FORM S-4

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box. o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o


(1)	Estimated solely for the purpose of calculating the registration fee under Rule 457(f) of the Securities Act of 1933, as amended the “Securities Act”).

(2)	Pursuant to Rule 457(n) under the Securities Act, no separate filing fee is required for the guarantees).

The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

$420,000,000 principal amount of its 7 3/8% Senior Subordinated Notes due 2014, which have been registered under the Securities Act of 1933, for any and all of its outstanding 7 3/8% Senior Subordinated Notes due 2014.


	•	We will exchange all outstanding notes that are validly tendered and not validly withdrawn for an equal principal amount of exchange notes that are freely tradable.

	•	You may withdraw tenders of outstanding notes at any time prior to the expiration date of the exchange offer.

	•	The exchange offer expires at 12:00 a.m. midnight, New York City time, on , 2005, unless extended. We do not currently intend to extend the expiration date.

	•	The exchange of outstanding notes for exchange notes in the exchange offer will not be a taxable event for United States federal income tax purposes.


	•	The exchange notes are being offered in order to satisfy certain of our obligations under the registration rights agreement entered into in connection with the private offering of the outstanding notes.

	•	The terms of the exchange notes to be issued in the exchange offer are substantially identical to the outstanding notes, except that the exchange notes will be freely tradable.


	•	The exchange notes may be sold in the over-the-counter market, in negotiated transactions or through a combination of such methods. We do not plan to list the notes on a national market.


	•	Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act of 1933.

	•	This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities.

	•	We have agreed that, for a period of 180 days after the consummation of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

See “Risk Factors” beginning on page 20 for a discussion of certain risks that you should consider before participating in the exchange offer.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the exchange notes to be distributed in the exchange offer or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. The prospectus may be used only for the purposes for which it has been published and no person has been authorized to give any information not contained herein. If you receive any other information, you should not rely on it. We are not making an offer of these securities in any state where the offer is not permitted.

Unless the context otherwise indicates, as used in this prospectus, (i) the terms “we,” “our,” “us” and similar terms refer to Dresser-Rand Group Inc. and its consolidated subsidiaries after giving effect to the consummation of the acquisition and financing thereof as described in “The Transactions,” (ii) the term “issuer” refers to Dresser-Rand Group Inc. and not to any of its subsidiaries, (iii) the term “Dresser-Rand Entities” refers to Dresser-Rand Company, and its direct and indirect subsidiaries, Dresser-Rand Canada, Inc. and Dresser-Rand GmbH, (iv) the term “guarantors” refers to the domestic direct and indirect wholly-owned subsidiaries of Dresser-Rand Group Inc., which will guarantee on a senior subordinated, unsecured basis the obligations of the issuer under the notes and (v) the term “Ingersoll-Rand” refers to Ingersoll-Rand Company Limited, a Bermuda corporation, and its predecessors.

The data included in this prospectus regarding industry size and relative industry position are based on a variety of sources, including company research, third party studies and surveys, industry and general publications and estimates based on our knowledge and experience in the industry in which we operate. These sources include publications by the International Compressed Air and Allied Machinery Committee, the National Electrical Manufacturers Association, the Gas Processors Suppliers Association, the Hydrocarbon Processing Industry, the Energy Information Administration, the National Petroleum Council, the National Petrochemical and Refiners Association, the American Petroleum Institute, Oil & Gas Journal magazine, Diesel and Gas Turbine World magazine, as well as information derived from our technology enabled selling system, D-R Avenue, and our CRM system, Client Interface Response System. Our estimates have been based on information obtained from our clients, suppliers, trade and business organizations and other contacts in the industry. We believe these estimates to be reliable as of the respective date of each report. However, this information may prove to be inaccurate due to the method by which we obtained some of the data for our estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. Forecasts are particularly likely to be inaccurate, especially over long periods of time. As an example of the unpredictable nature of these forecasts, in 1983, the U.S. Department of Energy forecast that oil would cost $74 per barrel in 1995, however, the price of oil was actually $17 per barrel. In addition, we do not know what assumptions regarding general economic growth were used in preparing the forecasts we cite. As a result, you should be aware that industry data included in this prospectus, and estimates and beliefs based on that data, may not be reliable.

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed information, including the section entitled “Risk Factors” and the financial statements and related notes, included elsewhere in this prospectus. Because this is a summary, it may not contain all the information that may be important to you. You should read the entire prospectus, including the financial statements and related notes, before making your investment decision.

Dresser-Rand Group Inc.

Our Business

We are among the largest global suppliers of rotating equipment solutions to the worldwide oil, gas, petrochemical and process industries. In 2003, approximately 95% of our revenues were generated from oil and gas infrastructure spending. Our services and products are used for a wide range of applications, including oil and gas production, high-pressure field injection and enhanced oil recovery, pipelines, refinery processes, natural gas processing, and petrochemical production. We believe we have the largest installed base in the world of the classes of equipment we manufacture, with an estimated 40% of the total installed base of equipment in operation. Our installed base includes such well-recognized brand names as Dresser-Rand, Dresser-Clark, Worthington, Turbodyne and Terry. We provide a full range of aftermarket parts and services to this installed base through our global network of 24 service and support centers covering 90 countries. Our extensive and diverse client base consists of most major and independent oil and gas producers and distributors worldwide, national oil and gas companies, and chemical and industrial companies. Our clients include BP, ChevronTexaco, Statoil, ExxonMobil, Lukoil, Sinopec, Shell Chemical, Duke Energy and the U.S. and certain foreign governments. No single client has represented more than 5% of our total revenues over any consecutive two-year period.

We operate globally with manufacturing facilities in the United States, France, Germany, Norway, China, India and Brazil. We have one of the broadest sales and services networks in the industry, with locations in all of the major international energy markets, established coverage of over 90 countries, and over 4,600 employees. We believe our recent financial performance demonstrates our ability to improve our results through on-going commitment to operational excellence, as well as through the growth of our services-centered, solutions-based business model. For the year ended December 31, 2003 and the nine months ended September 30, 2004, our backlog was $419.9 million and $586.2 million, we generated net income of $20.4 million and $37.7 million and EBITDA of $59.0 million and $60.6 million, respectively. EBITDA is defined, reconciled and its importance explained, in note 3 to “— Summary Historical and Pro Forma Combined Financial Data.” Our backlog and EBITDA for the nine month period ended September 30, 2004 increased 21.8% and 196.5%, respectively, from the nine month period ended September 30, 2003, reflecting the impact of both our growth-oriented business realignment and our continued focus on operating efficiency.

We continue to grow our business through a solutions-based service strategy that combines our industry-leading technology, proprietary worldwide service center network and deep product expertise. This approach drives our growth as we offer integrated service solutions that help our clients maximize returns on their production and processing equipment. We believe our business model and alliance-based approach align us with our clients who are shifting from purchasing isolated units and services on a transactional basis to choosing service providers that can help optimize performance over the entire life cycle of their equipment. Our alliance program encompasses both the provision of new units and/or services, and we offer our clients a dedicated team, streamlined engineering and procurement process and a life cycle approach to manufacturing, operating and maintaining their equipment, whether originally manufactured by us or by a third party.

Our business operates in two segments: new units and aftermarket parts and services. The following charts show the proportion of our revenue generated by segment, geography and end market for the periods indicated:

(PIE CHART)


	*New Units*

We are a leading manufacturer of highly-engineered turbo and reciprocating compression equipment and steam turbines, and also manufacture special-purpose gas turbines. In new unit sales of turbo and reciprocating compressors, we are the clear market leader in North America, and have consistently ranked in the top three in worldwide market share. We build custom-designed products to client specifications for long-life, critical applications.

We believe clients are increasingly choosing their suppliers based upon the capability to custom engineer, manufacture and deliver reliable high-performance products, with the lowest total cost of ownership, in the shortest cycle time, and to provide timely, locally based service and support. Our client alliance sales have increased substantially as a result of our ability to meet these client requirements. For example, the proportion of our core centrifugal and process reciprocating new unit revenues from client alliances has increased from approximately 20% for 2000 to approximately 45% for 2003.


	*Aftermarket Parts and Services*

Given the critical role played by the equipment we sell, customers place a great deal of importance on a supplier’s ability to provide rapid, comprehensive service, and we believe that the aftermarket parts and services business represents a significant long-term growth opportunity. We offer a comprehensive range of aftermarket parts and services, including installation, maintenance, monitoring, operation, repairs, overhauls and upgrades. We provide our solutions to our clients through a proprietary network of 24 service and support centers in 14 countries, employing over 1,000 service personnel, servicing our own and other OEMs’ turbo and reciprocating compressors as well as steam and gas turbines. Our coverage area of service centers servicing both turbo and reciprocating compressors is approximately twice as large as that of our next closest competitor.

We believe we have the largest installed base of the classes of equipment we manufacture and the largest aftermarket parts and services business in the industry. We provide parts and aftermarket services to the majority of our installed base of equipment, and estimate that we capture approximately 50% of the total aftermarket revenue generated by our installed base. We focus on a global offering of critical, technologically

advanced aftermarket offerings, and as a result our aftermarket activities tend to be concentrated on the provision of higher value added parts and upgrades, and the delivery of sophisticated operating, repair, and overhaul services. Smaller independent companies tend to focus on local markets and have a more basic aftermarket offering.

The steady demand from our installed base for parts and aftermarket services represents a stable source of recurring revenues and cash flow. Moreover, with our value-based solutions strategy, we have a demonstrated track record of growth in this segment as a result of our focus on expanding our service offerings into new areas, including servicing other OEMs’ installed base of equipment, developing new technology upgrades and increasing our penetration of higher value-added services to our own installed base.

Our Industry

The rotating equipment and services industry manufactures and services a wide range of technologically advanced equipment, including centrifugal and reciprocating compressors, steam and gas turbines, expanders and control systems. The rotating equipment industry includes manufacturing and servicing a wide and diverse range of products, which can be grouped into two distinct categories:

• “standard” equipment used for low-horsepower, lower-pressure and lower-volume applications; and

• custom-engineered equipment, built to customer specifications, engineered for the specific operating environment and application in which it will be put to use. This equipment is generally used in high-pressure/volume applications, typically consists of large equipment packages, and is generally used in large scale production operations.

Most of Dresser-Rand’s revenues are generated from the sale and servicing of this second category of rotating equipment. Demand for these products and services comes from a wide variety of large end markets, including companies in the three major segments of the oil and gas industries (upstream, involving the production of oil and gas; midstream, involving the preparation and transportation of natural gas and liquids for future use; and downstream, involving refining), petrochemical, chemical, general industrial and power industries. We estimate that the worldwide aggregate annual value of new unit sales of the classes of equipment we manufacture and the aftermarket parts and services needs of the installed base of such equipment (both in-house and outsourced) is approximately $10 billion.

We believe that the rotating equipment and services industry will continue to demonstrate significant growth due to the following factors:

• natural gas consumption is increasing worldwide at an average rate of 2.4% per year as a result of worldwide economic growth and the recognition of natural gas as a clean-air fuel;

• increased demand for forecasted natural gas is driving substantial growth in spending on liquified natural gas infrastructure; forecast spending on LNG plant equipment for 2005-2008 is $13.4 billion, 155% more than was spent from 1964-2004;

• decline rates associated with maturing natural gas fields in the United States and other countries have resulted in increased requirements for compression products and services to maintain commercially viable levels of production;

• the refining sector continues to experience increasing demand pressures as current refinery capacity is reaching a peak;

• environmental laws such as the Clean Air Act and the curtailing of the practice of flaring gas increase the demand for compression products and services;

• the production of natural gas and oil worldwide will continue to grow as a result of increasing demand for fossil fuels; and

• continued development of pipeline infrastructure, particularly in Asia and Latin America, and increased privatization of state-owned energy producers internationally, leading to increased outsourcing of compression services.

We believe that rotating equipment solutions providers with global scale will be well positioned to participate in a disproportionately high share of the future growth in this industry as customers increasingly shift their business to the handful of companies with the ability to fulfill the full range of their equipment and service needs worldwide.

Competitive Strengths

Global Presence and Market Leadership. We believe that our broad portfolio of products and services, global presence, strong brand recognition, track record of innovation and reputation for quality and performance, combined with a sales presence in more than 90 countries, provide us with a significant advantage in competition for business from large, multinational customers. We operate in all the world’s significant energy markets and believe that we are a leading provider in most of the markets we serve.

Largest Installed Base in the Industry. As of September 30, 2004, we estimate that there were more than 77,000 of our units in operation. We believe this represents more than 40% of all the units in our classes of products that are currently in operation and is the largest installed base of such equipment in the industry. This significant scale advantage offers a number of competitive benefits, including:

• a significant opportunity to grow our aftermarket parts and services business as a result of the portion of our installed base currently serviced by clients in-house, combined with an industry trend toward outsourcing;

• a substantial source of stable, recurring, high-margin aftermarket revenue from the significant parts and services requirements of units over their long operational lives and our clients’ general preference for OEM parts and services; and

• the capacity to support both a high level of reinvestment in research and development and a global service center network that is difficult for competitors with a smaller installed base to match.

      Largest Network of Service and Support Centers. We have 24 service and support centers employing approximately 1,000 service personnel in 14 countries, providing coverage in over 90 countries and offering a broad range of support services. Because many aftermarket parts and services sales decisions are made by clients at the local plant level, on the basis of supplier expertise, local presence and response time, we believe that our global network protects our existing aftermarket activity and positions us for future growth in this business.

      Leading Technology Platform. We have a long history of technology leadership and innovation in our industry. Our research efforts center around leading technologies that maximize operating performance by increasing efficiency, durability, reliability and versatility. For example, in the mid-1990s we spent approximately five years and over $60 million to develop our DATUM turbo compressor platform offerings. We believe this platform is more efficient than competing offerings, offers clients the lowest total cost of ownership, reduces emissions and noise levels and improves ease and speed of maintenance.

      Fastest Cycle Time. We believe we generally have the fastest cycle time in the industry among manufacturers in our product range. Our short cycle time, the time from order booking to unit delivery, is valuable to the client and provides us with a competitive advantage. On a typical oil and gas project, our fast cycle time can reduce unit delivery time by as much as 12 weeks, thus reducing project costs and providing earlier start-up of the production equipment.

      Substantial Investment in Systems. We view systems and processes as key elements in providing rapid, high-quality, differentiated service. We have invested substantial resources to develop a number of key proprietary systems. These systems automate portions of the engineering and design phases of a product, track information on our and our competitors’ installed base of equipment, and allow clients to log any technical support or service requests they have into our system and automatically be directed to


	the most appropriate subject-matter expert in our company. These proprietary systems enable us to reduce costs, shorten cycle times, better serve our clients and grow our aftermarket parts and services business, as well as allow us to effectively monitor and manage our responsiveness to client requests and manage the entire sales cycle from lead generation to order booking on a global basis.

	Strong and Experienced Management Team. Our management team has a demonstrated track record of financial and operational achievement. The management team has an average of 17 years experience with us, including our CEO who has been with us for 23 years, and has extensive industry experience and longstanding customer relationships. This management team has been responsible for the successful services revenue growth and cost reduction initiatives that have driven our increased profitability.

	Attractive Business Model. Our business model has several attractive features, including:

• Strong, Stable Cash Flow with Low Growth Capital Requirements. As a result of the recurring revenue from our aftermarket parts and services business, progress payments from customers that limit our need for additional working capital as we grow, and the moderate capital expenditures needed to support our services-based growth model, our business generates strong, recurring cash flows. Our cash flow from operations grew from $17.7 million to $62.3 million, an increase of 252%, for the nine month period ended September 30, 2004 as compared to the nine month period ended September 30, 2003.

• Visibility. We have a high degree of visibility into our forecasted financial performance. A substantial portion of our new unit orders is booked six to nine months in advance of delivery. As of September 30, 2004, our new units backlog was $417.8 million or 20.2% above the backlog at September 30, 2003. Since December 2000, our new units backlog has consistently exceeded 80% of our next twelve month new units revenues.

Business Strategy

In 2003, approximately 95% of our revenues were generated from energy infrastructure and oilfield spending. Additionally, $542.4 million, or 40.6%, of our total revenues were generated by our aftermarket parts and services business. We intend to continue to focus on the oilfield, natural gas and energy sectors and thus expect to capitalize on the expected long-term growth in equipment and services investment, especially related to natural gas, in these sectors. Specifically, we intend to:

      Increase Sales of Aftermarket Parts and Services to Existing Installed Base. The substantial portion of the aftermarket parts and services needs of our existing installed base of equipment currently not, or only partially, serviced by us represents a significant opportunity for growth. We believe the market has a general preference for aftermarket OEM parts and services. We are implementing a proactive approach to aftermarket parts and services sales that capitalizes on our knowledge of the installed base of our own and our competitors’ equipment. We believe our premium service level will result in continued growth of sales of aftermarket parts and services.

      Expand Aftermarket Parts and Services Business to Non-Dresser-Rand OEM Equipment. We believe the aftermarket parts and services market for non-Dresser-Rand equipment represents a significant growth opportunity that we have only just begun to pursue on a systematic basis. As a result of the knowledge and expertise derived from our long history and experience servicing the largest installed base in the industry, combined with our extensive investment in technology, we have a proven process of applying our technology and processes to improve the operating efficiency and performance of our competitors’ products. We intend to capitalize on our knowledge, our broad network of service centers, flexible technology and existing client relationships with most major industry participants to grow our aftermarket parts and services solutions for non-Dresser-Rand equipment.

      Grow Alliances. As a result of the need to improve efficiency in a competitive global economy, oil and gas companies are frequently consolidating their supplier relationships and seeking alliances with suppliers, shifting from purchasing units and services on an individual transactional basis to choosing


	service providers that can help them optimize performance over the entire life cycle of their equipment. In the past three years, we have seen a high level of interest among our clients in seeking alliances with us, and we have entered into agreements with more than 30 of our major clients. We plan to leverage our market leadership, global presence and comprehensive range of products and services to continue to take advantage of this trend by pursuing new client alliances as well as strengthening our existing alliances.

	Introduce New and Innovative Products and Technologies. We believe we are an industry leader in introducing new, value-added technology. Product innovation has historically provided, and we believe will continue to provide, significant opportunities to increase revenues from both new product sales and upgrades to our, and other OEMs’, installed base of equipment. Examples of recent new offerings include adapting the DATUM compressor platform for the revamping of other OEM equipment, a new design of dry-gas seals and bearings, a new generation of multiphase turbo separators and a complete line of remote-monitoring and control instrumentation that offers significant performance benefits to clients. We plan to continue developing innovative products, including new compressor platforms for subsea and underground applications, which would further open up new markets to us.

	Continue to Improve Profitability. We continually seek to improve our financial and operating performance through cost savings and productivity improvements. Since the fourth quarter of 2002, we adopted a number of restructuring programs across our entire company. An important element in these programs was process innovation that permitted us to streamline our operations. As a result, from September 30, 2002, through September 30, 2004, we consolidated eight facilities and reduced head count from 5,942 to 4,601 employees. As a result of our business realignment toward our aftermarket parts and services segment, our lean manufacturing initiatives and our decision to begin charging customers a margin on third-party equipment they ask us to package with our own units, our operating income per employee (based on the average number of employees in each period) for the nine month period ended September 30, 2004 as compared to the nine month period ended September 30, 2003, increased from approximately $1,241 to $9,390. We are focused on continuing to improve our cost position in every area of our business, and we believe there is substantial opportunity to further increase our productivity in the future.

	Selectively Pursue Acquisitions. We intend to continue our disciplined pursuit of acquisition opportunities that fit our business strategy. We expect to make acquisitions within the energy sector that add new products or technologies to our portfolio, provide us with access to new markets or enhance our current market positions. Given our size and the large number of small companies in our industry and related industries, we believe we are well positioned to be an industry consolidator over time.

The Acquisition

On August 25, 2004, Dresser-Rand Holdings, LLC, our indirect parent and an affiliate of First Reserve Corporation (“First Reserve”), entered into an equity purchase agreement with Ingersoll-Rand to purchase all of the equity interests in the Dresser-Rand Entities for approximately $1.13 billion. The acquisition closed on October 29, 2004. In connection with the acquisition, funds affiliated with First Reserve contributed $430 million in cash as equity to Dresser-Rand Holdings, LLC, which used this cash to fund a portion of the purchase price for the Dresser-Rand Entities. The remainder of the cash needed to finance the acquisition, including related fees and expenses, was provided by borrowings under our $420 million senior subordinated notes due 2014 and $695 million senior secured credit facility. The senior secured credit facility consists of a $395 million term loan portion and a $300 million revolving portion. See “The Transactions.”

Company Information

Dresser-Rand Group Inc. is a Delaware corporation formed in 2004. Our principal executive offices are located at Paul Clark Drive, Olean, New York 14760 and our telephone number is (716) 375-3000.

Our predecessor company was initially formed on December 31, 1986, when Dresser Industries, Inc. and Ingersoll-Rand entered into a partnership agreement for the formation of Dresser-Rand Company, a New York general partnership owned 50% by Dresser Industries, Inc. and 50% by Ingersoll-Rand. On October 1, 1992, Dresser Industries, Inc. purchased a 1% equity interest from the Dresser-Rand Company. In September 1999, Dresser Industries, Inc. merged with Halliburton Industries, and Dresser Industries, Inc.’s ownership interest in Dresser-Rand Company transferred to Halliburton Industries. On February 2, 2000, a wholly-owned subsidiary of Ingersoll-Rand purchased Halliburton Industries’ 51% interest in the Dresser-Rand Company.

Risk Factors

Investing in the notes involves substantial risk. You should carefully consider all the information in this prospectus prior to exchanging your outstanding notes. In particular, you should consider carefully the factors set forth under the heading “Risk Factors” below.

The Exchange Offer

In this prospectus, the term “outstanding notes” refers to the 7 3/8% senior subordinated notes due 2014; the term “exchange notes” refers to the 7 3/8% senior subordinated notes due 2014, each as registered under the Securities Act of 1933, as amended (the “Securities Act”); and the term “notes” refers to both the outstanding notes and exchange notes. On October 29, 2004, the issuer issued an aggregate of $420,000,000 principal amount of 7 3/8% senior subordinated notes due 2014 in a private offering.


General		In connection with the private offering, we entered into a registration rights agreement with the placement agents in which we agreed, among other things, to deliver this prospectus to you and to complete the exchange offer within 300 days after the date of first issuance of the outstanding notes. You are entitled to exchange in the exchange offer your outstanding notes for exchange notes which are identical in all material respects to the outstanding notes except:

		• the exchange notes have been registered under the Securities Act;

		• the exchange notes are not entitled to any registration rights which are applicable to the outstanding notes under the registration rights agreement; and

		• the liquidated damages provisions of the registration rights agreement are not applicable to the exchange notes.

The Exchange Offer		We are offering to exchange $420,000,000 principal amount of our 7 3/8% senior subordinated notes due 2014, which have been registered under the Securities Act, for any and all of our outstanding 7 3/8% senior subordinated notes due 2014.

		You may only exchange outstanding notes in a principal amount of $1,000 or in integral multiples of $1,000 in excess thereof.

Resale		Based on an interpretation by the staff of the Securities and Exchange Commission (the “SEC”) set forth in no-action letters issued to third parties, we believe that the exchange notes issued pursuant to the exchange offer in exchange for outstanding notes may be offered for resale, resold and otherwise transferred by you (unless you are our “affiliate” within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that:

		• you are acquiring the exchange notes in the ordinary course of your business; and

		• you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the exchange notes.

		If you are a broker-dealer and receive exchange notes for your own account in exchange for outstanding notes that you acquired as a result of market-making activities or other trading activities, you must acknowledge that you will deliver this prospectus in connection with any resale of the exchange notes. See “Plan of Distribution.”


		Any holder of outstanding notes who:

		• is our affiliate;

		• does not acquire exchange notes in the ordinary course of its business; or

		• tenders its outstanding notes in the exchange offer with the intention to participate, or for the purpose of participating, in a distribution of exchange notes

		cannot rely on the position of the staff of the SEC enunciated in Morgan Stanley & Co. Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling, dated available July 2, 1993, or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes.

Expiration Date		The exchange offer will expire at 12:00 a.m. midnight, New York City time, on , 2005, unless extended by us. We do not currently intend to extend the expiration date.

Withdrawal		You may withdraw the tender of your outstanding notes at any time prior to the expiration of the exchange offer. We will return to you any of your outstanding notes that are not accepted for any reason for exchange, without expense to you, promptly after the expiration or termination of the exchange offer.

Conditions to the Exchange Offer		The exchange offer is subject to customary conditions, which we may waive. See “The Exchange Offer — Conditions to the Exchange Offer.”

Procedures for Tendering Outstanding Notes		If you wish to participate in the exchange offer, you must complete, sign and date the applicable accompanying letter of transmittal, or a facsimile of such letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must then mail or otherwise deliver the applicable letter of transmittal, or a facsimile of such letter of transmittal, together with the outstanding notes and any other required documents, to the exchange agent at the address set forth on the cover page of the letter of transmittal.

		If you hold outstanding notes through The Depository Trust Company (“DTC”) and wish to participate in the exchange offer, you must comply with the Automated Tender Offer Program procedures of DTC by which you will agree to be bound by the letter of transmittal. By signing, or agreeing to be bound by, the letter of transmittal, you will represent to us that, among other things:

		• you are not our “affiliate” within the meaning of Rule 405 under the Securities Act or, if you are our affiliate, that you will comply with any applicable registration and prospectus delivery requirements of the Securities Act;


		• you do not have an arrangement or understanding with any person or entity to participate in the distribution of the exchange notes;

		• you are acquiring the exchange notes in the ordinary course of your business; and

		• if you are a broker-dealer that will receive exchange notes for your own account in exchange for outstanding notes that were acquired as a result of market-making activities, the you will deliver a prospectus, as required by law, in connection with any resale of such exchange notes.

Special Procedures for Beneficial Owners		If you are a beneficial owner of outstanding notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender those outstanding notes in the exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender those outstanding notes on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the applicable letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date.

Guaranteed Delivery Procedures		If you wish to tender your outstanding notes and your outstanding notes are not immediately available or you cannot deliver your outstanding notes, the applicable letter of transmittal or any other required documents, or you cannot comply with the applicable procedures under DTC’s Automated Tender Offer Program for transfer of book-entry interests, prior to the expiration date, you must tender your outstanding notes according to the guaranteed delivery procedures set forth in this prospectus under “The Exchange Offer — Guaranteed Delivery Procedures.”

Effect on Holders of Outstanding Notes		As a result of the making of, and upon acceptance for exchange of all validly tendered outstanding notes pursuant to the terms of the exchange offer, we will have fulfilled a covenant under the applicable registration rights agreement. Accordingly, there will be no increase in the interest rate on the outstanding notes under the circumstances described in the registration rights agreement. If you do not tender your outstanding notes in the exchange offer, you will continue to be entitled to all the rights and limitations applicable to the outstanding notes as set forth in the indenture, except we will not have any further obligation to you to provide for the exchange and registration of the outstanding notes under the registration rights agreement. To the extent that outstanding notes are tendered and accepted in the exchange offer, the trading market for remaining outstanding notes that are not so tendered and exchanged could be adversely affected.


Consequences of Failure to Exchange		All untendered outstanding notes will continue to be subject to the restrictions on transfer set forth in the outstanding notes and in the indenture. In general, the outstanding notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the outstanding notes under the Securities Act.

United States Federal Income Tax Consequences		The exchange of outstanding notes in the exchange offer will not be a taxable event for United States federal income tax purposes. See “United States Federal Income Tax Consequences of the Exchange Offer.”

Use of Proceeds		We will not receive any cash proceeds from the issuance of exchange notes in the exchange offer. See “Use of Proceeds.”

Exchange Agent		Citibank, N.A. is the exchange agent for the exchange offer. The address and telephone numbers of the exchange agent are set forth in the section captioned “The Exchange Offer — Exchange Agent” of this prospectus.

The Exchange Notes

The following summary is not intended to be complete. You should read the full text and more specific details contained elsewhere in this prospectus. For a more detailed description of the exchange notes, see “Description of the Notes.”


Issuer		Dresser-Rand Group Inc.

Notes Offered		$420,000,000 aggregate principal amount of 7 3/8% senior subordinated notes due 2014.

Maturity Date		November 1, 2014.

Interest		7 3/8% per annum, payable semi-annually in arrears.

Interest Payment Dates		May 1 and November 1, beginning on May 1, 2005.

Optional Redemption		We may redeem any of the exchange notes beginning on November 1, 2009. The initial redemption price is 103.688% of their principal amount, plus accrued interest. The redemption price will decline each year after 2009 and will be 100% of their principal amount, plus accrued interest, beginning on November 1, 2012.

		We may also redeem any of the exchange notes at any time prior to November 1, 2009, at a redemption price equal to 100% of the principal amount of notes to be redeemed, plus the Applicable Premium, defined under the section entitled “Description of the Notes,” as of, and accrued interest to, the redemption date.

		In addition, at any time prior to November 1, 2007, we may redeem up to 35% of the exchange notes at a redemption price of 107.375% of their principal amount plus accrued interest, using the proceeds from sales of certain kinds of capital stock. We may make such redemption only if, after such redemption, at least 65% of the aggregate principal amount of exchange notes originally issued under the indenture governing the exchange notes remains outstanding.

Change of Control		Upon a change of control, as defined under the section entitled “Description of the Notes,” we will be required to make an offer to purchase the exchange notes then outstanding at a purchase price equal to 101% of their principal amount, plus accrued interest to the date of repurchase. We may not have sufficient funds available at the time of a change of control to repurchase the exchange notes.

Guarantees		The wholly-owned domestic subsidiaries of the issuer that guarantee the issuer’s obligations under the new senior secured credit facility will guarantee the exchange notes. Each guarantor will provide a guarantee of the payment of the principal, premium and interest on the exchange notes on a senior subordinated, unsecured basis.

		The guarantee by each guarantor will be subordinated to all existing and future senior indebtedness of such guarantor, including such guarantor’s guarantee of the issuer’s obligations under the new senior secured credit facility. A substantial portion of our business is conducted through our foreign operating subsidiaries and non-wholly-owned subsidiaries, none of which will be a guarantor of the


		exchange notes. See Note 21 to the combined financial statements included elsewhere in this prospectus.

Ranking		The exchange notes will be the issuer’s senior subordinated, unsecured obligations. Accordingly, the notes will rank:

		• junior to any of the issuer’s existing and future senior indebtedness, including borrowings under the new senior secured credit facility;

		• equally with any of the issuer’s future senior subordinated indebtedness; and

		• senior to any of the issuer’s future indebtedness that expressly provides for its subordination to the exchange notes.

		In the event that our secured creditors, including the lenders under our new senior secured credit facility, exercise their rights with respect to our assets pledged to them, our secured creditors would be entitled to be repaid in full from the proceeds of those assets before those proceeds would be available for distribution to other creditors, including holders of the exchange notes. The assets of the issuer’s subsidiaries that are not guarantors of the exchange notes will be subject to the prior claims of all creditors, including trade creditors, of those non-guarantor subsidiaries.

		As of September 30, 2004, after giving effect to the private offering of the notes and the other transactions described in this prospectus:

		• We would have had $823 million principal amount of indebtedness, which includes the exchange notes and $395 million (excluding $180 million in letters of credit) of senior secured indebtedness under the new senior secured credit facility;

		• An additional $120 million (giving effect to $180 million in letters of credit) would have been available for borrowing under the new senior secured credit facility, which indebtedness would be senior secured indebtedness; and

		• Subsidiaries of the issuer that are not guarantors of the exchange notes would have had $213.4 million of indebtedness and other liabilities, including trade payables but excluding intercompany liabilities.

Certain Covenants		The terms of the exchange notes will limit our ability and the ability of our subsidiaries to:

		• incur additional indebtedness;

		• create liens;

		• pay dividends and make distributions in respect of capital stock;

		• redeem capital stock;

		• make investments or certain other restricted payments;

		• sell assets;

		• issue or sell stock of restricted subsidiaries;

Summary Historical and Pro Forma Combined Financial Data

The following table sets forth summary combined financial data of the Dresser-Rand Entities. The entities constituting the Dresser-Rand Entities collectively constitute our corporate predecessor. The summary combined financial data for the Dresser-Rand Entities for each of the years in the three years ended December 31, 2003 and as of December 31, 2003 have been derived from the Dresser-Rand Entities’ audited combined financial statements and related notes included elsewhere in this prospectus. The Dresser-Rand Entities’ unaudited summary combined financial data for the nine month periods ended September 30, 2003 and 2004 and as of September 30, 2004 have been derived from the Dresser-Rand Entities’ unaudited combined financial statements and related notes which are included elsewhere in this prospectus, and reflect all adjustments, consisting of normal, recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the Dresser-Rand Entities’ financial position, results of operations and cash flows at the end of and for the periods presented. The Dresser-Rand Entities’ historical results included below and elsewhere in this prospectus are not necessarily indicative of our future performance, and the Dresser-Rand Entities’ results of operations for the nine month period ended September 30, 2004 is not necessarily indicative of our results of operations for the full year. The following summary unaudited pro forma consolidated financial data of the Dresser-Rand Entities as of September 30, 2004 and for the year ended December 31, 2003 and the nine month period ended September 30, 2004 have been prepared to give pro forma effect to the transactions as if they had occurred on January 1, 2003, in the case of unaudited pro forma statements of operations data, and on September 30, 2004, in the case of unaudited pro forma balance sheet data. The successor balance sheet data and pro forma adjustments used in preparing the pro forma financial data reflect our preliminary estimates of the purchase price allocation, which may change upon finalization of our analysis. The pro forma financial data are for informational purposes only and should not be considered indicative of actual results that would have been achieved had the transactions actually been consummated on the dates indicated and do not purport to indicate balance sheet data or results of operations as of any future date or any future period. This information is only a summary and should be read in conjunction with “Unaudited Pro Forma Financial Information,” “Selected Historical Combined Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Dresser-Rand Entities’ combined financial statements and related notes included elsewhere in this prospectus.


																			Pro Forma
																			Nine
										Nine Months Ended						Pro Forma			Months
	Year Ended December 31,									September 30,						Year Ended			Ended
																December 31,			September 30,
	2001			2002			2003			2003			2004			2003			2004


	(In thousands)
Statement of Operations Data:
Total revenues	$	876,722		$	1,031,353		$	1,335,350		$	994,914		$	657,494		$	1,335,350		$	657,494
Cost of goods sold		721,062			873,902			1,140,154			866,655			503,903			1,150,410			515,453

Gross profit		155,660			157,451			195,196			128,259			153,591			184,940			142,041
Selling and administrative expenses		132,755			138,484			156,129			121,542			110,493			153,343			109,651
Restructuring charges(1)		2,137			5,185			—			—			—			—			—

Operating income		20,768			13,782			39,067			6,717			43,098			31,597			32,390
Interest income (expense)		(302	)		(776	)		1,938			408			2,306			(55,026	)		(40,417	)
Other income (expense), net		3,150			15,000			(9,202	)		(8,701	)		(2,754	)		(9,202	)		(2,754	)

Income (loss) before income taxes		23,616			28,006			31,803			(1,576	)		42,650			(32,631	)		(10,781	)
Provision (benefit) for income taxes(2)		14,781			11,910			11,438			(392	)		4,918			6,517			1,159

Net income (loss)	$	8,835		$	16,096		$	20,365		$	(1,184	)	$	37,732		$	(39,148	)	$	(11,940	)


																		Pro Forma
																		Nine
										Nine Months Ended						Pro Forma		Months
	Year Ended December 31,									September 30,						Year Ended		Ended
																December 31,		September 30,
	2001			2002			2003			2003			2004			2003		2004


	(In thousands, except ratios)
Cash flow data:
Cash flows provided by (used in) operating activities	$	57,837		$	42,671		$	50,963		$	17,697		$	62,285
Cash flows provided by (used in) investing activities		(15,896	)		3,171			(7,089	)		(4,776	)		(1,772	)
Cash flows provided by (used in) financing activities		(42,937	)		(18,759	)		(63,487	)		(53,195	)		(48,573	)
Other financial data:
EBITDA(3)		56,931			62,604			58,974			20,450			60,628		$	75,583	$	69,527
Adjustments to expenses due to change in ownership(4)		1,795			3,914			29,614			22,084			21,880			10,807		11,332
Unusual and other items included in EBITDA(5)		(1,914	)		(10,946	)		21,035			11,796			11,063			21,035		11,063
Depreciation and amortization		33,013			33,822			29,109			22,434			20,284			53,188		39,891
Capital expenditures		20,348			13,670			7,590			5,226			4,532			7,590		4,532
Ratio of earnings to fixed charges(6)		3.9	x		3.9	x		5.3	x		—			10.3	x		—		—


		As of December
		31, 2003		As of September 30, 2004

		Actual		Actual		Pro Forma(7)


		(In thousands)
Balance Sheet Data:
Cash and cash equivalents		$	41,537	$	53,274	$	125,897
Operating working capital(8)			80,581		79,339		94,019
Property, plant and equipment, net			101,438		91,053		225,654
Total assets			1,063,875		1,091,660		1,733,145
Goodwill			10,214		10,214		435,444
Deferred financing fees			—		—		33,252
Debt:
	Short-term debt		3,716		2,727		7,727
	Long-term debt, including current maturities		213		197		815,230
Total debt			3,929		2,924		822,957
Stockholders’ equity			565,035		607,332		430,000

(1) Includes severance expenses and facility exit costs associated with our corporate restructuring activities.

(2) On the closing date of the transactions we became a corporation. In the United States, we were a partnership during the periods presented. The data presented does not give effect to income taxes we would have been required to recognize if we were organized as a corporation, except with regards to the pro forma periods.

(3) EBITDA is defined as net income before interest, taxes, depreciation and amortization. EBITDA is not intended to represent cash flow from operations as defined by GAAP and should not be used as an alternative to net income as an indicator of operating performance or to cash flow as a measure of liquidity. While EBITDA is frequently used as a measure of operations and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. We present EBITDA because we consider it an important supplemental measure of our performance and believe it is frequently used by our investors and other interested parties, as well as by our management, in the evaluation of companies in our industry, many of which present EBITDA when reporting their results. In addition, EBITDA provides additional information used by our management and board of directors to facilitate internal comparisons to historical operating performance of prior periods. Further, management believes EBITDA facilitates their operating performance comparisons from period to period because it excludes potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as impact of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). The following table reconciles EBITDA to net income (loss):


																	Pro Forma
																	Nine
								Nine Months Ended						Pro Forma			Months
	Year Ended December 31,							September 30,						Year Ended			Ended
														December 31,			September 30,
	2001		2002		2003			2003			2004			2003			2004


	(In thousands)
Net income (loss)	$	8,835	$	16,096	$	20,365		$	(1,184	)	$	37,732		$	(39,148	)	$	(11,940	)
Income tax expense (benefit)		14,781		11,910		11,438			(392	)		4,918			6,517			1,159
Interest expense (income)		302		776		(1,938	)		(408	)		(2,306	)		55,026			40,417
Depreciation and amortization		33,013		33,822		29,109			22,434			20,284			53,188			39,891

EBITDA	$	56,931	$	62,604	$	58,974		$	20,450		$	60,628		$	75,583		$	69,527

EBITDA is different from Adjusted EBITDA, which is a measure used in certain covenants contained in our debt instruments. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Covenant Compliance” for a discussion of this measure and the covenants in which it is used.

(4) Expenses included in EBITDA that will be reduced or increased due to change in ownership:


																		Pro Forma
										Nine Months Ended						Pro Forma		Nine Months
	Year Ended December 31,									September 30,						Year Ended		Ended
																December 31,		September 30,
	2001			2002			2003			2003			2004			2003		2004


	(In thousands)
Net reduction in SFAS 106 expense(a)	$	5,385		$	8,566		$	10,087		$	7,565		$	8,437		$	—	$	—
Excess (additional) corporate allocation removal(b)		—			(2,976	)		5,716			4,162			3,338			5,716		3,338
Removal of incremental corporate overhead(c)		—			—			5,091			3,819			7,994			5,091		7,994
Pension(d)		(2,758	)		(844	)		9,552			7,162			2,735			—		—
Compensation adjustment(e)		(832	)		(832	)		(832	)		(624	)		(624	)		—		—

	$	1,795		$	3,914		$	29,614		$	22,084		$	21,880		$	10,807	$	11,332


(a)		Reflects SFAS No. 106, Employer’s Accounting for Postretirement Benefits other than Pensions, expense reduction with respect to certain former and current employees for which Ingersoll-Rand is retaining the SFAS No. 106 related liability.

(b)		Reflects the difference between the corporate overhead expenses allocated to us by Ingersoll-Rand and our estimated annual stand-alone expenses of $4.3 million.

(c)		Reflects adjustment for removal of incremental corporate allocation initiated in 2003 by Ingersoll-Rand.

(d)		Reflects an Ingersoll-Rand requirement to fund certain pension liabilities to the accumulated benefit obligation and the elimination of actuarial losses through purchase accounting due to assumption of liability associated with retired employees.

(e)		Reflects compensation expense related to the management equity program of $682,000 annually and CEO compensation adjustment of $150,000 annually.

(5) Unusual and other items included in EBITDA are further detailed on the following table:


																			Pro Forma
										Nine Months Ended						Pro Forma			Nine Months
	Year Ended December 31,									September 30,						Year Ended			Ended
																December 31,			September 30,
	2001			2002			2003			2003			2004			2003			2004


	(In thousands)
Restructuring severance(a)	$	2,137		$	5,185		$	11,696		$	6,280		$	4,841		$	11,696		$	4,841
Nigeria loss contract(b)		—			—			4,843			2,702			5,935			4,843			5,935
Nigeria casualty losses(c)		—			—			2,750			2,450			—			2,750			—
Obsolete and slow moving inventory adjustment(d)		—			—			3,300			—			3,000			3,300			3,000
New York State grant(e)		—			(8,000	)		1,289			—			—			1,289			—
Equity earnings losses(f)		610			479			133			(58	)		1,010			133			1,010
Insurance claim(g)		(4,531	)		(10,145	)		—			—			—			—			—
Equistar legal reserve reversal(h)		—			—			—			—			(4,500	)		—			(4,500	)
China bad debt(i)		—			—			—			—			970			—			970
Other expense (income)(j)		(130	)		1,535			(2,976	)		422			(193	)		(2,976	)		(193	)

	$	(1,914	)	$	(10,946	)	$	21,035		$	11,796		$	11,063		$	21,035		$	11,063


(a)		Reflects severance expenses associated with our efficiency initiatives. Subsequent to 2002, these expenses were included in cost of goods sold and selling and administrative expenses.


(b)		Reflects losses under (i) a contract imposed on the business by Halliburton Industries terminated at the end of 2004, and (ii) a contract in Nigeria we were forced to exit because of force majeure.

(c)		Reflects losses of inventory stocks resulting from a fire in a warehouse in Nigeria.

(d)		Offsets impact of decision to increase obsolete and slow moving inventory reserve level. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

(e)		Reflects one-time income from a New York State grant for the year ended December 31, 2002, and one-time charge related to refunding a portion of the grant in the year ended December 31, 2003. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

(f)		Non-cash losses in joint ventures.

(g)		Reflects gains from the settlement of an insurance claim relating to a fire that occurred in 2000.

(h)		Reflects one-time gain from reversal of legal claim reserve. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

(i)		Reflects write-off of receivables related to business closure.

(j)		Non-operating income and expense and other non-cash charges and credits. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

(6) The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings include pre-tax income from continuing operations and fixed charges include interest, whether expensed or capitalized, and an estimate of interest within rental expense. Our earnings were inadequate to cover fixed charges for the nine months ended September 30, 2003 by approximately $1.5 million, on a pro forma basis for the year ended December 31, 2003 by approximately $32.4 million and on a pro forma basis for the nine months ended September 30, 2004 by approximately $10.1 million.

(7) Gives effect to the transactions (assuming no working capital or other adjustments pursuant to the equity purchase agreement) as if they had occurred as of September 30, 2004. Total assets reflect our preliminary estimates of the purchase price allocation, which will change upon finalization of appraisals and other valuation studies that we will obtain in connection with the acquisition.

(8) Operating working capital is defined as accounts receivable plus inventories plus prepaid expenses, less accounts payable and accruals and customer advance payments.

You should carefully consider the risks described below as well as the other information contained in this prospectus before deciding to tender your outstanding notes in the exchange offer. Any of the following risks could materially adversely affect our business, financial condition and results of operations. In such case, you may lose all or part of your original investment.

If you do not exchange your outstanding notes for exchange notes in the exchange offer, you will continue to be subject to restrictions on transfer of your outstanding notes as set forth in the prospectus distributed in connection with the private offering of the outstanding notes. In general, the outstanding notes may not be offered or sold unless they are registered or exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the outstanding notes under the Securities Act. You should refer to “Prospectus Summary — The Exchange Offer” and “The Exchange Offer” for information about how to tender your outstanding notes.

