between the date hereof and the Closing Date, it
shall cause each Subsidiary not to effect or permit a "plant closing" or "mass
layoff" as these terms are defined in the WARN Act with respect to any
Transferred Subsidiary without notifying Buyer in advance and without complying
with the notice requirements and all other provisions of the WARN Act.
(b) Buyer and Seller 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 Foreign Employees of any Subsidiary.
49
(c) The parties intend that there will be continuity of employment
with respect to all the Business Employees. It is agreed that prior to, or
in connection with, the Closing, Buyer shall take no action to cause Seller
or any of its subsidiaries to terminate the employment of any Business
Employee, and neither Seller nor any of its subsidiaries shall be under any
obligation to terminate any Business Employee prior to or on the Closing
Date. Prior to the Closing Date, Buyer shall offer employment, commencing
on the Closing Date, to all Business Employees, including those on
vacation, leave of absence, disability or layoff, employed on the day
immediately preceding the Closing Date, on the same terms (including
salary, fringe benefits, job responsibility and location) as those provided
to such Business Employees by Seller or its subsidiaries on the day
immediately preceding the Closing Date.
6.8. Covenant to Satisfy Conditions. Each party hereto agrees to use
all reasonable efforts to insure that the conditions set forth in Article IV and
Article V hereof are satisfied, insofar as such matters are within the control
of such party.
6.9. Contact With Customers and Suppliers. Prior to the Closing, Buyer
and its representatives shall contact and communicate with the employees,
customers, suppliers and licensors of the Compression Services Business in
connection with the transactions contemplated hereby only with the prior written
consent of Seller, which consent shall not be unreasonably withheld or delayed
and may be conditioned upon a designee of Seller being present at any such
meeting or conference.
6.10. Projections. In connection with Buyer's investigation of the
Compression Services Business, Buyer may have received, or may receive, from
Seller, the Subsidiaries, their affiliates and/or their respective
representatives certain projections and other forecasts for the Compression
Services Business and certain business plan and budget information. Buyer
acknowledges that (i) there are uncertainties inherent in attempting to make
such projections, forecasts, plans and budgets, (ii) Buyer is familiar with such
uncertainties, (iii) Buyer is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all estimates, projections,
forecasts, plans and budgets so furnished to it, and (iv) Buyer will not assert
any claim against Seller, any Subsidiary, any of their affiliates or any of
their respective directors, officers, employees, affiliates or representatives,
or hold Seller, any Subsidiary, any of their affiliates or any such persons
liable, with respect thereto.
6.11. Competition. (a) Parent agrees that from the Closing until the
second anniversary of the Closing Date, it will not directly or indirectly
engage or invest in any business in competition with the Compression Services
Business as conducted immediately prior to the Closing. It is understood and
agreed that (i) Parent shall not be deemed to be in default with respect to the
foregoing covenants as a result of any investment it may make in not more than
five percent of the outstanding shares or other units of any security subject to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, (ii) the provisions of this Section 6.11(a) shall not apply to any
business activities of Parent, or any of its direct or indirect affiliates,
actually being conducted as of the date hereof, other than the Transferred
Subsidiaries and the Assets, (iii) this Section 6.11(a) shall not be construed
to prohibit Parent, directly or through any affiliate, from hereafter acquiring
and continuing to own and operate any entity which has operations that compete
with the Compression Services Business as conducted immediately prior to the
Closing if such operations account for no more than twenty percent
50
(20%) of such entity's (including its subsidiaries and divisions) consolidated
revenues, and (iv) the provisions of this Section 6.11(a) shall not be construed
to prohibit Parent, directly or through any affiliate, from selling inventory or
other assets currently owned by a subsidiary or affiliate.
(b) In the event that the covenants contained in Section 6.11(a)
are more restrictive than permitted by law, the parties hereto agree that
the covenants contained in Section 6.11(a) shall be enforceable and
enforced to the extent permitted by law.