The tender of outstanding notes under the exchange offer will reduce the outstanding amount of the outstanding notes, which may have an adverse effect upon, and increase the volatility of, the market prices of the outstanding notes due to a reduction in liquidity.

Our financial performance could be affected by our substantial indebtedness. As of September 30, 2004, after giving effect to the transactions described in this prospectus, including the private offering of the notes, our total indebtedness would have been approximately $823 million. In addition, we would have had $180 million of letters of credit outstanding and additional borrowings available under the revolving portion of our new senior secured credit facility of $120 million. We may also incur additional indebtedness in the future.

Our high level of indebtedness could have important consequences, including, but not limited to:


	•	making it more difficult for us to pay interest and satisfy our debt obligations, including our obligations with respect to the exchange notes;

	•	making it more difficult to self-insure and obtain surety bonds or letters of credit;

	•	increasing our vulnerability to general adverse economic and industry conditions;

	•	limiting our ability to obtain additional financing to fund future working capital, capital expenditures, research and development or other general corporate or business requirements;

	•	limiting our flexibility in planning for, or reacting to, changes in our business and in our industry; and

	•	placing us at a competitive disadvantage.

Our net cash flow generated from operating activities was $57.8 million, $42.7 million and $51.0 million for 2001, 2002 and 2003, respectively. Our interest expense, after giving effect to the transactions, for the twelve month period ended September 30, 2004 would have been $53.1 million. Our high level of indebtedness requires that we use a substantial portion of our cash flow from operations to pay principal of, and interest on, our indebtedness, which will reduce the availability of cash to fund working capital requirements, capital expenditures, research and development or other general corporate or business activities, including future acquisitions.

In addition, a substantial portion of our indebtedness bears interest at variable rates. If market interest rates increase, debt service on our variable-rate debt will rise, which would adversely affect our cash flow.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to sell assets, seek additional capital or seek to restructure or refinance our indebtedness, including the exchange notes. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.

Our ability to make payments on and to refinance our debt, including the exchange notes, and to fund planned capital expenditures and research and development efforts, will depend on our ability to generate cash. Our ability to generate cash is subject to economic, financial, competitive, legislative, regulatory and other factors that may be beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our new senior secured credit facility or otherwise in an amount sufficient to enable us to pay our debt, including the exchange notes, or to fund our other liquidity needs. We may need to refinance all or a portion of our debt, including the exchange notes, on or before maturity. We might be unable to refinance any of our debt, including our new senior secured credit facility or the notes, on commercially reasonable terms.

The issuer is a holding company conducting all its operations through subsidiaries. These subsidiaries are the issuer’s primary source of funds for debt payments. Similarly, the guarantors, even if they are operating companies that generate cash, may rely at least in part on subsidiaries of their own as a source of funds to meet any obligations that might arise under their guarantees. Generally, the ability of a subsidiary to make cash available to its parent is affected by its own operating results and is subject to applicable laws and contractual restrictions contained in its debt instruments and other agreements. Although the indenture governing the exchange notes limits the extent to which subsidiaries may agree to restrictions on their ability to make dividend and other payments to their parent companies, these limitations are subject to significant qualifications and exceptions. Moreover, there may be restrictions on payments by subsidiaries to their parent companies under applicable laws, including laws that require companies to maintain minimum amounts of capital and to make payments to shareholders only from profits. As a result, although a subsidiary of the issuer or a subsidiary of a guarantor may have cash, the issuer or that guarantor may not be able to obtain that cash to satisfy its obligations under the exchange notes or its guarantee, as applicable.

The exchange notes and the guarantees rank behind all of the issuer’s and the guarantors’ existing and future senior indebtedness, including the new senior secured credit facility. As a result of this subordination, upon any distribution to our creditors or the creditors of the guarantors in a bankruptcy, liquidation or reorganization or similar proceeding relating to us or the guarantors or our or their property, the holders of our senior indebtedness and the senior indebtedness of the guarantors will be entitled to be paid in full in cash before any payment may be made with respect to the exchange notes or the guarantees.

In addition, all payments on the exchange notes and the guarantees will be blocked in the event of a payment default on senior indebtedness and may be blocked for up to 179 consecutive days in the event of certain non-payment defaults on designated senior indebtedness.

In the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to the issuer or the guarantors, holders of the exchange notes will participate with trade creditors and all other holders of senior subordinated indebtedness of the issuer and the guarantors in the assets remaining after the issuer and the guarantors have paid all the senior indebtedness. However, because the indenture governing the exchange

Assuming we had completed the transactions on September 30, 2004, the notes and the guarantees would have been subordinated to $395 million of senior indebtedness, all of which would have represented borrowings under our new senior secured credit facility, and approximately $120 million would have been available for borrowing (after giving effect to letters of credit expected to be outstanding following the closing of the transactions) as additional senior indebtedness under the new senior secured credit facility, subject to compliance with covenants and conditions to borrowing under the new senior secured credit facility. We are permitted to borrow substantial additional indebtedness, including senior indebtedness, in the future under the terms of the indenture governing the exchange notes.

Holders of our secured debt will have claims that are prior to your claims as holders of the exchange notes up to the value of the assets and shares of capital stock securing the secured debt. In particular, the issuer and the guarantors are parties to our new senior secured credit facility, which is secured by substantially all their assets and shares of capital stock. In the event our secured creditors exercise their rights with respect to our pledged assets and shares of capital stock, our secured creditors will be entitled to be repaid in full from the proceeds of those assets and shares of capital stock before those proceeds would be available for distribution to other creditors, including holders of the exchange notes. In such event, we cannot assure you that there will be sufficient assets to pay amounts due on the exchange notes. As of September 30, 2004, after giving effect to the acquisition and related financing transactions, we would have had $395 million of secured debt and approximately $120 million would have been available for additional borrowings under our new senior secured credit facility (after giving effect to letters of credit expected to be outstanding following the closing of the transactions). The indenture governing the exchange notes also permits us to incur additional secured indebtedness.

The guarantors of the exchange notes will include only certain of our wholly-owned domestic subsidiaries. As a result, not all the issuer’s direct and indirect subsidiaries will guarantee the exchange notes. The issuer’s subsidiaries that will not guarantee the exchange notes had net sales of $686.4 million and $241.0 million for the year ended December 31, 2003 and the nine months ended September 30, 2004, respectively, and operating income of $45.1 million and $11.0 million for the year ended December 31, 2003 and the nine months ended September 30, 2004, respectively. As of December 31, 2003 and September 30, 2004, these non-guarantor subsidiaries had assets of $492.8 million, or 46.3%, and $472.1 million, or 43.2%, of our combined total assets, respectively.

Because a substantial portion of our operations are conducted by subsidiaries that will not guarantee the exchange notes, our cash flow and our ability to service debt, including our and the guarantors’ ability to pay the interest on and principal of the exchange notes when due, are dependent to a significant extent on interest payments, cash dividends and distributions and other transfers of cash from subsidiaries that will not guarantee the exchange notes. In addition, any payment of interest, dividends, distributions, loans or advances by subsidiaries that will not guarantee the exchange notes to us and the guarantors, as applicable, could be subject to taxation or other restrictions on dividends or repatriation of earnings under applicable local law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdiction in which these subsidiaries operate. Moreover, payments to us and the guarantors by subsidiaries that will not guarantee the exchange notes will be contingent upon these subsidiaries’ earnings.

Our subsidiaries that will not guarantee the exchange notes are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the exchange notes, or to make any funds available therefor, whether by dividends, loans, distributions or other payments. Any right that

Our new senior secured credit facility and the indenture governing the exchange notes contain a number of significant restrictions and covenants that limit our ability to:


	•	incur liens;

	•	borrow money, guarantee debt and, in the case of restricted subsidiaries, sell preferred stock;

	•	issue redeemable preferred stock;

	•	pay dividends;

	•	make redemptions and repurchases of certain capital stock;

	•	make capital expenditures and specified types of investments;

	•	prepay, redeem or repurchase subordinated debt;

	•	sell assets or engage in acquisitions, mergers, consolidations and asset dispositions;

	•	amend material agreements;

	•	change the nature of our business;

	•	engage in affiliate transactions; and

	•	restrict dividends or other payments from restricted subsidiaries.

The new senior secured credit facility also requires us to comply with specified financial ratios and tests, including but not limited to, a maximum consolidated net leverage ratio and a minimum consolidated interest coverage ratio.

These covenants could materially and adversely affect our ability to finance our future operations or capital needs. Furthermore, they may restrict our ability to expand, pursue our business strategies and otherwise conduct our business. Our ability to comply with these covenants may be affected by circumstances and events beyond our control, such as prevailing economic conditions and changes in regulations, and we cannot be sure that we will be able to comply. A breach of these covenants could result in a default under the indenture governing the exchange notes and/or the new senior secured credit facility. If there were an event of default under the indenture governing the exchange notes and/or the new senior secured credit facility, the affected creditors could cause all amounts borrowed under these instruments to be due and payable immediately. Additionally, if we fail to repay indebtedness under our new senior secured credit facility when it becomes due, the lenders under the new senior secured credit facility could proceed against the assets and capital stock which we have pledged to them as security. Our assets and cash flow might not be sufficient to repay our outstanding debt in the event of a default.

The guarantors’ guarantees of the exchange notes may be subject to review under federal bankruptcy law or relevant state fraudulent conveyance laws if a bankruptcy lawsuit is commenced by or on behalf of our or


	•	incurred this debt with the intent of hindering, delaying or defrauding current or future creditors; or

	•	received less than reasonably equivalent value or fair consideration for incurring this debt and the guarantor:


	•	was insolvent or was rendered insolvent by reason of the related financing transactions;

	•	was engaged, or about to engage, in a business or transaction for which its remaining assets constituted unreasonably small capital to carry on its business; or

	•	intended to incur, or believed that it would incur, debts beyond its ability to pay these debts as they mature, as all the foregoing terms are defined in or interpreted under the relevant fraudulent transfer or conveyance statutes,

then the court could void the guarantee or subordinate the amounts owing under the guarantee to the guarantor’s presently existing or future debt or take other actions detrimental to you.

The measure of insolvency for purposes of the foregoing considerations will vary depending upon the law of the jurisdiction that is being applied in any such proceeding. Generally, an entity would be considered insolvent if, at the time it incurred the debt or issued the guarantee:


	•	it could not pay its debts or contingent liabilities as they become due;

	•	the sum of its debts, including contingent liabilities, was greater than its assets, at fair valuation; or

	•	the present fair saleable value of its assets was less than the amount required to pay the probable liability on its total existing debts and liabilities, including contingent liabilities, as they become absolute and mature.

If a guarantee is voided as a fraudulent conveyance or found to be unenforceable for any other reason, you will not have a claim against that obligor and will only be our creditor or that of any guarantor whose obligation was not set aside or found to be unenforceable. In addition, the loss of a guarantee will constitute a default under the indenture governing the exchange notes, which default would cause all outstanding exchange notes to become immediately due and payable.

We believe that, at the time the guarantors initially incur the debt represented by the guarantees, the guarantors:


	•	will not be insolvent or rendered insolvent by the incurrence; and

	•	will have sufficient capital to run their businesses effectively.

We have relied on a limitation to be contained in the guarantors’ guarantees that limits each guarantee as necessary to prevent it from constituting a fraudulent conveyance under applicable law. However, a court passing on these questions might not reach the same conclusions.

The exchange notes are a new issue of securities, there is no existing market for the exchange notes and we do not know if a market will develop or, if a market does develop, whether it will be sustained. Although the placement agents have informed us that they intend to make a market in the exchange notes, they have no obligation to do so and may discontinue making a market at any time without notice. Accordingly, we cannot assure you that a liquid market will develop for the exchange notes, that you will be able to sell your exchange notes at a particular time or that the prices that you receive when you sell the exchange notes will be favorable.

We do not intend to apply for listing or quotation of the notes on any securities exchange or stock market.

Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of these securities. We cannot assure you that the market for the exchange

During the past several years, we have identified “material weaknesses” and “reportable conditions” in our internal financial controls. Some of these weaknesses resulted in errors in our internal historical financial statements that were corrected prior to issuance of the historical audited financial statements. In addition, we had significant fourth quarter, out of period adjustments, in fiscal 2000 through 2003 that were also corrected prior to the issuance of the historical audited financial statements. Although we have taken steps to correct the internal control deficiencies that resulted in the errors in our internal financial statements, we continue to have material weaknesses in our internal controls and finance organization.

In June 2004, the Public Company Accounting Oversight Board, or PCAOB, adopted rules for purposes of implementing Section 404 of the Sarbanes-Oxley Act of 2002, which included revised definitions of material weaknesses and significant deficiencies in internal control over financial reporting. The PCAOB defines a material weakness as “a significant deficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.” The new rules describe certain circumstances as being both significant deficiencies and strong indicators that a material weakness in internal control over financial reporting exists. We have identified a number of these specified circumstances, including identification by our auditors of material misstatements in internal drafts of our financial statements that were not initially identified by our internal control process, indicating an ineffective control environment. We have evaluated these deficiencies and determined that a material weakness in our internal control over financial reporting exists with respect to our ability to properly monitor and account for non-routine transactions and to apply GAAP in transactions subject to new or complex accounting pronouncements.

Though we continue to take steps to correct these internal control deficiencies, the efficacy of these steps and the steps we are still in the process of taking to improve the reliability of our interim financial statements is subject to continued management review supported by confirmation and testing by our internal auditors, as well as audit committee oversight. These measures, however, may not ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our future reporting obligations. In addition, we may in the future identify further material weaknesses or significant deficiencies in our internal control over financial reporting.

Beginning with the year ending December 31, 2005, pursuant to Section 404 of the Sarbanes-Oxley Act, our management will be required to deliver a report that assesses the effectiveness of our internal control over financial reporting, and our auditors will be required to deliver an attestation report on management’s assessment of and operating effectiveness of internal controls. We have substantial effort ahead of us to complete documentation of our internal control system and financial processes, information systems, assessment of their design, remediation of control deficiencies identified in these efforts and management testing of the design and operation of internal controls. We may not be able to complete the required management assessment by our reporting deadline. An inability to complete and document this assessment could result in a scope limitation qualification or a scope limitation disclaimer by our auditors on their attestation of our internal controls. In addition, if a material weakness were identified with respect to our internal control over financial reporting, we would not be able to conclude that our internal controls over financial reporting were effective, which could result in the inability of our external auditors to deliver an

This registration will result in our becoming subject to reporting and other obligations under the Exchange Act. These reporting and other obligations will place significant demands on our management, administrative and operational resources, including our accounting resources. We anticipate that, following the transactions, we will need to upgrade our systems, implement additional financial and management controls, reporting systems and procedures and hire additional accounting and finance staff. If we are unable to upgrade our financial and management controls, reporting systems and procedures in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired.

The businesses of most of our clients, particularly oil, gas and petrochemical companies, are, to varying degrees, cyclical and historically have experienced periodic downturns. Profitability in those industries is highly sensitive to supply and demand cycles and volatile product prices, and our clients in those industries historically have tended to delay large capital projects, including expensive maintenance and upgrades, during industry downturns. These industry downturns have been characterized by diminished product demand, excess manufacturing capacity and subsequent accelerated erosion of average selling prices. Demand for our new units and, to a lesser extent, aftermarket parts and services is driven by a combination of long-term and cyclical trends, including increased outsourcing of services, maturing oil and gas fields, the aging of the installed base of equipment throughout the industry, gas market growth and the construction of new gas infrastructure, and regulatory factors. In addition, the growth of new unit sales is generally linked to the growth of oil and gas consumption in markets in which we operate. Therefore, any significant downturn in our clients’ markets or in general economic conditions could result in a reduction in demand for our services and products and could harm our business.

We estimate that we currently provide approximately 50% of the third-party provided aftermarket parts and services needs of our own manufactured equipment base and less than two percent of the aftermarket parts and services needs of the equipment base of other manufacturers. Our future success depends, in part, on our ability to provide aftermarket parts and services to both our own and our competitors’ equipment base and our ability to develop and maintain our alliance relationships. Our ability to implement our business strategy successfully depends on a number of factors, including the success of our competitors in servicing the aftermarket parts and services needs of our clients, the willingness of our clients to outsource their service needs to us, the willingness of our competitors’ clients to outsource their service needs to us, and general economic conditions. We cannot assure you that we will succeed in implementing our strategy. See “Business — Business Strategy.”

We encounter competition in all areas of our business, principally in the new unit segment. The principal methods of competition in our markets include product performance, client service, product lead times, global reach, brand reputation, breadth of product line, quality of aftermarket service and support and price. Our clients increasingly demand more technologically advanced and integrated products, and we must continue to develop our expertise and technical capabilities in order to manufacture and market these products successfully. To remain competitive, we will need to invest continuously in research and development,

We have at times used acquisitions as a means of expanding our business and expect that we will continue to do so. If we do not successfully integrate acquisitions, we may not realize operating advantages and cost savings. Future acquisitions may require us to incur additional debt and contingent liabilities, which may materially and adversely affect our business, operating results and financial condition. The acquisition and integration of companies involve a number of risks, including:


	•	use of available cash, new borrowings or borrowings under our new senior credit facility to consummate the acquisition;

	•	demands on management related to the increase in our size after an acquisition;

	•	diversion of management’s attention from existing operations to the integration of acquired companies;

	•	integration into our existing systems;

	•	difficulties in the assimilation and retention of employees; and

	•	potential adverse effects on our operating results.

We may not be able to maintain the levels of operating efficiency that acquired companies achieved separately. Successful integration of acquired operations will depend upon our ability to manage those operations and to eliminate redundant and excess costs. We may not be able to achieve the cost savings and other benefits that we would hope to achieve from acquisitions, which could have a material adverse effect on our business, financial condition and results of operations.

Since we manufacture and sell our products and services worldwide, our business is subject to risks associated with doing business internationally. For the nine month period ended September 30, 2004, 40% of our net revenue was derived from North America, 19% from Latin America, 16% from Europe, 13% from Asia Pacific and 12% from the Middle East and Africa. Accordingly, our future results could be harmed by a variety of factors, including:


	•	changes in foreign currency exchange rates;

	•	exchange controls;

	•	changes in a specific country’s or region’s political or economic conditions, particularly in emerging markets;

	•	civil unrest in any of the countries in which we operate;

	•	tariffs, other trade protection measures and import or export licensing requirements;

	•	potentially negative consequences from changes in tax laws;

	•	difficulty in staffing and managing widespread operations;


	•	differing labor regulations;

	•	requirements relating to withholding taxes on remittances and other payments by subsidiaries;

	•	different regimes controlling the protection of our intellectual property;

	•	restrictions on our ability to own or operate subsidiaries, make investments or acquire new businesses in these jurisdictions;

	•	restrictions on our ability to repatriate dividends from our subsidiaries;

	•	difficulty in collecting international accounts receivable;

	•	difficulty in enforcement of contractual obligations governed by non-U.S. law;

	•	unexpected transportation delays or interruptions;

	•	unexpected changes in regulatory requirements; and

	•	the burden of complying with multiple and potentially conflicting laws.

Our international operations are affected by global economic and political conditions. Changes in economic or political conditions in any of the countries in which we operate could result in exchange rate movements, new currency or exchange controls or other restrictions being imposed on our operations or expropriation. In addition, the financial condition of foreign clients may not be as strong as that of our current domestic clients.

Some of the international markets in which we operate are politically unstable and are subject to occasional civil and communal unrest, such as Venezuela and Western Africa. For example, in Nigeria we recently terminated a contract due to civil unrest. Riots, strikes, the outbreak of war or terrorist attacks in foreign locations, such as in the Middle East, could also adversely affect our business.

Fluctuations in the value of the U.S. dollar may adversely affect our results of operations. Because our combined financial results are reported in dollars, if we generate sales or earnings in other currencies the translation of those results into dollars can result in a significant increase or decrease in the amount of those sales or earnings. In addition, our debt service requirements are primarily in U.S. dollars, even though a significant percentage of our cash flow is generated in euros or other foreign currencies. Significant changes in the value of the euro relative to the U.S. dollar could have a material adverse effect on our financial condition and our ability to meet interest and principal payments on U.S. dollar denominated debt, including the notes and the U.S. dollar denominated borrowings under the new senior secured credit facility.

In addition, fluctuations in currencies relative to currencies in which our earnings are generated may make it more difficult to perform period-to-period comparisons of our reported results of operations. For purposes of accounting, the assets and liabilities of our foreign operations, where the local currency is the functional currency, are translated using period-end exchange rates, and the revenues and expenses of our foreign operations are translated using average exchange rates during each period.

In addition to currency translation risks, we incur currency transaction risk whenever we or one of our subsidiaries enters into either a purchase or a sales transaction using a currency other than the local currency of the transacting entity. Given the volatility of exchange rates, we cannot assure you that we will be able to effectively manage our currency transaction and/or translation risks. Volatility in currency exchange rates may have a material adverse effect on our financial condition or results of operations. We have purchased and may continue to purchase foreign currency hedging instruments protecting or offsetting positions in certain currencies to reduce the risk of adverse currency fluctuations. We have in the past experienced and expect to continue to experience economic loss and a negative impact on earnings as a result of foreign currency exchange rate fluctuations.

The success of our business is largely dependent on our senior managers, as well as on our ability to attract and retain other qualified personnel. Six of the top members of our senior management team have been with us for over 20 years, including our chief executive officer and president who has been with us for 23 years. In addition, there is significant demand in our industry for qualified engineers and mechanics. We cannot assure you that we will be able to attract and retain the personnel, including qualified mechanics and engineers, necessary for the development of our business. The loss of the services of key personnel or the failure to attract additional personnel as required could have a material adverse effect on our business, financial condition and results of operations.

Our operations and properties are subject to stringent foreign, federal, state and local laws and regulations relating to environmental protection, including laws and regulations governing the investigation and clean up of contaminated properties as well as air emissions, water discharges, waste management and disposal and workplace health and safety. Such laws and regulations affect a significant percentage of our operations, are continually changing, are different in every jurisdiction and can impose substantial fines and sanctions for violations. Further, they may require substantial clean-up costs for our properties (many of which are sites of long-standing manufacturing operations) and the installation of costly pollution control equipment or operational changes to limit pollution emissions and/or decrease the likelihood of accidental hazardous substance releases. We must conform our operations and properties to these laws and adapt to regulatory requirements in all jurisdictions as these requirements change.

We routinely deal with natural gas, oil and other petroleum products. As a result of our fabrication and aftermarket parts and services operations, we generate, manage and dispose of or recycle hazardous wastes and substances such as solvents, thinner, waste paint, waste oil, washdown wastes and sandblast material. Hydrocarbons or other hazardous substances or wastes may have been disposed or released on, under or from properties owned, leased or operated by us or on, under or from other locations where such substances or wastes have been taken for disposal. These properties may be subject to investigatory, clean-up and monitoring requirements under foreign, federal, state and local environmental laws and regulations. Such liability may be imposed without regard to legality of the original actions and without regard to whether we knew of, or were responsible for, the presence of such hazardous or toxic substances, and such liability may be joint and several with other parties. If the liability is joint and several, we could be responsible for payment of the full amount of the liability, whether or not any other responsible party also is liable.

We have experienced, and expect to continue to experience, both operating and capital costs to comply with environmental laws and regulations, including the clean-up and investigation of some of our properties as well as offsite disposal locations. In addition, although we believe our operations are in compliance with environmental laws and regulations and that we will be indemnified by Ingersoll-Rand for certain contamination and compliance costs (subject to certain exceptions and limitations), new laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination, the imposition of new clean-up requirements, new claims for property damage or personal injury arising from environmental matters, or the refusal and/or inability of Ingersoll-Rand to meet its indemnification obligations could require us to incur costs or become the basis for new or increased liabilities that could have a material adverse effect on our business, financial condition and results of operations. For more information on the limitations of Ingersoll-Rand’s indemnity, see “Business — Environmental and Government Regulation.”

Our U.S. clients are heavily regulated by the Occupational Safety & Health Administration, or OSHA, concerning work place safety and health. Our clients have very high expectations regarding safety and health issues and require us to maintain safety performance records for our worldwide operations, field services, repair centers, sales, and manufacturing plant units. Our clients often insist that our safety performance equal or

In response to our clients’ requirements regarding safety performance, we maintain a database to measure our monthly and annual safety performance and track our incident rates. Our incident rates help us identify and track accident trends, determine root causes, formulate corrective actions, and implement preventive initiatives. We cannot assure you that we will be successful in maintaining or exceeding our clients’ requirements in this regard or that we will not lose the opportunity to bid on certain clients’ contracts.

As of September 30, 2004, we had 4,601 employees worldwide. Of our employees, approximately 62% are located in the United States. Approximately 37% of our employees in the United States are covered by collective bargaining agreements. None of our material collective bargaining agreements will expire through the end of 2005, and one will expire in each of 2006, 2007 and 2008. In addition, we have an agreement with the United Brotherhood of Carpenters and Joiners of America whereby we hire skilled trade workers on a contract-by-contract basis. Our contract with the United Brotherhood of Carpenters and Joiners of America can be terminated by either party with 90 days prior written notice. Our operations in the following countries are unionized: Le Havre, France; Oberhausen, Germany; Kongsberg, Norway; and Naroda, India. Additionally, overseas, approximately 37% of our employees belong to industry or national labor unions. Although we believe that our relations with our employees are good, we cannot assure you that we will be successful in negotiating new collective bargaining agreements, that such negotiations will not result in significant increases in the cost of labor or that a breakdown in such negotiations will not result in the disruption of our operations.

A holding company owned indirectly by First Reserve and its affiliates owns all of our outstanding shares of capital stock. Therefore, First Reserve and its affiliates have the power to control our affairs and policies. First Reserve also controls the election of directors, the appointment of management, the entering into of mergers, sales of substantially all our assets and other extraordinary transactions. The directors so elected have authority, subject to the terms of our debt, to issue additional stock, implement stock repurchase programs, declare dividends and make other decisions about our capital stock.

The interests of First Reserve and its affiliates could conflict with your interests. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of First Reserve as an equity holder might conflict with your interests as a holder of notes. First Reserve and its affiliates also may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to you as a holder of notes. In addition, First Reserve or its affiliates currently own, and may in the future own, businesses that directly compete with ours. While we will become subject to some of the provisions of the Sarbanes-Oxley Act of 2002 when this exchange offer is complete, these provisions will not require us to have independent directors. We have no plans at this time to appoint any independent directors to the issuer’s board of directors.

The historical financial information included in this prospectus may not necessarily reflect our results of operations, financial position and cash flows in the future or the results of operations, financial position and cash flows that would have occurred if we had been a separate, independent entity during the periods presented. The historical financial information included in this prospectus does not reflect the many significant changes that will occur in our capital structure, funding and operations as a result of the transactions or the additional costs we expect to incur in operating as an independent company. For example, funds required for working capital and other cash needs historically were obtained from Ingersoll-Rand on an interest-free,

Although we have a substantial operating history, prior to the acquisition we have not been operating as a stand-alone company. As a result of the acquisition, we no longer have access to the borrowing capacity, cash flow, assets and services of Ingersoll-Rand and its other affiliates as we did while under Ingersoll-Rand’s control. We are a significantly smaller company than Ingersoll-Rand, with significantly fewer resources and less diversified operations. Consequently, our results of operations are more susceptible than those of Ingersoll-Rand to competitive and market factors specific to our business.

In addition, we entered into a transition services agreement with Ingersoll-Rand in connection with the acquisition whereby Ingersoll-Rand agreed to provide us with certain services including, among others, compensation delivery services, health and welfare administration, pension administration, legal services and other services. Once the transition periods specified in the transition services agreement have expired, or if Ingersoll-Rand does not or is unable to perform its obligations under the transition services agreement, we will be required to provide these services ourselves or to obtain substitute arrangements with third parties. We may be unable to provide these services due to financial or other constraints or be unable to implement substitute arrangements on terms that are favorable to us, or at all.

We cannot assure you that we will continue to be managed as we were under the control of Ingersoll-Rand or continue to attract a sufficient amount of business to make our operations profitable as a stand-alone business.

Because some of our products are used in systems that handle toxic or hazardous substances, a failure or alleged failure of certain of our products have resulted in and in the future could result in claims against our company for product liability, including property damage, personal injury damage and consequential damages. Further, we may be subject to potentially material liabilities relating to claims alleging personal injury as a result of hazardous substances incorporated into our products.

Our success depends in part on our proprietary technology. We rely on a combination of patent, copyright, trademark, trade secret laws, confidentiality provisions and licensing arrangements to establish and protect our proprietary rights. If we fail to successfully enforce our intellectual property rights, our competitive position could suffer, which could harm our operating results. We may be required to spend significant resources to monitor and police our intellectual property rights. Similarly, if we were to infringe on the intellectual property rights of others, our competitive position could suffer. Furthermore, we cannot assure you that any pending patent application or trademark application held by us will result in an issued patent or registered trademark, or that any issued or registered patents or trademarks will not be challenged, invalidated, circumvented or rendered unenforceable. Also, others may develop technologies that are similar or superior to our technology, duplicate or reverse engineer our technology or design around the patents owned or licensed by us.

Litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our products infringe their intellectual property rights. Any litigation or claims brought by or against us, whether with or without merit, or whether successful

Our company’s name and principal mark is a combination of the names of our founder companies, Dresser Industries, Inc. and Ingersoll-Rand. We have acquired rights to use the “Rand” portion of our principal mark from Ingersoll-Rand, and the rights to use the “Dresser” portion of our name from Dresser, Inc., an affiliate of First Reserve. If we lose the right to use either the “Dresser” or “Rand” portion of our name, our ability to build our brand identity could be negatively affected.

We supply products to the natural gas industry, which is subject to inherent risks, including equipment defects, malfunctions and failures and natural disasters resulting in uncontrollable flows of gas or well fluids, fires and explosions. These risks may expose our clients to liability for personal injury, wrongful death, property damage, pollution and other environmental damage. We also may become involved in litigation related to such matters. If our clients suffer damages as a result of the occurrence of such events, they may reduce their orders from us. Our business, consolidated financial condition, results of operations and cash flows could be materially adversely affected as a result of such risks.

This prospectus includes “forward-looking statements.” These forward looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditure, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information. When used in this prospectus, the words “anticipates,” “believes,” “expects,” “intends” and similar expressions identify such forward-looking statements. Although we believe that such statements are based on reasonable assumptions, these forward-looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. These factors, risks and uncertainties include, among others, the following:


	•	economic or industry downturns;

	•	our inability to implement our business strategy to increase our aftermarket parts and services revenue;

	•	competition in our markets;

	•	economic, political and other risks associated with our international sales and operations;

	•	loss of our senior management;

	•	environmental compliance costs and liabilities;

	•	failure to maintain safety performance acceptable to our clients;

	•	failure to negotiate new collective bargaining agreements;

	•	our ability to operate as a stand-alone company;

	•	unexpected product claims or regulations;

	•	infringement on our intellectual property or our infringement on others’ intellectual property; and

	•	other factors described in this prospectus.

Our actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them does, what impact they will have on our results of operations and financial condition. We undertake no obligation to update or revise forward-looking statements which may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.

The following contains summaries of certain agreements that were entered into in connection with the acquisition. The descriptions of such agreements do not purport to be complete and are qualified in their entirety by reference to such agreements.

On August 25, 2004, Dresser-Rand Holdings, LLC entered into an equity purchase agreement with Ingersoll-Rand to purchase all of the equity interests in the Dresser-Rand Entities for approximately $1.13 billion. The acquisition closed on October 29, 2004. The purchase price is subject to estimated and final purchase price adjustments based on:


	•	the amount of working capital of the Dresser-Rand Entities as of the closing date;

	•	the amount of net cash of the Dresser-Rand Entities as of the closing date; and

	•	the amount of client prepayments of the Dresser-Rand Entities as of the closing date. See “Use of Proceeds.”

In order to determine the post-closing purchase price adjustments, the agreement provides that Ingersoll-Rand delivered to Dresser-Rand Holdings, LLC, shortly before the closing date, an estimated net cash statement and an estimated client prepayments statement, and within 90 days of the closing date, a closing working capital statement, a closing net cash statement, and a closing client prepayments statement. If the parties do not agree on the appropriate adjustments within a specified time period, the determination will be referred to an independent accounting firm for resolution. The parties have agreed to extend the date on which Ingersoll-Rand will deliver the statements until February 18, 2005. The purchase price will be increased or decreased to account for any difference between:


	•	the final net working capital amount and $149,677,999;

	•	the final net cash amount and the estimated net cash amount; and

	•	the final client prepayments amount and the estimated client prepayments amount.

In addition, the following additional amounts were paid to Dresser-Rand Holdings, LLC at closing: (1) an amount equal to client prepayments which have not been converted to work in progress, finished inventory or supplier prepayments (subject to post-closing adjustments), and (2) $17,000,000, which amount equals certain retiree welfare benefits less certain overdue receivables. An amount equal to any pension fund deficiency with respect to defined pension plans will be paid to Dresser-Rand Holdings, LLC, subject to provisions of the equity purchase agreement.

In connection with the acquisition, funds affiliated with First Reserve contributed an aggregate of $430 million to Dresser-Rand Holdings, LLC, our indirect parent, in exchange for all the membership interests in Dresser-Rand Holdings, LLC. In connection with, but shortly after, the acquisition, members of management have invested cash equity in Dresser-Rand Holdings, LLC, which has commensurately reduced First Reserve’s indirect percentage interest in Dresser-Rand Holdings, LLC. Dresser-Rand Holdings, LLC used First Reserve’s equity contribution, borrowings under the new senior secured credit facility and the proceeds from the original notes offering to fund the acquisition and to pay fees and expenses related to the transactions.

The equity purchase agreement contains customary seller representations and warranties, customary buyer representations and warranties, and customary covenants and other agreements between the sellers and Dresser-Rand Holdings, LLC.

The equity purchase agreement provides for indemnification for losses relating to specified events, circumstances and matters. The sellers have agreed to indemnify Dresser-Rand Holdings, LLC for certain liabilities, including:


	•	any losses arising from the inaccuracy or breach of certain representations and warranties of the sellers contained in the equity purchase agreement;

	•	any losses arising from breaches or defaults in the performance of any covenant, undertaking or other agreement or obligation of the sellers pursuant to the equity purchase agreement;

	•	any claim related to the sale or use of products containing asbestos;

	•	any claim for personal injury or property damage alleging defect in design, manufacture, materials or workmanship, or an alleged failure to exercise reasonable care in repair, service or maintenance, or failure to warn or provide adequate warning relating to the Dresser-Rand Entities’ products shipped prior to the closing;

	•	specified pre-closing taxes; and

	•	specified environmental liabilities.

The equity purchase agreement does not allow Dresser-Rand Holdings, LLC to make a claim for indemnification for any loss relating to a breach of a representation or warranty or covenant unless the losses for any claim or series of related claims exceed a de minimus limitation of $50,000 (other than for losses relating to several specified representations and warranties not subject to the de minimus limitation). The sellers’ indemnification obligations with respect to breaches of representations and warranties and covenants are subject to a “basket” of $18,000,000 in damages (other than for losses relating to several specified representations and warranties and covenants not subject to this basket). After Dresser-Rand Holdings, LLC has incurred damages as a result of breaches of representations and warranties contained in the equity purchase agreement that are in excess of the basket, the sellers are required to indemnify Dresser-Rand Holdings, LLC up to a cap of 33 1/3% of the purchase price (other than for losses relating to several specified representations and warranties and covenants not subject to the cap). Asbestos liability and products liability are not subject to the cap or basket, and taxes are not subject to either the cap, the basket or the de minimus limitation. Claims for breach of representations and warranties generally expire after 18 months, although breaches of the environmental and tax representations and warranties expire at closing, and several specified representations and warranties survive without limitations.

The equity purchase agreement includes an environmental covenant which provides, with the exception of non-Superfund off-site liabilities and non-asbestos environmental tort cases which have a three year limit for a claim to be filed, that Ingersoll-Rand will remain responsible without time limitations for all known environmental liabilities as of the closing date. Each of these liabilities must be placed on the Environmental Remediation and Compliance Schedule to the equity purchase agreement (the “Final Schedule”) and is defined as “Identified Environmental Liabilities.” We will be responsible for all liabilities that were not identified prior to the closing date. To determine which matters will be included in the Final Schedule, we conducted Phase I assessments at 30 Dresser-Rand Entity facilities. Based on this assessment, a schedule prepared prior to the signing of the equity purchase agreement includes: (a) a list of known non-compliance matters; (b) a list by facility of areas at which we plan to conduct Phase II sampling between the signing and the closing; (c) a list of documents requested but not yet received or analyzed by us as of the date of the equity purchase agreement; and (d) a list of all known off-site locations to which the facilities send waste.

The Final Schedule reflects the compliance issues identified earlier plus new compliance issues discovered during the review of documents produced after the date of the equity purchase agreement. In addition, based on the Phase II investigation, the Final Schedule will list all contamination that the parties agree should be included therein. The equity purchase agreement provides that the known areas of contamination included on the Final Schedule must be broadly defined to include each known point of contamination plus all contamination associated with that area or identified during an investigation relating to the known point of contamination. Known contamination will be included in the Final Schedule if it meets one of several standards, the most important of which is that if the contamination were known by the applicable

Ingersoll-Rand must use commercially reasonable efforts to correct non-compliance matters prior to the closing. Ingersoll-Rand is responsible for all response actions and must perform required response actions diligently, except that Ingersoll-Rand is only required to conduct a response action after being ordered to do so by a governmental entity to the extent the contamination at leased properties was caused by a third-party or to the extent the contamination at owned properties resulted from off-site migration caused by releases by a third-party.

Dresser-Rand Holdings, LLC and Ingersoll Rand have agreed to place a substantial number of matters on the Final Schedule. There are, however, a number of matters on which they have not be able to reach agreement, and under the terms of the equity purchase agreement, such matters may have to be resolved through the environmental arbitration procedure set forth in the equity purchase agreement.

The parties have entered into agreements governing several of their relationships following the closing. These agreements include a transition services agreement, supply agreement and license agreement, as well as an amended and restated limited liability company agreement which governs the rights of the funds affiliated with First Reserve with respect to their limited liability company interests in Dresser-Rand Holdings, LLC, and provides specific rights to the management investors of Dresser-Rand Holdings, LLC. The parties also entered into a stockholders’ agreement. See “Certain Related Party Transactions.”

In connection with the acquisition, funds affiliated with First Reserve contributed $430 million in cash to Dresser-Rand Holdings, LLC, which used this cash to fund a portion of the purchase price of the equity interests in the Dresser-Rand Entities. Immediately following the consummation of the transactions, Dresser-Rand Holdings, LLC, a holding company owned by funds affiliated with First Reserve, owned all of the capital stock of D-R Interholding, LLC, which in turn owns 99.7% of the issuer’s outstanding shares of capital stock. The remainder of the cash needed to finance the acquisition, including related fees and expenses, was provided by this offering and the borrowings under a new $695 million senior secured credit facility provided by affiliates of the placement agents, as joint bookrunners, lead arrangers or lenders, and a syndicate of banks and other financial institutions. Our new senior secured credit facility consists of a $395 million term loan portion and a $300 million revolving portion. Following the closing date of the transactions, the term loan portion of the new senior secured credit facility was fully funded and as of February 1, 2005 we had approximately $127 million of borrowing capacity under the revolving portion of our new senior secured credit facility, after giving effect to approximately $173 million of outstanding letters of credit.

The following table illustrates the approximate sources and uses for the acquisition.


(1)	Of the $395 million Term Loan B facility, €78.5 million is denominated in Euros.

(2)	As of February 1, 2005, we had approximately $127 million available for borrowing under the revolving portion of the new senior secured credit facility, after giving effect to approximately $173 million of outstanding letters of credit.

(3)	First Reserve and Ingersoll-Rand agreed to a gross cash purchase price of $1.2 billion for the acquisition, subject to working capital and other post-closing adjustments. The parties also agreed that, subject to certain closing adjustments, we were to have approximately $72.6 million of cash on hand upon consummation of the acquisition, resulting in the net purchase price reflected herein.

(4)	Consists of our portion of indebtedness related to a joint venture in China and indebtedness of a French subsidiary.

First Reserve Corporation is the leading private equity firm specializing in the energy industry with $4.7 billion under management in four active funds. Founded in 1980, First Reserve was the first private equity investment firm to actively pursue building a broadly diversified investment portfolio within the energy and energy-related sectors and has made investments totaling over $2.7 billion in over 80 principal transactions. The current management team has been in place since 1983, and First Reserve’s investment team collectively has over 250 years of energy investment experience. Other past and present First Reserve portfolio companies include Alpha Natural Resources, Cal Dive International, Chicago Bridge & Iron, Dresser Inc., Foundation Coal Corporation, Maverick Tube Corporation, National Oilwell, Natural Resource Partners, Pride International, Superior Energy Services and Weatherford International.

We will not receive any cash proceeds from the issuance of the exchange notes pursuant to the exchange offer. In consideration for issuing the exchange notes as contemplated in this prospectus, we will receive in exchange a like principal amount of outstanding notes, the terms of which are identical in all material respects to the exchange notes. The outstanding notes surrendered in exchange for the exchange notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the exchange notes will not result in any change in our capitalization.

The following table sets forth the Dresser-Rand Entities’ combined cash, cash equivalents and capitalization as of September 30, 2004 on an actual basis and as adjusted to give effect to the transactions (assuming no working capital or other adjustments pursuant to the equity purchase agreement). The information in this table should be read in conjunction with “The Transactions,” “Description of Other Indebtedness,” “Unaudited Pro Forma Financial Information,” “Selected Historical Combined Financial Information,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the combined financial statements and related notes, in each case, included elsewhere in this prospectus.


(1)	$5 million of the $300 million revolving portion of the new senior secured credit facility was drawn at closing and has since been repaid. As of February 1, 2005, we had approximately $127 million available for borrowing under the revolving portion of the new senior secured credit facility, after giving effect to approximately $173 million of outstanding letters of credit. See “The Transactions” and “Description of Other Indebtedness.”

(2)	Consists primarily of our portion of indebtedness related to a joint venture in China and indebtedness of a foreign subsidiary.

The following unaudited pro forma combined financial information has been derived by the application of pro forma adjustments to our historical combined financial statements for the year ended December 31, 2003, and the nine months ended September 30, 2004. The unaudited pro forma combined statements of operations give effect to (i) the purchase of the Dresser-Rand Entities, (ii) the notes offering of October 29, 2004, and (iii) the other related financing transactions, as if they had been consummated on January 1, 2003. The unaudited pro forma combined balance sheet gives effect to these events as if they had occurred on September 30, 2004. The adjustments necessary to fairly present this pro forma combined financial information have been made based on available information and in the opinion of management are reasonable and are described in the accompanying notes. The unaudited pro forma combined financial information should not be considered indicative of actual results that would have been achieved had these transactions been consummated on the respective dates indicated and do not purport to indicate balance sheet data or results of operations as of any future date or for any future period. We cannot assure you that the assumptions used in the preparation of the unaudited pro forma combined financial information will prove to be correct. You should read the unaudited pro forma combined financial information together with “Risk Factors,” “Use of Proceeds,” “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Combined Financial Statements and the notes thereto, included elsewhere in this prospectus.

We have prepared the unaudited pro forma combined financial information as follows:


	•	The unaudited pro forma combined financial information consists of an unaudited pro forma combined balance sheet, unaudited pro forma combined statements of operations and accompanying explanatory notes.

	•	Pro forma adjustments related to the unaudited pro forma combined statement of operations have been computed assuming the transactions were consummated on January 1, 2003 and include adjustments which give effect to the events that are (i) directly attributable to the transactions, (ii) expected to have a continuing impact and (iii) factually supportable. All pro forma adjustments have been explained in the related notes to the unaudited pro forma combined financial information.

	•	Tax effects of the pro forma adjustments have been calculated at the statutory rate in effect for the periods presented.


(1)	The amounts in this column represent the reported results of Dresser-Rand Company, our predecessor company.

(2)	The amounts in this column represent the adjustments to reflect the pro forma impact of the transactions.


(3)	The unaudited pro forma combined statements of operations do not reflect the non-recurring charges related to the write-off of $1,600 of in-process research and development intangible assets and the amortization of $6,836 of inventory stepped up as a result of purchase accounting, which will be included in the results of operations in the period in which it occurs.


(1)	The amounts in this column represent the reported combined balance sheet of Dresser-Rand Company, our predecessor company.

(2)	The amounts in this column represent the adjustments necessary to determine our pro forma combined balance sheet after giving effect of the transactions.


		identifiable intangible assets and amortizable lives may change as additional information becomes available, including final valuations.

(b)		Represents adjustments to record the difference between the projected benefit obligation and fair value of plan assets for our defined benefit plans in purchase accounting. This adjustment also eliminates the balance sheet impact of the pension plan that was reflected in our historical combined financial statements but retained by Ingersoll-Rand.

(c)		Reflects adjustments to eliminate receivables and payables between Dresser-Rand Company and affiliates, as these receivables and payables were required to be settled prior to consummation of the acquisition.

(d)		Reflects the deferred tax impact of the write-up of property, plant and equipment; write-up of identifiable intangible assets; and change in the pension liability. The deferred taxes calculated based on management’s preliminary assessment of the impact of each of the above items to the balance sheets of the foreign operations at the statutory rate of each country. Management expects that there will be no deferred tax impact of these items on the balance sheet for the partnership in the United States because the acquisition was structured such that book and tax basis of the assets will be the same, and there were no deferred taxes related to these items in the historical combined statements.

(e)		Represents $15,722 of deferred debt issuance costs associated with the new credit facility (to be amortized over 5 years for the portion allocated to the revolving facility and 7 years for the portion allocated to Term Loan B) and $17,530 of deferred debt issuance costs associated with the notes offered hereby (to be amortized over 10 years). Management believes that straight-line methodology of amortizing the deferred debt issuance costs does not differ materially from the effective interest rate method.

(f)		Represents adjustments to record the accumulated benefit obligation for our postretirement benefits other than pensions in purchase accounting. These adjustments also eliminate the accumulated benefit obligation for employees who are retired or eligible to retire, which has been retained by Ingersoll-Rand.

(g)		These adjustments represent the initial borrowings under the new revolving credit facility of $5,000, Term Loan B of $395,033 and the issuance of $420,000 of notes. There was no premium or discount associated with the issuance of debt.

(h)		This adjustment eliminates the equity of Dresser-Rand Company, including the accumulated other comprehensive income included in equity as the underlying assets and liabilities are reflected at fair value in purchase accounting.

(i)		This adjustment represents the investment of $430,000 of new equity from First Reserve.

The following table sets forth the selected historical combined financial information as of and for each of the years in the three year period ended December 31, 2003 and the nine month periods ended September 30, 2003 and September 30, 2004 for the Dresser-Rand Entities. The selected historical combined financial information for each of the years in the three year period ended December 31, 2003 and as of each of the years in the two year period ended December 31, 2003 has been derived from the Dresser-Rand Entities’ combined financial statements and the related notes, which have been audited by PricewaterhouseCoopers LLP, independent accountants, and which are included elsewhere in this prospectus. The selected historical combined balance sheet data as of the year ended December 31, 2001, the one month ended January 31, 2000 and the eleven months ended December 31, 2000 and the selected historical consolidated statement of operations data for the year ended December 31, 2001, the one month ended January 31, 2000 and the eleven months ended December 31, 2000 has been derived from the Dresser-Rand Entities’ unaudited combined financial statements, which are not included in this prospectus. The selected historical financial information as of and for each of the nine month periods ended September 30, 2003 and September 30, 2004 have been derived from the Dresser-Rand Entities’ unaudited combined financial statements included elsewhere in this prospectus which have been prepared on a basis consistent with the audited combined financial statements included elsewhere in this prospectus. In the opinion of management, such unaudited financial information reflects all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the results for those periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or any future period. Prior to February, 2000, Dresser-Rand Company was jointly owned by Ingersoll-Rand (49%) and Halliburton Industries (51%) under the terms of a joint venture agreement. Halliburton exercised a put option in the joint venture agreement which required Ingersoll-Rand to purchase Halliburton’s 51% interest in Dresser-Rand Company. The purchase was completed on February 2, 2000. Accordingly, the results of operations are separately stated for the eleven months ended December 31, 2000 to reflect the new ownership structure and related changes in the underlying accounts of the Dresser-Rand Entities resulting from the purchase transaction.

You should read the following table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Dresser-Rand Entities’ combined financial statements and the notes thereto, included elsewhere in this prospectus.


(1)	Includes severance expenses and facility exit costs associated with our corporate restructuring activities.

(2)	On the closing date of the transactions we became a corporation. Prior to that time, in the United States, we were a partnership. The data presented do not give effect to the income taxes we would have been required to recognize if we were organized as a corporation. Pro forma tax expense for the year ended December 31, 2003 and the nine month period ended September 30, 2004 was $6,517 and $1,159, respectively. Pro forma tax expense reflects income tax expense that we would have been required to pay if we were organized as a corporation during these periods and also includes other pro forma adjustments related to the acquisition of Dresser-Rand Company by First Reserve on October 29, 2004.

(3)	The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings include pre-tax income from continuing operations and fixed charges include interest, whether expensed or capitalized, and an estimate of interest within rental expense. Our earnings were inadequate


	to cover fixed charges for the one month ended January 31, 2000 by approximately $13.0 million, the eleven months ended December 31, 2000 by approximately $5.8 million and the nine months ended September 30, 2003 by approximately $1.5 million.

The statements in this discussion regarding the industry outlook, our expectations regarding the future performance of our business, and the other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in the “Risk Factors” section. You should read the following discussion together with the sections entitled “Forward-Looking Statements,” “Risk Factors” and the Combined Financial Statements and notes thereto of the Dresser-Rand Entities included elsewhere in this prospectus.

We are among the largest global suppliers of rotating equipment solutions to the worldwide oil, gas, petrochemical and industrial process industries. Our segments are new units and aftermarket parts and services. Our services and products are used for a wide range of applications, including oil and gas production, refinery processes, natural gas processing, pipelines, petrochemical production, high-pressure field injection and enhanced oil recovery. We also serve general industrial markets including paper, steel, sugar, distributed power and government markets.

We operate globally with manufacturing facilities in the United States, France, Germany, Norway, China, India and Brazil. We provide a wide array of products and services to our worldwide client base in over 90 countries from our 61 global locations in 11 U.S. states and 25 countries. Our total revenues by geographic region for the nine month period ended September 30, 2004 consisted of North America (40%), Latin America (19%), Europe (16%), Asia Pacific (13%) and the Middle East and Africa (12%).

On December 31, 1986, Dresser Industries, Inc. and Ingersoll-Rand (collectively, the partners) entered into a partnership agreement for the formation of Dresser-Rand Company, a New York general partnership owned 50% by Dresser Industries, Inc. and 50% by Ingersoll-Rand. The partners contributed substantially all of the operating assets and certain related liabilities, which comprised their worldwide reciprocating compressor, steam turbine and turbo-machinery businesses. The net assets contributed by the partners were recorded by Dresser-Rand Company at amounts approximating their historical values. Dresser-Rand Company commenced operations on January 1, 1987. On October 1, 1992 Dresser Industries, Inc. acquired a 1% equity interest from Dresser-Rand Company to increase its ownership to 51% of Dresser-Rand Company.

In September 1999, Dresser Industries, Inc. merged with Halliburton Industries. Accordingly, Dresser Industries, Inc.’s ownership interest in Dresser-Rand Company transferred to Halliburton Industries on that date. On February 2, 2000, a wholly-owned subsidiary of Ingersoll-Rand purchased Halliburton Industries’ 51% interest in Dresser-Rand Company for a net purchase price of approximately $543 million. The Dresser-Rand Company’s combined financial statements reflect Ingersoll-Rand’s additional basis in Dresser-Rand Company. Dresser-Rand Company has operated as an operating business unit of Ingersoll-Rand.

The combined financial statements included in this prospectus include the accounts of all wholly-owned and majority-owned subsidiaries of Dresser-Rand Company as well as the operations of Dresser-Rand Canada, Inc. and Dresser-Rand GmbH.

The preparation of this information was based on certain assumptions and estimates, including allocations of costs, from Ingersoll-Rand, which we believe are reasonable. This financial information may not, however, necessarily reflect the results of operations, financial positions and cash flows that would have occurred if we had been a separate, stand-alone entity during the periods presented or our future results of operations, financial positions and cash flows.

In connection with the transactions, we incurred substantial indebtedness, interest expense and repayment obligations. The interest expense relating to this debt will adversely affect our net income. In addition, we accounted for the acquisition under the purchase method of accounting, which resulted in an increase in

Since the fourth quarter of 2002, we adopted a number of restructuring programs across our entire company. An important element in these programs was head count reduction. As of September 30, 2003, our worldwide head count was 5,942 employees. For the 12 month period ended September 30, 2003, we reduced our head count, on a worldwide basis, by 928 employees. By September 30, 2004, we had reduced our head count by an additional 413 employees. An additional element of our restructuring plan was our streamlining of administrative functions. For example, we consolidated the management of three of our factories in New York under one management team. We continue to seek and implement cost-saving measures on an on-going basis.

We conduct operations in over 90 countries. Therefore, our results of operations are subject to both currency transaction risk and currency translation risk. We incur currency transaction risk whenever we or our subsidiaries enter into either a large purchase or sales transaction using a currency other than the local currency of the transacting entity. With respect to currency translation risk, our financial condition and results of operations are measured and recorded in the relevant local currency and then translated into U.S. dollars for inclusion in our historical consolidated financial statements. Exchange rates between these currencies and U.S. dollars in recent years have fluctuated significantly and may continue to do so in the future. The majority of our revenues and costs are denominated in U.S. dollars, with euro-related currencies also being significant. We generated 39% of our 2003 revenues in foreign currencies, and we incurred 41% of our 2003 total expenses in foreign currencies. The net appreciation of the euro against the U.S. dollar and other world currencies over the 2001 to 2003 period has had the impact of increasing sales and operating income, as reported in U.S. dollars in our historical consolidated financial statements. Historically, we have engaged in hedging strategies from time to time to reduce the effect of currency fluctuations on specific transactions. However, we have not sought to hedge currency translation risk. We expect to continue these hedging policies going forward. Significant declines in the value of the euro relative to the U.S. dollar could have a material adverse effect on our financial condition and our ability to meet interest and principal payments on U.S. dollar denominated debt, including the notes and borrowings under the new senior secured credit facility.

Our revenues are primarily generated through the sale of new units and aftermarket parts and services. Revenues from the sale of new units and revamps are recognized under the completed contract method. Revenues from aftermarket parts and services are recognized as the parts are shipped and services are rendered. Revenues have historically been driven by volume, rather than price, and are sensitive to foreign currency fluctuations.

Cost of sales includes raw materials and plant and related work force costs, freight and warehousing, as well as product engineering and research and development expenses.

Selling expenses consist of costs associated with marketing and sales. Administrative expenses are primarily management, accounting, corporate allocations and legal costs.

Other income (expense) includes those items that are non-operating in nature. Examples of items reported as other income (expense) are insurance proceeds, equity earnings in partially-owned affiliates, casualty losses, government grants and the impact of currency fluctuations.

Property, plant and equipment is reported at cost less accumulated depreciation, which is generally provided using the straight-line method over the estimated useful lives of the assets. Expenditures for improvements that extend the life of the asset are generally capitalized. Intangible assets primarily consist of amounts allocated to the installed base of our equipment. The intangible assets related to the installed base are amortized over their estimated useful lives.

For the periods presented, certain of the Dresser-Rand Entities were accounted for as a partnership and did not provide for U.S. income taxes, since all partnership income and losses were allocated to the partners for inclusion in their respective income tax returns. In connection with the transactions, the former partnership will be subject to corporate income taxes going forward. For income tax purposes, the former partnership assets will be recorded at their fair market value, and we will be able to depreciate those assets using a higher basis than the historical amount. On October 29, 2004, our business became subject to income tax, which will affect our results in the future.

Certain of our operations are subject to U.S. or foreign income taxes. In preparing our financial statements, we have determined the tax provision of those operations on a separate company basis.

Bookings represent orders placed during the period, whether or not filled. The elapsed time from booking to completion of performance may be up to 15 months. The backlog of unfilled orders includes amounts based on signed contracts as well as agreed letters of authorization which management has determined are likely to be performed. Although backlog represents only business that is considered firm, cancellations or scope adjustments may occur. In certain cases, cancellation of a contract provides us with the opportunity to bill for certain incurred costs and penalties. Backlog is adjusted to reflect project cancellations, deferrals, currency fluctuations and revised project scope.

Bookings represent orders placed during the period, whether or not filled. Backlog primarily consists of unfilled parts orders, with open repair and field service orders comprising a small part of the backlog. The cancellation of an order for parts can generally be made without penalty.

During the third quarter of 2003, a management review identified an issue relating to work-in-progress inventory at two of our manufacturing locations. It was determined that certain work-in-progress inventory had not been properly relieved upon shipment during the time period 1999 to 2003, resulting in an overstatement of inventory. Management immediately began an extensive, in-depth review of our accounts and records since Ingersoll-Rand acquired full ownership of Dresser-Rand Company in February 2000. This review resulted in overstatements requiring the following adjustments: reduction in inventory ($33.8 million); reduction in depreciation expense ($9.9 million); and reduction in pension expense ($7.5 million). In addition, the review revealed that certain accruals had not been properly relieved (a reduction of $6.7 million) and certain intercompany accounts had not been reconciled (a reduction of $10.1 million). The effect of these adjustments have been reflected in the historical audited financial statements.

As a consequence of the items referred to above, we conducted a thorough investigation of the relevant internal controls and made appropriate changes.

In the ordinary course of our business, we make use of letters of credit, bank guarantees and surety bonds. Since December 2001, the total amount of letters of credit, bank guarantees and surety bonds we had outstanding at any given time ranged from $115 million to $180 million. We use both performance bonds, ensuring the performance of our obligations under various contracts to which we are a party, and advance payments bonds, which ensure that clients that place purchase orders with us and make advance payments under such contracts are reimbursed to the extent we fail to deliver under the contract. Under the revolving portion of our new senior secured credit facility, we are entitled to have up to $300 million of letters of credit outstanding at any time.

The following table presents selected historical financial information regarding both of our segments for the nine months ended September 30, 2004 and September 30, 2003. Revenues by segment are also presented as a percentage of total revenues. The two columns under period-to-period change show the dollar and, for revenues, percentage change from 2003 to 2004.

Total Revenues. Total revenues decreased by $337.4 million, or 33.9%, to $657.5 million for the nine months ended September 30, 2004 from $994.9 million for the same period in 2003. The sales volume decrease was entirely limited to the new units segment and was attributable to the following factors: (1) our decision to start charging customers a margin with respect to third party equipment that we had been purchasing on their behalf on a cost only basis (we refer to such purchases as “buyouts”) resulting in certain customers purchasing such equipment directly and (2) an unusually high level of orders shipped in the prior year. The aftermarket parts and services segment revenues increased $2.8 million.

Cost of goods sold. Cost of goods sold as a percentage of revenues decreased to 76.6% for the nine months ended September 30, 2004 from 87.1% for the same period in 2003. This improvement was primarily

due to three factors. First, we began charging customers a margin on third-party equipment they ask us to package with our own units. Second, higher-margin aftermarket parts and services revenues increased to 61% of total revenues for the nine months ended September 30, 2004 from 40.0% for the same period in 2003. Third, manufacturing efficiencies were achieved through productivity initiatives, workforce and capacity rationalization efforts and improved supply chain management. Our results also improved due to the reversal of a reserve for a legal issue in the amount of $4.5 million, credited to cost of sales in the first quarter of 2004. Partially offsetting these factors were a number of one-time items that impacted cost of sales for the nine months ended September 30, 2004. First, we reserved an additional $3.0 million for obsolete and slow moving inventory (OSMI) during the first nine months of 2004 versus the same time period in 2003. Second, we suffered losses in the first nine months of 2004 related to a long-term repair and maintenance contract in Nigeria as well as a Force Majeure event in the same country. The losses related to Nigeria were $5.9 million for the first nine months of 2004 versus losses of $2.7 million for the same time period in 2003. The contract was imposed on us by a former majority owner and will terminate at the end of 2004.

Gross Profit. Gross profit increased by $25.3 million, or 19.8%, to $153.6 million for the nine months ended September 30, 2004 from $128.3 million for the same period in 2003 and increased to 23.4% of revenues for the period in 2004 from the 12.9% for the period in 2003, due to the factors mentioned above.

Selling and administrative expenses. Selling and administrative expenses decreased by $11.0 million to $110.5 million for the nine months ended September 30, 2004 from $121.5 million for the same period in 2003 as a result of our efforts to streamline our administrative operations. This decrease was achieved despite an increase in an expense allocation to us from Ingersoll-Rand of $3.3 million, from $11.2 million for the period in 2003 to $14.5 million for the period in 2004. As a percentage of revenues, selling and administrative expenses increased to 16.8% of revenues for the nine months ended September 30, 2004 from 12.2% of revenues for the same period in 2004. This increase was due to the 34% decrease in sales volume year over year.

Operating income. Operating income increased by $36.4 million to $43.1 million in 2004 from $6.7 million in 2003. The increase is primarily attributable to the factors contributing to the increased gross margin and decreased selling and administrative expenses, as discussed above.

Other income (expense), net. Other income (expense), net was an expense of $2.8 million for the nine months ended September 30, 2004, a 68% reduction from the $8.7 million expense for the same period in 2003. The decrease in expense for the period in 2004 was primarily the result of lower currency losses ($4.0 million lower) and $2.5 million of casualty losses in 2003, related to a fire at a warehouse in Nigeria and a flood in Le Havre, France.

Provision (benefit) for income taxes. The income tax provision for the period ended September 30, 2004 was $4.9 million, resulting in an effective rate of 11.5%. This compares to an income tax benefit of $0.4 million, resulting in an effective rate of 24.9% for the same period in 2003. The effective tax rate differs from the statutory U.S. rate of 35% primarily due to nontaxable partnership income or loss, the change in valuation allowances recorded by certain foreign operations, and foreign tax rate differences.

Bookings and backlog. Bookings represent orders placed during the period, whether or not filled. Backlog as of any date represents the number of orders left unfilled as of that date. Bookings during this period were $818.2 million, 31.3% above bookings for the period in 2003, and backlog at September 30, 2004 was $586.2 million compared to $481.1 million at September 30, 2003, a 21.8% increase.

Revenues. Revenues in the new units segment decreased by $340.2 million, or 57.0%, to $256.6 million in 2004 from $596.8 million in 2003. The decrease resulted from the factors described above.

Gross profit. Gross profit increased by $13.3 million, or 72%, to $31.7 million for the nine months ended September 30, 2004 from $18.4 million for the same period in 2003. As a percentage of segment revenues,

Operating income. Operating income increased by $23.7 million, to a profit of $2.0 million for the nine months ended September 30, 2004 from a loss of $21.7 million for the same period in 2003. As a percentage of segment revenues, operating income improved to a profit of 0.8% for the period in 2004 from a loss of 3.6% for the same period in 2003, primarily due to the factors mentioned above impacting gross profit.

Bookings and backlog. Bookings during the period in 2004 were $384.5 million, 46.7% above the bookings for the same period in 2003, and backlog at September 30, 2004 was $417.8 million, or 20.2% above the backlog at September 30, 2003.

Revenues. Revenues increased by $2.8 million, or 0.7%, to $400.9 million in 2004 from $398.1 million in 2003.

Gross profit. Gross profit increased by $10.4 million, or 9.0%, to $126.6 million for the nine months ended September 30, 2004 from $116.2 million for the same period in 2003 as a result of the increase in volume and the improvement in gross margins. As a percentage of revenues, gross profit increased to 31.6% for the period in 2004 from 29.2% for the same period in 2003 due to a more favorable product mix, price realization and increased manufacturing efficiencies.

Operating income. Operating income increased by $9.9 million, or 15.7%, to $72.9 million for the nine months ended September 30, 2004 from $63.0 million for the same period in 2003. Despite the modest increase in revenues, operating income as a percentage of segment revenues increased to 18.2% for the period in 2004 from 15.8% for the same period in 2003 due to cost control initiatives, manufacturing and operating efficiencies and a more favorable product mix.

Bookings and backlog. Bookings during the period in 2004 were $433.7 million, 20.1% above bookings for the same period in 2003, and backlog at September 30, 2004 was $168.4 million, or 26.2% above the backlog at September 30, 2003. This increase in bookings in 2004 is a result of our increased emphasis on aftermarket parts and services sales and the impact of geopolitical factors, which depressed bookings in this segment in the 2003 period.

The following table presents selected historical financial information regarding both of our segments for each of the years ended December 31, 2001, 2002 and 2003, respectively. Revenues by segments are also

Revenues. Total revenues increased by $304.0 million, or 29.5%, to $1,335.4 million in 2003 from $1,031.4 million in 2002. The sales volume increase was almost entirely attributable to sales by the new units segments, which experienced a $294.2 million increase. This increase resulted from increases in new units sales (increase of $149.0 million), buyouts (increase of $112.0 million) and revamps (increase of $33.0 million). The large increase was due to the high bookings levels experienced in 2001 and 2002 primarily for products to be delivered from Le Havre, Norway and Olean.

Cost of goods sold. Cost of goods sold as a percentage of revenues increased slightly to 85.4% in 2003 from 84.7% in 2002. This increase was primarily due to (i) the mix shift caused by the dramatic increase in new unit shipments as mentioned above, and (ii) costs incurred related to restructuring initiatives in 2003. This large mix shift was partially offset by improvements in the individual cost of goods sold components due to increased manufacturing efficiencies achieved through manufacturing productivity initiatives, workforce and capacity rationalization efforts and favorable material costs achieved through supply chain management efforts.

Gross profit. Gross profit increased by $37.7 million, or 23.9%, to $195.2 million in 2003 from $157.5 million in 2002 and decreased to 14.6% of revenues in 2003 from 15.3% in 2002, due to the factors mentioned above.

Selling and administrative expenses. Selling and administrative expenses decreased as a percentage of revenues, accounting for 11.7% of revenues in 2003 and 13.4% of revenues in 2002. Selling and administrative expenses increased by $17.6 million, or 12.7%, to $156.1 million in 2003 from $138.5 million in 2002. This increase was primarily attributable to increased allocations from Ingersoll-Rand amounting to $13.8 million. The Ingersoll–Rand allocation increase resulted from $5.1 million for tax department allocation expense for European entities and $8.7 million (from $1.3 million to $10.0 million) of corporate administration support.

Operating income. Operating income increased by $25.3 million, or 183%, to $39.1 million in 2003 from $13.8 million in 2002. The increase is primarily attributable to increased volume as well as the factors contributing to the increased gross margin, as discussed above.

Other income (expense), net. Other income (expense), net was an expense of $9.2 million in 2003, or $24.2 million higher than the $15.0 million income reported in 2002 as depicted in the table below. During 2003, we suffered two casualty losses. The casualty losses amounted to $2.8 million, which was primarily due to a fire at our inventory warehouse in Nigeria resulting in the loss of $2.3 million and flood damage at our Le Havre facility in the amount of $0.2 million. At the end of 2002, we received a training and capital grant from the New York State Empire Development Corporation, which resulted in other income of $8.0 million. In late 2003, we agreed to repay a portion of the grant due to lower-than-anticipated employment levels resulting in other expense of $1.3 million. During 2002, we received insurance proceeds as a result of a fire that destroyed a third-party facility, which warehoused patterns we use in the production process.

The following table depicts the components of other income (expense), net for the periods presented and the period over period change for each component.

Provision (benefit) for income taxes. The income tax provision for 2003 was $11.4 million resulting in an effective rate of 36.0%. This compares to an income tax provision of $11.9 million in 2002 resulting in an effective rate of 42.5%. The effective tax rate differs from the statutory U.S. rate of 35% primarily due to nontaxable partnership income or loss, the change in valuation allowances recorded by certain foreign operations, and foreign tax rate differences.

Bookings and backlog. Bookings during the period of $901.0 million were 13.4% below 2002, and backlog at the end of 2003 was $419.9 million compared to $826.4 million at the end of 2002, a 49.2% decrease.

Revenues. Revenues increased by $294.2 million, or 59.0%, to $793.0 million in 2003 from $498.8 million in 2002 due to strong shipments resulting from large bookings achieved in 2001 and 2002. Buyouts accounted for $112.2 million of the increase. For buyout orders booked before 2003, no margin was earned.

Gross profit. Gross profit increased by $33.9 million, or 616%, to $39.4 million in 2003 from $5.5 million in 2002. As a percentage of segment revenues, gross profit increased to 5.0% in 2003 from 1.1% in 2002 primarily due to increased volume and improved operating efficiencies.

Operating income. Operating loss decreased by $23.6 million, to a loss of $11.4 million in 2003 from a loss of $35.0 million in 2002. As a percentage of segment revenues, operating income improved primarily due to the factors mentioned above.

Bookings and backlog. Bookings during the year of $388.5 million were 22.2% below 2002, and backlog at the end of the year was $287.7 million, or 56% below the unusually high level in 2002 of $656.9 million.

Revenues. Revenues increased by $9.8 million, or 1.8%, to $542.4 million in 2003 from $532.6 million in 2002. This increase was primarily attributable to the large increase in field service activity (increase of $28.3 million) offset by decreases in parts (decrease of $8.3 million) and repair (decrease of $12.7 million) due to the delay in orders as a result of various geopolitical situations in Venezuela, Nigeria and the Middle East.

Gross profit. Gross profit increased by $9.1 million, or 5.9%, to $163.9 million in 2003 from $154.8 million in 2002 as a result of the increase in volume and the improvement of gross margins. As a percentage of revenues, gross profit increased to 30.2% in 2003 from 29.1% in 2002 due to a more favorable product mix, price realization and increased manufacturing efficiencies.

Operating income. Operating income increased by $15.4 million, or 18.6%, to $98.1 million in 2003 from $82.7 million in 2002. Despite the modest increase in revenues, operating income as a percentage of revenues increased to 18.0% in 2003 from 15.5% in 2002 due to cost control initiatives, manufacturing and operating efficiencies and a more favorable product mix.

Bookings and backlog. Bookings during the period of $512.5 million were 5.3% below 2002, and backlog at year-end was $132.2 million, or 22.0% below 2002.

Total revenues. Total revenues increased by $154.7 million, or 17.6%, to $1,031.4 million in 2002 from $876.7 million in 2001. Revenues were improved in both segments with most revenue components experiencing double-digit increases.

Cost of goods sold. Cost of goods sold as a percentage of revenues increased to 84.7% in 2002 from 82.2% in 2001. This increase was primarily due to a change in mix between segments, as well as within segments.

Gross profit. Gross profit was relatively unchanged with a slight increase of $1.8 million, or 1.2%, to $157.5 million in 2002 from $155.7 in 2001. Gross profit as a percentage of revenues decreased to 15.3% in 2002 from 17.8% in 2001 due to the change in mix and some margin decline in parts and repairs revenue components.

Selling and administrative expenses. Selling and administrative expenses increased by $5.7 million, or 4.3%, to $138.5 million in 2002 from $132.8 million in 2001. Selling and administrative expenses as a percentage of sales decreased from 15.1% to 13.4%. This spending increase was due to increased third-party commissions (increase of $2.1 million), Ingersoll-Rand corporate allocation (increase of $1.3 million) and other selling spending (increase of $4.6 million) offset by decreases in administration expenses (decrease of $2.2 million).

Operating income. Operating income decreased by $7.0 million, or 33.7%, to $13.8 million in 2002 from $20.8 million in 2001 despite the $154.7 million increase in revenues. The decrease in gross profit for new units contributed most to the operating income decline while selling and administrative expenses increased with volume.

Other income (expense), net. Other income (expense), net was income of $15.0 million in 2002, or $11.8 million more than the income of $3.2 million reported in 2001 as depicted in the table below. At the end of 2002, we received a training and capital grant from the New York State Empire Development Corporation, which resulted in other income of $8.0 million. There were no grants received in 2001. During both 2002 and 2001, we received insurance proceeds as a result of a fire that destroyed a third-party facility, which warehoused our patterns used in our production process.

The following table depicts the components of other income (expense), net for the periods presented and the period over period change for each component.

Provision (benefit) for income taxes. Our effective tax rate was 42.5% in 2002 versus the 62.6% rate in 2001. The effective tax rate differs from the statutory U.S. rate of 35% primarily due to nontaxable partnership income or loss, the change in valuation allowances recorded by certain foreign operations, and foreign tax rate differences.

Bookings and backlog. Bookings during the period of $1,040.8 million were 4.8% below 2001, and backlog at the end of 2002 was $826.4 million compared to $760.1 million at the end of 2001, an 8.7% increase.

Revenues. Revenues increased by $97.1 million, or 24.2%, to $498.8 million in 2002 from $401.7 million in 2001. The increase was primarily driven by the increase in buyouts by $45.5 million and new unit shipments.

Gross profit. Gross profit decreased by $4.1 million, or 42.7%, to $5.5 million in 2002 from $9.6 million in 2001. As a percentage of segment revenues, gross profit decreased to 1.1% in 2002 from 2.4% in 2001 and both years were lower than historical levels as a result of cost overruns associated with certain contracts.

Operating income (loss). Operating loss increased by $4.7 million, or 15.5%, to a loss of $35.0 million in 2002 from a loss of $30.3 million in 2001. As a percentage of segment revenues, the operating loss decreased to 7.0% in 2002 from 7.5% in 2001.

Bookings and backlog. Bookings during the period of $499.5 million were 15.2% below 2001, and backlog at year end was $656.9 million, or 9.5% above 2001.

Revenues. Revenue increased by $57.6 million, or 12.1%, to $532.6 million in 2002 from $475.0 million in 2001 due to an increase in all of the major revenue components. The increase was led by parts, repairs and field service activities.

Gross profit. Gross profit increased by $3.9 million, or 2.6%, to $154.8 million in 2002 from $150.9 million in 2001 due to increased sales volume, offset by an unfavorable parts mix and the impact of exiting the rental business in 2001. As a percentage of segment revenues, gross profit decreased to 29.1% in 2002 from 31.8% in 2001.

Operating income. Operating income decreased by $1.7 million, or 2.0%, to $82.7 million in 2002 from $84.4 million in 2001 due to the mix impact and the unfavorable impact of exiting the rental business in 2001. As a percentage of revenues, operating income decreased to 15.5% in 2002 from 17.8% in 2001 as a result of the workforce reductions discussed above.

Bookings and backlog. Bookings during the period of $541.3 million were 7.4% above 2001, and backlog at year end was $169.5 million, or 5.8% above 2001.

Historically, our primary source of cash has been from operations. Prior to the closing of the transactions, we participated in Ingersoll-Rand’s centralized treasury management system whereby, in certain countries, our cash receipts were remitted to Ingersoll-Rand and Ingersoll-Rand funded our cash disbursements. Our primary cash disbursements were for capital expenditures and working capital. Following the consummation of the transactions, we established our own cash management system.

Net cash flow provided by operating activities for the nine months ended September 30, 2004 was $62.3 million, which compares to $17.7 million for the same period in 2003. Net cash flow provided by from operating activities was $57.8 million, $42.7 million and $51.0 million for 2001, 2002 and 2003, respectively, mainly from profitable results of operations and changes in working capital.

Net cash flow provided by (used in) investing activities for the nine months ended September 30, 2004 was $(1.8) million, which compares to $(4.8) million for the same period in 2003. This negative cash flow was primarily due to capital expenditures of $4.5 million for the first nine months of 2004 and $5.2 million for the same period in 2003. For the years 2001, 2002 and 2003, net cash flow provided by (used in) investing activities was $(15.9) million, $3.2 million and $(7.1) million, respectively, resulting mainly from capital expenditures of $20.3 million, $13.7 million and $7.6 million in 2001, 2002 and 2003, respectively. These results were also favorably affected by insurance proceeds of $4.5 million and $10.1 million received in the years 2001 and 2002, respectively.

Net cash used in financing activities was $48.6 million for the first nine months of 2004 compared to $53.2 million for the first nine months of 2003. This negative cash flow reflects the change in intercompany accounts with Ingersoll-Rand of $47.6 million in 2004 and $58.5 million in 2003. For the years 2001, 2002 and 2003, net cash used in financing activities was $42.9 million, $18.8 million and $63.5 million for 2001, 2002 and 2003, respectively, representing the impact of the net change in intercompany accounts with Ingersoll-Rand and, in 2001, the repayment of short-term borrowings of $15.0 million.

We had approximately $91 million of cash on the closing date, subject to closing adjustments. Following consummation of the transactions, our primary cash uses will be to fund principal and interest payments on our debt, working capital and capital expenditures. Our interest expense, after giving effect to the transactions, for the twelve month period ended September 30, 2004 would have been $53.1 million. We expect to fund these cash needs with operating cash flow and borrowings under the revolving credit portion of our new senior secured credit facility.

As part of the transactions, we incurred debt of $820 million under the notes and the new senior secured credit facility and have additional borrowing capacity of $300 million under the revolving credit portion of the new senior secured credit facility, subject to certain conditions. At the closing of the transactions, of the $300 million of capacity, $180 million was used for outstanding letters of credit. We believe we have had approximately $150 million of letters of credit outstanding, on average, since 2000. The interest rates applicable under the new senior secured credit facility vary based on LIBOR and EURIBOR and our leverage ratio.

The $395 million of term loans under the new senior secured credit facility are repayable in quarterly installments beginning on December 31, 2004 with a portion of our Excess Cash Flow (as defined), if any. See “Description of Other Indebtedness.”

Our capital expenditures have averaged $13.9 million per year over the past three years. We expect that our capital expenditures going forward will be approximately 1.0% of sales versus the 1.3% over the past three years. We believe our capital needs have declined as a result of (1) our manufacturing footprint rationalization, (2) increased use of outsourcing and (3) growth in our less capital-intensive aftermarket parts and services businesses.

Our ability to make payments on and to refinance our indebtedness, including the notes, and to fund planned capital expenditures and research and development efforts, will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative,

We may repurchase our outstanding notes from time to time in open market transactions or otherwise where market conditions are favorable.

The following is a summary of our significant future contractual obligations by year as of December 31, 2003 as adjusted to give effect to the transactions:


(1)	Principally includes amortization payments required to be made under our new senior secured credit facility, which is expected to be entered into on the closing of the transactions, as well as the notes. See “Description of Other Indebtedness” and “Description of the Notes.”

(2)	Consists of an agreement to restructure a grant from Empire State Development Corporation — see Note 17 of accompanying financial statements.

We believe that our senior credit facilities and the indenture governing our outstanding notes are material agreements, that the covenants are material terms of these agreements and that information about the covenants is material to an investor’s understanding of our financial condition and liquidity. The breach of covenants in the senior credit facilities that are tied to ratios based on Adjusted EBITDA, as defined below, could result in a default under the senior credit facilities and the lenders could elect to declare all amounts borrowed due and payable. Any such acceleration would also result in a default under our indenture. Additionally, under the senior credit facilities and indenture, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is also tied to ratios based on Adjusted EBITDA.

Covenant levels and pro forma ratios for the four quarters ended September 30, 2004 are as follows:


(1)	Our ability to incur additional debt and make certain restricted payments under our indenture, subject to specified exceptions, is tied to an Adjusted EBITDA to fixed charge ratio of at least 2.0 to 1.

(2)	The ratio is calculated giving pro forma effect to the acquisition and the incurrences of debt under the indenture and the senior credit facility.

Beginning with the four quarters ending December 31, 2004, our senior credit facilities will require us to maintain an Adjusted EBITDA to cash interest ratio starting at a minimum of 1.75x and a total debt to Adjusted EBITDA ratio starting at a maximum of 6.85x. Failure to satisfy these ratio requirements would

In December 2004, the FASB released Statement 123R, Share-Based Payments, that is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” This Statement supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. Statement 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. The Company is currently evaluating its options with regards to early adoption of this statement as it relates to its management equity program. The pro forma statements presented in this document were prepared with the assumption of early adoption of this Statement.

In May 2004, the FASB released FASB Staff Position No. 106-2 (FSP FAS 106-2), “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003”. The current accounting rules require a company to consider current changes in applicable laws when measuring its postretirement benefit costs and accumulated post-retirement benefit obligations. We adopted FSP FAS 106-2 as of April 1, 2004, the beginning of its second quarter. We and our actuarial advisors determined that most benefits provided by its plan were at least actuarially equivalent to Medicare Part D. We remeasured the effects of this act on the accumulated projected benefit obligation as of April 1, 2004. The effect of the federal subsidy to which we are entitled will be accounted for as an actuarial gain of $13.7 million in 2004. The subsidy had no effect on post-retirement expense for 2003 or prior years.

We contributed a discretionary amount of $10.6 million to our pension plans in 2003. We contributed an additional $30.0 million to our U.S. plan during 2004, all of which was discretionary. We contributed approximately $3.6 million to our non U.S. plans during 2004. Our policy is to fund an amount, which could be in excess of the pension cost expensed, subject to the limitations imposed by current tax regulations.

Pension benefit payments for 2004 were approximately $14.2 million. Pension expense for 2004 was approximately $5.4 million.

In connection with the transactions, Ingersoll-Rand will pay us an amount approximately equal to the excess, if any, of the aggregate liabilities (based on certain assumptions as agreed between Ingersoll-Rand and us) of our pension plans over the aggregate fair market value of the assets of our pension plans, each as determined on the date of the consummation of the transactions.

We fund postretirement benefit costs principally on a pay-as-you-go basis. Benefit payments for postretirement benefits, which reflect future service, as appropriate, are expected to be paid as follows:

In connection with the transactions, Ingersoll-Rand has agreed to retain all postretirement benefit obligations with respect to our employees who are retired or are eligible to retire on or prior to the consummation of the transactions. We expect our postretirement benefit obligations to decrease by approximately 75% as a result of Ingersoll-Rand’s retention of these obligations.

The notes to the financial statements include a summary of significant accounting policies and methods used in the preparation of the consolidated financial statements and the following summarizes what we believe are the critical accounting policies and methods we use:


	•	Revenue recognition — We use the completed contract method for recognizing revenue for our long-term contracts. This method recognizes revenue when the contract is substantially completed as opposed to the percentage-of-completion method which recognizes revenue as the contract progresses. If we use the percentage-of-completion method to recognize revenue, revenue would be recognized in periods prior to substantial completion of the contract.


	The completed contract method requires the use of estimates as to the future costs that will be incurred related to the contract. These costs include material, labor and overhead. Factors influencing these future costs include the availability of materials and skilled laborers.


	•	Inventory — We purchase materials for the manufacture of components for use in our contracts and for use by our aftermarket parts and services business. The decision to purchase a set quantity of a particular item is influenced by several factors including: current and projected cost; future estimated availability; existing and projected contracts to produce certain items; and the estimated needs for our aftermarkets parts and services business. We estimate the net realizable value of our inventories and establish reserves to reduce the carrying amount of these inventories as necessary.

	•	Employee benefit plans — We provide a range of benefits to employees and retired employees, including pensions, postretirement, postemployment and health-care benefits. Determining the cost associated with such benefits is dependent on various actuarial assumptions, including discount rates, expected return on plan assets, compensation increases, employee mortality and turnover rates, and health-care cost trend rates. Independent actuaries perform the required calculations to determine expense in accordance with U.S. generally accepted accounting principles. Actual results may differ from the actuarial assumptions and are generally accumulated and amortized over future periods. We review our actuarial assumptions at each measurement date and make modifications to the assumptions based on then current rates and trends if appropriate to do so. The discount rate, the rate of compensation increase and the expected long-term rates of return on plan assets are determined as of the measurement date. The discount rate reflects a rate at which pension benefits could be effectively settled. The discount rate is established and based primarily on the yields of high-quality fixed-income investments available and expected to be available during the period to maturity of the pension and postretirement benefits. We also review the yields reported by Moody’s on AA corporate bonds as of the measurement date. The rate of compensation increase is dependent on expected future compensation levels. The expected long-term rates of return are projected to be the rates of return to be earned over the period until the benefits are paid. Accordingly, the long-term rates of return should reflect the rates of return on present investments, expected contributions to be received during the current year and on reinvestments over the period. The rates of return utilized reflect the expected rates of return during the periods for which the payment of benefits is deferred. The expected long-term rate of return on plan assets used is based on what is realistically achievable based on the types of assets held by the plans and the plan’s investment policy. We review each plan and its returns and asset allocations to determine the appropriate expected long-term rate of return on plan assets to be used. At the end of 2002, we believed a revision to our long-term expectations for returns was necessary based upon the market performance experienced in 2001 and 2002. We believe that the assumptions utilized in


		recording its obligations under its plans are reasonable based on input from its actuaries, outside investment advisors, and information as to assumptions used by plan sponsors.


	Shareholders’ equity at December 31, 2003 and 2002, includes a reduction for a minimum liability adjustment net of tax, of $77.0 million and $77.9 million, respectively. The reason for the increase in the minimum liability adjustment year-over-year is primarily due to the change in the discount rates.

	Changes in any of the assumptions that were used in computing the net periodic pension cost or postretirement cost could have an impact on the various components that comprise these costs. Estimated sensitivities to the U.S. net periodic pension cost of a 0.25% rate decrease in the two basic assumptions are a follows: the discount rate would increase expense by approximately $1.0 million, and the estimated return on assets assumption would increase expense by approximately $0.6 million. A 0.25% rate decrease in the discount rate for postretirement benefits would increase net periodic postretirement benefit cost by $0.3 million and a 1.0% increase in the health care cost trend rate would increase the cost by approximately $2.8 million.


	•	Commitments and contingencies — We are involved in various litigations, claims and administrative proceedings, including environmental matters, arising in the normal course of business. We have recorded reserves in the financial statements related to these matters which are developed based on consultation with legal counsel and internal and external consultants and engineers, depending on the nature of the reserve. We provide for environmental reserves when, in conjunction with our internal and external counsel, we determine that a liability is both probable and estimable. In many cases, the liability is not fixed or capped when we first record a liability for a particular site. Factors that affect the recorded amount of the liability in future years include: our participation percentage due to a settlement by or bankruptcy of other potentially responsible parties; a change in the environmental laws requiring more stringent requirements; a change in the estimate of future costs that will be incurred to remediate the site; and changes in technology related to environmental remediation.

We have accrued liabilities for product liability claims, including workers’ compensation matters and product warranty issues. We have recorded reserves in the financial statements related to these matters, which are developed using input derived from actuarial estimates and historical and anticipated experience data depending on the nature of the reserve. We believe our estimated reserves are reasonable. If the level of claims changes or if the cost to provide the benefits related to these claims should change, our estimate of the underlying liability may change.


	•	Goodwill and other intangible assets — We have significant goodwill and other intangible assets on our balance sheet. The valuation and classification of these assets and the assignment of amortization lives involves significant judgments and the use of estimates. The testing of these intangible assets under established accounting guidelines for impairment also requires significant use of judgment and assumptions, particularly as it relates to the identification of reporting units and the determination of fair market value. These estimated fair market values are based on estimates of future cash flows of our businesses. Factors affecting these future cash flows include: the continued market acceptance of the products and services offered by our businesses; the development of new products and services by our businesses and the underlying cost of development; the future cost structure of our businesses; and future technological changes. Our goodwill and other intangible assets are tested and reviewed for impairment on an annual basis or when there is a significant change in circumstances. We believe that our use of estimates and assumptions are reasonable and comply with generally accepted accounting principles. Changes in business conditions could potentially require future adjustments to these valuations.

The preparation of all financial statements includes the use of estimates and assumptions that affect a number of amounts included in our financial statements. If actual amounts are ultimately different from previous estimates, the revisions are included in our results for the period in which the actual amounts become known. Historically, the aggregate differences, if any, between our estimates and actual amounts in any year, have not had a significant impact on the consolidated financial statements.

Compression is a process whereby a volume of gas at an existing pressure is moved to a desired higher pressure. Compression is required at many steps of the oil and natural gas production and processing cycle: at the wellhead, at gathering lines, in pipelines, in storage systems, and at refineries and processing facilities.

Over the life of an oil and gas well, reservoir pressure and deliverability typically decline as reserves are extracted. With respect to gas, as the natural reservoir pressure of the well declines below the line pressure of the gas gathering or pipeline system used to transport the product, gas no longer flows naturally in those facilities. At this time compression equipment is applied to increase efficiency. Compression is also used to enhance production of oil from secondary reservoirs, by re-injecting gas to lift oil and increase the reservoir production rate and yield.

Midstream applications involve the transmission and storage of hydrocarbons. As gas is transported through a pipeline, compressor units are applied along the pipeline to manage the flow of natural gas through the pipeline to its destination.

Upon reaching a processing facility, crude oil and natural gas are generally impure and not marketable as produced at the wellhead. Processing equipment is used to separate oil, gas and water and to remove various contaminants in preparation for further processing. This processing involves chemical reactions at specific temperatures, volumes and pressures. Compression is integral to affect these processes.

Compression is also used in gas storage projects to inject gas into underground reservoirs during off-peak seasons for withdrawal later during periods of high demand.

In refining and petrochemical applications, oil and gas are further treated to create a wide range of fuels, industrial gases and chemicals. In refineries, compression is integral to producing fuels such as gasoline, jet fuel, diesel and heating oil from crude oil. The Clean Air Act is driving increased used of compression in the refinery industry, as compression is integral to the processes that allow the production of low-pollutant fuels.