(c) During the period beginning on the date hereof and ending on
the earlier of (i) the second anniversary of the Closing Date and (ii) the
date of termination of this Agreement, each of Parent and Seller will not,
directly or indirectly, (A) solicit or seek to employ any Business Employee
who is actively engaged by Seller or one of its subsidiaries in the
Compression Services Business as of the date of this Agreement; or (B)
cause or attempt to cause any such Business Employee to resign or sever
such person's relationship with the Compression Services Business. The
limitations set forth in this paragraph (c) shall not apply to any person
whose employment is terminated, directly or indirectly, by Buyer or any of
its affiliates; who responds to an advertisement that is placed in general
circulation by or on behalf of Parent, Seller or any of their subsidiaries
and that is not targeted at persons to whom paragraph (c) otherwise would
apply; or who initiates employment discussions with Parent, Seller or any
of their subsidiaries.
(d) Each of the parties hereto acknowledges and agrees that the
remedy at law for any breach of the requirements of this Section 6.11 would
be inadequate, and agrees and consents that without intending to limit any
additional remedies that may be available, temporary and permanent
injunctive and other equitable relief may be granted without proof of
actual damage or inadequacy of legal remedy in any proceeding which may be
brought to enforce any of the provisions of this Section 6.11.
6.12. Asset Returns. In the event Buyer receives any assets of the
Compression Services Business that are not intended to be transferred pursuant
to the terms of this Agreement, Buyer agrees to promptly return such assets to
Seller at Seller's expense. In the event any payments are made to Buyer
following the Closing with respect to accounts receivable that are not
attributable to the Compression Services Business or that relate to any Excluded
Assets or Excluded Liabilities, Buyer agrees to forward such payments to Seller
promptly. In the event any payments are made to Seller following the Closing
with respect to accounts receivable that are attributable to the Compression
Services Business or that relate to any Assets or Assumed Liabilities, Seller
agrees to forward such payments to Buyer promptly. In the event that, following
the Closing, Seller or any of the Subsidiaries receive any assets that were
intended to be, but were not, transferred pursuant to this Agreement at the
Closing, Seller shall promptly notify Buyer to such effect and shall comply with
its obligations in respect thereof contemplated by Section 1.12.
6.13. Transition Services Agreements. On or prior to the Closing Date,
Buyer and Seller shall execute and deliver, or cause one or more of their
subsidiaries to execute and deliver, a transition services agreement
substantially in the
51
form attached as Exhibit F hereto (the "Seller Transition Services Agreement")
and a transition services agreement substantially in the form attached as
Exhibit G hereto (the "Buyer Transition Services Agreement", together with the
Seller Transition Services Agreement, the "Transition Services Agreements") with
respect to facilities and services currently shared by the Compression Services
Business and other business operations of Seller or its subsidiaries.
6.14. Guarantees. Parent hereby guarantees full and timely performance
by Seller of Seller's obligations under this Agreement. Hanover hereby
guarantees full and timely performance by Buyer of Buyer's obligations under
this Agreement.
6.15. Private Placement. From the period beginning on the date hereof
and ending on the date that is 150 days after the Closing Date (the "Private
Placement Period"), Hanover shall use its reasonable efforts to assist Parent to
accelerate the monetization of the shares of Hanover Stock owned by Parent as a
result of the transactions contemplated by this Agreement through the private
placement of such shares with institutional investors; provided that, during the
Private Placement Period, in the event Parent rejects an unconditional and
unqualified written bona fide offer to purchase all (but not less than all) of
the shares of Hanover Stock then owned by Parent in a private placement of such
shares at a net price (after taxes and transaction costs and expenses) in cash
equal to or above the value used in the determination of the Stock Purchase
Price pursuant to Section 1.7, Hanover's obligations under (a) this Section 6.15
and (b) the Registration Rights Agreement shall automatically terminate.
6.16. Seller Credit Support Instruments. From and after the date
hereof, neither Seller nor any of its affiliates shall issue any standby letters
of credit, guarantees, indemnity bonds or other credit support instruments on
behalf of Seller and/or the Subsidiaries except in the Ordinary Course of
Business.
6.17. Use of Name. (a) Each of Parent and Seller agrees that, until
the third anniversary of the Closing Date, it will not directly or indirectly
use the name "Dresser-Rand Compression Services" or "D-R Compression Services"
as or as part of any trade name, corporate name, domain name, trademark or
service xxxx or as part of any logo or design, except with respect to and in
connection with (i) binding transactions in effect as of or prior to the Closing
Date or (ii) the utilization of inventory and other consumable products owned by
Seller or any of its subsidiaries on the Closing Date. Neither Seller nor Parent
shall interfere in any manner with Hanover's or its subsidiaries use of the name
"D-R Compression Services."