Other downstream compression applications are found in the petrochemical industry where hydrocarbon raw material — primarily crude oil and natural gas are processed into products such as ethylene, propylene, ammonia or methanol for the production of end use products like fertilizer, plastics and fibers.

The rotating equipment and services industry manufactures and services a wide range of technologically advanced equipment, including centrifugal and reciprocating compressors, steam and gas turbines, expanders and control systems. Demand for these solutions comes from a wide variety of large end markets, including the three major segments of the oil and gas industries (upstream, involving the production of oil and gas; midstream, involving the preparation and transportation of natural gas and liquids for future use; and downstream, involving refining), and the petrochemical, chemical, general industrial and power industries.

The rotating equipment industry includes a wide and diverse range of products, which can be grouped into two distinct categories:


	•	“standard” equipment, based on a single, non-custom design, used for low-horsepower, lower-pressure and lower-volume applications in wellhead production from onshore or shallow-water offshore platform production; and


	•	custom-engineered equipment, built to customer specifications, engineered for the specific operating environment and application in which it will be put to use. This equipment is generally used in high-pressure/volume applications, typically consists of large equipment packages, and is generally used in large scale production operations including mission-critical applications in deepwater offshore sites, major pipeline and storage systems and large processing and refining facilities and liquefying natural gas.

Most of Dresser-Rand’s revenues are generated from the sale and servicing of this second category of rotating equipment. We estimate that the worldwide aggregate annual value of new unit sales of the classes of equipment we manufacture and the aftermarket parts and services needs of the installed base of such equipment (both in-house and outsourced) is approximately $10 billion.

Our industry is typically divided into two segments: new unit sales and aftermarket parts and services.

New unit sales includes the engineering, manufacturing and sales of reciprocating and centrifugal compressors, steam and gas turbines, expanders and control systems.


	•	*Reciprocating Compressors.* Reciprocating compressors use traditional piston and cylinder design to increase pressure within a chamber. Typically, reciprocating compressors are used in lower volume/higher compression ratio applications, including refinery processes, natural gas gathering and processing, extraction of natural gas liquids, chemical and refrigeration processes, and natural gas, ethylene, carbon dioxide and natural gas pipelines.

	•	*Centrifugal Compressors.* Centrifugal compressors are a class of turbomachinery that uses a series of graduated impellers to increase pressure. Centrifugal compressors are typically used in a variety of higher-volume/lower compression ratio, and low and high pressure applications including oil and gas production, liquid natural gas, gas to liquid, synfuels, and process applications similar to reciprocating compressors.

	•	*Turbines.* Steam and gas turbines are typically used as prime movers for mechanical and electrical drive applications including compressors, pumps, fans, blowers, and electrical generators.

Since many of the units we sell are placed in mission critical applications for clients it is important that this equipment function as efficiently as possible as reliably as possible at the lowest cost possible. For this reason we believe that clients are focused on reducing the total cost of ownership throughout the life cycle of the equipment, and typically seek the most advanced technology in order to increase operating efficiency. Additionally, with units having a typical operating life of 30 years or more, units have substantial long term parts and services needs over their operating lives. For this reason we also believe clients consider quality and breadth of aftermarket support in selecting a supplier of rotating equipment.

With operational lives measured in decades, there is a substantial installed based of the compressors and related equipment in operation worldwide. Over their operating life cycle, these units have substantial parts and servicing needs. In addition, the units are typically completely revamped on a periodic basis. Clients purchase parts and upgrades either from the OEM or third-party providers. Repair, maintenance, and revamp service needs are met through a combination of client inhouse resources, OEMs and third-party service providers. Clients are increasingly outsourcing their services, as outsourcing provides the client greater financial and operating flexibility by minimizing their investment in maintenance personnel and technically proficient service resources with strong product experience. When selecting an aftermarket service provider, clients typically seek suppliers who can provide responsive and reliable service and solutions, from locally based service centers, across their entire installed base.

Overall demand for compression products and services is generally linked to oil and natural gas consumption, both domestically and internationally. We believe that the rotating equipment and aftermarket services industry continues to have significant growth potential due to the following factors:


	•	natural gas consumption is increasing worldwide at an average rate of 2.4% per year as a result of worldwide economic growth and the recognition of natural gas as a clean air fuel;

	•	increased demand for forecasted natural gas is driving substantial growth in spending on liquefied natural gas infrastructure; forecast spending on LNG plant equipment for 2005-2008 is $13.4 billion, 155% more than was spent on such equipment from 1964-2004;

	•	decline rates associated with maturing natural gas fields in the United States (as reflected in the table below) and other countries have resulted in increased requirements for compression products and services to maintain commercially viable levels of production;


	•	the refining sector continues to experience increasing demand pressures as current refinery capacity is reaching a peak;

	•	environmental laws such as the Clean Air Act and the curtailing of the prior practice of flaring gas will increase the demand for compression products and services;

	•	the production of natural gas and oil worldwide, as reflected in the table below, will continue to grow as a result of increasing demand for fossil fuels; and


	•	continued development of pipeline infrastructure, as reflected in the table below, particularly in Asia and Latin America, and increased privatization of state-owned energy producers internationally, will lead to increased outsourcing of compression services.

Demand for compressors and related products and aftermarket services is generally less affected by short-term market cycles and oil and gas price volatility than the financial performance of companies operating in other sectors of the oilfield services industry because:


	•	the demand for rotating equipment solutions is tied primarily to oil and natural gas consumption, which is generally less cyclical in nature than exploration activities;

	•	rotating equipment is typically required for (i) oil and gas to be delivered from the wellhead to end-users, and (ii) end users to be able to process the oil and gas;

	•	the customer base for rotating equipment solutions covers a wide range of end markets; and

	•	demand for rotating equipment and services is geographically diversified.

Adding to this stability is the fact that, while rotating equipment often must be specifically engineered or reconfigured to meet the unique demands of our customers, the fundamental technology of compression equipment has not experienced significant technological change.

The foregoing information includes projections, or “forward-looking statements.” Projections are inherently uncertain; actual events will differ from the projections. Forecasts are particularly likely to be inaccurate, especially over long periods of time. See “Risk Factors” for factors that could cause actual results to vary from results referred to in the forward-looking statements above.

We are among the largest global suppliers of rotating equipment solutions to the worldwide oil, gas, petrochemical and process industries. In 2003, approximately 95% of our revenues were generated from oil and gas infrastructure spending. For the nine month period ended September 30, 2004, approximately 55% of our revenues were generated by our aftermarket parts and services segment, with the remainder generated by our new units segment. Our services and products are used for a wide range of applications, including oil and gas production, high-pressure field injection and enhanced oil recovery, pipelines, refinery processes, natural gas processing, and petrochemical production. We believe we have the largest installed base in the world of the classes of equipment we manufacture, with an estimated 40% of the total installed base of equipment in operation. Our installed base of equipment includes such well-recognized brand names as Dresser-Rand, Dresser-Clark, Worthington, Turbodyne and Terry. We provide a full range of aftermarket parts and services to this installed base through our global network of 24 service and support centers covering 90 countries. Our extensive and diverse client base consists of most major independent oil and gas producers and distributors worldwide, national oil and gas companies, and chemical and industrial companies. Our clients include BP, ChevronTexaco, Statoil, ExxonMobil, Lukoil, Sinopec, Shell Chemical, Duke Energy and the U.S. and certain foreign governments. No single client has represented more than 5% of our total revenues over any consecutive two-year period.

We operate globally with manufacturing facilities in the United States, France, Germany, Norway, China, India and Brazil. We have one of the broadest sales and services networks in the industry, with locations in all of the major international energy markets, established coverage of over 90 countries, and over 4,600 employees worldwide. We believe our recent financial performance demonstrates our ability to improve our results through on-going commitment to operational excellence, as well as through the growth of our services-centered, solutions-based business model. For the year ended December 31, 2003 and the nine months ended September 30, 2004, our backlog was $419.9 million and $586.2 million, and we generated net income of $20.4 million and $37.7 million, and EBITDA of $59.0 and $60.6, respectively. Our backlog and EBITDA for the nine month period ended September 30, 2004 increased 21.8% and 196.5%, respectively, from the nine month period ended September 30, 2003, reflecting the impact of both our growth-oriented business realignment and our continued focus on operating efficiency. Our backlog increased from $481.1 million for the nine months ended September 30, 2003 to $586.2 million for the nine months ended September 30, 2004, of which $244.5 million had been filled by December 31, 2004.

We continue to evolve our business toward a solutions-based service offering that combines our industry-leading technology, proprietary worldwide service center network and deep product expertise. This approach drives our growth as we offer integrated service solutions that help our clients maximize returns on their production and processing equipment. We believe our business model and alliance-based approach align us with our clients who are shifting from purchasing isolated units and services on a transactional basis to choosing service providers that can help optimize performance over the entire life cycle of their equipment. Our alliance program encompasses both the provision of new unit and/or services, and we offer our clients a dedicated team, streamlined engineering and procurement process and a life cycle approach to manufacturing, operating and maintaining their equipment, whether originally manufactured by us or by a third party. In a typical alliance, we are either the exclusive or preferred supplier of equipment and aftermarket parts and services to a client. Our alliances enable us to:


	•	lower clients’ total cost of ownership and improve equipment performance;

	•	lower our and our clients’ transaction costs;

	•	better forecast our future revenues; and

	•	develop a broad, continuing business-to-business relationship with our clients that often results in a substantial increase in the level of activity with those clients.

The markets in which we operate are large and fragmented. We estimate that the worldwide aggregate annual value of new unit sales of the classes of equipment we manufacture and the aftermarket parts and services needs of the installed base of such equipment (both in-house and outsourced) is approximately


	•	the trend to increased outsourcing of equipment maintenance and operation;

	•	the maturation of producing fields worldwide, which requires increasing use of compression equipment to maintain production levels;

	•	the substantial increase in demand for natural gas, which is driving growth in gas production, storage and transmission infrastructure;

	•	regulatory and environmental initiatives, including clean fuel legislation and stricter emissions controls worldwide;

	•	the aging installed base of equipment, which is increasing demand for aftermarket parts and services, revamps and upgrades;

	•	increasing construction of natural gas production, storage and transportation infrastructure; and

	•	the increased worldwide demand for fuel and feedstock resulting from economic growth.

Largest Installed Base in the Industry. As of September 30, 2004, we estimate that there were more than 77,000 of our units in operation. We believe this represents more than 40% of all the units in our classes of products that are currently in operation, and is the largest installed base of such equipment in the industry. This significant scale advantage offers a number of competitive benefits, including:


	•	a significant opportunity to grow our aftermarket parts and services business as a result of the portion of our installed base currently serviced by clients in-house, combined with an industry trend toward outsourcing;

	•	a substantial source of stable, recurring, defensible high-margin aftermarket revenue from the significant parts and services requirements of units over their long operational lives and clients’ general preference for OEM parts and services; and

	•	the capacity to support both a high level of reinvestment in research and development and a global service center network that is difficult for competitors with a smaller installed base to match.

Leading Technology Platform. We have a long history of technology leadership and innovation in our industry. Our research efforts center around leading technologies that maximize operating performance by increasing efficiency, durability, reliability and versatility. We are focused on developing new platform products, enhancing our existing platforms, and developing upgrades that can be offered to our existing installed base of units. For example, in the mid-1990s we spent approximately five years and over $60 million to develop our DATUM turbo compressor platform offerings. We believe this platform is more efficient than competing offerings, offers clients the lowest total cost of ownership, reduces emissions and noise levels and

Fastest Cycle Time. We believe we generally have the fastest cycle time in the industry among manufacturers in our product range. Our short cycle time, the time from order booking to unit delivery, is valuable to the client and provides us with a competitive advantage. For example, the rules based design of our DATUM compressor platform, combined with our proprietary product Configurator software, allow us to shorten the front-end specification, design and engineering phases of the manufacturing process typically by one-third, thereby reducing the overall delivery time to our clients. On a typical oil and gas project, this can reduce unit delivery time by as much as 12 weeks, thus reducing project costs and providing earlier start-up of the production equipment.

Substantial Investment in Systems. We view systems and processes as key elements in providing rapid, high-quality, differentiated service. We have invested substantial resources to develop a number of key systems, including:


	•	Configurator. Our proprietary system for automating the preliminary engineering phase of designing a product to client specifications and automatically generating design drawings and bills of materials, which enables us to reduce costs and reduce by more than two months the typical industry cycle time of 12-14 months.

	•	D-R Avenue. Part of our Client Relationship Management (CRM) system, D-R Avenue is a recently deployed proprietary database with information on our installed base of equipment as well as the equipment of some of our competitors, including type, location, age, application, and maintenance history. This database positions us to better serve our clients and grow our aftermarket parts and services business by leveraging our knowledge and resources through a proactive sales approach.

	•	Client Interface and Response System (CIRS). Part of our CRM system, this proprietary client relationship system allows clients to log any technical support or service requests they have into our system, automatically directs the request to both our field-based account manager and the most appropriate subject-matter expert in our company, and tracks our follow up on the client request. This provides the client with rapid access to the most knowledgeable personnel in our organization, and allows us to effectively monitor and manage our responsiveness to client requests.

	•	Skills Registry. This database contains profiles of our service personnel, including education, training, experience, performance and safety records, and language skills. We frequently provide clients with profiles of our proposed service personnel, allowing them the opportunity to preapprove members of their service team.

	•	TES. We use a Siebel-based technology enabled selling tool (TES), which allows us to systematically manage the entire sales cycle from lead generation to order booking on a global basis. This system provides productivity gains in our business processes associated with opportunity management, data collection and analysis, market intelligence, and communication associated with our clients and markets.

Strong and Experienced Management Team. Our management team has a demonstrated track record of financial and operational achievement. The management team has an average of 17 years experience with us, including our CEO who has been with us for 23 years, and has extensive industry experience and longstanding customer relationships. This management team has been responsible for the successful services revenue growth and cost reduction initiatives that have driven our increased profitability.

Attractive Business Model. Our business model has several attractive features, including:


	•	Strong, Stable Cash Flow with Low Growth Capital Requirements. As a result of the recurring revenue from our aftermarket parts and services business, progress payments from customers that limit our need for additional working capital as we grow, and the moderate capital expenditures needed to support our services-based growth model, our business generates strong, recurring cash flows. Our cash


		flow from operations grew from $17.7 million to $62.3 million, an increase of 252%, for the nine month period ended September 30, 2004 as compared to the nine month period ended September 30, 2003.

	•	Visibility. We have a high degree of visibility into our forecasted financial performance. A substantial portion of our new unit orders is booked six to nine months in advance of delivery. As of September 30, 2004 and September 30, 2003, our new units backlog was $417.8 million and $347.7 million, respectively, representing a 20.2% increase. Since December 2000, our new units backlog has consistently exceeded 80% of our next twelve month new units revenues.

In 2003, approximately 95%, of our revenues were generated from energy infrastructure and oilfield spending. Additionally, $542.4 million, or 40.6%, of our total revenues were generated by our aftermarket parts and services business. We intend to continue to focus on the oilfield, natural gas and energy sectors and thus expect to capitalize on the expected long-term growth in equipment and services investment, especially related to natural gas, in these sectors.

Increase Sales of Aftermarket Parts and Services to Existing Installed Base. The substantial portion of the aftermarkets parts and services needs of our existing installed base of equipment currently not, or only partially, serviced by us represents a significant opportunity for growth. We believe the market has a general preference for aftermarket OEM parts and services. We are implementing a proactive approach to aftermarket parts and services sales that capitalizes on our knowledge of the installed base of our own and our competitors’ equipment. By using D-R Avenue, we are in a position to be able to identify technology upgrades that improve the performance of our clients’ assets and to proactively suggest upgrade and revamp projects that clients may not have considered. We are upgrading our service response by integrating the expertise of our factory-based product engineers with the client-oriented service personnel in the field through our CIRS system. The CIRS system significantly enhances our ability to rapidly and accurately respond to any technical support or service request from our clients. We believe our premium service level will result in continued growth of sales of aftermarket parts and services.

Expand Aftermarket Parts and Services Business to Non-Dresser-Rand OEM Equipment. We believe the aftermarket parts and services market for non-Dresser-Rand equipment represents a significant growth opportunity that we have only just begun to pursue on a systematic basis. As a result of the knowledge and expertise derived from our long history and experience servicing the largest installed base in the industry, combined with our extensive investment in technology, we have a proven process of applying our technology and processes to improve the operating efficiency and performance of our competitors’ products. Additionally, with the largest global network of full-capability service centers, we are often in a position to provide quick response to clients and to offer local service. We believe these are important service differentiators for our clients. Through the D-R Avenue project, we have assembled a significant amount of data on competitors’ installed equipment base, and we intend to capitalize on our knowledge, our broad network of service centers, flexible technology and existing relationships with most major industry participants to grow our aftermarket parts and services solutions for non-Dresser-Rand equipment.

Grow Alliances. As a result of the need to improve efficiency in a competitive global economy, oil and gas companies are frequently consolidating their supplier relationships and seeking alliances with suppliers, shifting from purchasing units and services on an individual transactional basis to choosing service providers that can help them optimize performance over the entire life cycle of their equipment. In the past three years, we have seen a high level of interest among our clients in seeking alliances with us, and we have entered into agreements with more than 30 of our major clients. We plan to leverage our market leadership, global presence and comprehensive range of products and services to continue to take advantage of this trend by pursuing new client alliances as well as strengthening our existing alliances. We currently are the only alliance partner for rotating equipment with Statoil, Marathon Ashland Petroleum, Shell Chemicals (USA) and others. In addition, we are a preferred, non-exclusive supplier to other alliance partners, including British Petroleum, ConocoPhillips, ExxonMobil and Duke Energy.

Expand our Performance-Based Long-Term Service Contracts. We are growing the outsourced services market with our performance-based operations and maintenance solutions (known as our Availability+ program), which are designed to offer clients significant value (improved equipment performance, decreased life cycle cost and higher availability levels) versus the traditional services and products approach. These contracts generally represent multiyear, recurring revenue opportunities for us that typically include a performance-based element to the service provided. We offer these contracts for most of the markets that we serve.

Introduce New and Innovative Products and Technologies. We believe we are an industry leader in introducing new, value-added technology. Product innovation has historically provided, and we believe will continue to provide, significant opportunities to increase revenues from both new product sales and upgrades to our installed base of equipment. Many of our products utilize innovative technology that lowers operating costs, and other OEMs’, improves convenience and increases reliability and performance. These products typically generate higher margins than our more conventional products. Examples of recent new offerings include adapting the DATUM compressor platform for the revamping of other OEM equipment, a new design of dry-gas seals and bearings, and a new generation of multiphase turbo separators. We recently have introduced a complete line of remote-monitoring and control instrumentation that offers significant performance benefits to clients and enhances our operations and maintenance services offering. We plan to continue developing innovative products, including new compressor platforms for subsea and underground applications, which would further open up new markets to us.

Continue to Improve Profitability. We continually seek to improve our financial and operating performance through cost savings and productivity improvements. Since the fourth quarter of 2002, we adopted a number of restructuring programs across our entire company. An important element in these programs was process innovation that permitted us to streamline our operations. As a result, from September 30, 2002 through September 30, 2004, we consolidated eight facilities and reduced head count from 5,942 to 4,601 employees. As a result of our business realignment toward our aftermarket parts and services segment, our lean manufacturing initiatives and our decision to begin charging customers a margin on third-party equipment they ask us to package with our own units, our operating income per employee (based on the average number of employees in each product) for the nine month period ended September 30, 2004 as compared to the nine month period ended September 30, 2003, increased from $1,241 to $9,390. We are focused on continuing to improve our cost position in every area of our business, and we believe there is substantial opportunity to further increase our productivity in the future.

Selectively Pursue Acquisitions. We intend to continue our disciplined pursuit of acquisition opportunities that fit our business strategy. We expect to make acquisitions within the energy sector that add new products or technologies to our portfolio, provide us with access to new markets or enhance our current market positions. Given our size and the large number of small companies in our industry and related industries, we believe we are well positioned to be an industry consolidator over time.

We design, manufacture and market highly engineered rotating equipment and services sold primarily to the worldwide oil, gas, petrochemical and industrial process industries. Our segments are new units and

We are a leading manufacturer of highly-engineered turbo and reciprocating compression equipment and steam and also manufacture special-purpose gas turbines. Our new unit products are built to client specifications for long-life, critical applications. The following is a description of the new unit products that we currently offer.

Turbo Products. We are a leading supplier of turbomachinery for the oil and gas industries worldwide. In 2003, in North America new unit turbomachinery sales, we were the clear leader, and continued to rank in the top three in worldwide market share. Centrifugal compressors utilize turbomachinery technology that employs a series of graduated impellers to increase pressure. Generally, these centrifugal compressors are used to re-inject natural gases into petroleum fields to increase field pressures for added petroleum recovery. In addition, centrifugal compression is used to separate the composition of various gases in process applications to extract specific gases. These compressors are also used to provide the compression needed to increase pressures required to transport gases between gas sources through pipelines. Applications for our turbo products include gas lift and injection, gas gathering, storage and transmission, synthetic fuels, ethylene, fertilizer, refineries and chemical production.

In 1995, we introduced the DATUM product line, which incorporates enhanced engineering features that provide significant operating and maintenance benefits for our clients. The DATUM is a comprehensive line

In addition, we offer a variety of gas turbines ranging in power capacity from approximately 1.5 to 60 megawatts (MW), which support driver needs for various centrifugal compressor product lines, as well as for power generation applications.

Reciprocating Compressors. We are a leading supplier of reciprocating compressors, offering products ranging from medium to high speed separable units driven by engines to large slow speed motor driven process reciprocating compressors. In 2003, in North America new unit reciprocating processors sales, we were the clear leader, and continued to rank in the top three in worldwide market share. Reciprocating compressors use a traditional piston and cylinder design engine to increase pressure within a chamber. Typically, reciprocating compressors are used in lower volume/higher compression ratio applications. We offer 11 models of process reciprocating compressors, with power capacity ranging from 5 to 45,000 HP, and pressures ranging from vacuum to 60,000 psig. We offer six models of separable compressors, with power ratings to 10,500 HP. Applications for our reciprocating compressors include refiner processes, natural gas transmission and processing, high pressure injection, pipelines, production, natural gas liquid recovery, gas gathering, gas lift, gas reinjection and fuel gas booster.

Steam Turbines. We are a leading supplier of standard and engineered mechanical drive steam turbines and turbine generator sets. Steam turbines use steam from power plant or process applications and expand it through nozzles and fixed and rotating vanes, converting the steam energy into mechanical energy of rotation. We are one of the few remaining North American manufacturers of standard and engineered multi-stage steam turbines. Our mechanical drive steam turbine models have power capacity ranging from 2 to 75,000 HP and are used primarily to drive pumps, fans, blowers and compressors. Our models that have power capacity up to 75,000 kW are used to drive electrical generators. Our steam turbines are used in a variety of industries, including oil and gas, refining, petrochemical, chemical, pulp and paper, electrical power production and utilities, sugar and palm oil. We also build equipment for universities, municipalities and hospitals. We are the sole supplier to the United States Navy of steam turbines for aircraft carrier propulsion.

In addition to supplying new rotating units, there are significant opportunities for us to supply engineered revamp and upgrade services to the installed base of rotating equipment.

Revamp services involve significant improvement of the aerodynamic performance of rotating machinery by incorporating newer technology to enhance equipment efficiency, durability or capacity. For example, steam turbine revamps involve modifying the original steam flow path components to match new operating specifications such as horsepower, speed and steam condition.

Upgrade services are offered to all lines of rotating equipment, either in conjunction with revamps or on a stand alone basis. Upgrades are offered to provide the latest applicable technology components for the equipment to improve durability, reliability, and/or availability. Typical upgrades include replacement of components such as governors, bearings, seals, pistons, electronic control devices, and retrofitting of existing lubrication, sealing and control systems with newer technology.

Our proactive efforts to educate our clients on improved revamp technologies to our DATUM line has proven to offer significant growth potential with attractive margins. We have the support systems in place, including our technology platform and service facilities and our cost effective Configurator platform, for preparing accurate proposals, to take advantage of the growth potential in this market. In addition, we believe our alliance relationships will allow us to create new revamp opportunities.

New product development is an important part of our business. We believe we are an industry leader in introducing new, value-added technology. Our investment in research and development has resulted in numerous technology upgrades focused on aftermarket parts and services growth. Our recent new product development includes adapting the DATUM compressor platform for revamping of other OEM equipment, a new design of dry-gas seals and bearings, and a new generation of multiphase turbo separators. We have recently introduced a complete suite package of remote monitoring and control instrumentation that offers significant performance benefits to clients and enhances our operations and maintenance services offering. We plan to continue developing innovative products, including new compressor platforms for subsea and underground applications, which would be first-in-class products opening up new markets.

We believe clients are increasingly choosing their suppliers based upon capability to custom engineer, manufacture and deliver reliable high-performance products, with the lowest total cost of ownership, in the shortest cycle time, and to provide timely, locally based service and support. Our client alliance sales have increased substantially as a result of our ability to meet these client requirements. For example, the proportion of our core centrifugal and process reciprocating new unit revenues from client alliances has increased from approximately 20% for 2000 to approximately 45% for 2003.

The aftermarket parts and services segment provides us with long-term growth opportunities and a steady stream of recurring revenues and cash flow. With a typical operating life of 30 years or more, rotating equipment requires substantial aftermarket parts and services needs over its operating life. Parts and services activities tend to realize higher margins than new unit sales. Additionally, the cumulative revenues from these aftermarket activities often exceeds the initial purchase price of the unit, which in many cases is as low as five percent of the total life cycle cost of the unit of the total life cycle cost to the client over the life of the unit. Our aftermarket parts and services business offers a range of services designed to enable clients to maximize their return on assets by optimizing the performance of their mission-critical rotating equipment. We offer a broad range of aftermarket parts and services, including:


	•	Replacement Parts

	•	Equipment Repair & Rerates

	•	Field Service Turnaround

	•	Equipment Installation

	•	U.S. Navy Service & Repair

	•	Applied Technology

	•	Operation and Maintenance Contracts

	•	Long-Term Service Agreements

	•	Rotor Storage

	•	Special Coatings/ Weldings

	•	Condition Monitoring

	•	Product Training

	•	Controls Retrofit

	•	Turnkey Installation/ Project Management

	•	Equipment Technology Upgrades

	•	Site/ Reliability Audits

We believe we have the largest installed base of the classes of equipment we manufacture and the largest associated aftermarket parts and services business in the industry. Many of the units we manufacture are unique and highly engineered and require knowledge of their design and performance characteristics to service. We estimate that we currently provide approximately 50% of the supplier provided aftermarket parts and services needs of our own manufactured equipment base, and less than two percent of the aftermarket parts and services needs of the equipment base of other manufacturers. We focus on a global offering of critical, technologically advanced aftermarket offerings, and as a result our aftermarket activities tend to be concentrated on the provision of higher value added parts and upgrades, and the delivery of sophisticated operating, repair, and overhaul services. Smaller independent companies tend to focus on local markets and have a more basic aftermarket offering.

We believe clients generally show a preference for purchasing aftermarket parts and services from the OEM of a unit. A significant portion of our installed base is serviced in-house by our clients. However, we believe there is an increasing trend for clients to outsource this activity, driven by declining in-house expertise, cost efficiency and the superior service levels and operating performance offered by OEM service providers. We do not believe that a material portion of our installed base is serviced by any single third-party provider. The steady demand from our installed base for parts and aftermarket services represents a stable source of recurring revenues and cash flow. Moreover, with our value-based solutions strategy, we have a demonstrated track record of growth in this segment as a result of our focus on expanding our service offerings into new areas, including servicing other OEMs’ installed base of equipment, developing new technology upgrades and increasing our penetration of higher volume-added services to our own installed base.

Because equipment in our industry typically has a multi-decade operational life, we believe aftermarket parts and services capability is a key element in both new unit purchasing decisions and sales of service contracts. Given the critical role played by the equipment we sell, customers place a great deal of importance on a supplier’s ability to provide rapid, comprehensive service, and we believe that the aftermarket parts and services business represents a significant long-term growth opportunity. We believe important factors for our clients include a broad product range servicing capability, the ability to provide technology upgrades, local presence and rapid response time. We offer a comprehensive range of aftermarket parts and services, including installation, maintenance, monitoring, operation, repairs, overhauls and upgrades. We provide our solutions to our clients through a proprietary network of 24 service and support centers in 14 countries, employing over 1,000 service personnel, servicing our own and other OEMs’ turbo and reciprocating compressors as well as steam and gas turbines. Our coverage area of service centers servicing both turbo and reciprocating compressors is believed to be more than twice as large as that of our next closest competitor.

We market our services and products worldwide through our established sales presence in over 20 countries. In addition, in certain countries in which we do business, we sell our services and products through distributors. Our sales force is comprised of over 350 direct sales/service personnel and a global network of 85 independent representatives, as well as 24 service and support centers in 14 countries who sell our products and provide service and aftermarket support to our installed base locally in over 90 countries.

Our manufacturing processes generally consist of fabrication, machining, component assembly and testing. Many of our products are designed, manufactured and produced to order and are often built to clients’ specifications for long-life, mission-critical applications. To improve quality and productivity, we are implementing a variety of manufacturing strategies including focus factories, low cost manufacturing, and integrated supply chain management. With the introduction of the Configurator, we have reduced cycle times of engineering designs by approximately one-third, which we believe to be one of the lowest cycle times in the industry. In addition, we have been successful in outsourcing the fabrication of subassemblies and components of our products, such as lube oil consoles and gas seal panels, whenever costs are significantly lower and quality is comparable to our own manufacturing. Our manufacturing operations are conducted in nine locations

We strive to manufacture the highest quality products and are committed to improve the quality and efficiency of our products and processes. For example, we have established a full-time worldwide process innovation team of 80 employees who work across our various departments, including engineering, finance, purchasing and others, and who are focused on providing our clients with faster and improved configured solutions, short service response times, improved cycle times and on-time-delivery. The team uses a combination of operational performance and continuous improvement tools from Lean Enterprise, 6 Sigma, Value Engineering/ Value Analysis, Total Quality Management, plus other value-creation and change management methodologies. Our aggressive focus on product quality is essential due to the strict performance requirements for our final products. All of our plants are certified in compliance with ISO 9001, with several also holding ISO 14001.

We manufacture many of the components included in our products. The principal raw materials required for the manufacture of our products are purchased from numerous suppliers, and we believe that available sources of supply will generally be sufficient for its needs for the foreseeable future.

Our clients include most of the world’s major and national oil companies, large, independent refiners, major energy companies, multinational engineering and construction companies, process and petrochemical companies, the United States government, and other businesses operating in certain process industries. Our extensive and diverse client base consists of most major public, private and government energy companies worldwide and includes BP, ChevronTexaco, Statoil, ExxonMobil, Lukoil, Sinopec, Shell Chemical, Duke Energy and U.S. and foreign governments. While orders in our industry tend to be large, no single client has represented more than 5% of our total revenues over any consecutive two year period, and in any given year only once has a single client represented greater than 10% of our total net revenues. In 2003, our largest client, British Petroleum, represented 10.8% of our total revenues.

We believe our business model aligns us with our clients who are shifting from purchasing isolated units and services on an individual transactional basis to choosing service providers that can help optimize performance over the entire life cycle of their equipment. We are responding to this demand by moving to an alliance-based approach. An alliance can encompass the provision of new units and/or services, whereby we offer our clients a dedicated, experienced team, streamlined engineering and procurement processes, and a life cycle approach to operating and maintaining their equipment. Pursuant to the terms of an alliance agreement, we become the client’s exclusive or preferred supplier, of rotating equipment and aftermarket parts and services which gives us an advantage in obtaining new business from that client. Our client alliance agreements include frame agreements, preferred supplier agreements, and blanket purchasing agreements. The alliance agreements are generally terminable upon 30 days’ notice, and therefore do not assure a long-tern business relationship. We have so far entered more than 30 significant alliances, and currently are the only alliance partner for like rotating equipment with exclusive alliances with Statoil, Marathon Ashland and Shell Chemicals (USA). We also have preferred supplier alliances with ConocoPhillips, ExxonMobil and Duke Energy, and non-exclusive agreements with BP and other clients.

We encounter competition in all areas of our business, principally in the new units segment. We compete against products manufactured by both U.S. and non-U.S. companies. The principal methods of competition in these markets relate to product performance, client service, product lead times, global reach, brand reputation, breadth of product line, quality of aftermarket service and support and price. We believe the significant capital required to construct new manufacturing facilities, the production volumes required to maintain low unit costs, the need to secure a broad range of reliable raw material and intermediate material supplies, the significant technical knowledge required to develop high performance products, applications and processes and the need to develop close, integrated relationships with clients serve as disincentives for new

Over the last 20 years, the turbo compressor industry has consolidated from more that 15 to eight competitors, the reciprocating compressor industry has consolidated from 12 to six competitors and the steam turbine industry has consolidated from 18 to nine competitors. Our competitors in the new unit segment of the turbo compressor industry include General Electric/ Nuovo Pignone, Siemens, Solar Turbines, Inc., Rolls-Royce Group plc, Elliott/ Ebara, Mitsubishi Heavy Industries and Man Turbo (GHH); in the reciprocating compressor industry include General Electric/ Nuovo Pignone, Burckhardt, Sulzer, Ltd., Neuman & Esser, Peter Brotherhood Ltd., Ariel Corp., Thomassen and Cooper Compression; and in the steam turbine industry include Elliott, Siemens, General Electric/ Nuovo Pignone, Mitsubishi Heavy Industries, Tuthill Coppus Murray, Shin Nippon and Kühnle, Kopp & Kausch.

In our aftermarket parts and services segment, we compete with our major competitors as discussed above, small independent local providers and our clients’ in-house service providers. However, we believe there is an increasing trend for clients to outsource services, driven by declining in-house expertise, cost efficiency and the superior service levels and operating performance offered by OEM knowledgeable service providers.

We typically spend about one percent of our revenues on research and development each year. Our research and development expense for 2003 was $8.1 million. We believe current expenditures are adequate to sustain ongoing research and development activities. It is our policy to make a substantial investment in research and development each year in order to maintain our product and services leadership positions. We have developed many of the technology and product breakthroughs in our markets, and manufacture some of the most advanced products available in each of our product lines. We believe we have significant opportunities for growth by developing new services and products that offer our clients greater performance and significant cost savings. We are also actively involved in research and development programs designed to improve existing products and manufacturing methods.

As of September 30, 2004, we had 4,601 employees worldwide. Of our employees, approximately 62% are located in the United States. Approximately 37% of our employees in the United States are covered by collective bargaining agreements. None of our material collective bargaining agreements will expire through the end of 2005, and one will expire in each of 2006, 2007 and 2008. In addition, we have an agreement with the United Brotherhood of Carpenters and Joiners of America whereby we hire skilled trade workers on a contract-by-contract basis. Our contract with the United Brotherhood of Carpenters and Joiners of America can be terminated by either party with ninety days prior written notice. Our operations in the following countries are unionized: Le Havre, France; Oberhausen, Germany; Kongsberg, Norway; and Naroda, India. Additionally, overseas, approximately 37% of our employees belong to industry or national labor unions. We believe that our relations with our employees are good.

Our corporate headquarters are located in Olean, New York. The following table describes the material facilities owned or leased by us and our subsidiaries as of June 30, 2004:

Manufacturers, such as our company, are subject to extensive environmental laws and regulations concerning, among other things, emissions to the air, discharges to land, surface water and subsurface water, the generation, handling, storage, transportation, treatment and disposal of waste and other materials, and the remediation of environmental pollution relating to such companies’ (past and present) properties and operations. Costs and expenses under such environmental laws incidental to ongoing operations are generally included within operating budgets. Potential costs and expenses may also be incurred in connection with the repair or upgrade of facilities to meet existing or new requirements under environmental laws. In many instances, the ultimate costs under environmental laws and the time period during which such costs are likely to be incurred are difficult to predict. We do not believe that our liabilities in connection with compliance issues will have a material adverse effect on us.

Various federal, state and local laws and regulations impose liability on current or previous real property owners or operators for the cost of investigating, cleaning up or removing contamination caused by hazardous or toxic substances at the property. In addition, such laws impose liability for such costs on persons who disposed of or arranged for the disposal of hazardous substances at third-party sites. Such liability may be imposed without regard to legality of the original actions and without regard to whether we knew of, or were responsible for, the presence of such hazardous or toxic substances, and such liability may be joint and several with other parties. If the liability is joint and several, we could be responsible for payment of the full amount of the liability, whether or not any other responsible party is also liable.

We have sent wastes from our operations to various third-party waste disposal sites. From time to time we receive notices from representatives of governmental agencies and private parties contending that we are potentially liable for a portion of the investigation and remediation costs and damages at such third party sites. We do not believe that our liabilities in connection with such third-party sites, either individually or in the aggregate, will have a material adverse effect on us.

The equity purchase agreement provides that, with the exception of non-Superfund off-site liabilities and non-asbestos environmental tort cases which have a three year limit for a claim to be filed, Ingersoll-Rand will remain responsible without time limitations for all known environmental liabilities as of the closing date. Each of these liabilities has to be placed on The Environmental Remediation and Compliance Schedule to the equity purchase agreement (the “Final Schedule”) prior to the closing and are defined as “Identified Environmental Liabilities.” We will be responsible for all liabilities that were not identified prior to the closing date. To determine which matters will be included in the Final Schedule, we conducted Phase I assessments at 30 Dresser-Rand Entity facilities. Based on this assessment, a schedule prepared prior to the signing of the equity purchase agreement includes: (a) a list of known non-compliance matters; (b) a list by facility of areas at which we plan to conduct Phase II sampling between the signing and the closing; (c) a list of documents

Prior to the closing, the Final Schedule will be prepared to reflect the compliance issues identified earlier plus new compliance issues discovered during the review of documents produced after the date of the equity purchase agreement. In addition, based on the Phase II investigation, the Final Schedule will list all contamination that the parties agree should be included therein. The equity purchase agreement provides that the known areas of contamination included on the Final Schedule must be broadly defined to include each known point of contamination plus all contamination associated with that area or identified during an investigation relating to the known point of contamination. Known contamination will be included in the Final Schedule if it meets one of several standards, the most important of which is that if the contamination were known by the applicable governmental authority, that authority would be expected to require a response action (which is broadly defined to include not only cleanup, but investigation and monitoring). If the parties cannot agree whether a point of contamination belongs on the Final Schedule, the equity purchase agreement includes an arbitration provision to resolve the issue.

We rely on a combination of patent, trademark, copyright and trade secret laws, employee and third-party nondisclosure/confidentiality agreements and license agreements to protect our intellectual property. We sell most of our products under a number of registered trade names brand names and registered trademarks which we believe are widely recognized in the industry.

In addition, many of our products and technologies are protected by patents. Except for our company’s name and principal mark “Dresser-Rand,” no single patent, trademark or trade name is material to our business as a whole. We anticipate we will apply for additional patents in the future as we develop new products and processes. Any issued patents that cover our proprietary technology may not provide us with substantial protection or be commercially beneficial to us. The issuance of a patent is not conclusive as to its validity or its enforceability. If we are unable to protect our patented technologies, our competitors could commercialize our technologies. Competitors may also be able to design around our patents. In addition, we may also face claims that our products, services, or operations infringe patent or other intellectual property rights of others.

With respect to proprietary know-how, we rely on trade secret protection and confidentiality agreements. Monitoring the unauthorized use of our proprietary technology is difficult, and the steps we have taken may not prevent unauthorized use of such technology. The proprietary disclosure or misappropriation of our trade secrets could harm our ability to protect our rights and our competitive position.

In the normal course of business, we are involved in a variety of lawsuits, claims and legal proceedings, including commercial and contract disputes, employment matters, product liability claims, environmental liabilities and intellectual property disputes. In our opinion, pending legal matters are not expected to have a material adverse effect on our results of operations, financial condition, liquidity or cash flows.

The following table sets forth the name, age as of December 1, 2004 and position of each person that serves as an executive officer or director of our company.

Vincent R. Volpe Jr. is our President and Chief Executive Officer and serves as a member of our board of directors following the acquisition. Mr. Volpe has been with Dresser-Rand Company and its predecessor companies since 1981. He has held positions in Engineering, Marketing and Operations residing and working in various countries, including: Applications Engineer in Caracas, Venezuela; Vice President Dresser-Rand Japan in Tokyo, Japan; Vice President Marketing and Engineering Steam and Turbo Products; and Executive Vice President European Operations in Le Havre, France and President Dresser-Rand Europe in London, U.K. Mr. Volpe returned to Olean in January 1997 and became President of Dresser-Rand Company’s Turbo Product Division, a position he held until September 2000. In April 1999, he assumed the additional role of Chief Operating Officer for Dresser-Rand Company, responsible for worldwide manufacturing, technology and supply chain management, serving in that position until September 2000. Mr. Volpe became President and Chief Executive Officer of Dresser-Rand Company in September 2000. He is proficient in five languages. Mr. Volpe earned a BS in Mechanical Engineering and a BA in German literature, both from Lehigh University.

Stephen A. Riordan is our Chief Financial Officer following the acquisition. Mr. Riordan has served as Vice President, Finance since January 2003. From January 1998 until December 2002, Mr. Riordan worked as an independent consultant to numerous Ingersoll-Rand business units both domestically and internationally. Mr. Riordan joined Ingersoll-Rand in 1981 and spent sixteen years in the Finance function in positions of increasing responsibility. From May 1993 until November 1997, Mr. Riordan was the Worldwide Division Controller for Ingersoll-Rand’s European Paving Equipment business unit in Germany. Mr. Riordan earned his CPA and is presently a Certified Management Accountant. Mr. Riordan possesses a BS in Accountancy from Bentley College and an MBA from Lehigh University.

Walter J. Nye is our Executive Vice President, Worldwide Product Services following the acquisition. Mr. Nye has been with Dresser-Rand Company and its predecessor companies since 1975. He has held numerous positions of increasing responsibility including Controller, Turbo Products Division; President, Dresser-Rand Services Division; and has served as Executive Vice President, Product Services since October 1997. Prior to this appointment, Mr. Nye served as Controller for Worldwide Turbo Operations. He has worldwide responsibility for our aftermarket parts and services business, including sales, repairs, field technical support, services and solutions. He has also been active in the involvement in Olean Turbo world class

Bradford W. Dickson is our Executive Vice President, New Equipment Worldwide following the acquisition. Mr. Dickson has been with Dresser-Rand Company and its predecessor companies since 1977. He has held various leadership positions in International Sales, Marketing, and Project Management for Dresser-Rand Company and its predecessors, including three years located in Caracas, Venezuela managing the Venezuelan and Colombian Operations. From January 1999 to August 2000, Mr. Dickson served as Executive Vice President, Latin America, and served as Executive Vice President, The Americas Region, from August 2000 to April 2, 2003. From April 2002 to July 2003, Mr. Dickson served as Executive Vice President, The Americas and Asia Pacific Regions. He was appointed in July 2003 to Executive Vice President, responsible for all company new equipment sales worldwide, and also carries responsibility for Corporate Marketing and the Government Business Unit. Mr. Dickson has over 27 years of experience in the global energy industry working with compressors and turbines for process, oil and gas applications. Mr. Dickson earned a BS in Engineering from the University of Illinois and an MBA from the University of Southern California’s Marshall School of Business.

Christopher Rossi is our Vice President and General Manager, North American Operations following the acquisition. Mr. Rossi has been with Dresser-Rand Company and its predecessor companies since 1987. He has held various leadership positions within Dresser-Rand Company in the areas of Engineering, Production, Materials Management, and Supply Chain Management. In October 2003, Mr. Rossi was appointed as Vice President and General Manager, North American Operations, responsible for all U.S. plants, and worldwide Development Engineering. Mr. Rossi served as Vice President, Supply Chain Management Worldwide from March 1998 to January 2001, and as Vice President and General Manager Painted Post Operation from February 2001 to October 2003. Mr. Rossi earned a BSME from Virginia Tech and an MBA in Corporate Finance and Operations Management from the University of Rochester’s Simon School of Business.

Jean-Francois Chevrier is our Vice President and General Manager, European Operations following the acquisition. Mr. Chevrier has been with Dresser-Rand Company and its predecessor companies since 1990. He has held the positions of Operations Manager in Le Havre, France; Director, Special Projects in Olean, New York; and General Manager Turbo Products, Europe. From March 1997 to July 2000, he held the position of Vice President & General Manager, French Operations. Since August 2000, Mr. Chevrier has served as the Vice President & General Manager for European Operations in Le Havre, France, which includes responsibility for our businesses and plants in Oberhausen, Germany, and Kongsberg, Norway. Prior to joining Dresser-Rand Company, Mr. Chevrier held various leadership positions at a Peugeot subsidiary, specializing in military and aerospace hydraulic equipment. Mr. Chevrier earned a BSME from Tarbes University in France.

Elizabeth C. Powers is our Vice President, Human Resources following the acquisition. Ms. Powers has served as Vice President, Human Resources of Dresser-Rand Company since April 2004. Ms. Powers was the Vice President for Ingersoll-Rand’s Global Business Service from January 1999 until January 2003. In this capacity, she was responsible for directing the design of worldwide benefits, as well as establishing the Human Resource Shared Services organization for Ingersoll-Rand. Ms. Powers left Ingersoll-Rand on a leave of absence from January 2003 until March 2004. Ms. Powers has been with Dresser-Rand Company and its predecessor companies since 1986. She has held various Human Resource positions in Dresser-Rand Company since the start of the joint venture and has also worked as Director and Vice President of Human Resources in various Ingersoll-Rand businesses. From 1994 to 1998, Ms. Powers served as worldwide Vice President, Human Resources, Production Equipment Group. She has also served on the Board of Rx Intelligence. Ms. Powers earned a BS from Cornell University’s School of Industrial & Labor Relations.

William E. Macaulay is the Chairman of our board of directors following the acquisition. Mr. Macaulay is the Chairman and Chief Executive Officer of First Reserve, which he joined in 1983. Mr. Macaulay serves as Chairman of Pride International, Inc., a contract drilling and related services company, and Foundation Coal Corporation, a major coal producer. He also serves as a director of ANR Holdings, LLC, the parent company of Alpha Natural Resources, LLC, Dresser, Inc., an equipment and services company serving the

Thomas J. Sikorski is a member of our board of directors following the acquisition. Mr. Sikorski is a Managing Director of First Reserve and joined that firm in April 2002. Mr. Sikorski serves as a director of Dresser, Inc., an equipment and service company serving the energy industry. Prior to joining First Reserve, Mr. Sikorski was a co-founder and partner with Windward Capital, a New York-based private equity firm, since September 1994. Prior to that, he was a Director at MetLife Private Equity Investments and a Vice President in the CSFB Private Equity Group. Mr. Sikorski also serves as a director of Quanta Services, Inc., Aquilex Services, Inc. and HCC Industries, Inc.

Mark A. McComiskey is a member of our board of directors following the acquisition. Mr. McComiskey is a Vice President of First Reserve and joined that firm in June 2004. Prior to joining First Reserve, Mr. McComiskey was a principal at Clayton, Dubilier and Rice Inc., a private equity firm, from June 2000 until May 2004. Previously, Mr. McComiskey was an attorney at the international law firm of Debevoise & Plimpton LLP from October 1997 until June 2000.

Kenneth W. Moore is a member of our board of directors following the acquisition. Mr. Moore is a Director of First Reserve and joined that firm in January 2004. Before joining First Reserve, Mr. Moore was a Vice President at Morgan Stanley, an investment bank, from 2000 until 2004. Prior to joining Morgan Stanley, Mr. Moore was an Associate at Chase Securities from 1998 until 2000.

Our board of directors currently has an audit committee, a compensation committee and a nominating and corporate governance committee. Our current audit committee consists of Mark A. McComiskey and Kenneth W. Moore. Our current compensation committee consists of Mark A. McComiskey, Kenneth W. Moore and Vincent R. Volpe Jr. Mr. McComiskey serves as the chairman of our compensation committee. Our current nominating and corporate governance committee consists of Mark A. McComiskey, Thomas J. Sikorsky and Vincent R. Volpe Jr.

We expect the members of our board of directors to receive customary fees for their services, and to be reimbursed for their expenses in connection with their services to us.

The following summary compensation table sets forth information concerning compensation earned in 2003, by our chief executive officer and our other four most highly compensated executive officers at the end of the last fiscal year. All references to stock under “Executive Compensation” refer to shares of common stock of Ingersoll-Rand and all references to “plans” refer to executive compensation plans of Ingersoll-Rand. After the consummation of the acquisition our management no longer participates in such plans.

(1)

For 2003 this column reflects both amounts earned as annual bonuses and under the Performance Share Program. The Performance Share Program provides annual awards based on a combination of the achievement of strategic initiatives and annual financial performance. Payments are made in cash unless previously deferred into the Executive Deferral Plan. The amounts earned as bonuses and under the Performance Share Program for 2003 are as follows:


(2)	The average dollar to euro exchange rate for 2003 was used to reflect earnings and bonus for Mr. Chevrier.

The following table sets forth information concerning the grant of stock options of Ingersoll-Rand to our Chief Executive Officer and each of our other four most highly compensated executive officers during the last fiscal year.


(a)	Options/ SARs issued by Ingersoll-Rand prior to the date of the acquisition.

The following table sets forth information concerning the exercise of stock options of Ingersoll-Rand during 2003 by each of our chief executive officer and our other four most highly compensated executive officers and the 2003 year-end value of unexercised options.


(a)	Options/ SARs issued by Ingersoll-Rand prior to the date of the acquisition.

Prior to March 31, 1998, we sponsored qualified and nonqualified defined benefit pension plans for our salaried employees. The benefits under these plans were based on final average pay and service at retirement, subject to applicable offsets.

Effective March 31, 1998, we amended our qualified and nonqualified defined benefit pension plans to cease benefit accruals as of that date. That is, for employees hired prior to March 31, 1998, their accrued benefits were frozen and no additional accruals due to service and or pay were granted. Employees hired after March 31, 1998 were not eligible to participate in the defined benefit pension plans.

Messrs. Volpe, Nye and Dickson have estimated annual accrued pension benefits of $2,500, $2,100 and $1,800, respectively. These benefit amounts are payable at age 65 as a single life annuity and represent the benefit payable from both the qualified and nonqualified defined benefit pension plans. These benefits amounts

On October 27, 2004, we entered into an employment agreement with Vincent R. Volpe, pursuant to which Mr. Volpe serves as our President and Chief Executive Officer. Mr. Volpe’s employment agreement has an indefinite term. During the term of his agreement, Mr. Volpe is entitled to an annual base salary of $500,000. Mr. Volpe is also eligible to receive a performance based bonus for each year during the term of his employment agreement, with a target bonus of up to 100% of his base salary, payable, at Mr. Volpe’s election, in cash, common units of Dresser-Rand Holdings, LLC or a combination thereof. Mr. Volpe’s total compensation will be reviewed at least once every twelve months by our board of directors. For 2004, in addition to his annual bonus, we will pay Mr. Volpe a one-time special bonus equal to the bonus that would have been paid to Mr. Volpe with respect to such year pursuant to the Ingersoll-Rand Performance Share Program at the same time as provided by such program.

Mr. Volpe purchased $1,999,992 of common units of Dresser-Rand Holdings, LLC at the same price paid per unit by funds affiliated with First Reserve in connection with the acquisition. In addition, Mr. Volpe is also eligible to receive grants of profits units of Dresser-Rand Holdings, LLC that permit him to share in appreciation in the value of our shares and which are subject to the terms and conditions of the amended and restated limited liability company agreement of Dresser-Rand Holdings, LLC to be agreed upon by First Reserve and Mr. Volpe.

An employment agreement was entered into with Mr. Jean-Francois Chevrier on July 25, 1990, pursuant to which Mr. Chevrier serves as our Vice President & General Manager, European Operations and Chief Executive Officer for Dresser-Rand S.A. (Le Havre, France), reporting directly to Dresser-Rand Company’s Chief Executive Officer. As of December 31, 2003, Mr. Chevrier’s annual base salary was €168,977. Mr. Chevrier is also eligible to receive an annual bonus with a target payment equal to 40% of his annual base salary (and a maximum payment equal to 60% of his annual base salary) if certain targets based on our financial results and his individual performance are met. A company car is also made available to Mr. Chevrier pursuant to the terms of his employment agreement. Mr. Chevrier’s employment agreement is subject to the Ingeneers and Officers of the Metal Industry National Bargaining Agreements (Convention Collective Nationale des Ingenieurs et Cadres de la Metallurgie). Pursuant to such National Bargaining Agreements, Mr. Chevrier is entitled to notice in the event that Mr. Chevrier’s employment is terminated and certain severance payments based on his age and service with us at the time of termination. Based on his current age and service, Mr. Chevrier would be entitled to six months notice prior to a termination of his employment and an additional severance payment of approximately €144,798.

In connection with, but shortly after, the closing of the acquisition, several of our executive officers, including our Chief Executive Officer and each of our four other most highly compensated executive officers, acquired common units in Dresser-Rand Holdings, LLC at the same price paid per unit by funds affiliated with First Reserve in connection with the acquisition. Executives who purchased common units were also issued profits units in Dresser-Rand Holdings, LLC, which permit them to share in appreciation in the value of our shares. The terms of the plan are set forth in the Amended and Restated Limited Liability Company Agreement of Dresser-Rand Holdings, LLC which we refer to as the Holdings LLC Agreement. The following contains a summary of the material terms of the Holdings LLC Agreement.

The Holdings LLC Agreement permits the grant of the right to purchase common units to members of Dresser-Rand Holdings, LLC and the grant of profit units, consisting of one initial tranche of service units and five initial tranches of exit units to certain management members who own common units. On November 1, 2004, First Reserve, through its affiliated funds, and certain other members purchased 100,609,829 common

First Reserve may amend the Holdings LLC Agreement, provided that no amendment is permitted that would adversely affect the management members as a class without the consent of a majority in interest, excluding profit units, of the management members.

The units of Dresser-Rand Holdings, LLC consist of common units and profit units, which consist of service units and five tranches of exit units. As of February 1, 2005, approximately 98.4% of common units were held by First Reserve, approximately 1.3% were held by certain members of our management and approximately 0.3% were held by other investors. The profit units are held exclusively by members of our management.

The following is a summary of certain terms of the common units, service units and the five exit unit tranches and certain rights and restrictions applicable to those units.

A holder of units is entitled to one vote for each unit outstanding on a given record date, or other date as applicable, provided that if a management member ceases to provide services to or for the benefit of Dresser-Rand Holdings, LLC, the units held by such management member will cease to have voting rights.

Service units vest in five equal annual installments on the first five anniversaries of the issuance date, subject to the management member’s continued service to or for the benefit of Dresser-Rand Holdings, LLC. All of the service units will vest immediately prior to the occurrence of a change of control under the Holdings LLC Agreement.

Subject to the management member’s continued service to or for the benefit of Dresser-Rand Holdings, LLC and other agreed upon conditions, management members will receive a distribution for their exit units upon the occurrence of a transaction where First Reserve exchanges all or a portion of its units for cash, cash equivalents or marketable publicly-traded securities only if the value First Reserve receives from such transaction exceeds certain multiples of the initial price paid by First Reserve.

The units held by members are not transferable for a limited period of time except in certain circumstances. In addition, the units may be repurchased by Dresser-Rand Holdings, LLC, and in certain cases, First Reserve, in the event that a management member is subject to an involuntary transfer of his or her units or if a management member receives a bona fide offer to purchase his or her units and such management member wants to accept such offer. First Reserve has the ability to force members to sell their units along with First Reserve if First Reserve decides to sell its units. Under certain conditions, First Reserve may convert each member’s units into an economically equivalent amount of security interests of the successor entity in connection with an initial public offering under the Holdings LLC Agreement.

The management members that hold units are entitled to participate in certain sales by First Reserve. In addition, many of the restrictions on transfer will cease to apply in the event of an initial public offering under the Holdings LLC Agreement.

In December 2004, we adopted a stock incentive plan under which certain of our employees purchased our common stock.

To reward selected key employees in the event of a successful sale of Dresser-Rand Company, Ingersoll-Rand established a sales incentive program. Each of Mr. Stephen Riordan, Mr. Walter Nye, Mr. Bradford Dickson and Mr. Jean-Francois Chevrier received, pursuant to the program, payments from Ingersoll-Rand equal to 100% of their total cash compensation (annual base salary plus annual target bonus amount) as of the date of the sale. Other key employees participating in the program received varying percentages of their total cash compensation, depending on their tenure and status with us. In addition, all participants in the program had their unvested stock options, or stock equivalency rights for non US employees, in Ingersoll-Rand vest immediately as of the date of the sale.

In addition, Mr. Volpe, our Chief Executive Officer, received payments from Ingersoll-Rand equal to two times his total cash compensation (annual base salary plus annual target bonus amount) as of the date of the sale and his unvested stock options vested as of the date of the sale.

The following table sets forth information with respect to the ownership of the common units of Dresser-Rand Group Inc. as of February 1, 2005 by (i) each person known by us to beneficially own more than 5% of the outstanding common stock, (ii) each of our directors, (iii) each named executive officer and (iv) all directors and executive officers as a group. Unless otherwise indicated, the address of each person named in the table below is c/o Dresser-Rand Group Inc., Paul Clark Drive, Olean, New York 14760.


	*	Less than 1% of outstanding common stock outstanding (excluding in the case of Directors and executive officers as a group, units beneficially owned by First Reserve Fund IX, L.P. (“Fund IX”) and First Reserve Fund X, L.P. (“Fund X”)).


(1)	Includes beneficial ownership of shares of common stock of Dresser-Rand Group Inc. by Fund X. First Reserve GP X, L.P. (“GP X”) is the general partner of Fund X. First Reserve GP X, Inc. (“GP X, Inc.”) is the general partner of GP X. The address of GP X, Inc., GP X and Fund X is c/o First Reserve Corporation, One Lafayette Place, Greenwich, CT 06830.

(2)	Includes beneficial ownership of shares of common stock of Dresser-Rand Group Inc. by Fund IX. First Reserve GP IX, L.P. (“GP IX”) is the general partner of Fund IX. First Reserve GP IX, Inc. (“GP IX Inc.”) is the general partner of GP IX. The address of GP IX, Inc., GP IX and Fund IX, L.P. is c/o First Reserve Corporation, One Lafayette Place, Greenwich, CT 06830.

(3)	Mr. Macaulay is the Chairman, Chief Executive Officer and a member of the board of directors of First Reserve Corporation, GP IX, Inc. and GP X, Inc. Mr. Sikorski is a Managing Director of First Reserve Corporation, GP IX, Inc. and GP X, Inc. Ken Moore is a Director of First Reserve Corporation, GP IX, Inc. and GP X, Inc. Mr. McComiskey is a Vice President of First Reserve Corporation, GP IX, Inc. and GP X, Inc. Messrs. Macaulay, Sikorski, Moore and McComiskey all disclaim beneficial ownership of any common stock owned by such entities or their affiliates. The address of GP IX, Inc., GPX, Inc., GP IX, GP X, Fund IX, Fund X, William E. Macaulay, Thomas J. Sikorski, Mark A. McComiskey and Kenneth W. Moore is c/o First Reserve Corporation, One Lafayette Place, Greenwich, CT 06830.

(4)	Certain members of our senior management were given the right to purchase common units of Dresser-Rand Holdings, LLC.

Amended and Restated Limited Liability Company Agreement of Dresser-Rand Holdings, LLC

In connection with the acquisition, Dresser-Rand Holdings, LLC, our indirect parent, amended and restated its limited liability company agreement, governing, among other things, the terms under which senior management acquired common units in Dresser-Rand Holdings, LLC. For a summary of the material terms of the Holdings LLC Agreement, see “Management — Dresser-Rand Holdings, LLC Membership Interests.”

We have entered into a stockholders agreement with First Reserve and certain management stockholders that governs the terms and conditions under which the management stockholders may transfer their shares of our common stock, in addition to other shareholder matters. The stockholders agreement provides that First Reserve will designate all of the nominees for election to our board of directors. Our board of directors currently consists of our Chief Executive Officer and four other directors nominated by First Reserve and may be subsequently expanded by vote of the board. All significant decisions involving us require the approval of First Reserve.

The stockholders agreement provides that First Reserve will have the ability to require us to register its shares of our common stock. In addition, in connection with other registered offerings by us, holders of shares of our common stock will have the ability to exercise certain piggyback registration rights with respect to such shares. Furthermore any proposed transfers of our common stock by a management stockholder (other than affiliates of First Reserve) will be subject to a right of first refusal by us and First Reserve. The stockholders agreement grants to management stockholders “tag-along” rights, and to First Reserve, “drag-along” rights, in each case in connection with transfers by First Reserve of our common stock.

In connection with the acquisition, we and Ingersoll-Rand entered into a transition services agreement as of the closing to facilitate consistent service and satisfaction for our clients. Ingersoll-Rand provides services as requested by us, including, amongst others, compensation delivery services, health and welfare administration, pension administration, legal services and other services, and agreed upon between the parties. All third party costs associated with the services are our responsibility, whether paid by Ingersoll-Rand or passed directly on to us.

The provision of services commenced on the closing date and will terminate on the first anniversary of the closing date; provided, however, that we may cancel any service upon 30 days’ written notice of cancellation and Ingersoll-Rand may cease to provide a service upon 90 days’ written notice to us if Ingersoll-Rand ceases to provide such services to all of Ingersoll-Rand’s subsidiaries, divisions and business units.

We entered into a supply agreement with Ingersoll-Rand, expiring on December 31, 2009, whereby we supply Ingersoll-Rand with certain assembly units (an “FRG”) for Ingersoll-Rand’s “PET Star 4” product. There are no minimum order quantities under this agreement.

As contemplated by the equity purchase agreement, we and Dresser-Rand S.A. agreed to certain covenants with and granted intellectual property rights related to the development of Ingersoll-Rand’s 250 kilowatt microturbine to Ingersoll-Rand Energy Systems Corporation and the Energy Systems Division of Ingersoll-Rand. Pursuant to the terms of the license agreement, Energy Systems was granted a perpetual fully paid up, non-exclusive, worldwide right and license (without the right to sublicense) to practice and use any intellectual property owned by us or Dresser-Rand S.A. relating to the 250 kilowatt microturbines, and to manufacture, use, market and sell microturbines with a generating capacity of 1,000 kilowatts or less.

Our company’s name and principal mark is a combination of the names of our founder companies, Dresser Industries, Inc. and Ingersoll-Rand. We have acquired rights to use the “Rand” portion of our principal mark from Ingersoll-Rand as part of the sale agreement. The rights to use the “Dresser” portion of our name in perpetuity were acquired from Dresser, Inc., an affiliate of First Reserve for total consideration of $5 million payable over 10 years.

In connection with the transactions, we entered into a senior secured credit facility with Citicorp North America, Inc., as administrative agent, Citigroup Global Markets Inc., as joint lead arranger and joint book manager, Morgan Stanley Senior Funding, Inc., as joint lead arranger, joint book manager and co-syndication agent, UBS Securities LLC, as joint lead arranger, joint book manager and co-syndication agent, and each lender party thereto.

On a pro forma basis after giving effect to the transactions, the senior secured credit facility provides senior secured financing of $695 million, consisting of:


	•	a $395 million term loan facility (with a €78.5 million sub-facility); and

	•	a $300 million revolving credit facility (with a sub-facility denominated in euros in an amount not to exceed the equivalent of $200 million and in sterling in an amount not to exceed the equivalent of $75 million).

The term loan portion of our new senior secured credit facility was fully funded and on February 1, 2005 we had approximately $127 million of borrowing capacity under the revolving portion of our new senior secured credit facility, after giving effect to approximately $173 million of outstanding letters of credit.

Upon the occurrence of certain events, we may request an increase to the existing term loan facility and/or the existing revolving credit facility in an aggregate amount not to exceed $200 million, subject to receipt of commitments by existing lenders or other financial institutions reasonably acceptable to the administrative agent.

We and certain of our foreign subsidiaries are the borrowers for the term loan facility and the revolving credit facility. The foreign subsidiary borrowers are referred to herein as Euro Borrowers. The revolving credit facility includes borrowing capacity available for letters of credit and for borrowings on same-day notice, referred to as swingline loans.

The U.S. dollar denominated borrowings under the senior secured credit facility bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the highest of (1) the rate that the administrative agent announces from time to time as its prime or base commercial lending rate, (2) the three month certificate of deposit rate plus 1/2 of 1% and (3) the federal funds rate plus 1/2 of 1% or (b) a LIBOR rate determined by reference to the costs of funds for deposits in U.S. dollars for the interest period relevant to such borrowing adjusted for certain additional costs. Euro borrowings under the senior secured credit facility bear interest at a rate equal to an applicable margin plus, a EURIBOR rate determined by reference to the costs of funds for deposits in euros for the interest period relevant to such borrowing adjusted for certain additional costs. Borrowings in a foreign currency, other than Euros under the senior secured credit facility, bear interest at a rate equal to an applicable margin, plus a LIBOR rate determined by reference to the costs of funds for deposits in the currency of such borrowing for the interest period relevant to such borrowings adjusted for certain additional costs.

The initial applicable margin for borrowings under the revolving credit facility is 1.50% with respect to base rate borrowings and 2.50% with respect to LIBOR and EURIBOR borrowings (which margin will be reduced to 1.25% and 2.25%, respectively if our leverage ratio is less than 5.0 to 1.0 but greater than or equal to 4.0 to 1.0, and to 1.00% and 2.00%, respectively if our leverage ratio is less than 4.0 to 1.0). The initial applicable margin for base rate borrowings under the term loan facility is 1.00%. The initial applicable margin for LIBOR borrowings and EURIBOR borrowings under the term loan facility is 2.00% and 2.50%, respectively.

In addition to paying interest on outstanding principal under the senior secured credit facility, we are required to pay a commitment fee to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder. The initial commitment fee rate is 0.50% per annum (which fee will be reduced to 0.375% per annum if our leverage ratio is less than 4.0 to 1.0). We also have to pay letter of credit fees equal to the applicable margin then in effect with respect to LIBOR loans under the revolving credit facility on the face amount of each such letter of credit. We also have to pay to each bank issuing a letter of credit fees equal to 1/4 of 1% on the face amount of each letter of credit and other customary documentary and processing charges.

The senior secured credit facility requires us to prepay outstanding term loans, subject to certain exceptions, with:


	•	beginning in the year ending December 31, 2005, 75% (which percentage will be reduced to 50% if our leverage ratio is equal to or less than 5.00 to 1.00 and greater than 4.00 to 1.00, and to 25% if our leverage ratio is equal to or less than 4.00 to 1.00 and greater than 3.00 to 1.00, and to 0% if our leverage ratio is equal to or less than 3.00 to 1.00) of our annual excess cash flow;

	•	100% of the net cash proceeds in excess of an agreed upon amount from non-ordinary course asset sales and casualty and condemnation events, if we do not reinvest or contract to reinvest those proceeds within 12 months, subject to certain limitations;

	•	100% of the net cash proceeds of any incurrence of debt, other than certain debt permitted under the senior secured credit facility; and

	•	100% of amounts in excess of an aggregate amount of $5.0 million in respect of certain claims arising out of the Acquisition, subject to certain exceptions.

The foregoing mandatory prepayments other than from excess cash flow will be applied to the remaining installments of the term loan facility on a pro rata basis. Mandatory prepayments from excess cash flow and optional prepayments will be applied to the remaining installments of the term loan facility at our direction. Each lender has the right to decline any mandatory prepayment of its term loans in which case the amount of such prepayment will be retained by us.

We may voluntarily prepay outstanding loans under the senior secured credit facility at any time without premium or penalty, other than customary “breakage” costs with respect to LIBOR or EURIBOR loans.

We are required to repay installments on the loans under the term loan facility in quarterly principal amounts equal to one quarter of 1.00% of their funded total principal amount for the first six years and six months, with the remaining amount payable on the date that is seven years from the date of the closing of the senior secured credit facility.

Principal amounts outstanding under the revolving credit facility will be due and payable in full at maturity, five years from the date of the closing of the senior secured credit facility.

All our obligations and the obligations of the Euro Borrowers under the senior secured credit facility are unconditionally guaranteed by each of our existing and future domestic wholly-owned subsidiaries (subject to exceptions with respect to immaterial subsidiaries and with respect to any guaranty that could create materially adverse tax consequences), and our direct parent, D-R Interholding, LLC, referred to, collectively, as Domestic Guarantors.

All our obligations under the senior secured credit facility, our guarantee of the obligations of the Euro Borrowers under the senior secured credit facility, and the guarantees of our obligations and the obligations of the Euro Borrowers under the senior secured credit facility by the Domestic Guarantors, are secured by


	•	subject to certain exceptions, a pledge of 100% of our capital stock and the capital stock of each direct, material domestic subsidiary owned by us or a Domestic Guarantor (other than subsidiaries substantially all of whose assets consist of stock in controlled foreign corporations) and 65% of the capital stock of each direct, material foreign subsidiary owned by us or a Domestic Guarantor and of each direct, material domestic subsidiary owned by us or a Domestic Guarantor substantially all of whose assets consist of stock in controlled foreign corporations; and

	•	subject to certain exceptions, a security interest in substantially all of the tangible and intangible assets owned by us and each Domestic Guarantor.

All obligations of each Euro Borrower under the senior secured credit facility are also unconditionally guaranteed by certain of our existing and future wholly-owned foreign subsidiaries (subject to exceptions with respect to immaterial subsidiaries and with respect to any guaranty that could create materially adverse tax or legal consequences) referred to, collectively, as Foreign Guarantors.

In addition, all obligations of each Euro Borrower under the senior secured credit facility, and the guarantees of those obligations by the applicable Foreign Guarantors, are secured by substantially all the assets of such Euro Borrower and the applicable Foreign Guarantors, including, but not limited to:


	•	subject to certain exceptions, a pledge of 100% of the capital stock of each direct, material subsidiary of such Euro Borrower and the applicable Foreign Guarantors (subject to exceptions with respect to any pledge that could create materially adverse tax or legal consequences); and

	•	subject to certain exceptions and limitations under applicable law, a security interest in substantially all of the tangible and intangible assets of such Euro Borrower and the applicable Foreign Guarantors.

The senior secured credit facility contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability, the ability of our parent D-R Interholding, LLC, and each of its subsidiaries to:


	•	sell assets;

	•	incur additional indebtedness;

	•	prepay, redeem or repurchase other indebtedness (including the notes);

	•	pay dividends and distributions or repurchase capital stock;

	•	create liens on assets;

	•	make investments, loans or advances;

	•	make capital expenditures;

	•	make amendments to any corporate documents that would be materially adverse to the lenders;

	•	make certain acquisitions;

	•	engage in mergers or consolidations;

	•	engage in certain transactions with affiliates;

	•	amend certain material agreements governing indebtedness (including the notes);

	•	change the business conducted by D-R Interholding, LLC and its subsidiaries;

	•	enter into agreements that restrict dividends from subsidiaries;


	•	enter into sale and lease-back transactions; and

	•	enter into swap agreements.

In addition, the senior secured credit facility requires us to maintain the following financial covenants:


	•	a maximum consolidated net leverage ratio; and

	•	a minimum interest coverage ratio.

The senior secured credit facility also contains certain customary affirmative covenants and events of default.

We and the guarantors have entered into registration rights agreement with the placement agents of the outstanding notes in which we and the guarantors agreed, under certain circumstances, to use our reasonable best efforts to file a registration statement relating to the offer to exchange the outstanding notes for exchange notes and thereafter cause the registration statement to become effective under the Securities Act within 270 days following the closing date of the issuance of the outstanding notes and to consummate the exchange offer within 300 days following such closing date. The exchange notes will have terms identical in all material respects to the outstanding notes, except that the exchange notes will not contain terms with respect to transfer restrictions, registration rights and additional interest for failure to observe certain obligations in the registration rights agreement. The outstanding notes were issued on October 29, 2004.

Under some circumstances, the Issuer and the guarantors may be required to use their commercially reasonable efforts to file and cause to be declared effective, in addition to or in lieu of the exchange offer registration statement, a shelf registration statement covering resales of the outstanding notes. If the Issuer and the guarantors fail to meet specified deadlines under the registration rights agreement, then the Issuer will be obligated to pay additional Interest to holders of the outstanding notes. See “— Registration Rights; Additional Interest.”

If you wish to exchange your outstanding notes for exchange notes in the exchange offer, you will be required to make the following written representations:


	•	you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 of the Securities Act;

	•	you have no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of the exchange notes in violation of the provisions of the Securities Act;

	•	you are not engaged in, and do not intend to engage in, a distribution of the exchange notes; and

	•	you are acquiring the exchange notes in the ordinary course of your business.

Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where the broker-dealer acquired the outstanding notes as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. Please see “Plan of Distribution.”

Based on interpretations by the SEC set forth in no-action letters issued to third parties, we believe that you may resell or otherwise transfer exchange notes issued in the exchange offer without complying with the registration and prospectus delivery provisions of the Securities Act, if:


	•	you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 under the Securities Act;

	•	you do not have an arrangement or understanding with any person to participate in a distribution of the exchange notes;

	•	you are not engaged in, and do not intend to engage in, a distribution of the exchange notes; and

	•	you are acquiring the exchange notes in the ordinary course of your business.

If you are our affiliate or an affiliate of any guarantor, or are engaging in, or intend to engage in, or have any arrangement or understanding with any person to participate in, a distribution of the exchange notes, or are not acquiring the exchange notes in the ordinary course of your business:


	•	You cannot rely on the position of the SEC set forth in Morgan Stanley & Co. Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter to Shearman & Sterling, dated July 2, 1993, or similar no-action letters; and

	•	in the absence of an exception from the position stated immediately above, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes.

This prospectus may be used for an offer to resell, resale or other transfer of exchange notes only as specifically set forth in this prospectus, With regard to broker-dealers, only broker-dealers that acquired the outstanding notes as a result of market-making activities or other trading activities may participate in the exchange offer. Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. Please read “Plan of Distribution” for more details regarding the transfer of exchange notes.

On the terms and subject to the conditions set forth in this prospectus and in the accompanying letters of transmittal, we will accept for exchange in the exchange offer any outstanding notes that are validly tendered and not validly withdrawn prior to the expiration date, Outstanding notes may only be tendered in a principal amount of $1,000 or in integral multiples of $1,000 in excess thereof. We will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding notes surrendered in the exchange offer.

The form and terms of the exchange notes will be identical in all material respects to the form and terms of the outstanding notes except the exchange notes will be registered under the Securities Act, will not bear legends restricting their transfer and will not provide for any additional interest upon our failure to fulfill our obligations under the registration rights agreement to complete the exchange offer, or file, and cause to be effective, a shelf registration statement, if required thereby, within the specified time period. The exchange notes will evidence the same debt as the outstanding notes. The exchange 7 3/8% senior subordinated notes due 2014 will be issued under and entitled to the benefits of the same indenture that authorized the issuance of the outstanding 7 3/8% senior subordinated notes due 2014. Consequently, both series of notes will be treated as a single class of debt securities under the indenture. For a description of the indenture, see “Description of the Notes.”

The exchange offer is not conditioned upon any minimum aggregate principal amount of outstanding notes being tendered for exchange.

As of the date of this prospectus, $420 million aggregate principal amount of the 7 3/8% senior subordinated notes due 2014 and are outstanding. This prospectus and the letters of transmittal are being sent to all registered holders of outstanding notes. There will be no fixed record date for determining registered holders of outstanding notes entitled to participate in the exchange offer, we intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement, the applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations of the SEC. Outstanding notes that are not tendered for exchange in the exchange offer will remain outstanding and continue to accrue interest and will be entitled to the rights and benefits such holders have under the indenture and the registration rights agreement except we will not have any further obligation to you to provide for the registration of the outstanding notes under the registration rights agreement.

We will be deemed to have accepted for exchange properly tendered outstanding notes when we have given oral or written notice of the acceptance to the exchange agent. The exchange agent will act as agent for

If you tender your outstanding notes in the exchange offer, you will not be required to pay brokerage commissions or fees or, subject to the instructions in the accompanying letter of transmittal, transfer taxes with respect to the exchange of outstanding notes. We will pay all charges and expenses, other than certain applicable taxes described below in connection with the exchange offer, It is important that you read “— Fees and Expenses” below for more details regarding fees and expenses incurred in the exchange offer.

As used in this prospectus, the term “expiration date” means 12:00 a.m. midnight, New York City time, on , 2005. However, if we, in our sole discretion, extend the period of time for which the exchange offer is open, the term “expiration date” will mean the latest time and date to which we shall have extended the expiration of the exchange offer.

To extend the period of time during which an exchange offer is open, we will notify the exchange agent of any extension by oral or written notice, followed by notification by press release or other public announcement to the registered holders of the outstanding notes no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.


	•	to delay accepting for exchange any outstanding notes (if we amend or extend the exchange offer);

	•	to extend the exchange offer or to terminate the exchange offer if any of the conditions set forth below under “— Conditions to the Exchange Offer” have not been satisfied, by giving oral or written notice of such delay, extension or termination to the exchange agent; and

	•	subject to the terms of the registration rights agreement, to amend the terms of the exchange offer in any manner.

Any delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice to the registered holders of the outstanding notes. If we amend the exchange offer in a manner that they determine to constitute a material change, we will promptly disclose the amendment in a manner reasonably calculated to inform the holders of outstanding notes of that amendment.

Despite any other term of the exchange offer, we will not be required to accept for exchange, or to issue exchange notes in exchange for, any outstanding notes and we may terminate or amend the exchange offer as provided in this prospectus prior to the expiration date if in our reasonable judgment:


	•	the exchange offer or the making of any exchange by a holder violates any applicable law or interpretation of the SEC; or

	•	any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that, in their judgment, would reasonably be expected to impair their ability to proceed with the exchange offer.

In addition, we will not be obligated to accept for exchange the outstanding notes of any holder that has not made to us:


	•	the representations described under “— Purpose and Effect of the Exchange Offer,” “— Procedures for Tendering Outstanding Notes” and “Plan of Distribution;” or


	•	any other representations as may be reasonably necessary under applicable SEC rules, regulations, or interpretations to make available to us an appropriate form for registration of the exchange notes under the Securities Act.

We expressly reserve the right at any time or at various times to extend the period of time during which the exchange offer is open. Consequently, we may delay acceptance of any outstanding notes by giving oral or written notice of such extension to their holders. We will return any outstanding notes that we do not accept for exchange for any reason without expense to their tendering holder promptly after the expiration or termination of the exchange offer.

We expressly reserve the right to amend or terminate the exchange offer and to reject for exchange any outstanding notes not previously accepted for exchange, upon the occurrence of any of the conditions of the exchange offer specified above. We will give oral or written notice of any extension, amendment, non-acceptance or termination to the holders of the outstanding notes as promptly as practicable. In the case of any extension, such notice will be issued no later than 9:00 a.m. New York City time, on the next business day after the previously scheduled expiration date.

These conditions are for our sole benefit and we may assert them regardless of the circumstances that may give rise to them or waive them in whole or in part at any or at various times prior to the expiration date in our sole discretion. If we fail at any time to exercise any of the foregoing rights, this failure will not constitute a waiver of such right. Each such right will be deemed an ongoing right that we may assert at any time or at various times prior to the expiration date.

In addition, we will not accept for exchange any outstanding notes tendered, and will not issue exchange notes in exchange for any such outstanding notes, if at such time any stop order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the indenture under the Trust Indenture Act of 1939 (the “TIA”),

To tender your outstanding notes in the exchange offer, you must comply with either of the following:


	•	complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, have the signature(s) on the letter of transmittal guaranteed if required by the letter of transmittal and mail or deliver such letter of transmittal or facsimile thereof to the exchange agent at the address set forth below under “— Exchange Agent” prior to the expiration date; or

	•	comply with DTC’s Automated Tender Offer Program procedures described below.


	•	the exchange agent must receive certificates for outstanding notes along with the accompanying letter of transmittal prior to the expiration date;

	•	the exchange agent must receive a timely confirmation of book-entry transfer of outstanding notes into the exchange agent’s account at DTC according to the procedures for book-entry transfer described below or a properly transmitted agent’s message prior to the expiration date; or

	•	you must comply with the guaranteed delivery procedures described below.

Your tender, if not withdrawn prior to the expiration date, constitutes an agreement between us and you upon the terms and subject to the conditions described in this prospectus and in the accompanying letter of transmittal.

The method of delivery of outstanding notes, letters of transmittal, and all other required documents to the exchange agent is at your election and risk. We recommend that instead of delivery by mail, you use an overnight or hand delivery service, properly insured. In all cases, you should allow sufficient time to assure timely delivery to the exchange agent before the expiration date, You should not send letters of transmittal or certificates representing outstanding notes to us. You may request that your broker, dealer, commercial bank, trust company or nominee effect the above transactions for you.

If you are a beneficial owner whose outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company, or other nominee and you wish to tender your notes, you should promptly contact the registered holder and instruct the registered holder to tender on your behalf. If you wish to tender the outstanding notes yourself, you must, prior to completing and executing the accompanying letter of transmittal and delivering your outstanding notes, either:


	•	make appropriate arrangements to register ownership of the outstanding notes in your name; or

	•	obtain a properly completed bond power from the registered holder of outstanding notes.

The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date.

Signatures on the letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another “eligible guarantor institution” within the meaning of Rule 17A(d)- 15 under the Exchange Act unless the outstanding notes surrendered for exchange are tendered:


	•	by a registered holder of the outstanding notes who has not completed the box entitled “Special Registration Instructions” or “Special Delivery Instructions” on the accompanying letter of transmittal; or

	•	for the account of an eligible guarantor institution.

If the letter of transmittal is signed by a person other than the registered holder of any outstanding notes listed on the outstanding notes, such outstanding notes must be endorsed or accompanied by a properly completed bond power, The bond power must be signed by the registered holder as the registered holder’s name appears on the outstanding notes and an eligible guarantor institution must guarantee the signature on the bond power.

If the accompanying letter of transmittal or any certificates representing outstanding notes, or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, those persons should also indicate when signing and, unless waived by us, they should also submit evidence satisfactory to us of their authority to so act.

The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC’s system may use DTC’s Automated Tender Offer Program to tender. Participants in the program may, instead of physically completing and signing the accompanying letter of transmittal and delivering it to the exchange agent, electronically transmit their acceptance of the exchange by causing DTC to transfer the outstanding notes to the exchange agent in accordance with DTC’s Automated Tender Offer Program procedures for transfer. DTC will then send an agent’s message to the exchange agent. The term “agent’s message” means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, which states that:


	•	DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering outstanding notes that are the subject of the book-entry confirmation;

	•	the participant has received and agrees to be bound by the terms of the accompanying letter of transmittal, or in the case of an agent’s message relating to guaranteed delivery, that such participant has received and agrees to be bound by the applicable notice of guaranteed delivery; and

	•	we may enforce that agreement against such participant.

In all cases, we will promptly issue exchange notes for outstanding notes that we have accepted for exchange under the exchange offer only after the exchange agent timely receives:


	•	outstanding notes or a timely book-entry confirmation of such outstanding notes into the exchange agent’s account at the applicable book-entry transfer facility; and


	•	a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent’s message.

By tendering outstanding notes pursuant to the exchange offer, you will represent to us that, among other things:


	•	you are not our affiliate or an affiliate of any guarantor within the meaning of Rule 405 under the Securities Act;

	•	you do not have an arrangement or understanding with any person or entity to participate in a distribution of the exchange notes; and

	•	you are acquiring the exchange notes in the ordinary course of your business.

In addition, each broker-dealer that is to receive exchange notes for its own account in exchange for outstanding notes must represent that such outstanding notes were acquired by that broker-dealer as a result of market-making activities or other trading activities and must acknowledge that it will deliver a prospectus that meets the requirements of the Securities Act in connection with any resale of the exchange notes. The accompanying letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. See “Plan of Distribution.”

We will interpret the terms and conditions of the exchange offer, including the letters of transmittal and the instructions to the letters of transmittal, and will resolve all questions as to the validity, form, eligibility, including time of receipt, and acceptance of outstanding notes tendered for exchange. Our determinations in this regard will be final and binding on all parties. We reserve the absolute right to reject any and all tenders of any particular outstanding notes not properly tendered or to not accept any particular outstanding notes if the acceptance might, in their or their counsel’s judgment, be unlawful. We also reserve the absolute right to waive any defects or irregularities as to any particular outstanding notes prior to the expiration date.

Unless waived, any defects or irregularities in connection with tenders of outstanding notes for exchange must be cured within such reasonable period of time as we determine. Neither we, the exchange agent, nor any other person will be under any duty to give notification of any defect or irregularity with respect to any tender of outstanding notes for exchange, nor will any of them incur any liability for any failure to give notification. Any outstanding notes received by the exchange agent that are not properly tendered and as to which the irregularities have not been cured or waived will be returned by the exchange agent to the tendering holder, unless otherwise provided in the accompanying letter of transmittal, promptly after the expiration date.

Promptly after the date of this prospectus, the exchange agent will establish an account with respect to the outstanding notes at DTC, as book-entry transfer facilities, for purposes of the exchange offer. Any financial institution that is a participant in the book-entry transfer facility’s system may make book-entry delivery of the outstanding notes by causing the book-entry transfer facility to transfer those outstanding notes into the exchange agent’s account at the facility in accordance with the facility’s procedures for such transfer. To be timely, book-entry delivery of outstanding notes requires receipt of a confirmation of a book-entry transfer, a “book-entry confirmation,” prior to the expiration date. In addition, although delivery of outstanding notes may be effected through book-entry transfer into the exchange agent’s account at the applicable book-entry transfer facility, the accompanying letter of transmittal or a manually signed facsimile thereof, together with any required signature guarantees and any other required documents, or an “agent’s message,” as defined below, in connection with a book-entry transfer, must, in any case, be delivered or transmitted to and received by the exchange agent at its address set forth on the cover page of the accompanying letter of transmittal prior to the expiration date to receive exchange notes for tendered outstanding notes, or the guaranteed delivery procedure described below must be complied with. Tender will not be deemed made until such documents are received by the exchange agent. Delivery of documents to the applicable book-entry transfer facility does not constitute delivery to the exchange agent.

Holders of outstanding notes who are unable to deliver confirmation of the book-entry tender of their outstanding notes into the exchange agent’s account at the applicable book-entry transfer facility or all other documents required by the accompanying letter of transmittal to the exchange agent on or prior to the expiration date must tender their outstanding notes according to the guaranteed delivery procedures described below.

If you wish to tender your outstanding notes but your outstanding notes are not immediately available or you cannot deliver your outstanding notes, the accompanying letter of transmittal or any other required documents to the exchange agent or comply with the procedures under DTC’s Automatic Tender Offer Program prior to the expiration date, you may still tender if:


	•	the tender is made through an eligible guarantor institution;

	•	prior to the expiration date, the exchange agent receives from such eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail, or hand delivery or a properly transmitted agent’s message and notice of guaranteed delivery, that (1) sets forth your name and address, the certificate number(s) of such outstanding notes and the principal amount of outstanding notes tendered; (2) states that the tender is being made thereby; and (3) guarantees that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal, or facsimile thereof, together with the outstanding notes or a book-entry confirmation, and any other documents required by the letter of transmittal, will be deposited by the eligible guarantor institution with the exchange agent; and

	•	the exchange agent receives the properly completed and executed letter of transmittal or facsimile thereof, as well as certificate(s) representing all tendered outstanding notes in proper form for transfer or a book-entry confirmation of transfer of the outstanding notes into the exchange agent’s account at DTC and all other documents required by the letter of transmittal within three New York Stock Exchange trading days after the expiration date.

Upon request, the exchange agent will send to you a notice of guaranteed delivery if you wish to tender your notes according to the guaranteed delivery procedures.

Except as otherwise provided in this prospectus, you may withdraw your tender of outstanding notes at any time prior to 12.00 a.m. midnight, New York City time, on the expiration date.


	•	the exchange agent must receive a written notice, which may be by telegram, telex, facsimile or letter, of withdrawal at its address set forth below under “— Exchange Agent;” or

	•	you must comply with the appropriate procedures of DTC’s Automated Tender Offer Program system.


	•	specify the name of the person who tendered the outstanding notes to be withdrawn;

	•	identify the outstanding notes to be withdrawn, including the certificate numbers and principal amount of the outstanding notes; and

	•	where certificates for outstanding notes have been transmitted, specify the name in which such outstanding notes were registered, if different from that of the withdrawing holder.

If certificates for outstanding notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates, you must also submit:


	•	the serial numbers of the particular certificates to be withdrawn; and

	•	a signed notice of withdrawal with signatures guaranteed by an eligible institution unless your are an eligible guarantor institution.

If outstanding notes have been tendered pursuant to the procedures for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the applicable book-entry transfer facility to be credited with the withdrawn outstanding notes and otherwise comply with the procedures of the facility. We will determine all questions as to the validity, form, and eligibility, including time of receipt of notices of withdrawal and their determination will be final and binding on all parties. Any outstanding notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any outstanding notes that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder, without cost to the holder, or, in the case of book-entry transfer, the outstanding notes will be credited to an account at the applicable book-entry transfer facility, promptly after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn outstanding notes may be retendered by following the procedures described under “— Procedures for Tendering Outstanding Notes” above at any time on or prior to the expiration date.