(b) Parent shall not permit the transfer of Seller or substantially
all of Seller's assets, as the case may be, to any third party ("Third
Party Acquirer") on terms permitting such Third Party Acquirer to use the
name "Dresser-Rand Compression Services" as or as part of any trade name,
corporate name, domain name, trademark or service xxxx or as part of any
logo or design, except with respect to and in connection with (i) binding
transactions in effect as of or prior to the Closing Date (other than a
transaction comprising the transfer of Seller or substantially all of
Seller's assets to a Third Party Acquirer) or (ii) the utilization of
inventory and other consumable products owned by Seller or any of its
subsidiaries on the Closing Date.
6.18. Follow-On Relationship. (a) During the period from the earlier
of (a) fifteen months after the Closing Date or (b) January 1, 2002, until the
third anniversary of the earlier of such dates, Hanover shall purchase products,
goods and services with aggregate
52
purchase prices of not less than twenty-five million dollars ($25,000,000) from
Seller, its successors and/or any Third Party Acquirer, subject (i) in the case
of any products, goods and services previously delivered to the Compression
Services Business from other operating units of Seller or its subsidiaries, to
reasonably agreeable pricing terms, it being understood that all other terms
shall continue as the terms for such products, goods or services during such
period and (ii) in the case of any new products, goods and services, to
reasonably agreeable pricing, delivery and warranty terms.
(b) Hanover shall be relieved of its obligations pursuant to
Section 6.18(a) in the event that Seller or a Third Party Acquirer
continues to violate the provisions of Section 6.17(b) after receiving two
written notices at least 14 days apart (with respect to two separate
violations or an ongoing violation which is not terminated after delivery
of the first notice) from Hanover or Buyer in good faith requesting that
Seller or such Third Party Acquirer promptly discontinue using the name
"Dresser-Rand Compression Services" in violation of Section 6.17(b) of this
Agreement.
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 consent of Seller and Buyer;
(b) by Buyer if the Closing has not occurred on or before December
11, 2000, unless the failure of such consummation shall be due to the
failure of Buyer to comply in all material respects with the
representations, warranties, agreements and covenants contained herein to
be performed by Buyer on or before December 11, 2000;
(c) by Seller if the Closing has not occurred on or before
December 11, 2000, unless the failure of such consummation shall be due to
the failure of Seller to comply in all material respects with the
representations, warranties, agreements and covenants contained herein to
be performed by Seller on or before December 11, 2000; or
(d) by either Seller or Buyer 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 Seller or Buyer pursuant to Section 7.1 hereof, written
notice thereof shall forthwith be given to the other party. If this Agreement is
terminated and the transactions contemplated by this Agreement are abandoned as
provided herein:
53
(eeeee) 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;
(fffff) The provisions of the Confidentiality Agreement shall continue
in full force and effect; and
(ggggg) No party to this Agreement will have any liability under this
Agreement to any other 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 Section 9.1.
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification.
(a) Indemnification by Seller. (i) Subject to the limits set forth in
this Section 8.1, Seller agrees to indemnify, defend and hold Buyer and its
affiliates (including, after the Closing Date, the Transferred
Subsidiaries) and their respective officers, directors, partners,
stockholders, employees, agents and representatives (the "Buyer Indemnified
Persons") harmless from and in respect of any and all losses, damages,
costs and reasonable expenses (including, without limitation, reasonable
fees and expenses of counsel) (collectively, "Losses"), that they may incur
arising out of or due to (A) any inaccuracy of any representation or the
breach of any warranty, covenant, undertaking or other agreement of Seller
contained in this Agreement or the Disclosure Schedule (other than with
respect to Taxes) and (B) the Excluded Liabilities (other than with respect
to Taxes). Anything to the contrary contained herein notwithstanding, (X)
none of the Buyer Indemnified Persons shall be entitled to recover from
Seller or any of its affiliates for any claims for indemnity or damages
with respect to any inaccuracy or breach of any representations or
warranties, unless and until the total of all such claims in respect of
Losses pursuant to this Section 8.1(a) exceeds $1,000,000 (the "Buyer
Deductible") and then only for the amount by which such claims exceed such
amount, and (Y) the Buyer Indemnified Parties shall not be entitled to
recover more than an amount equal to fifty percent (50%) of the Purchase
Price for any inaccuracies or breaches of representations or warranties
hereof, it being understood that no such limit shall apply in the case of
fraud.
(ii) Buyer agrees to cooperate with Seller and to take all other
reasonable actions, and make all other reasonable omissions, to avoid
and minimize Losses indemnified by Seller hereunder arising out of or
due to any inaccuracy or breach of Section 2.17. This Article VIII
constitutes the sole remedy of the Buyer Indemnified Persons against
Seller and its affiliates regarding Losses relating to Environmental
Laws or Hazardous Materials and the Buyer Indemnified Persons hereby
waive all other rights or causes of action against Seller and its
affiliates under or relating to Environmental Laws or Hazardous
Materials.
54
(b) Indemnification by Buyer. Subject to the limits set forth in this
Section 8.1, Buyer agrees to indemnify, defend and hold Seller, its
affiliates and its and their agents and representatives (the "Seller
Indemnified Persons") harmless from and in respect of any and all Losses
that they may incur arising (A) out of or due to any inaccuracy of any
representation or the breach of any warranty, covenant, undertaking or
other agreement of Buyer or Hanover contained in this Agreement; (B) as a
result of the conduct of the Compression Services Business or of any
Transferred Subsidiary after the Closing Date; (C) under any guarantees,
standby letters of credit or other forms of credit support provided by
Seller or any of its affiliates to third parties in respect of obligations
of the Compression Services Business or of any Transferred Subsidiary and
(D) out of or due to the Assumed Liabilities. Anything to the contrary
contained herein notwithstanding, (X) none of Seller Indemnified Persons
shall be entitled to recover from Buyer or any of its affiliates for any
claims for indemnity or damages with respect to any inaccuracy or breach of
any representations or warranties, unless and until the total of all such
claims in respect of Losses pursuant to this Section 8.1(b) exceeds
$1,000,000 (the "Seller Deductible") and then only for the amount by which
such claims exceed such amount, and (Y) Seller Indemnified Parties shall
not be entitled to recover more than an amount equal to fifty percent (50%)
of the Purchase Price for any inaccuracies or breaches of representations
or warranties hereof, it being understood that no such limit shall apply in
the case of fraud.
(c) Indemnification Calculations. (i) The amount of any Losses for
which indemnification is provided under this Article VIII shall be computed
net of any insurance proceeds received by the indemnified party in
connection with such Losses. If an indemnified party receives insurance
proceeds 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 received, up to the amount of
indemnification received. An indemnified party shall use commercially
reasonable efforts to pursue insurance claims with respect to any Losses.
If the amount with respect to which any claim is made under this Article
VIII or under Section 6.5 (an "Indemnity Claim") gives rise to a currently
realizable Tax Benefit (as defined below) to the party making the claim,
the indemnity payment shall be reduced by the amount of such Tax Benefit
actually available to the party making the claim. To the extent such
Indemnity Claim does not give rise to a currently realizable Tax Benefit,
if the amount with respect to which such Indemnity Claim is made gives rise
to a subsequently 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. Refunds relating to subsequent
Tax Benefits shall be made on the last business day of the month following
the year in which the Tax Benefit is realized. For the purposes of this
Agreement, any subsequently realized Tax Benefit shall be treated as though
it were a reduction in the amount of the initial Indemnity Claim, and the
liabilities of the parties shall be redetermined as though both occurred at
or prior to the time of payment of the initial Indemnity Claim. 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 realized
proportionately with any other losses, deductions, credits or
55
items. For the purposes of this Section 8.1(c), a Tax Benefit is "currently
realizable" to the extent that such Tax Benefit can actually be realized in
the current taxable period or year or in any Tax Return with respect
thereto (including through a carry back to a prior taxable period) or in
any taxable period or year prior to the date of the Indemnity Claim. In the
event that there should be a determination disallowing the Tax Benefit, the
indemnifying party shall be liable to refund to the indemnified party the
amount of any related reduction previously allowed or payments previously
made to the indemnifying party pursuant to this Section 8.1(c). The amount
of the refunded reduction or payment shall be deemed a payment under this
Section 8.1(c) and thus shall be paid subject to any applicable reductions
under this Section 8.1(c).
(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.