Notwithstanding any other provision of the exchange offer, the Issuer is not required to accept for exchange, or to issue exchange notes in exchange for, any outstanding notes, and the Issuer and the guarantors may terminate or amend the exchange offer, if at any time prior to the expiration date, the Issuer and the guarantors determine that the exchange offer violates applicable law or SEC policy. In addition, with respect to any holder, the exchange offer is conditioned on the tender of the outstanding notes to us by such holder in accordance with the terms and conditions set forth in this prospectus and the accompanying letter of transmittal.

The foregoing conditions are for our sole benefit, and we may assert them regardless of the circumstances giving rise to any such condition, or we may waive the conditions, completely or partially, whenever or as many times as we choose, in our reasonable discretion. The foregoing rights are not deemed waived because we fail to exercise them, but continue in effect, and we may still assert them whenever or as many times as we choose. If we determine that a waiver of conditions materially changes the exchange offer, the prospectus will be amended or supplemented, and the exchange offer extended, if appropriate, as described under “— Terms of the Exchange Offer.”

In addition, at a time when any stop order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or with respect to the qualification of the indenture under the Trust Indenture Act of 1939, as amended, we will not accept for exchange any outstanding notes tendered, and no exchange notes will be issued in exchange for any such outstanding notes.

If the Issuer and the guarantors are not permitted to consummate the exchange offer because the exchange offer is not permitted by applicable law or SEC policy, the registration rights agreement requires that the Issuer and the guarantors use commercially reasonable efforts to file a shelf registration statement to cover resales of the outstanding notes by the holders thereof who satisfy specified conditions relating to the provision of information in connection with the shelf registration statement. See “— Registration Rights; Additional Interest.”

Citibank, N.A. has been appointed as the exchange agent for the exchange offer. Citibank, N.A. also acts as trustee under the indenture governing the notes. You should direct all executed letters of transmittal and all questions and requests for assistance, requests for additional copies of this prospectus or of the letters of

If you deliver the letter of transmittal to an address other than the one set forth above or transmit instructions via facsimile other than the one set forth above, that delivery or those instructions will not be effective.

We will bear the expenses of soliciting tenders. The principal solicitation is being made by mail. We may make additional solicitations by facsimile, telephone or in person by their officers and regular employees and their affiliates.

We have not retained any dealer-manager in connection with the exchange offer and will not make any payment to broker-dealers or others for soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and reimburse it for its related, reasonable out-of-pocket expenses.

We will pay the cash expenses to be incurred in connection with the exchange offer, which are estimated in the aggregate to be approximately $500,000. They include:


	•	SEC registration fees;

	•	fees and expenses of the exchange agent and trustee;

	•	accounting and legal fees and printing costs; and

	•	related fees and expenses.

We will record the exchange notes in their accounting records at the same carrying value as the outstanding notes, which is the aggregate principal amount as reflected in their accounting records on the date of exchanges. Accordingly, we will not recognize any gain or loss for accounting purposes upon the consummation of the exchange offer. We will record the expenses of the exchange offer as incurred.

We will pay all transfer taxes, if any, applicable to the exchanges of outstanding notes under the exchange offer. The tendering holder, however, will be required to pay any transfer taxes, whether imposed on the registered holder or any other person, if:


	•	certificates representing outstanding notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of outstanding notes tendered;

	•	tendered outstanding notes are registered in the name of any person other than the person signing the letter of transmittal; or

	•	a transfer tax is imposed for any reason other than the exchange of outstanding notes under the exchange offer.

If satisfactory evidence of payment of such taxes is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed to that tendering holder.

Holders who tender their outstanding notes for exchange will not be required to pay any transfer taxes. However, holders who instruct us to register exchange notes in the name of, or request that outstanding notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be required to pay any applicable transfer tax.

If you do not exchange your outstanding notes for exchange notes under the exchange offer, your outstanding notes will remain subject to the restrictions on transfer of such outstanding notes:


	•	as set forth in the legend printed on the notes as a consequence of the issuances of the outstanding notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and

	•	as otherwise set forth in the offering memorandum distributed in connection with the private offering of the outstanding notes.

In general, you may not offer or sell your outstanding notes unless they are registered under the Securities Act or if the offer or sale is exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the outstanding notes under the Securities Act.


	(a) required to file the exchange offer registration statement; or

	(b) permitted to consummate the exchange offer because the exchange offer is not permitted by applicable law or SEC policy; or


	(2) for any other reason the exchange offer is not consummated within 300 days following the closing date of the issuance of the outstanding notes; or

	(3) any holder of Transfer Restricted Securities notifies the Issuer prior to the effectiveness of the exchange offer registration statement that:


	(a) it is prohibited by law or SEC policy from participating in the exchange offer;

	(b) it may not resell the exchange notes acquired by it in the exchange offer to the public without delivering a prospectus and the prospectus contained in the exchange offer registration statement is not appropriate or available for such resales; or

	(c) it is a broker-dealer and owns notes acquired directly from the Issuer or an affiliate of the Issuer,

the Issuer and the Guarantors will file with the SEC a shelf registration statement to cover resales of the outstanding notes by the holders of the outstanding notes who satisfy certain conditions relating to the provision of information in connection with the shelf registration statement.

For purposes of the preceding, “Transfer Restricted Securities” means each note until the earliest to occur of:


	(1) the date on which such note has been exchanged by a person other than a broker-dealer for an exchange note in the exchange offer;


	(2) following the exchange by a broker-dealer in the exchange offer of a note for an exchange note, the date on which such exchange note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the exchange offer registration statement;

	(3) the date on which such note has been effectively registered under the Securities Act and disposed of in accordance with the shelf registration statement; or

	(4) the date on which such note is sold pursuant to Rule 144 under the Securities Act.

If a shelf registration statement is required, the Issuer and the guarantors must:


	(1) use commercially reasonable efforts to file the shelf registration statement with the SEC on or prior to 210 days after such filing obligation arises, unless such day is not a business day, then the next succeeding business day, and

	(2) use commercially reasonable efforts to cause the shelf registration to be declared effective by the SEC on or prior to 270 days after such obligation arises, unless such day is not a business day, then the next succeeding business day.


	(1) the Issuer and the guarantors fail to consummate the exchange offer within 300 days after the closing of this offering with respect to the exchange offer registration statement or fail to cause the shelf registration statement to be effective, if applicable, within 270 days after the date the filing obligation with respect thereto arises; or

	(2) the shelf registration statement or the exchange offer registration statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Transfer Restricted Securities during the periods specified in the registration rights agreement

(each such event referred to in clauses (1) through (2) above, a “Registration Default”), then the Issuer and the Guarantors will pay Additional Interest to each holder of notes, with respect to the first 90-day period immediately following the occurrence of the first Registration Default in an amount equal to 0.25% per annum.

The amount of the Additional Interest will increase by an additional 0.25% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Additional Interest for all Registration Defaults of 1.0% per annum.

All accrued Additional Interest will be paid by the Issuer and the guarantors on the next scheduled interest payment date to DTC or its nominee by wire transfer of immediately available funds or by federal funds check and to holders of Certificated Notes by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified.

The amount of Additional Interest shall not increase because more than one Registration Default has occurred and is pending. Following the cure of all Registration Defaults, the accrual of Additional Interest will cease.

In order to participate in the exchange offer, holders of outstanding notes will be required to make certain representations to the Issuer. In order to have their outstanding notes included in the shelf registration statement and benefit from the provisions regarding additional interest set forth above, holders of outstanding notes will be required to be named as a selling security holder, to deliver certain information to be used in connection with the shelf registration statement and to provide comments on the shelf registration statement within the time periods set forth in the registration rights agreement. By acquiring transfer restricted securities or exchange notes, a holder will be deemed to have agreed to indemnify the Issuer and the guarantors against certain losses arising out of information furnished by such holder in writing for inclusion in any shelf registration statement. Holders of outstanding notes will also be required to suspend their use of the prospectus included in the exchange offer statement (as to broker-dealers required to deliver a prospectus in connection

Participating in the exchange offer is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take.

We may in the future seek to acquire untendered outstanding notes in open market or privately negotiated transactions, through a subsequent exchange offer or otherwise. We have no present plans to acquire any outstanding notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered outstanding notes.

You can find the definitions of certain terms used in this description under the subheading “— Certain Definitions.” In this description, the term “Issuer” refers only to Dresser-Rand Group Inc. and its successors under the indenture and not to any of its Subsidiaries.

The outstanding notes were issued and the exchange notes will be issued under an indenture among the Issuer, the Guarantors and Citibank, N.A., as trustee. The terms of the notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended.

The following description is a summary of the material provisions of the indenture. It does not restate the indenture in its entirety. We urge you to read the indenture because it, and not this description, define your rights as holders of the notes. Copies of the indenture are available as set forth below under “— Additional Information.” Certain defined terms used in this description but not defined below under “— Certain Definitions” have the meanings assigned to them in the indenture.

The Holder of a note is treated as the owner of it for all purposes. Only Holders have rights under the indenture.


	•	general unsecured senior subordinated obligations of the Issuer;

	•	subordinated in right of payment to all existing and future Senior Indebtedness of the Issuer, including borrowings under the Credit Agreement;

	•	effectively subordinated in right of payment to any existing and future Indebtedness and other liabilities, including trade payables, of the Issuer’s Foreign Subsidiaries, certain Domestic Subsidiaries that are not Guarantors and any future Unrestricted Subsidiaries;

	•	pari passu in right of payment with all future senior subordinated Indebtedness of the Issuer;

	•	senior in right of payment to any future Indebtedness of the Issuer that expressly provides for its subordination to the notes; and

	•	unconditionally guaranteed on a senior subordinated basis, jointly and severally, by the Guarantors.

A substantial portion of the personal property and all other material assets of the Issuer and its Subsidiaries, including the Guarantors (subject to certain limited exceptions agreed upon with respect to immaterial Subsidiaries and with respect to any guarantee that could create materially adverse tax consequences), have been pledged to secure our obligations to our secured creditors, including our obligations under the Credit Agreement. In the event our secured creditors exercise their rights with respect to their pledged assets, our secured lenders would be entitled to be repaid in full from the liquidation of those assets before those assets would be available for distribution to our other creditors, including holders of the notes. See “Risk Factors — Our secured creditors will be entitled to be paid in full from the proceeds of our pledged assets before those proceeds will be available for payment on the notes.” In addition, the assets of the Subsidiaries of the Issuer that are not Guarantors will be subject to the prior claims of all creditors, including trade creditors, of those Subsidiaries. See “Risk Factors — Certain subsidiaries are not included as guarantors.”

As of September 30, 2004, after giving effect to the Transactions, including this offering:


	•	the Issuer and its Subsidiaries would have had $823 million principal amount of Indebtedness on a consolidated basis (including the notes), of which:


	•	$398 million would have been Senior Indebtedness, comprised principally of borrowings and guarantees under the Credit Agreement (excluding $180 million in letters of credit); and


	•	$395 million would have been secured (comprised solely of borrowings under the Credit Agreement but excluding $180 million in letters of credit); and


	•	an additional $120 million would have been available for borrowing under the Credit Agreement, which Indebtedness when incurred would be Senior Indebtedness and would be secured; and

	•	Subsidiaries of the Issuer that are not Guarantors would have had $213.4 million of Indebtedness and other liabilities, including trade payables but excluding intercompany liabilities.

The notes were initially guaranteed, on a senior subordinated, unsecured basis, by each of the Issuer’s direct and indirect Restricted Subsidiaries were Domestic Subsidiaries on the Issue Date and that guarantee Indebtedness under the Credit Agreement.


	•	a general senior subordinated, unsecured obligation of that Guarantor;

	•	subordinated in right of payment to all existing and future Senior Indebtedness of that Guarantor, including any borrowings and guarantees by that Guarantor of Indebtedness under the Credit Agreement;

	•	pari passu in right of payment with all future senior subordinated Indebtedness of that Guarantor; and

	•	senior in right of payment to any future Indebtedness of that Guarantor that expressly provides for its subordination to the Guarantor’s Note Guarantee.

Each Note Guarantee is subordinated to the prior payment in full of all Senior Indebtedness of that Guarantor. The obligations of each Guarantor under its Note Guarantee are limited as necessary to prevent that guarantee from constituting a fraudulent conveyance under applicable law. See “Risk Factors — The guarantees may not be enforceable because of fraudulent conveyance laws.” As of September 30, 2004, after giving effect to the Transactions, including this offering, the Guarantors would have had $395 million of Senior Indebtedness (excluding $180 million in letters of credit under the Credit Agreement), all of which would have been guarantees of Indebtedness under the Credit Agreement.

A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person, other than the Issuer or another Guarantor, unless:


	(1) immediately after giving effect to that transaction, no Default or Event of Default exists; and

	(2) either:


	(a) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger assumes all the obligations of that Guarantor under the indenture and its Note Guarantee pursuant to a supplemental indenture in the form attached as an exhibit to the indenture; or

	(b) in the case of any such sale or disposition (including by way of any such consolidation or merger), the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the indenture.

(1) in connection with any sale, disposition or transfer of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) the Issuer or a Restricted Subsidiary of the Issuer, if the sale, disposition or transfer does not violate the first paragraph of the “Asset Sale” provisions of the indenture;


	(2) in connection with any sale, disposition or transfer of all of the Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) the Issuer or a Restricted Subsidiary of the Issuer, if the sale, disposition or transfer does not violate the first paragraph of the “Asset Sale” provisions of the indenture;

	(3) if the Issuer designates any Restricted Subsidiary that is a Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of the indenture;

	(4) upon legal defeasance or satisfaction and discharge of the indenture as provided below under the captions “— Legal Defeasance and Covenant Defeasance” and “— Satisfaction and Discharge”; or

	(5) upon the release of such Guarantor’s guarantee under the Credit Agreement or under such other Indebtedness requiring such Guarantor to provide a Note Guarantee as provided below under the caption “— Certain Covenants — Additional Note Guarantees.”

As of the date of the indenture, all of our Subsidiaries were Restricted Subsidiaries. However, under the circumstances described below under the caption “— Certain Covenants — Designation of Restricted and Unrestricted Subsidiaries,” the Issuer is permitted to designate certain of its Subsidiaries as Unrestricted Subsidiaries. The Issuer’s Unrestricted Subsidiaries will not be subject to the restrictive covenants in the indenture. The Issuer’s Unrestricted Subsidiaries will not guarantee the notes, and if the Issuer designates any Restricted Subsidiary as an Unrestricted Subsidiary in accordance with the indenture, the Note Guarantee of such Subsidiary will be released.

On October 29, 2004 the Issuer issued $420.0 million in aggregate principal amount of notes. The Issuer may issue an unlimited amount of additional notes under the indenture from time to time. Any issuance of additional notes is subject to all of the covenants in the indenture, including the covenant described below under the caption “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Equity.” The notes issued in this offering and any additional notes subsequently issued under the indenture will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase.

The Issuer issued the outstanding notes in denominations of $1,000 and integral multiples of $1,000. The notes will mature on November 1, 2014. Interest on the notes accrues at the rate of 7 3/8% per annum and is payable semi-annually in arrears on May 1 and November 1 of each year, commencing on May 1, 2005. The Issuer makes each interest payment to the holders of record on the immediately preceding April 15 and October 15.

Interest on the notes accrues from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

If a Holder has given wire transfer instructions to the Issuer, the paying agent will remit on behalf of the Issuer all principal, interest and premium and Additional Interest, if any, on that Holder’s notes in accordance with those instructions. All other payments on the notes will be made by check mailed to the Holders at their addresses set forth in the register of Holders.

The trustee will initially act as paying agent and registrar. The Issuer may change the paying agent or registrar without prior notice to the Holders, and the Issuer or any of its Subsidiaries may act as paying agent or registrar.

A Holder may transfer or exchange notes in accordance with the provisions of the indenture. The Issuer, the registrar and the trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents in connection with a transfer of notes. Holders will be required to pay all taxes due on transfer. Neither the Issuer nor the registrar will be required to transfer or exchange any note selected for redemption. Also, neither the Issuer nor the registrar will be required to transfer or exchange any note for a period of 15 days before a selection of notes to be redeemed.

The notes are senior subordinated Indebtedness of the Issuer. The payment of the Senior Subordinated Obligations, to the extent set forth in the indenture, is subordinated in right of payment to the prior payment in full, in cash or Cash Equivalents, of all Obligations due in respect of existing and future Senior Indebtedness. Payments under the Note Guarantee of each Guarantor are subordinated to the prior payment in full, in cash or Cash Equivalents, of all Senior Indebtedness of such Guarantor, including Senior Indebtedness of such Guarantor incurred after the date of the indenture, on the same basis as provided below with respect to the subordination of payments on the Notes by the Issuer to the prior payment in full of Senior Indebtedness of the Issuer. See “Risk Factors — Your right to receive payments on the exchange notes will be junior to the issuer’s existing and future senior indebtedness, and the guarantees of the exchange notes will be junior to all the guarantors’ existing and future senior indebtedness.” Notwithstanding the foregoing, payment from the money or the proceeds of Government Securities held in any trust described under “— Legal Defeasance and Covenant Defeasance” or “— Satisfaction and Discharge”, below, will not be contractually subordinated in right of payment to any Senior Indebtedness or subject to the restrictions described herein.

The holders of Senior Indebtedness are entitled to receive payment in full in cash or Cash Equivalents of all Obligations due in respect of Senior Indebtedness (including, with respect to Designated Senior Indebtedness, any interest accruing after the commencement of any proceeding described below at the rate specified in the applicable Designated Senior Indebtedness whether or not interest is an allowed claim enforceable against the Issuer or any Guarantor in such proceeding) before the Holders will be entitled to receive any payment on account of Senior Subordinated Obligations or any payment to acquire any of the notes for cash, property or securities, or any distribution with respect to the notes of any cash, property or securities (except that Holders may receive and retain Permitted Junior Securities and payments made from any trust described under “— Legal Defeasance and Covenant Defeasance” or “— Satisfaction and Discharge”), in the event of any distribution to creditors of the Issuer:


	(1) in a liquidation or dissolution of the Issuer;

	(2) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Issuer or its property;

	(3) in an assignment for the benefit of creditors; or

	(4) in any marshaling of the Issuer’s assets and liabilities.

In addition, until all Obligations due with respect to Senior Indebtedness are paid in full in cash or Cash Equivalents (including, with respect to Senior Indebtedness, any interest accruing after the commencement of any proceeding described above at the rate specified in the applicable Designated Senior Indebtedness whether or not interest is an allowed claim enforceable against the Issuer or any Guarantor in such proceeding), any such distribution to which Holders would be entitled shall be made to the holders of Senior Indebtedness (except that Holders may receive and retain Permitted Junior Securities and payments made from any trust described under “— Legal Defeasance and Covenant Defeasance” or “— Satisfaction and Discharge”).

The Issuer also may not make any payment in respect of any Senior Subordinated Obligations (except in Permitted Junior Securities or from any trust described under “— Legal Defeasance and Covenant Defeasance” or “— Satisfaction and Discharge”) if:


	(1) a payment default on Designated Senior Indebtedness occurs and is continuing; or

	(2) any other default occurs and is continuing on any series of Designated Senior Indebtedness that permits holders of that series of Designated Senior Indebtedness to accelerate its maturity and a responsible officer of the trustee receives actual notice of such default (a “Payment Blockage Notice”) from the trustee or other representative for the holders of any Designated Senior Indebtedness, or the holders of at least a majority of the outstanding principal amount of such Designated Senior Indebtedness.


	(1) in the case of a payment default in respect of Designated Senior Indebtedness, upon the date on which such default is cured or waived; and

	(2) in the case of a nonpayment default in respect of Designated Senior Indebtedness, upon the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received.

No new Payment Blockage Notice may be delivered unless and until: (1) 360 days have elapsed since the delivery of the immediately prior Payment Blockage Notice and (2) all scheduled payments of principal, interest and premium and Additional Interest, if any, on the notes that have come due have been paid in full in cash.

No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice.

If the trustee or any Holder receives a payment in respect of the notes (except in Permitted Junior Securities or from any trust described under “— Legal Defeasance and Covenant Defeasance” or “— Satisfaction and Discharge”) when:


	(1) the payment is prohibited by these subordination provisions; and

	(2) the trustee or such Holder has actual knowledge that the payment is prohibited,

the trustee or the Holder, as the case may be, will hold the payment in trust for the benefit of holders of Senior Indebtedness. Upon the proper written request of the holders of Senior Indebtedness, the trustee or the Holder, as the case may be, will deliver the amounts in trust to the holders of Senior Indebtedness or their proper representative.

The Issuer must promptly notify holders of Senior Indebtedness if payment of the notes is accelerated because of an Event of Default. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice may be given to the indenture trustee or other trustee, agent or representative for such Senior Indebtedness.

Payments under the Note Guarantee of each Guarantor will be subordinated to the prior payment in full of all Senior Indebtedness of such Guarantor, including Senior Indebtedness of such Guarantor incurred after the date of the indenture, on the same basis as provided above with respect to the subordination of payments on the notes by the issuer to the prior payment in full of Senior Indebtedness of the issuer. See “Risk Factors — Your right to receive payments on the notes will be junior to the issuer’s existing and future senior indebtedness, and the guarantees of the notes will be junior to all of the guarantors’ existing and future senior indebtedness.”

By reason of the subordination provisions described above, in the event of a bankruptcy, liquidation or reorganization of the Issuer or the Guarantors, Holders may recover less, ratably, than creditors of the Issuer and the Guarantors who are holders of Senior Indebtedness. As a result of the obligation to deliver amounts received in trust to holders of Senior Indebtedness, holders of notes may recover less, ratably, than trade

At any time prior to November 1, 2007, the Issuer may on any one or more occasions redeem up to 35% of the aggregate principal amount of notes issued under the indenture (including any additional notes issued after the Issue Date) at a redemption price of 107.375% of the principal amount, plus accrued and unpaid interest and Additional Interest, if any, to, but not including, the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that:


	(1) at least 65% of the aggregate principal amount of notes issued under the indenture (excluding notes held by the Issuer and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and

	(2) the redemption occurs within 180 days of the date of the closing of such Equity Offering.

Except pursuant to the preceding paragraph or as otherwise set forth below, the notes will not be redeemable at the Issuer’s option prior to November 1, 2009. We are not, however, prohibited from acquiring the notes by means other than a redemption, whether pursuant to a tender offer, open market purchase or otherwise, so long as the acquisition does not violate the terms of the indenture.

On or after November 1, 2009, the Issuer may redeem all or a part of the notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, on the notes to be redeemed, to, but not including, the applicable redemption date, if redeemed during the twelve month period beginning on November 1 of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:

In addition, at any time prior to November 1, 2009, the Issuer may also redeem all or a part of the notes at a redemption price equal to 100% of the principal amount of notes to be redeemed, plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to, but not including, the redemption date, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date.

All redemptions of the notes will be made upon not less than 30 days’ nor more than 60 days’ prior notice mailed by first class mail to each Holder’s registered address. Unless the Issuer defaults in the payment of the redemption price, interest will cease to accrue on the notes or portions thereof called for redemption on the applicable redemption date.

The Issuer is not required to make mandatory redemption or sinking fund payments with respect to the notes.

If a Change of Control occurs, each Holder will have the right to require the Issuer to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that Holder’s notes pursuant to a Change of Control Offer on the terms set forth in the indenture. In the Change of Control Offer, the Issuer will offer a Change of Control Payment in cash equal to 101% of the aggregate principal amount of notes repurchased plus accrued and unpaid interest and Additional Interest, if any, on the notes repurchased to, but not including, the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control, the Issuer will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase notes on the Change of Control Payment Date specified in the notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the indenture and described in such notice. The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the indenture, the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of the indenture by virtue of such compliance.


	(1) accept for payment all notes or portions of notes properly tendered pursuant to the Change of Control Offer;

	(2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all notes or portions of notes properly tendered; and

	(3) deliver or cause to be delivered to the trustee the notes properly accepted together with an Officers’ Certificate stating the aggregate principal amount of notes or portions of notes being purchased by the Issuer.

The paying agent will promptly mail or wire transfer to each Holder of notes properly tendered and so accepted the Change of Control Payment for such notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new note equal in principal amount to any unpurchased portion of the notes surrendered, if any; provided that each new note will be in a principal amount of $1,000 or an integral multiple of $1,000. Any note so accepted for payment will cease to accrue interest on and after the Change of Control Payment Date. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as reasonably practicable after the Change of Control Payment Date.

The Credit Agreement will prohibit the Issuer from purchasing any notes, and will also provide that certain change of control events with respect to the Issuer would constitute a default under the Credit Agreement. Any future credit agreements or other agreements relating to Senior Indebtedness to which the Issuer becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when the Issuer is prohibited from purchasing notes, the Issuer could seek the consent of its senior lenders to the purchase of notes or could attempt to refinance the borrowings that contain such prohibition. If the Issuer does not obtain such a consent or repay such borrowings, the Issuer will remain prohibited from purchasing notes. In such case, the Issuer’s failure to purchase tendered notes would constitute an Event of Default under the indenture, which would, in turn, likely constitute a default under such Senior Indebtedness. In such circumstances, the subordination provisions in the indenture would likely restrict payments to the Holders.

The provisions described above that require the Issuer to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the indenture are applicable. Except as described above with respect to a Change of Control, the indenture does not contain provisions that

The Issuer will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture applicable to a Change of Control Offer made by the Issuer and purchases all notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given pursuant to the indenture as described above under the caption “— Optional Redemption,” unless and until there is a default in payment of the applicable redemption price.

The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of the Issuer and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder to require the Issuer to repurchase its notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Issuer and its Subsidiaries taken as a whole to another Person or group may be uncertain.

The Issuer will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:


	(1) the Issuer (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of; and

	(2) at least 75% of the consideration received in the Asset Sale by the Issuer or such Restricted Subsidiary is in the form of cash, Cash Equivalents or Marketable Securities. For purposes of this provision, each of the following will be deemed to be cash:


	(a) any liabilities of the Issuer or any Restricted Subsidiary of the Issuer (other than contingent liabilities and liabilities that are by their terms subordinated to the notes or any Note Guarantee) that are assumed by the transferee of any such assets and as a result of which the Issuer and such Restricted Subsidiary of the Issuer are released from any further liability in connection therewith;

	(b) any securities, notes, other obligations or assets received by the Issuer or any such Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into cash or Cash Equivalents within 180 days of the receipt thereof, to the extent of the cash or Cash Equivalents received in that conversion;

	(c) any Designated Non-cash Consideration received by the Issuer or any of its Restricted Subsidiaries in such Asset Sale; provided that the aggregate Fair Market Value of such Designated Non-cash Consideration, taken together with the Fair Market Value at the time of receipt of all other Designated Non-cash Consideration received pursuant to this clause (c), less the amount of Net Proceeds previously realized in cash from prior Designated Non-cash Consideration, is less than the greater of (x) 2.50% of Total Assets at the time of the receipt of such Designated Non-cash Consideration (with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value), and (y) $35.0 million; and

	(d) any Capital Stock or assets of the kind referred to in clause (2) or (4) of the next paragraph of this covenant.

Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Issuer (or the applicable Restricted Subsidiary, as the case may be) may:


	(1) to repay (w) Indebtedness and other Obligations constituting Senior Indebtedness, (x) any Indebtedness that was secured by the assets sold in such Asset Sale, (y) other pari passu Indebtedness (provided that the Issuer shall also equally and ratably reduce Indebtedness under the notes by making an offer (in accordance with the procedures set forth below for an Asset Sale) to all Holders to purchase at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, the pro rata principal amount of notes) or (z) Indebtedness of a Restricted Subsidiary that is not a Guarantor, in each case other than Indebtedness owed to any Parent, the Issuer or any of their respective Affiliates;

	(2) to acquire all or substantially all of the assets of, or any Capital Stock of, another Permitted Business; provided, that in the case of any such acquisition of Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary of the Issuer;

	(3) to make a capital expenditure; or

	(4) to acquire other assets that are not classified as current assets under GAAP and that are used or useful in a Permitted Business; or

(b) enter into a binding commitment to apply the Net Proceeds pursuant to clause (a) (2), (3) or (4) above, provided that such binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment until the earlier of (x) the date on which such acquisition or expenditure is consummated, and (y) the 180th day following the expiration of the aforementioned 365 day period.

Pending the final application of any Net Proceeds, the Issuer may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by the indenture.

Any Net Proceeds from Asset Sales that are not applied or invested as provided in the second paragraph of this covenant will constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds exceeds $15.0 million, within ten Business Days thereof, the Issuer will make an Asset Sale Offer to all Holders and all holders of other Indebtedness that is pari passu with the notes containing provisions similar to those set forth in the indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of the principal amount of the notes and such other pari passu Indebtedness plus accrued and unpaid interest and Additional Interest, if any, on the notes and such other pari passu Indebtedness to, but excluding, the date of purchase and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Issuer may use those Excess Proceeds for any purpose not otherwise prohibited by the indenture. If the aggregate principal amount of notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the notes and such other pari passu Indebtedness to be purchased shall be purchased on a pro rata basis based on the principal amount of notes and such other pari passu Indebtedness tendered. In such event, the trustee shall select the notes to be purchased as provided under the caption “— Selection and Notice.” Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of the indenture, the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the indenture by virtue of such compliance.

The Credit Agreement will prohibit the Issuer from purchasing any notes with the proceeds of Asset Sales. Any future credit agreements or other agreements relating to Senior Indebtedness to which the Issuer

becomes a party may contain similar restrictions and provisions. In the event an Asset Sale occurs at a time when the Issuer is prohibited from purchasing notes, the Issuer could seek the consent of its senior lenders to the purchase of notes or could attempt to refinance, repay or replace the borrowings that contain such prohibition with new Indebtedness without such prohibition. If the Issuer does not obtain such a consent or refinance, repay or replace such borrowings, the Issuer will remain prohibited from purchasing notes. In such case, the Issuer’s failure to purchase tendered notes would constitute an Event of Default under the indenture which would, in turn, constitute a default under such Senior Indebtedness. In such circumstances, the subordination provisions in the indenture would likely restrict payments to the Holders. Finally, the Issuer’s ability to pay cash to Holders upon an Asset Sale may be limited by the Issuer’s financial resources.

If less than all of the notes are to be redeemed at any time, the trustee will select notes for redemption as follows:


	(1) if the notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the notes are listed; or

	(2) if the notes are not listed on any national securities exchange, on a pro rata basis.

No notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 days but not more than 60 days before the redemption date to each Holder of notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the notes or a satisfaction and discharge of the indenture. Notices of redemption may not be conditional.

If any note is to be redeemed in part only, the notice of redemption that relates to that note will state the portion of the principal amount of that note that is to be redeemed. A new note in principal amount equal to the unredeemed portion of the original note will be issued in the name of the Holder upon cancellation of the original note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on notes or portions of notes called for redemption.


	(1) the notes are assigned an Investment Grade Rating from both of the Rating Agencies; and

	(2) no Default or Event of Default shall have occurred and be continuing,

then, beginning on that day, the covenants specifically listed under the following captions in this prospectus will be terminated:


	(1) “— Repurchase at the Option of Holders — Asset Sales”;

	(2) “— Restricted Payments”;

	(3) “— Incurrence of Indebtedness and Issuance of Preferred Equity”;

	(4) “— Dividend and Other Payment Restrictions Affecting Subsidiaries”;

	(5) “— Designation of Restricted and Unrestricted Subsidiaries”;

	(6) “— Transactions with Affiliates”;

	(7) clause (4) of the covenant described below under the caption “— Merger, Consolidation or Sale of Assets”; and

	(8) “— Business Activities.”

The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:


	(1) declare or pay any dividend or make any other payment or distribution on account of the Issuer’s or any of its Restricted Subsidiaries’ Equity Interests or to the direct or indirect holders of the Issuer’s or any of its Restricted Subsidiaries’ Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Issuer and other than dividends or distributions payable to the Issuer or a Restricted Subsidiary of the Issuer);

	(2) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Issuer, any Parent or any Restricted Subsidiary held by Persons other than the Issuer or any of its Restricted Subsidiaries;

	(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value, any Indebtedness of any Parent, the Issuer or any Guarantor that is contractually subordinated to the notes or to any Note Guarantee (excluding (x) any intercompany Indebtedness between or among the Issuer and any of its Restricted Subsidiaries or (y) the purchase, repurchase or other acquisition of Indebtedness that is contractually subordinated to the notes or to any Note Guarantee, as the case may be, purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition), except a payment of interest or principal at the Stated Maturity thereof; or

	(4) make any Restricted Investment;

(all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as “Restricted Payments”), unless, at the time of and after giving effect to such Restricted Payment:


	(1) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;

	(2) the Issuer would, after giving pro forma effect to such Restricted Payment as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption “— Incurrence of Indebtedness and Issuance of Preferred Equity”; and

	(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and its Restricted Subsidiaries since the date of the indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (5) (only to the extent of one-half of the amounts paid pursuant to such clause), (6), (8), (9), (10), (11), (12), (14), (15), (16) and (17) of the next succeeding paragraph), is less than the sum, without duplication, of:


	(a) 50% of the Consolidated Net Income of the Issuer for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing prior to the date of the indenture to the end of the Issuer’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus

	(b) 100% of the aggregate net proceeds, including cash and the Fair Market Value of property other than cash, received by the Issuer since the date of the indenture (x) as a contribution to its common equity capital or (y) from the issue or sale of Equity Interests of the Issuer or any Parent (other than Disqualified Stock, Designated Preferred Stock, Excluded Contributions or Cash Contributions) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Issuer); plus


	(c) to the extent that any Restricted Investment that was made after the date of the indenture is sold for cash or otherwise liquidated or repaid for cash, 100% of the aggregate amount received in cash and the Fair Market Value of property other than cash received; plus

	(d) to the extent that any Unrestricted Subsidiary of the Issuer designated as such after the date of the indenture is redesignated as a Restricted Subsidiary after the date of the indenture or has been merged into, consolidated or amalgamated with or into, or transfers or conveys its assets to, the Issuer or a Restricted Subsidiary of the Issuer, 100% of the Fair Market Value of the Issuer’s Investment in such Subsidiary as of the date of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable) after deducting any Indebtedness associated with the Unrestricted Subsidiary so designated or combined or any Indebtedness associated with the assets so transferred or conveyed; plus

	(e) 100% of any dividends or distributions received by the Issuer or a Restricted Subsidiary of the Issuer after the date of the indenture from an Unrestricted Subsidiary of the Issuer, to the extent that such dividends or distributions were not otherwise included in the Consolidated Net Income of the Issuer for such period.


	(1) the payment of any dividend or distribution or the consummation of any redemption within 60 days after the date of declaration of the dividend or distribution or giving of the redemption notice, as the case may be, if, at the date of declaration or notice, the dividend, distribution or redemption payment would have complied with the provisions of the indenture;

	(2) the making of any Restricted Payment in exchange for, or out of the net cash proceeds received by the Issuer of the substantially concurrent sale (other than to a Subsidiary of the Issuer) of, Equity Interests of the Issuer or any Parent (other than Disqualified Stock) or from the substantially concurrent contribution of such proceeds to the capital of the Issuer in any form other than Disqualified Stock or Indebtedness; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(b) of the preceding paragraph;

	(3) the repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness of the Issuer or any Restricted Subsidiary of the Issuer that is contractually subordinated to the notes or to any Note Guarantee with the net cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness;

	(4) the payment of any dividend (or, in the case of any partnership or limited liability company, any similar distribution) by a Restricted Subsidiary of the Issuer to the holders of its Equity Interests on a pro rata basis;

	(5) the repurchase, redemption or other acquisition or retirement (or dividends or distributions to any Parent to finance any such repurchase, redemption or other acquisition or retirement) for value of any Equity Interests of the Issuer, any Parent or any Restricted Subsidiary of the Issuer held by any current or former officer, director, consultant or employee of the Issuer, any Parent or any Restricted Subsidiary of the Issuer pursuant to any equity subscription agreement, stock option agreement, shareholders’ or members’ agreement or similar agreement, plan or arrangement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $4.0 million in any calendar year (with unused amounts in any calendar year being permitted to be carried over into succeeding calendar years); provided further, that the amount in any calendar year may be increased by an amount not to exceed:

(a) the cash proceeds received by the Issuer or any of its Restricted Subsidiaries from the sale of Equity Interests (other than Disqualified Stock) of Issuer or any Parent (to the extent contributed to the capital of the Issuer or any Restricted Subsidiary in any form other than Disqualified Stock or Indebtedness) to members of management, directors or consultants of Issuer and its Restricted Subsidiaries or any Parent that occurs after the date of the indenture (provided


	that the amount of such cash proceeds utilized for any such repurchase, retirement, other acquisition, or dividend or distribution will not increase the amount available for Restricted Payments under clause (3) of the immediately proceeding paragraph and to the extent such cash proceeds have not otherwise been applied to the payment of Restricted Payments); plus

	(b) the cash proceeds of key man life insurance policies received by the Issuer or any Parent (to the extent such cash proceeds are contributed to the capital of the Issuer in any form other than Disqualified Stock or Indebtedness) and its Restricted Subsidiaries after the date of the indenture, less any amounts previously applied to the payment of Restricted Payments pursuant to this clause (5);

(provided that the Issuer may elect to apply all or any portion of the aggregate increase contemplated by clauses (a) and (b) above in any single calendar year; provided further, however, notwithstanding the foregoing, to the extent such repurchase, redemption or other acquisition or retirement is effected through the issuance of Indebtedness to such officer, director, consultant or employee the payment under this provision will be deemed to have been made on the date of repayment of such Indebtedness);


	(6) the repurchase of Equity Interests deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of those stock options;

	(7) the declaration and payment of regularly scheduled or accrued dividends or distributions to holders of any class or series of Disqualified Stock of the Issuer or any Restricted Subsidiary of the Issuer issued on or after the date of the indenture in accordance with the Fixed Charge Coverage Ratio test described below under the caption “— Incurrence of Indebtedness and Issuance of Preferred Equity”;

	(8) Permitted Payments to Parent;

	(9) purchases of receivables pursuant to a Receivables Repurchase Obligation in connection with a Qualified Receivables Financing;

	(10) the declaration and payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued after the date of the indenture and the declaration and payment of dividends to any Parent, the proceeds of which will be used to fund the payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of any Parent issued after the date of the indenture; provided, however, that (A) for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance (and the payment of dividends or distributions) on a pro forma basis, the Issuer could incur an additional $1.00 of Indebtedness pursuant to the Fixed Charge Coverage Ratio, and (B) the aggregate amount of dividends declared and paid pursuant to this clause (10) does not exceed the net cash proceeds actually received by the Issuer (including any such proceeds contributed to the capital of the Issuer in any form other than Disqualified Stock or Indebtedness by any Parent) from any such sale of Designated Preferred Stock (other than Disqualified Stock) issued after the date of the indenture;

	(11) any payments made in connection with the consummation of the Transactions (as described in this prospectus);

	(12) Investments that are made with Excluded Contributions;

	(13) other Restricted Payments in an aggregate amount not to exceed $25.0 million since the date of the indenture;

	(14) the satisfaction of change of control obligations once the Issuer has fulfilled its obligations under the indenture with respect to a Change of Control;

	(15) the repayment of intercompany debt that was permitted to be incurred under the indenture;


	(16) cash dividends or other distributions on the Issuer’s Capital Stock used to, or the making of loans to any Parent to, fund the payment of fees and expenses owed by the Issuer or its Restricted Subsidiaries to Affiliates, to the extent permitted by the covenant described under “— Transactions with Affiliates”;

	(17) the payment of dividends or distributions on the Issuer’s common equity (or the payment of dividends or distributions to any Parent to fund the payment by such Parent of dividends or distributions on its common equity) of up to 5.0% per calendar year of the net cash proceeds received by the Issuer from any public Equity Offering or contributed to the capital of the Issuer in any form other than Disqualified Stock or Indebtedness by any Parent from any public Equity Offering; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(b) of the preceding paragraph;

	(18) any payments in connection with any merger or consolidation involving the Issuer or any of its Restricted Subsidiaries that does not violate the provisions of the indenture described below under the caption “— Merger, Consolidation or Sale of Assets”;

	(19) payments of principal of, and interest on, any Management Notes; and

	(20) the distribution, as a dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to, Dresser-Rand Holdings, LLC, Holdings, the Issuer or a Restricted Subsidiary of the Issuer by, Unrestricted Subsidiaries;

provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clause (10) or (17), no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof.

The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Issuer or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.

The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, “incur”) any Indebtedness (including Acquired Debt), and the Issuer will not issue any Disqualified Stock and the Issuer will not permit any of its Restricted Subsidiaries to issue any Disqualified Stock or preferred equity; provided, however, that the Issuer may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and the Issuer or any Restricted Subsidiary of the Issuer may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock or preferred equity, if the Fixed Charge Coverage Ratio for the Issuer’s most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or such preferred equity is issued, as the case may be, would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock or the preferred equity had been issued, as the case may be, at the beginning of such four-quarter period.

The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, “Permitted Debt”):


	(1) the incurrence by the Issuer, the Guarantors or any of the Issuer’s Restricted Subsidiaries of additional Indebtedness and letters of credit and bankers’ acceptances thereunder under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Issuer and any Guarantors and any Restricted Subsidiaries thereunder) not to exceed $895 million;

	(2) the incurrence by the Issuer and its Restricted Subsidiaries of Indebtedness to the extent outstanding on the date of the indenture;


	(3) the incurrence by the Issuer and the Guarantors (including any future Guarantor) of Indebtedness represented by the notes and the related Note Guarantees to be issued on the date of the indenture and the exchange notes and the related Note Guarantees to be issued pursuant to the registration rights agreement;

	(4) the incurrence by the Issuer or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings, industrial revenue bonds, purchase money obligations or other Indebtedness or preferred stock, or synthetic lease obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of design, development, construction, installation or improvement of property (real or personal and including Capital Stock), plant or equipment used in the business of the Issuer or any of its Restricted Subsidiaries (in each case, whether through the direct purchase of such assets or the Equity Interests of any Person owning such assets), in an aggregate principal amount not to exceed, immediately after giving effect to any such incurrence, the greater of (x) $70.0 million or (y) 5% of Total Assets;

	(5) the incurrence by the Issuer or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted by the indenture to be incurred under the first paragraph of this covenant or clause (2), (3), (4), (5), (12), (15) or (16) of this paragraph;

	(6) the incurrence by the Issuer or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Issuer and any of its Restricted Subsidiaries; provided, however, that:


	(a) if the Issuer or any Guarantor is the obligor on such Indebtedness and the payee is not the Issuer or a Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the notes, in the case of the Issuer, or the Note Guarantee, in the case of a Guarantor; and

	(b) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Issuer or a Restricted Subsidiary of the Issuer and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Issuer or a Restricted Subsidiary of the Issuer, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Issuer or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);


	(7) the issuance by any of the Issuer’s Restricted Subsidiaries to the Issuer or to another Restricted Subsidiary of shares of preferred equity or Disqualified Stock; provided, however, that:


	(a) any subsequent issuance or transfer of Equity Interests that results in any such preferred equity or Disqualified Stock being held by a Person other than the Issuer or a Restricted Subsidiary of the Issuer, and

	(b) any sale or other transfer of any such preferred equity or Disqualified Stock to a Person that is not either the Issuer or a Restricted Subsidiary of the Issuer,

will be deemed, in each case, to constitute an issuance of such preferred equity or Disqualified Stock by such Restricted Subsidiary that was not permitted by this clause (7);


	(8) the incurrence by the Issuer or any of its Restricted Subsidiaries of Hedging Obligations other than for speculative purposes;

	(9) the guarantee by any Restricted Subsidiary of the Issuer of Indebtedness of the Issuer or a Restricted Subsidiary of the Issuer that was permitted to be incurred by another provision of this covenant (including the first paragraph hereof); provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the notes, then the guarantee thereof shall be subordinated or pari passu, as applicable, to the same extent as the Indebtedness so guaranteed;


	(10) the incurrence by the Issuer or any of its Restricted Subsidiaries of Indebtedness in respect of workers’ compensation claims, payment obligations in connection with health or other types of social security benefits, unemployment or other insurance or self-insurance obligations, reclamation, statutory obligations, bankers’ acceptances, performance, surety or similar bonds and letters of credit or completion or performance guarantees or equipment leases (including, without limitation, performance guarantees and reimbursement obligations arising under or in accordance with the terms of the Purchase Agreement), or other similar obligations in the ordinary course of business or consistent with past practice;

	(11) the incurrence by the Issuer or any of its Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds;

	(12) Indebtedness, Disqualified Stock or preferred equity of Persons that are acquired by the Issuer or any of its Restricted Subsidiaries or merged into a Restricted Subsidiary in accordance with the terms of the indenture; provided, however, that such Indebtedness, Disqualified Stock or preferred equity is not incurred or issued in contemplation of such acquisition or merger or to provide all or a portion of the funds or credit support required to consummate such acquisition or merger; provided further, however, that for any such Indebtedness, Disqualified Stock or preferred equity outstanding under this clause (12) in excess of $10.0 million on the date such Person is acquired by the Issuer or a Restricted Subsidiary, after giving effect to such acquisition and the incurrence or issuance of such Indebtedness, Disqualified Stock or preferred equity either:


	(a) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence of this covenant; or

	(b) the Fixed Charge Coverage Ratio, on the date of and after giving pro forma effect to such acquisition and such incurrence or issuance, would not be reduced as a result of such acquisition;


	(13) Indebtedness incurred by a Receivables Subsidiary in a Qualified Receivables Financing that is Non-Recourse Debt to the Issuer or any Restricted Subsidiary of the Issuer other than such Receivables Subsidiary (except for Standard Securitization Undertakings);

	(14) the incurrence of Indebtedness arising from agreements of the Issuer or a Restricted Subsidiary providing for indemnification, adjustment of purchase price, earn outs, or similar obligations, in each case, incurred or assumed in connection with the disposition or acquisition of any business, assets or a Subsidiary in accordance with the terms of the indenture, other than guarantees of Indebtedness incurred or assumed by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition;

	(15) the incurrence by the Issuer or any of its Restricted Subsidiaries of additional Indebtedness or the issuance of Disqualified Stock or preferred equity in an aggregate principal amount (or accreted value, as applicable) or having an aggregate liquidation preference at any time outstanding not to exceed $85.0 million (it being understood that any Indebtedness, Disqualified Stock or preferred equity incurred pursuant to this clause (15) shall cease to be deemed incurred or outstanding for purposes of this covenant from and after the date on which the Issuer could have incurred such Indebtedness or Disqualified Stock or preferred equity under the first paragraph of this covenant without reliance upon this clause (15));

	(16) the incurrence by the Issuer or any of its Restricted Subsidiaries of additional Indebtedness arising out of advances on exports, advances on imports, advances on trade receivables, factoring of receivables, customer prepayments and similar transactions in the ordinary course of business and consistent with past practice;

	(17) the incurrence of additional Indebtedness by a Foreign Subsidiary in an aggregate principal amount which does not exceed the greater of (a) $50 million or (b) 3.5% of the Total Assets at any one time outstanding (which amount may, but need not, be incurred in whole or in part under a Credit Facility);


	(18) Indebtedness of the Issuer or any of its Restricted Subsidiaries in respect of the Management Notes; and

	(19) Contribution Indebtedness.

For purposes of determining compliance with this “Incurrence of Indebtedness and Issuance of Preferred Equity” covenant, in the event that an item of proposed Indebtedness, Disqualified Stock or preferred equity meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (19) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Issuer will be permitted to classify such item of Indebtedness, Disqualified Stock or preferred equity on the date of its incurrence and will only be required to include the amount and type of such Indebtedness, Disqualified Stock or preferred equity in one of the above clauses, although the Issuer may divide and classify an item of Indebtedness, Disqualified Stock or preferred equity in one or more of the types of Indebtedness, Disqualified Stock or preferred equity and may later reclassify all or a portion of such item of Indebtedness, Disqualified Stock or preferred equity, in any manner that complies with this covenant. The accrual of interest or dividends, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the reclassification of preferred equity as Indebtedness due to a change in accounting principles, and the payment of dividends on Disqualified Stock or preferred equity in the form of additional shares of the same class of Disqualified Stock or preferred equity will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock or preferred equity for purposes of this covenant; provided, in each such case (other than preferred stock that is not Disqualified Stock), that the amount of any such accrual, accretion or payment is included in Fixed Charges of the Issuer as accrued. Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Issuer or any Restricted Subsidiary may incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values.


	(1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;

	(2) the principal amount of the Indebtedness, in the case of any other Indebtedness; and

	(3) in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of:


	(a) the Fair Market Value of such assets at the date of determination; and

	(b) the amount of the Indebtedness of the other Person.

The Issuer will not, and will not permit any Guarantor to, incur any Indebtedness that is subordinated in right of payment to any Senior Indebtedness unless such Indebtedness is pari passu with, or subordinated in right of payment to, the notes or any Note Guarantee, as applicable; provided that the foregoing limitation shall not apply to distinctions between categories of Senior Indebtedness that exist by reason of any Liens or guarantees arising or created in respect of some but not all such Senior Indebtedness.

The Issuer will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind securing Indebtedness (other than Permitted Liens) which ranks pari passu with or is subordinated to the notes or the Note Guarantees upon any of their property or assets, now owned or hereafter acquired, unless all payments due under the indenture and the notes are secured on an equal and ratable basis with the obligations so secured (or, in the case of subordinated Indebtedness, contractually prior or senior thereto, with the same relative priority as the notes shall have with respect to such subordinated Indebtedness) until such time as such obligations are no longer secured by a Lien.

The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:


	(a) pay dividends or make any other distributions on its Capital Stock to the Issuer or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Issuer or any of its Restricted Subsidiaries;

	(b) make loans or advances to the Issuer or any of its Restricted Subsidiaries; or

	(c) sell, lease or transfer any of its properties or assets to the Issuer or any of its Restricted Subsidiaries.

However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:


	(1) agreements governing Indebtedness outstanding on the Issue Date, the Credit Agreement and Credit Facilities as in effect on the date of the indenture and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that such amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not, in the good faith judgment of the Issuer’s Board of Directors, materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of the indenture;

	(2) the indenture, the notes and the Note Guarantees;

	(3) applicable law, rule, regulation, order, approval, license, permit or similar restriction;

	(4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Issuer or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred or issued in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture to be incurred;

	(5) non-assignment provisions or subletting restrictions in contracts, leases and licenses entered into in the ordinary course of business;

	(6) purchase money obligations for property (including Capital Stock) acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature described in clause (c) of the preceding paragraph;

	(7) any agreement for the sale or other disposition of the Capital Stock or assets of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending closing of the sale or other disposition;

	(8) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not, in the good faith judgment of the Issuer’s Board of Directors, materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

	(9) Liens permitted to be incurred under the provisions of the covenant described above under the caption “— Liens” that limits the right of the debtor to dispose of the assets securing such Indebtedness;

	(10) provisions limiting the disposition or distribution of assets or property or transfer of Capital Stock in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements, limited liability company organizational documents, and other similar agreements entered into (a) in the ordinary course of business, consistent with past practice or (b) with the approval of the


	Issuer’s Board of Directors, which limitation is applicable only to the assets, property or Capital Stock that are the subject of such agreements;

	(11) any encumbrance or restriction of a Receivables Subsidiary effected in connection with a Qualified Receivables Financing; provided, however, that such restrictions apply only to such Receivables Subsidiary;

	(12) restrictions on cash, Cash Equivalents, Marketable Securities or other deposits or net worth imposed by customers or lessors under contracts or leases entered into in the ordinary course of business;

	(13) other Indebtedness of Restricted Subsidiaries (i) that are Guarantors that is incurred subsequent to the date of the indenture pursuant to the covenant described under “— Incurrence of Indebtedness and Issuance of Preferred Equity” or (ii) that is incurred subsequent to the date of the indenture pursuant to clauses (4) and (15) of the second paragraph of the covenant described under “— Incurrence of Indebtedness and Issuance of Preferred Equity”;

	(14) encumbrances on property that exist at the time the property was acquired by the Issuer or a Restricted Subsidiary;

	(15) contractual encumbrances or restrictions in effect on the Issue Date, and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not, in the good faith judgment of the Issuer’s Board of Directors, materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of the indenture; or

	(16) any encumbrances or restrictions imposed by any amendments or refinancings of the contracts, instruments or obligations referred to above in clauses (1) through (15); provided that such amendments or refinancings are not, in the good faith judgment of the Issuer’s Board of Directors, materially more restrictive, taken as a whole, than such encumbrances and restrictions prior to such amendment or refinancing.

The Issuer will not, directly or indirectly, consolidate or merge with or into another Person or sell, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets (determined on a consolidated basis for the Issuer and its Restricted Subsidiaries), in one or more related transactions to another Person, unless:


	(1) either (a) the Issuer is the surviving entity; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation, partnership or limited liability company organized or existing under the laws of the United States, any state of the United States or the District of Columbia;

	(2) the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Issuer under the notes, the indenture and the registration rights agreement, in each case pursuant to agreements reasonably satisfactory to the trustee;

	(3) immediately after such transaction, no Default or Event of Default exists; and

	(4) (a) the Issuer or the Person formed by or surviving any such consolidation or merger (if other than the Issuer), or to which such sale, assignment, transfer, conveyance or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and to any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “— Incurrence of Indebtedness and Issuance of Preferred Equity” or (b) the Fixed Charge Coverage Ratio for the


	successor entity and its Restricted Subsidiaries, on the date of and after giving pro forma effect to such acquisition and such incurrence or issuance, would not be less than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such transaction.

In addition, the Issuer may not, directly or indirectly, lease all or substantially all of the properties and assets (determined on a consolidated basis for the Issuer and its Restricted Subsidiaries) in one or more related transactions, to any other Person.


	(1) a merger of the Issuer with an Affiliate solely for the purpose of reincorporating the Issuer in another jurisdiction; or

	(2) any consolidation or merger, or any sale, assignment, transfer, conveyance, lease or other disposition of assets between or among the Issuer and any of its Restricted Subsidiaries.

The Issuer will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Issuer (each, an “Affiliate Transaction”), involving aggregate consideration in excess of $1.0 million, unless:


	(1) the Affiliate Transaction is on terms that are not materially less favorable to the Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person; and

	(2) the Issuer delivers to the trustee:


	(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, a resolution of the Board of Directors of the Issuer certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members, if any, of the Board of Directors of the Issuer; and

	(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $25.0 million, an opinion as to the fairness to the Issuer or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.

The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:


	(1) any employment agreement, employee benefit plan, officer or director indemnification agreement or any similar arrangement entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business or consistent with past practice and payments pursuant thereto;

	(2) transactions (including a merger) between or among the Issuer and/or any of its Restricted Subsidiaries;

	(3) transactions with a Person (other than an Unrestricted Subsidiary of the Issuer) that is an Affiliate of the Issuer solely because the Issuer owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person;

	(4) payment of reasonable fees to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Issuer or any of its Restricted Subsidiaries or any Parent;


	(5) any issuance of Equity Interests (other than Disqualified Stock) of the Issuer to Affiliates of the Issuer or to any director, officer, employee or consultant of the Issuer or any Parent, and the granting and performance of registration rights;

	(6) Restricted Payments and Investments that do not violate the provisions of the indenture described above under the caption “— Restricted Payments”;

	(7) the entering into any agreement to pay, and the payment of, customary annual management, consulting, monitoring and advisory fees to the Equity Investors in an amount not to exceed in any four quarter period the greater of (x) $5.0 million and (y) 2% of Consolidated Cash Flow of the Issuer and its Restricted Subsidiaries for such period;

	(8) loans or advances to employees or consultants in the ordinary course of business or consistent with past practice not to exceed $2.5 million in the aggregate at any one time outstanding;

	(9) any transaction effected as part of a Qualified Receivables Financing;

	(10) any transaction in which the Issuer or any of its Restricted Subsidiaries, as the case may be, delivers to the trustee a letter from an accounting, appraisal or investment banking firm of national standing stating that such transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view or that such transaction meets the requirements of clause (1) of the preceding paragraph;

	(11) the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of its obligations under the terms of, any acquisition agreements or members’ or stockholders agreement or related documents to which it is a party as of the date of the indenture and any amendment thereto or similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of its obligations under, any future amendment to any such existing agreement or under any similar agreement entered into after the date of the indenture shall only be permitted by this clause (11) to the extent that the terms of any such existing agreement, together with all amendments thereto, taken as a whole, or such new agreement are not, in the good faith judgment of the Issuer’s Board of Directors, otherwise more disadvantageous to the Holders taken as a whole than the original agreement as in effect on the date of the indenture;

	(12) transactions with Unrestricted Subsidiaries, customers, clients, suppliers, joint venture partners or purchasers or sellers of goods or services, or lessors or lessees of property, in each case in the ordinary course of business and otherwise in compliance with the terms of the indenture which are, in the aggregate (taking into account all the costs and benefits associated with such transactions), materially no less favorable to the Issuer or its Restricted Subsidiaries than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person, in the good faith judgment of the Issuer’s Board of Directors or senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party;

	(13) (x) guarantees of performance by the Issuer and its Restricted Subsidiaries of Unrestricted Subsidiaries of the Issuer in the ordinary course of business, except for guarantees of Indebtedness in respect of borrowed money, and (y) pledges of Equity Interests of Unrestricted Subsidiaries of the Issuer for the benefit of lenders of Unrestricted Subsidiaries of the Issuer;

	(14) if such Affiliate Transaction is with a Person in its capacity as a holder of Indebtedness or Capital Stock of the Issuer or any Restricted Subsidiary where such Person is treated no more favorably than the holders of Indebtedness or Capital Stock of the Issuer or any Restricted Subsidiary;

	(15) transactions effected pursuant to agreements in effect on the Issue Date and any amendment, modification or replacement of such agreement (so long as such amendment or replacement is not in the good faith judgment of the Issuer’s Board of Directors materially more disadvantageous to the Holders of the notes, taken as a whole than the original agreement as in effect on the Issue Date);


	(16) payments to the Equity Investors made for any financial advisory, financing or other investment banking activities, including without limitation, in connection with acquisitions or divestitures, which payments are approved by a majority of the Issuer’s Board of Directors;

	(17) any restructuring or similar transactions contemplated to be effected pursuant to the terms of the Holdings LLC Agreement or the Dresser-Rand Holdings, LLC Agreement; and

	(18) the issuance of Management Notes.

The Issuer will not, and will not permit any of its Restricted Subsidiaries to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Issuer and its Restricted Subsidiaries taken as a whole.

If the Issuer or any of its Restricted Subsidiaries acquires or creates another wholly-owned Domestic Subsidiary on or after the date of the indenture, then that newly acquired or created Domestic Subsidiary, if such Subsidiary guarantees any Indebtedness of the Issuer (unless such Subsidiary is a Receivables Subsidiary), must become a Guarantor (which Note Guarantee shall be senior to or pari passu with such Restricted Subsidiary’s guarantee of such other Indebtedness unless such other Indebtedness is Senior Indebtedness, in which case the Note Guarantee may be subordinated to the guarantee of such Senior Indebtedness to the same extent as the notes are subordinated to such Senior Indebtedness) and execute a supplemental indenture and deliver an opinion of counsel satisfactory to the trustee within 30 days of the date on which it was acquired or created; provided that any Domestic Subsidiary that constitutes an Immaterial Subsidiary need not become a Guarantor until such time as it (i) ceases to be an Immaterial Subsidiary or (ii) guarantees the Credit Agreement.

The Board of Directors of the Issuer may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Issuer and its Restricted Subsidiaries in the Subsidiary designated as Unrestricted shall be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the covenant described above under the caption “— Restricted Payments” or under one or more clauses of such definition of Permitted Investments, as determined by the Issuer. That designation will only be permitted if such Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors of the Issuer may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if that redesignation would not cause a Default.

Any designation of a Subsidiary of the Issuer as an Unrestricted Subsidiary will be evidenced to the trustee by filing with the trustee a certified copy of a resolution of the Board of Directors of the Issuer giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the preceding conditions and was permitted by the covenant described above under the caption “— Restricted Payments.” If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Issuer as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption “— Incurrence of Indebtedness and Issuance of Preferred Equity,” the Issuer will be in default of such covenant. The Board of Directors of the Issuer may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Issuer; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Issuer of any outstanding Indebtedness of such Unrestricted Subsidiary, and such designation will only be permitted if (1) (x) the

The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the indenture or the notes unless such consideration is offered to be paid and is paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Whether or not required by the rules and regulations of the SEC, so long as any notes are outstanding, the Issuer will provide to the Trustee, if not filed electronically with the SEC, all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Issuer were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that describes the financial condition and results of operations of the Issuer and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Issuer and its consolidated Subsidiaries) and, with respect to the annual information only, a report thereon by the Issuer’s certified independent accountants.

In addition, following the consummation of the exchange offer contemplated by the registration rights agreement, whether or not required by the rules and regulations of the SEC, the Issuer will file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC’s rules and regulations (unless the SEC will not accept such a filing).

In addition, the Issuer and the Guarantors agree that, for so long as any notes remain outstanding, if at any time they are not required to file with the SEC the reports required by the preceding paragraphs, they will furnish to the Holders and to prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.


	(1) default for 30 days in the payment when due of interest on, or Additional Interest, if any, with respect to, the notes, whether or not such payment is prohibited by the provisions described above under “— Ranking”;

	(2) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the notes, whether or not such payment is prohibited by the provisions described above under “— Ranking”;

	(3) failure by the Issuer or any of its Restricted Subsidiaries to comply with the provisions described under the captions “— Repurchase at the Option of Holders — Change of Control” or “— Certain Covenants — Merger, Consolidation or Sale of Assets”;

	(4) failure by the Issuer or any of its Restricted Subsidiaries for 60 days after notice to the Issuer by the trustee or the Holders of at least 25% in aggregate principal amount of the notes then outstanding voting as a single class to comply with any of the other agreements in the indenture;

(5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuer or any of its Significant Subsidiaries or group of Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary (or the payment of which is guaranteed by the Issuer or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of the indenture (but excluding Indebtedness owing to the Issuer or a Restricted Subsidiary), if that default:


	(a) is caused by a failure to pay principal on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness upon the Stated Maturity of such Indebtedness (a “Payment Default”); or

	(b) results in the acceleration of such Indebtedness prior to its Stated Maturity,

and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $25.0 million or more;


	(6) failure by the Issuer or any of its Significant Subsidiaries, or group of Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary, to pay final and nonappealable judgments entered by a court or courts of competent jurisdiction aggregating in excess of $25.0 million (net of any amounts which are covered by insurance or bonded), which judgments are not paid, waived, satisfied, discharged or stayed for a period of 60 days;

	(7) except as permitted by the indenture, any Note Guarantee of any Significant Subsidiary or group of Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect (other than in accordance with the terms of such Note Guarantee and the indenture), or any Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee and such Default continues for 10 days; and

	(8) certain events of bankruptcy or insolvency described in the indenture with respect to the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary.

In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Issuer, any Restricted Subsidiary of the Issuer that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Issuer that, taken together, would constitute a Significant Subsidiary, all outstanding notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding notes may declare all the notes to be due and payable immediately; provided that any such declaration of acceleration shall not become effective until the earlier of (x) five Business Days after receipt of the acceleration notice by the Bank Agent and the Issuer or (y) acceleration of the Indebtedness under the Credit Agreement; provided further that such acceleration shall be automatically rescinded and annulled without any further action required on the part of the trustee or the Holders in the event that any and all Events of Default specified in the acceleration notice under the indenture shall have been cured, waived or otherwise remedied as provided in the indenture prior to the expiration of the period referred to in the preceding clauses (x) and (y).

Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding notes may direct the trustee in its exercise of any trust or power. The trustee may withhold from Holders notice of any continuing Default or Event of Default if it determines that withholding notice is in their interest, except a Default or Event of Default relating to the payment of principal, interest or premium or Additional Interest, if any.

In the event of any Event of Default specified in clause (5) of the first paragraph above, such Event of Default and all consequences thereof (excluding, however, any resulting payment default) will be annulled, waived and rescinded, automatically and without any action by the trustee or the Holders, if within 20 days

Subject to the provisions of the indenture relating to the duties of the trustee, in case an Event of Default occurs and is continuing, the trustee will be under no obligation to exercise any of the rights or powers under the indenture at the request or direction of any Holders unless such Holders have offered to the trustee indemnity or security satisfactory to the trustee against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest or Additional Interest, if any, when due, no Holder may pursue any remedy with respect to the indenture or the notes unless:


	(1) such Holder has previously given the trustee notice that an Event of Default is continuing;

	(2) Holders of at least 25% in aggregate principal amount of the then outstanding notes have requested the trustee to pursue the remedy;

	(3) such Holders have offered the trustee security or indemnity satisfactory to the trustee against any loss, liability or expense;

	(4) the trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity; and

	(5) Holders of a majority in aggregate principal amount of the then outstanding notes have not given the trustee a direction inconsistent with such request within such 60-day period.

The Holders of a majority in aggregate principal amount of the then outstanding notes by notice to the trustee may, on behalf of the Holders of all of the notes, rescind an acceleration or waive any existing Default or Event of Default and its consequences under the indenture except a continuing Default or Event of Default in the payment of interest or premium or Additional Interest, if any, on, or the principal of, the notes.

The Issuer is required to deliver to the trustee annually a statement regarding compliance with the indenture. Upon becoming aware of any Default or Event of Default that has not been cured, the Issuer is required to deliver to the trustee a statement specifying such Default or Event of Default.

No Personal Liability of Directors, Officers, Employees, Stockholders and Members

No director, manager, officer, employee, incorporator, stockholder or member of the Issuer, any Parent or any Subsidiary, as such, will have any liability for any obligations of the Issuer or the Guarantors under the notes, the indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. The waiver may not be effective to waive liabilities under the federal securities laws.

The Issuer may at any time, at the option of its Board of Directors evidenced by a resolution set forth in an Officers’ Certificate, elect to have all of its obligations discharged with respect to the outstanding notes and all obligations of the Guarantors discharged with respect to their Note Guarantees (“Legal Defeasance”) except for:


	(1) the rights of Holders of outstanding notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on, such notes when such payments are due from the trust referred to below;


	(2) the Issuer’s obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust;

	(3) the rights, powers, trusts, duties and immunities of the trustee, and the Issuer’s and the Guarantors’ obligations in connection therewith; and

	(4) the Legal Defeasance provisions of the indenture.

In addition, the Issuer may, at its option and at any time, elect to have the obligations of the Issuer and the Guarantors released with respect to certain covenants (including the obligation to make Change of Control Offers and Asset Sale Offers, its obligations under the covenants described in “— Certain Covenants,” and the cross-acceleration provision and judgment default provisions described under “— Events of Default and Remedies”) that are described in the indenture (“Covenant Defeasance”) and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the notes.

In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under “— Events of Default and Remedies” will no longer constitute an Event of Default with respect to the notes.


	(1) the Issuer must irrevocably deposit with the trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, or interest and premium and Additional Interest, if any, on, the outstanding notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Issuer must specify whether the notes are being defeased to such stated date for payment or to a particular redemption date;

	(2) in the case of Legal Defeasance, the Issuer must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee (subject to customary exceptions and exclusions) confirming that (a) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

	(3) in the case of Covenant Defeasance, the Issuer must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee (subject to customary exceptions and exclusions) confirming that the Holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

	(4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from, or arising in connection with, the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing);

	(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than the indenture) to which the Issuer or any of its Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is bound, including the Credit Agreement;

	(6) the Issuer is not prohibited from making payments in respect of the notes by the provisions described under “— Ranking”;


	(7) the Issuer must deliver to the trustee an Officers’ Certificate stating that the deposit was not made by the Issuer with the intent of preferring the Holders over the other creditors of the Issuer with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuer or others; and

	(8) the Issuer must deliver to the trustee an Officers’ Certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Except as provided in the next two succeeding paragraphs, the indenture, the notes or the Note Guarantee may be amended or supplemented with the consent of the Issuer and Holders of at least a majority in aggregate principal amount of the notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes), and any existing Default or Event of Default or compliance with any provision of the indenture, the notes or the Note Guarantee may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes).

Without the consent of the Issuer and each Holder affected, an amendment, supplement or waiver may not (with respect to any notes held by a non-consenting Holder):


	(1) reduce the principal amount of notes whose Holders must consent to an amendment, supplement or waiver;

	(2) reduce the principal of or change the fixed maturity of any note or alter the provisions with respect to the redemption of the notes (other than payment provisions relating to the covenants described above under the caption “— Repurchase at the Option of Holders”);

	(3) reduce the rate of or change the time for payment of interest, including default interest, on any note;

	(4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Additional Interest, if any, on, the notes (except a rescission of acceleration of the notes by the Holders of at least a majority in aggregate principal amount of the then outstanding notes and a waiver of the payment default that resulted from such acceleration);

	(5) make any note payable in money other than that stated in the notes;

	(6) make any change in the provisions of the indenture relating to waivers of past Defaults or impair the rights of Holders to receive payments of principal of, or interest or premium or Additional Interest, if any, on, the notes;

	(7) waive a redemption payment with respect to any note (other than a payment required by one of the covenants described above under the caption “— Repurchase at the Option of Holders”);

	(8) release any Guarantor that is a Significant Subsidiary from any of its obligations under its Note Guarantee or the indenture, except in accordance with the terms of the indenture;

	(9) impair the right to institute suit for the enforcement of any payment on or with respect to the notes or any Note Guarantees;

	(10) modify the subordination provisions of the indenture in any manner adverse to the Holders; or

	(11) make any change in the preceding amendment and waiver provisions.

Notwithstanding the preceding, without the consent of any Holder, the Issuer, the Guarantors and the trustee may amend or supplement the indenture, the notes or the Note Guarantees:


	(1) to cure any ambiguity, defect or inconsistency;

	(2) to provide for uncertificated notes in addition to or in place of certificated notes;

	(3) to provide for the assumption of the Issuer’s or a Guarantor’s obligations to Holders of notes and Note Guarantees in the case of a merger or consolidation or sale of all or substantially all of the Issuer’s or such Guarantor’s assets, as applicable;

	(4) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the indenture of any such Holder;

	(5) to comply with requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act;

	(6) to conform the text of the indenture, the Note Guarantees or the notes to any provision of this Description of the Notes to the extent that such provision in this Description of the Notes was intended to be a verbatim recitation of a provision of the indenture, the Note Guarantees or the notes;

	(7) to provide for the issuance of additional notes in accordance with the limitations set forth in the indenture; or

	(8) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the notes and to release Guarantors from the Note Guarantee in accordance with the terms of the indenture as of the date of the indenture;

	(9) to comply with the rules of any applicable securities depositary; or

	(10) to provide for a successor trustee in accordance with the terms of the indenture or to otherwise comply with any requirement of the indenture.

The consent of the Holders is not necessary under the indenture to approve the particular form of any proposed amendment, waiver or consent. It is sufficient if such consent approves the substance of the proposed amendment, waiver or consent.

The indenture will be discharged and will cease to be of further effect as to all notes issued thereunder, when:


	(a) all notes that have been authenticated and, except lost, stolen or destroyed notes that have been replaced or paid and notes for whose payment money has been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer, have been delivered to the trustee for cancellation; or

	(b) all notes that have not been delivered to the trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Issuer or any Guarantor has irrevocably deposited or caused to be deposited with the trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non- callable Government Securities, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness (including all principal, interest, and Additional Interest) on the notes not delivered to the trustee for cancellation;


	(2) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of,


	or constitute a default under, any other instrument to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound;

	(3) the Issuer or any Guarantor has paid or caused to be paid all other sums payable by it under the indenture; and

	(4) the Issuer has delivered irrevocable instructions to the trustee under the indenture to apply the deposited money toward the payment of the notes at maturity or on the redemption date, as the case may be.

In addition, the Issuer must deliver an Officers’ Certificate to the trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

If the trustee becomes a creditor of the Issuer or any Guarantor, the indenture limits the right of the trustee to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must (i) eliminate such conflict within 90 days, (ii) apply to the SEC for permission to continue as trustee (if the indenture has been qualified under the Trust Indenture Act) or (iii) resign. The Holders of a majority in aggregate principal amount of the then outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee, subject to certain exceptions. The indenture provides that in case an Event of Default occurs and is continuing, the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any Holder, unless such Holder has offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense.

Anyone who receives this prospectus may obtain a copy of the indenture without charge by contacting the Issuer in the manner described in this prospectus under the caption “Where You Can Find More Information.”

Except as set forth below, the exchange notes will be issued in registered, global form in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. Exchange notes will be issued at the closing of the exchange offer only against surrender of outstanding notes.

The exchange notes initially will be represented by one or more Notes in registered, global form without interest coupons (collectively, the “Global Notes”). On the date of the closing of the exchange offer, the Global Notes will be deposited with the trustee as custodian for The Depository Trust Company (“DTC”), in New York, New York, and registered in the name of DTC or its nominee, in each case for credit to an account of a direct or indirect participant in DTC as described below.

Unless definitive exchange notes are issued, the Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may be exchanged for Notes in certificated form. See “— Exchange of Global Notes for Certificated Notes.”

Ownership of interests in the Global Notes (“Book-Entry Interests”) will be limited to persons that have accounts with DTC, or persons that hold interests through such Participants (as defined below). Except under the limited circumstances described below, beneficial owners of Book-Entry Interests will not be entitled to physical delivery of exchange notes in definitive form.

Book-Entry Interests will be shown on, and transfers thereof will be effected only through, records maintained in book-entry form by DTC or DTC’s nominees and Participants. In addition while the exchange

The following description of the operations and procedures of DTC is provided solely as a matter of convenience. These operations and procedures are solely within the control of DTC and are subject to change. The Issuer takes no responsibility for these operations and procedures and urges investors to contact DTC or its participants directly to discuss these matters.

DTC has advised the Issuer that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the “Participants”) and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the placement agents), banks, trust companies, clearing corporations and certain other organizations. Access to DTC’s system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the “Indirect Participants”). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants.


	(1) upon deposit of the Global Notes, DTC will credit the accounts of Participants pursuant to the corresponding letters of transmittal with portions of the principal amount of the Global Notes; and

	(2) ownership of these interests in the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interests in the Global Notes).

The Issuer understands that under existing industry practice, in the event that it requests any action of holders of exchange notes, or an owner of a beneficial interest in the Global Notes desires to take any action that DTC, as the holder of such Global Notes is entitled to take, DTC would authorize the Participants to take the action and the Participants would authorize beneficial owners owning through the Participants to take the action or would otherwise act upon the instruction of the beneficial owners. Neither the Issuer nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of notes by DTC, or for maintaining, supervising or reviewing any records of DTC relating to the notes.

All interests in a Global Note may be subject to the procedures and requirements of DTC. The laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such Persons will be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge such interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests.

Except as described below, owners of interest in the Global Notes will not have notes registered in their names, will not receive physical delivery of notes in certificated form and will not be considered the registered owners or “Holders” thereof under the indenture for any purpose.

Payments in respect of the principal of, and interest and premium and Additional Interest, if any, on a Global Note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered Holder under the indenture. Under the terms of the indenture, the Issuer, the paying agent and the trustee will treat the Persons in whose names the notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving payments and for all other purposes. Consequently, none of the Issuer, the trustee, the paying agent nor any agent of the Issuer, the trustee or the paying agent has or will have any responsibility or liability for:


	(1) any aspect of DTC’s records or any Participant’s or Indirect Participant’s records relating to or payments made on account of beneficial ownership interest in the Global Notes or for maintaining, supervising or reviewing any of DTC’s records or any Participant’s or Indirect Participant’s records relating to the beneficial ownership interests in the Global Notes: or

	(2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants.

DTC has advised the Issuer that its current practice, upon receipt of any payment in respect of securities such as the notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the trustee, the paying agent or the Issuer. The Issuer, the trustee and the paying agent will not be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the notes, and the Issuer, the paying agent and the trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes.

Transfers between Participants in DTC will be effected in accordance with DTC’s procedures, and will be settled in same-day funds.

DTC has advised the Issuer that it will take any action permitted to be taken by a Holder only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the notes, DTC reserves the right to exchange the Global Notes for legended notes in certificated form, and to distribute such Notes to its Participants.

Although DTC has agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among participants in DTC, DTC is under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. None of the Issuer, the paying agent, the trustee or their respective agents will have any responsibility for the performance by DTC or its Participants or Indirect Participants of their respective obligations under the rules and procedures governing DTC’s operations.

A Global Note is exchangeable for definitive notes in registered certificated form (“Certificated Notes”) if:


	(1) DTC (a) notifies the Issuer that it is unwilling or unable to continue as depositary for the Global Notes or (b) has ceased to be a clearing agency registered under the Exchange Act, and in each case the Issuer fails to appoint a successor depositary;


	(2) the Issuer, at its option, notifies the trustee in writing that it elects to cause the issuance of the Certificated Notes; or

	(3) there shall have occurred and be continuing a Default or Event of Default with respect to the notes.

In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the trustee by or on behalf of DTC in accordance with the indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures.)

Certificated Notes may not be exchanged for beneficial interests in any Global Note unless the transferor first delivers to the trustee a written certificate (in the form provided in the indenture) to the effect that such transfer will comply with the appropriate transfer restrictions applicable to such notes.

In the event the Global Notes, or any portion thereof, is redeemed, DTC will redeem an equal amount of the Book-Entry Interests in such Global Notes from the amount received by it in respect of the redemption of such Global Notes. The redemption price payable in connection with the redemption of such Book-Entry Interests will be equal to the amount received by DTC in connection with the redemption of such Global Notes or any portion thereof. The Issuer understands that, under existing practices of DTC, if fewer than all of the Notes are to be redeemed at any time, DTC will credit its Participants’ accounts on a proportionate basis, with adjustments to prevent fractions, or by lot or on such other basis as DTC deems fair and appropriate; provided, however, that no Book-Entry Interest of $1,000 principal amount or less may be redeemed in part.

The Issuer will make payments in respect of the exchange notes represented by the Global Notes (including principal, premium, if any, interest and Additional Interest, if any) by wire transfer of immediately available funds to the accounts specified by DTC or its nominee. The Issuer will make all payments of principal, interest and premium, if any, and Additional Interest, if any, with respect to Certificated Notes by wire transfer of immediately available funds to the accounts specified by the Holders of the Certificated Notes or, if no such account is specified, by mailing a check to each such Holder’s registered address. The exchange notes represented by the Global Notes are expected to be eligible to trade in DTC’s Same-Day Funds Settlement System, and any permitted secondary market trading activity in such notes will, therefore, be required by DTC to be settled in immediately available funds. The Issuer expects that secondary trading in any Certificated Notes will also be settled in immediately available funds.

Set forth below are certain defined terms used in the indenture. Reference is made to the indenture for a full disclosure of all defined terms used therein, as well as any other capitalized terms used herein for which no definition is provided.


	(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and

	(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Additional Interest” means all Additional Interest then owing pursuant to the registration rights agreement.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.

“Applicable Premium” means, with respect to any note on any redemption date, the greater of:


	(a) the present value at such redemption date of (i) the redemption price of the note at November 1, 2009 (such redemption price being set forth in the table appearing above under the caption “— Optional Redemption”), plus (ii) all required interest payments due on the note through November 1, 2009 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over

	(b) the principal amount of the note.


	(1) an Investment by the Issuer or any Restricted Subsidiary of the Issuer in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Issuer or any Restricted Subsidiary of the Issuer, or shall be merged with or into or consolidated with the Issuer or any Restricted Subsidiary of the Issuer; or

	(2) the acquisition by the Issuer or any Restricted Subsidiary of the Issuer of the assets of any Person (other than a Restricted Subsidiary of the Issuer) which constitute all or substantially all of the assets of such Person or comprise any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business.


	(1) the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Issuer and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the indenture described above under the caption “— Repurchase at the Option of Holders — Change of Control” and/or the provisions described above under the caption “— Certain Covenants — Merger, Consolidation or Sale of Assets” and not by the provisions described above under the caption “— Repurchase at the Option of Holders — Asset Sales”; and

	(2) the issuance or sale of Equity Interests in any of the Issuer’s Restricted Subsidiaries.

Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale:


	(1) any single transaction or series of related transactions that involves assets or Equity Interests of any Restricted Subsidiary having a Fair Market Value of less than $5.0 million;

	(2) a transfer of assets between or among the Issuer and any of its Restricted Subsidiaries;

	(3) an issuance or sale of Equity Interests by a Restricted Subsidiary of the Issuer to the Issuer or to another Restricted Subsidiary of the Issuer;

	(4) the sale or lease of inventory, products or services or the lease, assignment or sub-lease of any real or personal property in the ordinary course of business;


	(5) the sale or discounting of accounts receivable in the ordinary course of business;

	(6) any sale or other disposition of damaged, worn-out, obsolete or no longer useful assets or properties in the ordinary course of business;

	(7) any sale of assets received by the Issuer or any of its Restricted Subsidiaries upon the foreclosure on a Lien;

	(8) the sale or other disposition of cash, Cash Equivalents or Marketable Securities;

	(9) a sale of accounts receivable and related assets of the type specified in the definition of “Receivables Financing” to a Receivables Subsidiary in a Qualified Receivables Financing;

	(10) a transfer of accounts receivable and related assets of the type specified in the definition of “Receivables Financing” (or a fractional undivided interest therein) by a Receivables Subsidiary in a Qualified Receivables Financing;

	(11) a Restricted Payment that does not violate the covenant described above under the caption “— Certain Covenants — Restricted Payments” or any Permitted Investment;

	(12) any sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary;

	(13) the granting of Liens not otherwise prohibited by the indenture;

	(14) the surrender, or waiver of contract rights or settlement, release or surrender of contract, tort or other claims; and

	(15) any exchange of assets related to a Permitted Business of comparable market value, as determined in good faith by the Issuer.

“Bank Agent” means the agent for the lenders under the Credit Agreement or its successors as agent for the lenders under the Credit Agreement.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.


	(1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;

	(2) with respect to a partnership, the Board of Directors or other governing body of the general partner of the partnership;

	(3) with respect to a limited liability company, the Board of Directors or other governing body, and in the absence of same, the manager or board of managers or the managing member or members or any controlling committee thereof; and

	(4) with respect to any other Person, the board or committee of such Person serving a similar function.

“Business Day” means a day other than a Saturday, Sunday or other day on which banking institutions are authorized or required by law to close in New York State.

“Capital Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet (excluding the footnotes thereto) prepared in accordance with GAAP.


	(1) in the case of a corporation, corporate stock;

	(2) in the case of an association or business entity that is not a corporation, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

	(3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and

	(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

“Cash Contributions” means the aggregate amount of cash contributions made to the capital of the Issuer or any Guarantor described in the definition of “Contribution Indebtedness.”


	(1) United States dollars or, in the case of any Foreign Subsidiary, such local currencies held by it from time to time in the ordinary course of business;

	(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than one year from the date of acquisition;

	(3) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a rating at the time of acquisition thereof of P-1 or better from Moody’s or A-1 or better from S&P;

	(4) repurchase obligations for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

	(5) commercial paper having one of the two highest ratings obtainable from Moody’s or S&P and, in each case, maturing within one year after the date of acquisition;

	(6) securities issued or fully guaranteed by any state or commonwealth of the United States, or by any political subdivision or taxing authority thereof having one of the two highest ratings obtainable from Moody’s or S&P, and, in each case, maturing within one year after the date of acquisition;

	(7) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition;

	(8) Indebtedness or Preferred Stock issued by Persons with a rating of “A” or higher from S&P or “A-2” from Moody’s; and

	(9) in the case of any Foreign Subsidiary, investments denominated in the currency of the jurisdiction in which that Foreign Subsidiary is organized or has its principal place of business, which are similar to and have similar ratings from similar rating agencies to the items specified in clauses (2), (3), (4), (6), (7) and (8).


	(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Issuer and its Restricted Subsidiaries, in each case, taken as a whole, to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) other than the Permitted Holders;

	(2) the adoption of a plan relating to the liquidation or dissolution of the Issuer;

	(3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Permitted Holders, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the voting power of the Voting Stock of the Issuer; or

	(4) the first day on which a majority of the members of the Board of Directors of Holdings or the Issuer are not Continuing Directors.

“Change of Control Offer” has the meaning assigned to that term in the indenture.

“Change of Control Payment” has the meaning assigned to that term in the indenture.

“Change of Control Payment Date” has the meaning assigned to that term in the indenture.

“Consolidated Cash Flow” means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period (A) plus, without duplication to the extent the same was excluded in calculating Consolidated Net Income:


	(1) provision for taxes based on income profits or capital of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus

	(2) the Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income; plus

	(3) depreciation, amortization (including amortization of intangibles, deferred financing fees and any amortization expense included in pension, OPEB or other employee benefit expense) and other non-cash expenses (including without limitation write-downs and impairment of property, plant, equipment and intangibles and other long-lived assets and the impact of purchase accounting on such Person and its Restricted Subsidiaries for such period) to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus

	(4) the amount of any restructuring charges (which, for the avoidance of doubt, shall include retention, severance, systems establishment cost or excess pension, other post employment benefits, curtailment or other excess charges); plus

	(5) the minority interest expense consisting of subsidiary income attributable to minority equity interests of third parties in any non-wholly-owned subsidiary in such period or any prior period, except to the extent of dividends declared or paid on Equity Interests held by third parties; plus

	(6) the amount of management, consulting, monitoring and advisory fees and related expenses paid to the Permitted Holders (or any accruals related to such fees and related expenses) during such period; provided that such amount shall not exceed in any four quarter period the greater of (x) $5.0 million and (y) 2% of Consolidated Cash Flow of the Issuer and its Restricted Subsidiaries for each period; plus

	(7) equity earnings losses in affiliates; plus

	(8) other non-operating expenses; plus


	(9) accretion of asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations, and any similar accounting in prior periods; minus

(B)(1) non-cash items increasing such Consolidated Net Income for such period, other than any items which represent the reversal in such period of any accrual of, or cash reserve for, anticipated charges in any prior period where such accrual or reserve is no longer required and (2) an amount representing non-cash income from the reversal of the Equistar legal reserve of $4.5 million in the first quarter of 2004; and (3) an additional amount not to exceed $3.6 million in the fourth quarter of 2003,

“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:


	(1) any net after-tax extraordinary, unusual or nonrecurring gains or losses (less all fees and expenses relating thereto) or income or expense or charge (including, with limitation, income and expenses from the New York state grant, SFAS 106 expense, pension expense, excess corporate and tax department allocations from Ingersoll-Rand, casualty losses, severance expenses, relocation expenses, other restructuring expenses, special provisions to increase the OSMI reserve, and losses on contracts in Nigeria), including, without limitation, any severance expense, and fees, expenses or charges related to any offering of Equity Interests of such Person, any Investment, acquisition or Indebtedness permitted to be incurred hereunder (in each case, whether or not successful), including all fees, expenses, charges and change in control payments related to the Transactions, in each case shall be excluded;

	(2) any net after-tax income or loss from discontinued operations and any net after-tax gain or loss on disposal of discontinued operations shall be excluded;

	(3) any net after-tax gains or losses (less all fees and expenses or charges relating thereto) attributable to business dispositions or asset dispositions other than in the ordinary course of business (as determined in good faith by the Board of Directors of the Issuer) shall be excluded;

	(4) any net after-tax income or loss (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of indebtedness and Hedging Obligations shall be excluded;

	(5) (A) the Net Income for such period of any Person that is not a Restricted Subsidiary, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions or other payments in respect of equity that are actually paid in cash (or to the extent converted into cash) by the referent Person to the Issuer or a Restricted Subsidiary thereof in respect of such period and (B) the Net Income for such period shall include any dividend, distribution or other payments in respect of equity paid in cash by such Person to the Issuer or a Restricted Subsidiary thereof in excess of the amount included in clause (A);

	(6) any non-cash charges from the application of the purchase method of accounting in connection with the Transactions or any future acquisition, to the extent that any such charges are deducted in computing such Consolidated Net Income, shall be excluded;

	(7) accruals and reserves that are established within twelve months after the acquisition’s Closing Date (as defined in Purchase Agreement) and that are so required to be established in accordance with GAAP shall be excluded;

	(8) any non-cash impairment charges resulting from the application of Statements of Financial Accounting Standards No. 142 and No. 144 and the amortization of intangibles pursuant to Statement of Financial Accounting Standards No. 141 shall be excluded;

	(9) any long-term incentive plan accruals and any non-cash compensation expense realized from grants of stock appreciation or similar rights, stock options or other rights to officers, directors and employees of such Person or any of its Restricted Subsidiaries shall be excluded;


	(10) solely for the purpose of determining the amount available for Restricted Payments under clause (3)(a) of the first paragraph of “— Certain Covenants — Restricted Payments,” the Net Income of any Restricted Subsidiary that is not a Guarantor will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders or members, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that Consolidated Net Income of such Person shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) by such Person to the Issuer or another Restricted Subsidiary thereof in respect of such period, to the extent not already included therein; and

	(11) the cumulative effect of a change in accounting principles will be excluded.

“Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (“primary obligations”) of any other Person in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent:


	(1) to purchase any such primary obligation or any property constituting direct or indirect security thereof;

	(2) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or

	(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such obligation against loss in respect thereof.