(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 18 month anniversary
of the Closing Date, provided that (i) the representations and warranties
set forth in Sections 2.3, 2.4, 2.12, 2.13, 2.24, the first sentence of
Section 2.1, and Sections 3.2 and 3.5 will survive the Closing Date and
will remain in full force and effect until the expiration of the applicable
statute of limitations (after giving effect to waiver, mitigation or
extension thereof) and (ii) the representations and warranties set forth in
Section 2.17 will survive the Closing Date and will remain in full force
and effect until the third anniversary of the Closing Date; 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 Section 8.1(a) or
8.1(b), the party or parties seeking indemnification 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 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 or, following the delivery by the Indemnifying Party to
the party or parties seeking indemnification of the Indemnifying Party's
acknowledgment in writing that the relevant Loss is an indemnified
liability hereunder, 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. The Indemnifying Party
and the party seeking indemnification agree to
56
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. 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 and (y)
all relief provided is paid or satisfied in full by the Indemnifying 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. 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).
(f) Payment. On each occasion that any indemnified party shall be
entitled to indemnification or reimbursement under this Section 8.1, 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 Section 8.1, 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) Tax Indemnity. Notwithstanding anything to the contrary in this
Section 8.1 (other than as specifically set forth in Sections 8.1(c) and
(d)), indemnification with respect to Taxes shall be governed solely by
Section 6.5.
ARTICLE IX
MISCELLANEOUS
9.1. Fees and Expenses. Except as otherwise provided in this Agreement,
each of Seller and Buyer shall bear its own expenses in connection with the
preparation and negotiation of this Agreement and the consummation of the
transactions contemplated by this Agreement. Each of Seller and Buyer shall bear
the fees and expenses of any broker or finder retained by such party and their
respective affiliates in connection with the transactions contemplated herein.
9.2. Governing Law. This Agreement shall be construed under and governed
by the laws of 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 Buyer and Seller.
57
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 Buyer, in the case of assignment by Seller, and
Seller, in the case of any assignment by Buyer.
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 Buyer:
Hanover Compression Inc.
00000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
With a copy to:
Hanover Compressor Company
00000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
58
With a copy to:
Xxxxxx & Xxxxxxx
Sears Tower, Suite 5800
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
If to Hanover:
Hanover Compressor Company
00000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
With a copy to:
Xxxxxx & Xxxxxxx
Sears Tower, Suite 5800
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
If to Seller:
Dresser-Rand Company
00000 Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxx 00000
Attn: Chief Counsel
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
With a copy to:
Xxxxxxxxx-Xxxx Company
000 Xxxxxxxx Xxxxx Xxxx
Xxxxxxxxx Xxxx, Xxx Xxxxxx 00000
Attn: Corporate Secretary
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
59
With a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
If to Parent:
Xxxxxxxxx-Xxxx Company
000 Xxxxxxxx Xxxxx Xxxx
Xxxxxxxxx Xxxx, Xxx Xxxxxx 00000
Attn: Corporate Secretary
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
With a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx
(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.
Except as otherwise provided herein, any notice under this Agreement
will be deemed to have been given (x) on the date such notice is personally
delivered or delivered by facsimile, (y) four days after the date of mailing if
sent by certified or registered mail or (z) the next succeeding business day
after the date such notice is delivered to the overnight courier service if sent
by overnight courier; provided that in each case notices received after 4:00
p.m. (local time of the recipient) shall be deemed to have been duly given on
the next business day.
9.7. Complete Agreement. This Agreement, the Confidentiality Agreement 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.
60
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. Seller and Buyer will consult with each other and will
mutually agree upon any publication or press release of any nature with respect
to 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. 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.
9.11. 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.
9.12. 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 give to any person or corporation, other than the parties hereto
and their permitted successors or assigns, any rights or remedies under or by
reason of this Agreement.
9.13. Bulk Sales Law. Buyer and Seller each agree to waive compliance by
the other with the provisions of the bulk sales laws of any jurisdiction.
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
61
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.
62
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be
executed by its duly authorized officer, in each case as of the day and year
first above written.
HANOVER COMPRESSOR COMPANY
By: /s/ XXXXXXX X. XXXXXXXX
____________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President
HANOVER COMPRESSION INC.
By: /s/ XXXXXXX X. XXXXXXXX
____________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President
DRESSER-RAND COMPANY
By: Xxxxxxxxx-Xxxx Company (a General Partner)
By: /s/ XXXXXX X. XXXX
____________________________
Name: Xxxxxx X. Xxxx
Title: Vice-President
By: D-R Acquisition, LLC (a General Partner)
By Xxxxxxxxx-Xxxx Company (as its Sole Member)
By: /s/ XXXXXX X. XXXX
____________________________
Name: Xxxxxx X. Xxxx
Title: Vice-President
With respect to Sections 6.11, 6.14 and 6.17 only:
XXXXXXXXX-XXXX COMPANY
By: /s/ XXXXXX X. XXXX
____________________________
Name: Xxxxxx X. Xxxx
Title: Vice-President
63
AMENDMENT NO. 1 TO PURCHASE AGREEMENT
-------------------------------------
Amendment No. 1, dated as of August 31, 2000 (this "Amendment"), to
the Purchase Agreement (the "Purchase Agreement"), dated as of July 11, 2000, by
and among Hanover Compressor Company, a Delaware corporation ("Hanover"),
Hanover Compression Inc., a Delaware corporation and a wholly owned subsidiary
of Hanover (the "Buyer"), Dresser-Rand Company, a New York general partnership
(the "Seller") and Xxxxxxxxx-Xxxx Company (the "Parent").
W I T N E S S E T H:
-------------------
WHEREAS, Buyer and Seller desire to amend the Purchase Agreement as
provided herein;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, it is hereby agreed as follows:
ARTICLE I
---------
1.1 Section 2.13(a) of the Disclosure Schedule. Section 2.13(a) of
the Disclosure Schedule is hereby amended by deleting the existing Section
2.13(a) of the Disclosure Schedule in its entirety and replacing it with the new
Section 2.13(a) of the Disclosure Schedule attached hereto as Attachment A.
1.2 Exhibit A to the Purchase Agreement. Exhibit A to the Purchase
Agreement is hereby amended by deleting the existing Exhibit A in its entirety
and replacing it with the new Exhibit A attached hereto as Attachment B.
1.3 Exhibit C to the Purchase Agreement. Exhibit C to the Purchase
Agreement is hereby amended by deleting the existing Exhibit C in its entirety
and replacing it with the new Exhibit C attached hereto as Attachment C.
1.4 Post-Closing Name Changes. Article VI of the Purchase Agreement
is hereby amended by inserting at the end thereof, the following new Section
6.19:
"Section 6.19. Post-Closing Name Changes. Each of Hanover and Buyer
shall use its reasonable best efforts to cause the name of each Transferred
Subsidiary to be changed (where applicable) to a name that does not include
the words "Dresser-Rand" as promptly as practicable after the Closing (but
in any event no later than 60 days after the Closing Date)."
ARTICLE II
----------
The Purchase Agreement, as amended by this Amendment, is and shall
continue to be in full force and effect and is hereby in all respects ratified
and confirmed. Nothing in this Amendment shall waive or be deemed to waive or
modify (except as expressly set forth herein)
any rights or obligations of any of the parties under the Purchase Agreement.
This Amendment shall be governed by, and construed in accordance with, the laws
of the State of New York. This Amendment may be executed in one or more
counterparts each of which shall be deemed to be an original by the party
executing such counterpart, but all of which shall be considered one and the
same instrument.
IN WITNESS WHEREOF, each of the undersigned has caused this Amendment
to be executed by its duly authorized officer, in each case as of the day and
year first above written.
HANOVER COMPRESSOR COMPANY
By: /s/ XXXXXXX X. XXXXXXXX
____________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President
HANOVER COMPRESSION INC.
By: /s/ XXXXXXX X. XXXXXXXX
____________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President
DRESSER-RAND COMPANY
By: Xxxxxxxxx-Xxxx Company (a General Partner)
By: /s/ XXXXXX X. XXXXXX
____________________________
Name: Xxxxxx X. Xxxxxx
Title: Vice-President
By: D-R Acquisition, LLC (a General Partner)
By: Xxxxxxxxx-Xxxx Company
(as its Sole Member)
By: /s/ XXXXXX X. XXXXXX
____________________________
Name: Xxxxxx X. Xxxxxx
Title: Vice-President
XXXXXXXXX-XXXX COMPANY
By: /s/ XXXXXX X. XXXXXX
____________________________
Name: Xxxxxx X. Xxxxxx
Title: Vice-President
2