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of the Issuer or any Parent, as the case may be, who:


	(1) was a member of such Board of Directors on the date of the indenture, or

	(2) was nominated for election or elected to such Board of Directors by one or more of the Equity Investors or with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

“Contribution Indebtedness” means Indebtedness of the Issuer or any Guarantor in an aggregate principal amount not greater than twice the aggregate amount of cash contributions (other than Excluded Contributions) made to the equity capital of the Issuer or such Guarantor after the date of the indenture, provided that:


	(1) if the aggregate principal amount of such Contribution Indebtedness is greater than one times such cash contributions to the equity capital of the Issuer or such Guarantor, as applicable, the amount in excess shall be Indebtedness (other than secured Indebtedness) with a Stated Maturity later than the Stated Maturity of the notes, and

	(2) such Contribution Indebtedness (x) is incurred within 180 days after the making of such cash contributions and (y) is designated as Contribution Indebtedness pursuant to an Officer’s Certificate on the incurrence date thereof.

“Credit Agreement” means that certain credit agreement, dated the Issue Date, by and among the Issuer, the guarantors named therein, Citicorp North America, Inc., as administrative agent, Citigroup Global Markets Inc., as joint lead arranger and joint book manager, Morgan Stanley Senior Funding, Inc., as joint lead arranger, joint book manager and co-syndication agent, UBS Securities LLC, as joint lead arranger and joint book manager, UBS AG, Stamford Branch, as co-syndication agent, and each of the other lender parties

“Credit Facilities” means one or more debt facilities (including, without limitation, the Credit Agreement) or commercial paper facilities, in each case, with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced (whether upon or after termination or otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in part from time to time in one or more agreement or indentures (in each case with the same or new lenders or institutional investors), including any agreement or indenture extending the maturity thereof or otherwise restructuring all or any portion of the indebtedness thereunder or increasing the amount loaned or issued thereunder or altering the maturity thereof.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Designated Non-cash Consideration” means the Fair Market Value of non-cash consideration received by the Issuer or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as “Designated Non-cash Consideration” pursuant to an Officer’s Certificate, setting forth the basis of such valuation, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of such Designated Non-cash Consideration.

“Designated Preferred Stock” means Preferred Stock of the Issuer or any Parent (other than Disqualified Stock) that is issued for cash (other than to the Issuer or any of its Subsidiaries or an employee stock ownership plan or trust established by the Issuer or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officers’ Certificate, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (3)(b) of the covenant described under “— Certain Covenants — Restricted Payments.”

“Designated Senior Indebtedness” means (1) any Indebtedness under the Credit Agreement and (2) any other Indebtedness constituting Senior Indebtedness that, at the date of determination, has an aggregate principal amount outstanding of at least $25 million and that is specifically designated by the Issuer in the instrument creating or evidencing such Senior Indebtedness as “Designated Senior Indebtedness” or, in the alternative, as to which the trustee is given written notice that such Indebtedness is “Designated Senior Indebtedness.”

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature. Notwithstanding the preceding sentence, any Capital Stock will not constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Issuer to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale. The amount of Disqualified Stock deemed to be outstanding at any time for purposes of the indenture will be the maximum amount that the Issuer and its Restricted Subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends. The term “Disqualified Stock” shall also include any options, warrants or other rights that are convertible into Disqualified Stock or that are redeemable at the

“Domestic Subsidiary” means any Restricted Subsidiary of the Issuer that was formed under the laws of the United States or any state of the United States or the District of Columbia.

“Dresser-Rand Holdings, LLC Agreement” means the limited liability company agreement of Dresser-Rand Holdings, LLC.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“Equity Offering” means (i) an offer and sale of Capital Stock (other than Disqualified Stock) of the Issuer or any Parent (to the extent the net proceeds therefrom are contributed to the equity capital of the Issuer) pursuant to (x) a registration statement that has been declared effective by the SEC pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Issuer or any Parent), or (y) a private issuance exempt from registration under the Securities Act.

“Excluded Contributions” means the net cash proceeds received by the Issuer after the date of the indenture from:


	(1) contributions to its common equity capital, and

	(2) the sale (other than to a Subsidiary of the Issuer) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Issuer,

in each case designated as “Excluded Contributions” pursuant to an Officers’ Certificate of the Issuer, the net cash proceeds of which are excluded from the calculation set forth in clause (3)(b) of “— Certain Covenants — Restricted Payments.”

“Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, determined in good faith by (i) the Directors of the Issuer (unless otherwise provided in the indenture) for transactions valued at, or in excess of, $10.0 million; provided that, if the Issuer or any Restricted Subsidiary is required by any antitrust authority to sell any asset, the consideration received upon such Asset Sale shall be deemed to be the “Fair Market Value” of such asset.

“Fixed Charge Coverage Ratio” means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases, redeems, defeases or otherwise discharges any Indebtedness (other than (i) ordinary working capital borrowings and (ii) in the case of revolving credit borrowings or revolving advances under any Qualified Receivables Financing, in which case interest expense will be computed based upon the average daily balance of such Indebtedness during the applicable period) or issues, repurchases or redeems preferred equity subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment, repurchase, redemption, defeasance or other discharge of Indebtedness, or such issuance, repurchase or redemption of preferred equity, and the use of the proceeds therefrom, as if the same had occurred at the beginning of the applicable four-quarter reference period.

In addition, for purposes of calculating the Fixed Charge Coverage Ratio, Asset Acquisitions, dispositions, mergers, consolidations and discontinued operations (as determined in accordance with GAAP), and any related financing transactions, that the specified Person or any of its Restricted Subsidiaries has both determined to make and made after the date of the indenture and during the four-quarter reference period or

subsequent to such reference period and on or prior to or simultaneously with the Calculation Date shall be calculated on a pro forma basis assuming that all such Asset Acquisitions, dispositions, mergers, consolidations and discontinued operations (and the change of any associated Fixed Charges and the change in Consolidated Cash Flow resulting therefrom) had occurred on the first day of the four-quarter reference period, including any pro forma expense and cost reductions and other operating improvements that have occurred or are reasonably expected to occur, in the reasonable judgment of the chief financial officer of the Issuer (regardless of whether these cost savings or operating improvements could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any other regulation or policy of the SEC related thereto). Any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period, and if, since the beginning of the four-quarter reference period, any Person that subsequently became a Restricted Subsidiary or was merged with or into the Issuer or any of its other Restricted Subsidiaries since the beginning of such period shall have made any acquisition, Investment, disposition, merger, consolidation or discontinued operation, in each case with respect to an operating unit of a business, that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be adjusted giving pro forma effect thereto for such period as if such Asset Acquisition, disposition, discontinued operation, merger or consolidation had occurred at the beginning of the applicable four-quarter reference period. Any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period.

For purposes of this definition, whenever pro forma effect is to be given to any transaction, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Issuer. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness if such Hedging Obligation has a remaining term in excess of 12 months). Interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Issuer to be the rate of interest implicit in such Capital Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Issuer may designate. Any such pro forma calculation may include adjustments appropriate, in the reasonable determination of the Issuer as set forth in an Officers’ Certificate, to reflect operating expense reductions reasonably expected to result from any acquisition or merger.

“Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of:


	(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, excluding amortization of debt issuance costs and the expensing of any bridge or other financing fees, but including original issue discount, non-cash interest payments, the interest component of any deferred payment obligations (classified as Indebtedness under the indenture), the interest component of all payments associated with Capital Lease Obligations and net of the effect of all payments made or received pursuant to Hedging Obligations in respect of interest rates; plus

	(2) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; plus

	(3) all cash dividend payments or other cash distributions on any series of preferred equity of such Person and all other dividend payments or other distributions on the Disqualified Stock of such Person; less

	(4) interest income,

“Foreign Subsidiary” means any Restricted Subsidiary of the Issuer other than a Domestic Subsidiary.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of the indenture.

“Government Securities” means securities that are direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged.

“guarantee” means a guarantee, other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner, including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise).


	(1) the subsidiaries of the Issuer that execute the indenture on the Issue Date; and

	(2) any other Subsidiary of the Issuer that becomes a Guarantor in accordance with the provisions of the indenture, and their respective successors and assigns, in each case, until the Note Guarantee of such Person has been released in accordance with the provisions of the indenture.

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:


	(1) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;

	(2) other agreements or arrangements designed to manage interest rates or interest rate risk; and

	(3) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.

“Holdings LLC Agreement” means the limited liability company agreement of Holdings.

“Immaterial Subsidiary” means any Subsidiary that is not a Material Subsidiary.

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent:


	(1) in respect of borrowed money;

	(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

	(3) in respect of banker’s acceptances;

	(4) representing Capital Lease Obligations;

	(5) representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed;

	(6) representing any Hedging Obligations; or

(7) to the extent not otherwise included, with respect to the Issuer and its Restricted Subsidiaries, the amount then outstanding (i.e., advanced, and received by, and available for use by, the Issuer or any of its Restricted Subsidiaries) under any Receivables Financing (as set forth in the books and records of the Issuer or any Restricted Subsidiary and confirmed by the agent, trustee or other representative of the institution or group providing such Receivables Financing),

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes (i) all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person); provided, however, that the amount of such Indebtedness shall be the lesser of (x) the Fair Market Value of such asset as of such date of determination and (y) the amount of such Indebtedness of such other Person; and (ii) to the extent not otherwise included, the guarantee by the specified Person of any Indebtedness of any other Person. Notwithstanding the foregoing, “Indebtedness” shall not include (a) accrued expenses, royalties and Trade Payables; (b) Contingent Obligations incurred in the ordinary course of business; and (c) asset retirement obligations and obligations in respect of reclamation and workers’ compensation (including pensions and retiree medical care) that are not overdue by more than 90 days.

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s or BBB — (or the equivalent) by S&P, or, if either such entity ceases to rate the notes for reasons outside of the control of the Issuer, the equivalent investment grade credit rating from any other Rating Agency.


	(1) securities issued or directly and fully guaranteed or insured by the U.S. government or any agency or instrumentality thereof (other than Cash Equivalents) and in each case with maturities not exceeding two years from the date of acquisition;

	(2) investments in any fund that invests exclusively in investments of the type described in clause (1) which fund may also hold immaterial amounts of cash pending investment and/or distribution; and

	(3) corresponding instruments in countries other than the United States customarily utilized for high quality investments and in each case with maturities not exceeding two years from the date of acquisition.

“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including guarantees or other obligations), advances or capital contributions (excluding accounts receivable, trade credit and advances to customers and commission, travel and similar advances to officers, employees and consultants made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Issuer or any Subsidiary of the Issuer sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Issuer such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Issuer, the Issuer will be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Issuer’s Investments in such Subsidiary that were not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption “— Certain Covenants — Restricted Payments.”

“Lien” means, with respect to any asset (except in connection with a Qualified Receivables Financing), any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a

“Management Notes” means any notes evidencing Indebtedness which, by their terms, are expressly subordinated to the notes offered hereunder, that are issued by the Issuer, any Subsidiary or any Parent to existing or former employees, officers, consultants, or directors of the Issuer or any Subsidiary or any Parent in consideration for such person’s Equity Interests of the Issuer, any Subsidiary or any Parent.

“Marketable Securities” means, with respect to any Asset Sale, any readily marketable equity securities that are (i) traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market; and (ii) issued by a corporation having a total equity market capitalization of not less than $250.0 million; provided that the excess of (A) the aggregate amount of securities of any one such corporation held by the Issuer and any Restricted Subsidiary over (B) ten times the average daily trading volume of such securities during the 20 immediately preceding trading days shall be deemed not to be Marketable Securities, as determined on the date of the contract relating to such Asset Sale.

“Material Subsidiary” means any Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of the indenture, provided, however, that all references to “10 percent” in such definition shall be replaced with “5.0 percent.”

“Moody’s” means Moody’s Investors Service, Inc. and its successors and assigns.

“Net Income” means, with respect to any Person for any period, the net income (loss) of such Person for such period, determined in accordance with GAAP and before any reduction in respect of dividends on preferred interests, excluding, however, (a) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with (1) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (2) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries and (b) any extraordinary or nonrecurring gain or loss, together with any related provision for taxes on such extraordinary or nonrecurring gain or loss.

“Net Proceeds” means the aggregate cash proceeds received by the Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any Designated Non-cash Consideration received in any Asset Sale and any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding the assumption by the acquiring Person of Indebtedness relating to the disposed assets or other consideration received in any non-cash form), net of the direct costs relating to such Asset Sale and the sale of such Designated Non-cash Consideration, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale or taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness, other than Indebtedness under a Credit Facility, secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP, including without limitation, pension and post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.

(1) as to which neither the Issuer nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) other than a pledge of the Equity Interest of any Unrestricted Subsidiaries, (b) is directly or indirectly liable (as a guarantor or otherwise) other than by virtue of a pledge of the Equity Interests of any Unrestricted Subsidiaries, or (c) constitutes the lender; and

(2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit, upon notice, lapse of time or both, any holder of any other Indebtedness (other than the notes offered hereby) of the Issuer or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity.

“Note Guarantee” means the guarantee by each Guarantor of the Issuer’s obligations under the indenture and the notes, executed pursuant to the provisions of the indenture.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages, costs, expenses and other liabilities payable under the documentation governing any Indebtedness.

“Officer” means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Senior Vice President, any Vice President or any Assistant Vice President of such Person.

“Officers’ Certificate” means a certificate signed on behalf of the Issuer by at least two Officers of the Issuer, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Issuer, that meets the requirements of the indenture.

“Permitted Business” means the businesses of the Issuer and its Subsidiaries engaged in on the date of the indenture and any other activities that are similar, ancillary or reasonably related to, or a reasonable extension, expansion or development of, such businesses or ancillary thereto.

“Permitted Holders,” means the Equity Investors and Related Parties. Any person or group whose acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of the indenture will thereafter, together with its Affiliates, constitute an additional Permitted Holder.


	(1) any Investment in the Issuer or in a Restricted Subsidiary of the Issuer;

	(2) any Investment in, cash, Cash Equivalents, Marketable Securities or Investment Grade Securities;

	(3) any Investment by the Issuer or any Restricted Subsidiary of the Issuer in a Person, if as a result of such Investment:


	(a) such Person becomes a Restricted Subsidiary of the Issuer; or

	(b) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary of the Issuer;


	(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales”;

	(5) any Investment the payment for which consists of Equity Interests (other than Disqualified Stock) of the Issuer or any Parent (which Investment, in the case of any Parent, is contributed to the common equity capital of the Issuer; provided that any such contribution shall be excluded from clause 3(b) of the first paragraph of the covenant described under the caption “— Certain Covenants — Restricted Payments”);

	(6) any Investments received (i) in compromise or resolution of (A) obligations of trade creditors or customers that were incurred in the ordinary course of business of the Issuer or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bank-


	ruptcy or insolvency of any trade creditor or customer; or (B) litigation, arbitration or other disputes; or (ii) as a result of a foreclosure by the Issuer or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

	(7) Investments represented by Hedging Obligations;

	(8) loans or advances to officers, directors and employees made in the ordinary course of business of the Issuer or any Restricted Subsidiary of the Issuer in an aggregate principal amount not to exceed $2.5 million at any one time outstanding;

	(9) repurchases of the notes;

	(10) Investments in Permitted Businesses, joint ventures or Unrestricted Subsidiaries having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (10) that are at that time outstanding, not to exceed the greater of (x) $70.0 million and (y) 5% of Total Assets at the time of such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

	(11) any Investment in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person in connection with a Qualified Receivables Financing, including Investments of funds held in accounts permitted or required by the arrangements governing such Qualified Receivables Financing or any related Indebtedness; provided, however, that any Investment in a Receivables Subsidiary is in the form of a Purchase Money Note, contribution of additional receivables or an equity interest;

	(12) any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with the provisions of the second paragraph of the covenant described under “— Certain Covenants — Transaction with Affiliates” (except for transactions described in clauses (6), (8), (10) and (12) of such paragraph);

	(13) guarantees issued in accordance with the covenants described under “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Equity” and “— Certain Covenants — Additional Note Guarantees”;

	(14) any Investment existing on the date of the indenture and any Investment that replaces, refinances or refunds an existing Investment; provided, that the new Investment is in an amount that does not exceed the amount replaced, refinanced or refunded, and is made in the same Person as the Investment replaced, refinanced or refunded;

	(15) Investments consisting of purchases and acquisitions of inventory, supplies, materials and equipment or purchases of contract rights or licenses or leases of intellectual property, in each case in the ordinary course of business; and

	(16) additional Investments by the Issuer or any Restricted Subsidiary having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), taken together with all other Investments made pursuant to this clause (16) that are at the time outstanding not to exceed 2% of Total Assets; provided, however, that if any Investment pursuant to this clause (16) is made in a Person that is not a Restricted Subsidiary of the Issuer at the date of the making of such Investment and such Person becomes a Restricted Subsidiary of the Issuer after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) above and shall cease to have been made pursuant to this clause (16) for so long as such Person continues to be a Restricted Subsidiary;

provided, however, that with respect to any Investment, the Issuer may, in its sole discretion, allocate all or any portion of any Investment to one or more of the above clauses (1) through (16) so that the entire Investment would be a Permitted Investment.


	(1) Equity Interests in the Issuer; or

	(2) debt securities that are subordinated to all Senior Indebtedness and any debt securities issued in exchange for Senior Indebtedness to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Indebtedness under the indenture.


	(1) Liens securing Indebtedness and other Obligations under Credit Facilities incurred pursuant to the covenant “Incurrence of Indebtedness and Issuance of Preferred Equity” and/or securing Hedging Obligations related thereto;

	(2) Liens in favor of the Issuer or any of its Restricted Subsidiaries;

	(3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Issuer or any Restricted Subsidiary of the Issuer; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Issuer or the Restricted Subsidiary;

	(4) Liens on property (including Capital Stock) existing at the time of acquisition of the property by the Issuer or any Subsidiary of the Issuer; provided that such Liens were in existence prior to, such acquisition, and not incurred in contemplation of, such acquisition and do not extend to any property other than the property so acquired by the Issuer or such Restricted Subsidiary;

	(5) Liens or deposits to secure the performance of statutory or regulatory obligations, or surety, appeal, indemnity or performance bonds, warranty and contractual requirements or other obligations of a like nature incurred in the ordinary course of business;

	(6) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof;

	(7) Liens to secure Indebtedness (including Capital Lease Obligations) permitted to be incurred pursuant to clause (4) of the definition of Permitted Debt covering only the assets acquired with or financed by such Indebtedness;

	(8) Liens securing Indebtedness permitted to be incurred pursuant to clause (15) of the definition of Permitted Debt;

	(9) Liens existing on the date of the indenture;

	(10) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;

	(11) Liens created for the benefit of (or to secure) the notes (or the Note Guarantees);

	(12) Liens securing Indebtedness or other obligations incurred in the ordinary course of business of the Issuer or any Subsidiary of the Issuer with respect to obligations that do not exceed 5% of Total Assets at any one time outstanding;

	(13) Liens on accounts receivable and related assets of the type specified in the definition of “Receivables Financing” incurred in connection with a Qualified Receivables Financing;

	(14) licenses of intellectual property in the ordinary course of business;

	(15) Liens to secure a defeasance trust;

	(16) Liens on equipment of the Issuer or any Restricted Subsidiary granted in the ordinary course of business to clients of which such equipment is located;


	(17) Liens imposed by law (including, without limitation, Liens in favor of customers for equipment under order or in respect of advances paid in connection therewith), such as carriers’, warehousemen’s, landlord’s, lessor’s, suppliers, banks, repairmen’s and mechanics’ Liens, and Liens of landlords securing obligations to pay lease payments that are not yet due and payable or in default, in each case, incurred in the ordinary course of business;

	(18) Liens securing the aggregate amount of Indebtedness (including Acquired Debt) incurred in connection with (or at any time following the consummation of) an Asset Acquisition made in accordance with the indenture equal to, at the time of incurrence, the net increase in inventory, accounts receivable and net property, reserves, plant and equipment attributable to such Asset Acquisition from the amounts reflected on the Issuer’s historical consolidated balance sheet as of the end of the full fiscal quarter ending on or prior to the date of such Asset Acquisition, calculated after giving effect on a pro forma basis to such Asset Acquisition (which amount may, but need not, be incurred in whole or in part under the Credit Agreement) less the amount of Indebtedness incurred in connection with such Asset Acquisition secured by Liens pursuant to clause (4) or (7) above;

	(19) Liens incurred or deposits made in the ordinary course of business to secure payment of workers’ compensation or to participate in any fund in connection with workmen’s compensation, unemployment insurance, old-age pensions or other social security programs;

	(20) easements, rights of way zoning and similar restrictions, reservations (including severances, leases or reservations of oil, gas, coal, minerals or water rights), restriction or encumbrances in respect of real property or title defects that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties (as such properties are used by the Issuer or its Subsidiaries) or materially impair their use in the operation of the business of the Issuer and its Subsidiaries;

	(21) Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under the indenture; provided, however, that:


	(a) the new Lien shall be limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and accessions to such property or proceeds or distributions thereof); and

	(b) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge;


	(22) Liens arising from precautionary Uniform Commercial Code financing statement filings regarding operating leases entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;

	(23) judgment Liens not giving rise to an Event of Default so long as any appropriate legal proceedings that may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such legal proceedings may be initiated shall not have expired;

	(24) Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or other obligations of such Unrestricted Subsidiary;

	(25) leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Issuer and its Restricted Subsidiaries; and

	(26) Liens securing insurance premium financing arrangements, provided that such Lien is limited to the applicable insurance contracts.


	(1) payments to any Parent in amounts equal to the amounts required for any direct payment of the Issuer to pay fees and expenses (including franchise or similar taxes) required to maintain its corporate existence, customary salary, bonus and other benefits payable to officers and employees of any direct parent of the Issuer and general corporate overhead expenses of any direct parent of the Issuer to the extent such fees and expenses are attributable to the ownership or operation of the Issuer and its Subsidiaries;

	(2) for so long as the Issuer is a member of a group filing a consolidated or combined tax return with any Parent, payments to any Parent in respect of an allocable portion of the tax liabilities of such group that is attributable to the Issuer and its Subsidiaries (“Tax Payments”). The Tax Payments shall not exceed the lesser of (i) the amount of the relevant tax (including any penalties and interest) that the Issuer would owe if the Issuer were filing a separate tax return (or a separate consolidated or combined return with its Subsidiaries that are members of the consolidated or combined group), taking into account any carryovers and carrybacks of tax attributes (such as net operating losses) of the Issuer and such Subsidiaries from other taxable years and (ii) the net amount of the relevant tax that such Parent actually owes to the appropriate taxing authority. Any Tax Payments received from the Issuer shall be paid over to the appropriate taxing authority within 30 days of any Parent’s receipt of such Tax Payments or refunded to the Issuer; and

	(3) dividends or distributions paid to any Parent, if applicable, in amounts equal to amounts required for any Parent, if applicable, to pay interest and/or principal on Indebtedness the proceeds of which have been contributed to the Issuer or any of its Restricted Subsidiaries and that has been guaranteed by, or is otherwise considered Indebtedness of, the Issuer incurred in accordance with the covenant described under “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Equity.”

“Permitted Refinancing Indebtedness” means any Indebtedness of the Issuer or any of its Restricted Subsidiaries (other than Disqualified Stock) issued in exchange for, or the net proceeds of which are used to extend, renew, refund, refinance, replace, defease or discharge other Indebtedness of the Issuer or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:


	(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, renewed, refunded, refinanced, replaced, defeased or discharged (plus any premium required to be paid on the Indebtedness being so renewed, refunded, replaced, defeased or discharged, plus the amount of all fees and expenses incurred in connection therewith);

	(2) such Permitted Refinancing Indebtedness has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of, the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged, provided that this clause (2) shall not apply to debt under Credit Facilities;

	(3) if the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the Notes or the Note Guarantees, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the holders of Notes as those contained in the documentation governing the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged;

	(4) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is pari passu in right of payment with the notes or any Note Guarantees, such Permitted Refinancing Indebtedness is pari passu in right of payment with, or subordinated in right of payment to, the notes or such Note Guarantees; and


	(5) such Permitted Refinancing Indebtedness shall not include Indebtedness of the Issuer or a Restricted Subsidiary that refinance Indebtedness of an Unrestricted Subsidiary.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“Purchase Agreement” means the Purchase Agreement dated as of August 25, 2004 between Dresser-Rand Holdings, LLC and Ingersoll-Rand Company Limited.

“Purchase Money Note” means a promissory note of a Receivables Subsidiary evidencing a line of credit, which may be irrevocable, from the Issuer or any Subsidiary of the Issuer to a Receivables Subsidiary in connection with a Qualified Receivables Financing, which note is intended to finance that portion of the purchase price that is not paid by cash or a contribution of equity.

“Qualified Receivables Financing” means any Receivables Financing of a Receivables Subsidiary that meets the following conditions:


	(1) the Board of Directors of the Issuer will have determined in good faith that such Qualified Receivables Financing (including financing terms, covenants, termination events and other provisions) is in the aggregate economically fair and reasonable to the Issuer and the Receivables Subsidiary,

	(2) all sales of accounts receivable and related assets to the Receivables Subsidiary are made at Fair Market Value (as determined in good faith by the Issuer), and

	(3) the financing terms, covenants, termination events and other provisions thereof will be market terms (as determined in good faith by the Issuer) and may include Standard Securitization Undertakings.

The grant of a security interest in any accounts receivable of the Issuer or any of its Restricted Subsidiaries (other than a Receivables Subsidiary) to secure a Credit Facility will not be deemed a Qualified Receivables Financing. For purposes of the indenture, a receivables facility whether now in existence or arising in the future (and any replacement thereof with substantially similar terms in the aggregate) will be deemed to be a Qualified Receivables Financing that is not recourse to the Issuer (except for Standard Securitization Undertakings).

“Rating Agency” means each of S&P and Moody’s, or if S&P or Moody’s or both shall not make a rating on the notes publicly available, a nationally recognized statistical rating organization or organizations, within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by the Issuer as a replacement agency or agencies for S&P or Moody’s, or both, as the case may be.

“Receivables Financing” means any transaction or series of transactions that may be entered into by the Issuer or any of its Subsidiaries pursuant to which the Issuer or any of its Subsidiaries may sell, convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of a transfer by the Issuer or any of its Subsidiaries), and (b) any other Person (in the case of a transfer by a Receivables Subsidiary), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Issuer or any of its Subsidiaries, and any assets related thereto, including, without limitation, all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable and any Hedging Obligations entered into by the Issuer or any such Subsidiary in connection with such accounts receivable.

“Receivables Repurchase Obligation” means any obligation of a seller of receivables in a Qualified Receivables Financing to repurchase receivables arising as a result of a breach of a representation, warranty or covenant or otherwise, including as a result of a receivable or portion thereof becoming subject to any asserted defense, dispute, off-set or counterclaim of any kind as a result of any action taken by, any failure to take action by or any other event relating to the seller.

“Receivables Subsidiary” means a Wholly-Owned Restricted Subsidiary of the Issuer (or another Person formed for the purposes of engaging in a Qualified Receivables Financing with the Issuer in which the Issuer or any Subsidiary of the Issuer makes an Investment and to which the Issuer or any Subsidiary of the Issuer transfers accounts receivable and related assets) which engages in no activities other than in connection with the financing of accounts receivable of the Issuer and its Subsidiaries, all proceeds thereof and all rights (contractual or other), collateral and other assets relating thereto, and any business or activities incidental or related to such business, and which is designated by the Board of Directors of the Issuer (as provided below) as a Receivables Subsidiary and:


	(1) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is guaranteed by the Issuer or any other Subsidiary of the Issuer (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is recourse to or obligates the Issuer or any other Subsidiary of the Issuer in any way other than pursuant to Standard Securitization Undertakings, or (iii) subjects any property or asset of the Issuer or any other Subsidiary of the Issuer, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings,

	(2) with which neither the Issuer nor any other Subsidiary of the Issuer has any material contract, agreement, arrangement or understanding other than on terms which the Issuer reasonably believes to be no less favorable to the Issuer or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Issuer, and

	(3) to which neither the Issuer nor any other Subsidiary of the Issuer has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Issuer shall be evidenced to the trustee by filing with the trustee a certified copy of the resolution of the Board of Directors of the Issuer giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing conditions.

“Registration Rights Agreement” means the registration rights agreement dated the date of the indenture, among the Issuer, the Guarantors, Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc., UBS Securities LLC and the other placement agents party thereto.


	(1) any controlling stockholder, partner, member, 50% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Equity Investor;

	(2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 50% or more controlling interest of which consist of any one or more Equity Investors and/or such other Persons referred to in the immediately preceding clause; or

	(3) any Person with whom an Equity Investor or a Related Party (under clauses (1) or (2) of the definition of Related Party) may be deemed as part of a “group” within the meaning of Section 13(d)(3) of the Exchange Act.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Subsidiary” of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

“S&P” means Standard & Poor’s Ratings Services and its successors and assigns.

“Senior Indebtedness” means the following obligations of the Issuer or any Guarantor, whether outstanding on the Issue Date or thereafter incurred: (1) all Indebtedness and all other monetary obligations (including, without limitation, expenses, fees, principal, interest, reimbursement obligations under letters of credit and indemnities payable in connection therewith) under (or in respect of) the Credit Agreement or Hedging Obligation relating to the Indebtedness under the Credit Agreement and (2) all other Indebtedness and all other monetary obligations of the Issuer or any Guarantor (other than the notes and any Note

Guarantee), including principal and interest on such Indebtedness, unless such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is pari passu with, or subordinated in right of payment to, the notes or any Note Guarantee; provided that the term “Senior Indebtedness” shall not include (a) any Indebtedness of the Issuer or any Guarantor that, when incurred, was without recourse to the Issuer or such Guarantor, (b) any Indebtedness of the Issuer or any Guarantor to a Subsidiary of the Issuer, or to a joint venture in which the Issuer or any Restricted Subsidiary has an interest, (c) any Indebtedness of the Issuer or any Guarantor, to the extent not permitted by the “Incurrence of Indebtedness and Issuance of Preferred Equity” covenant or the “Limitation on Senior Subordinated Indebtedness” covenant; provided that Indebtedness under the Credit Agreement shall be deemed Senior Indebtedness if the Issuer or any Guarantor, as the case may be believed in good faith at the time of incurrence that it was permitted to incur such Indebtedness under the indenture and delivers an officers’ certificate to the lenders under the Credit Agreement to such effect, (d) any repurchase, redemption or other obligation in respect of Disqualified Stock, (e) any Indebtedness to any employee of the Issuer or any of its Subsidiaries, (f) any liability for taxes owed or owing by the Issuer or any Guarantor, or (g) any Trade Payables.

“Senior Subordinated Obligations” means any principal of, premium, if any, or interest on the notes payable pursuant to the terms of the notes or any Note Guarantee or upon acceleration, including any amounts received upon the exercise of rights of rescission or other rights of action (including claims for damages) or otherwise, to the extent relating to the purchase price of the notes or amounts corresponding to such principal, premium, if any, or interest on the notes.

“Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of the indenture.

“Standard Securitization Undertakings” means representations, warranties, covenants, indemnities and guarantees of performance entered into by the Issuer or any Subsidiary of the Issuer which the Issuer has determined in good faith to be customary in a Receivables Financing including, without limitation, those relating to the servicing of the assets of a Receivables Subsidiary, it being understood that any Receivables Repurchase Obligation shall be deemed to be a Standard Securitization Undertaking.

“Stated Maturity” means, with respect to any installment of principal on any series of Indebtedness, the date on which the final payment of principal was scheduled to be paid in the documentation governing such Indebtedness as of the date of the indenture, and will not include any contingent obligations to repay, redeem or repurchase any such principal prior to the date originally scheduled for the payment thereof.


	(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

	(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

“Total Assets” means the total consolidated assets of the Issuer and its Restricted Subsidiaries, as shown on the most recent balance sheet of the Issuer.

“Trade Payables” means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services.

“Transactions” means, collectively, (1) the acquisition by Dresser-Rand Holdings, LLC of all of the equity interests in Dresser-Rand Company and each of Dresser-Rand Company’s direct and indirect subsidiaries pursuant to the Purchase Agreement, (2) the completion of and borrowings under the Credit Agreement as described in this prospectus and (3) the offering of the notes and, with respect to each of (1), (2) and (3), the transactions contemplated thereby.

“Treasury Rate” means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two business days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to November 1, 2009; provided, however, that if the period from the redemption date to November 1, 2009, is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.


	(1) any Subsidiary of the Issuer that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Issuer in the manner provided below; and

	(2) any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors of the Issuer may designate any Subsidiary of the Issuer (including any newly acquired or newly formed Subsidiary of the Issuer) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on any property of, the Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that the Subsidiary to be so designated and its Subsidiaries do not at the time of designation have and do not thereafter incur Non-recourse Debt (other than guarantees of performance of the Unrestricted Subsidiary in the ordinary course of business, excluding guarantees of Indebtedness for borrowed money); provided further, however, that either:


	(a) the Subsidiary to be so designated has total consolidated assets of $1,000 or less; or

	(b) if such Subsidiary has consolidated assets greater than $1,000, then such designation would be permitted under the covenant entitled “— Certain Covenants — Restricted Payments.”

The Board of Directors of the Issuer may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation:


	(x) (1) the Issuer could incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test described under “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Equity,” or (2) the Fixed Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries would be greater than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation, and

	(y) no Event of Default shall have occurred and be continuing.

Any such designation by the Board of Directors of the Issuer shall be evidenced to the trustee by promptly filing with the trustee a copy of the resolution of the Board of Directors of the Issuer giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.

“Voting Stock” of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:


	(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at


	final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

	(2) the then outstanding principal amount of such Indebtedness.

“Wholly-Owned Restricted Subsidiary” of any specified Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares) will at the time be owned by such Person or by one or more Wholly-Owned Restricted Subsidiaries of such Person.

The exchange of outstanding notes for exchange notes in the exchange offer will not constitute a taxable event to holders for United States federal income tax purposes. Consequently, no gain or loss will be recognized by a holder upon receipt of an exchange note, the holding period of the exchange note will include the holding period of the outstanding note exchanged therefor and the basis of the exchange note will be the same as the basis of the outstanding note immediately before the exchange.

In any event, persons considering the exchange of outstanding notes for exchange notes should consult their own tax advisors concerning the United States federal income tax consequences in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction.

Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the consummation of the exchange offer, they will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, all dealers effecting transactions in the exchange notes may be required to deliver a prospectus.

We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or through brokers or dealers. who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit of any such resale of exchange notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

For a period of 180 days after the consummation of the registered exchange offer we will promptly send additional copies of this prospectus and any amendments or supplements to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holders of the outstanding notes) other than commissions or concessions of any broker-dealers and will indemnify you (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

The validity and enforceability of the exchange notes and the exchange guarantees will be passed upon for us by Simpson Thacher & Bartlett LLP, New York, New York.

The combined financial statements as of December 31, 2003 and 2002 and for each of the three years in the period ended December 31, 2003 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

We and out guarantor subsidiaries have filed with the SEC a registration statement on Form S-4 under the Securities Act with respect to the exchange notes being offered hereby. This prospectus, which forms a part of the registration statement, does not contain all of the information set forth in the registration statement. For further information with respect to the Issuer, the Parent Guarantor, Celanese, their respective subsidiaries and the exchange notes, reference is made to the registration statement. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete. We and our guarantor subsidiaries are not currently subject to the informational requirements of the Exchange Act. As a result of the offering of the exchange notes, we and our guarantor subsidiaries will become subject to the informational requirements of the Exchange Act, and, in accordance therewith, will file reports and other information with the SEC. The registration statements, such reports and other information can be inspected and copied at the Public Reference Room of the SEC located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549. Copies of such materials, including copies of all or any portion of the registration statement, can be obtained from the Public Reference Room of the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. Such materials may also be accessed electronically by means of the SEC’s home page on the Internet (http://www.sec.gov).

So long as we and our guarantor subsidiaries are subject to the periodic reporting requirements of the Exchange Act, we and our guarantor subsidiaries are required to furnish the information required to be filed with the SEC to the trustee and the holders of the outstanding notes. We and our guarantor subsidiaries have agreed that, even if they are not required under the Exchange Act to furnish such information to the SEC, they will nonetheless continue to furnish information that would be required to be furnished by them and their guarantor subsidiaries by Section 13 of the Exchange Act, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report thereon by their certified independent accountants to the trustee and the holders of the outstanding notes or exchange notes as if they were subject to such periodic reporting requirements.

In our opinion, the accompanying combined balance sheet and the related combined statements of income, changes in Ingersoll-Rand Company Limited investment and cash flows present fairly, in all material respects, the financial position of the Dresser-Rand Company (the “Company”), a wholly-owned partnership of Ingersoll-Rand Company Limited (“IR”), at December 31, 2003 and 2002, and the combined results of their operations and cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 7 to the combined financial statements, on January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangibles Assets.”

On December 31, 1986, Dresser Industries, Inc. (Dresser) and Ingersoll-Rand Company (IR)(collectively, the Partners) entered into a partnership agreement for the formation of Dresser-Rand Company (the Company), a New York general partnership owned 50% by Dresser and 50% by IR. The Partners contributed substantially all of the operating assets and certain related liabilities, which comprised their worldwide reciprocating compressor, steam turbine, and turbo-machinery businesses. The net assets contributed by the Partners were recorded by the Company at amounts approximating their historical values. The Company commenced operations on January 1, 1987. On October 1, 1992, Dresser purchased a 1% interest from the Company thus increasing its ownership to 51%.

In September 1999, Dresser merged with Halliburton Industries (“Halliburton”). Accordingly, Dresser’s ownership interest in the Company transferred to Halliburton on that date. On February 2, 2000, a wholly-owned subsidiary of IR purchased Halliburton’s 51% interest in the Company for a net purchase of approximately $543 million. The Company’s combined financial statements reflect IR’s additional basis in the Company.

The Company is engaged in the design, manufacture and sale of gas compressors, gas and steam turbines, gas expanders and associated control panels. The Company is an operating business segment of IR. Ingersoll-Rand Company Limited is the successor to Ingersoll-Rand Company following a reorganization that became effective on December 31, 2001.

The combined financial statements include the accounts of all wholly-owned and majority-owned subsidiaries of the Company as well as the operations of Dresser-Rand Canada, Inc. and Dresser-Rand GmbH, which are owned by IR, but are managed and operated by the Company. The accompanying financial statements include the operating results of the following entities.

The combined financial statements include all revenues, costs, assets and liabilities directly attributable to the Company. Allocation of costs for facilities, functions and certain services performed by IR organizations for the Company, including environmental and other risk management, internal audit, transportation services, administration of benefit and insurance programs and certain tax, legal, accounting and treasury functions have been made on the basis described in Note 3. All of the allocations and estimates in the combined financial statements are based on assumptions that the management of the Company and IR believe are reasonable. The Company’s financial information included herein is not necessarily indicative of the financial position, results of operations and cash flows of the Company in the future or indicative of the results that would have been reported if the Company had operated as an unaffiliated enterprise.

A summary of significant accounting policies used in the preparation of the accompanying financial statements follows:

Principles of Combination: The combined financial statements include the accounts and activities of the Company. Partially owned equity companies are accounted for under the equity method as the Company’s ownership interest ranges from 40% to 50%. All material intercompany transactions between entities included in the combined financial statements have been eliminated. Transactions between the Company and IR and its affiliates are herein referred to as “related party” or “affiliated” transactions. Such transactions have not been eliminated.

Use of Estimates: In conformity with accounting principles generally accepted in the United States of America, management has used estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Significant estimates include accounting for doubtful accounts, depreciation and amortization, inventory reserves, valuation of assets including goodwill and other intangible assets, product warranties, sales allowances, taxes, environmental and product liabilities, self insurance programs and other contingencies. Actual results could differ from those estimates.

Marketable Securities: The Company’s marketable securities have historically consisted of equity securities, all of which are held for varying and indefinite periods of time, pursuant to maturity dates, market conditions and other factors. It is the Company’s intent to maintain a liquid portfolio to take advantage of

investment opportunities; therefore, all marketable securities are considered held for sale and are classified as current assets. Accordingly, the securities are stated at fair value. Actual sales of securities resulting in realized gains and losses on marketable securities are included in the statement of income, as a component of “Other income (expense)” and are derived using the specific identification method for determining the cost of securities.

Allowance for Doubtful Accounts: The Company establishes an allowance for estimated bad debts by applying specified percentages to the adjusted receivable aging categories. The percentage applied against the aging categories increases as the accounts become further past due. Accounts in excess of 360 days past due are generally fully reserved. In addition, the reserves are periodically reviewed for specific customer accounts identified as known collection problems due to insolvency, disputes or other collection issues.

Inventories: Inventories are stated at cost, which is not in excess of net realizable value. Cost is based on the first-in, first-out, (FIFO) method. Provision is made for slow-moving, obsolete or unusable inventory.

Property, Plant and Equipment: Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation expense is computed principally using the straight-line method over the estimated useful lives of the assets. The useful lives of buildings range from 30 years to 50 years; the useful lives of machinery and equipment range from 5 years to 12 years. Maintenance and repairs are expensed as incurred. At December 31, 2003 and 2002, gross land and buildings totaled $51.9 million and $49.5 million, respectively, while gross machinery and equipment totaled $128.4 million and $145.7 million, respectively. Accumulated depreciation at December 31, 2003 and 2002 was $78.9 million and $81.0 million, respectively. Depreciation expense for 2003, 2002 and 2001 was $21.8 million, $27.0 million and $26.3 million, respectively.

Intangible Assets: Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standard (SFAS) No. 142, “Goodwill and Other Intangible Assets.” Under the provisions of this standard, goodwill and intangible assets deemed to have indefinite lives are no longer subject to amortization, but rather are tested for impairment at least annually. All other intangible assets are to be amortized over their estimated useful lives.

The carrying value of goodwill and other intangibles is reviewed if the facts and circumstances, such as a significant decline in sales, earnings or cash flows or material adverse changes in the business climate, suggest that it may be impaired. If this review, which is performed at least annually, indicates that goodwill will not be recoverable as determined based on the estimated discounted cash flows of the reporting unit, impairment is measured by comparing the carrying value of goodwill to fair value. Fair value is determined based on quoted market values, discounted cash flows or appraisals.

Income Taxes: The Company is a partnership and generally does not provide for U.S. incomes taxes since all partnership income and losses are allocated to IR for inclusion in its income tax returns; however, a substantial portion of the Company’s operations are subject to U.S. or foreign income taxes. In preparing its combined financial statements, the Company has determined the tax provision for those operations on a separate return basis. Deferred taxes are provided on temporary differences between assets and liabilities for financial reporting and tax purposes as measured by enacted tax rates expected to apply when temporary differences are settled or realized. A valuation allowance is established for deferred tax assets when it is more likely than not that a portion of the assets will not be realized.

Product Warranty: Warranty accruals are recorded at the time the products are sold and are estimated based upon product warranty terms and historical experience. Warranty accruals are adjusted for known or anticipated warranty claims as new information becomes available.

Environmental Costs: Environmental expenditures relating to current operations are expensed or capitalized as appropriate. Expenditures relating to existing conditions caused by past operations, which do not

contribute to current or future revenues, are expensed. Costs to prepare environmental site evaluations and feasibility studies are accrued when the Company commits to perform them. Liabilities for remediation costs are recorded when they are probable and reasonably estimable, generally no later than the completion of feasibility studies or the Company commitment to a plan of action. The assessment of this liability, which is calculated based on existing technology, does not reflect any offset for possible recoveries from insurance companies and is not discounted.

Revenue Recognition: A significant portion of the Company’s sales are made pursuant to written contractual arrangements to design, develop, manufacture and/or modify complex products to the specifications of its customers, or to provide services related to the performance of such contracts. These contracts are accounted for in accordance with American Institute of Certified Public Accountants Statement of Position 81-1, “Accounting for the Performance of Construction-Type and Certain Production-Type Contracts,” and with revenues and profits recognized using the completed contract method of accounting. Under this method, revenue and profits on contracts are recorded when the contracts are complete or substantially complete. Provisions for anticipated losses on contracts are recorded in the period in which they become evident. Contracts normally take between nine and twelve months to complete.

Revenue from field services is recognized as the service is performed. Revenue from repair services is recognized when the repaired unit is shipped and title and risk of loss have transferred to the customer.

Customer progress payments in excess of the investment in inventory are held as customer advance payments in accounts payable and accruals.

Research and Development Costs: Research and development expenditures, including qualifying engineering costs, are expensed when incurred and amounted to $8.1 million in 2003, $8.0 million in 2002, and $7.0 million in 2001.

Comprehensive Income: Comprehensive income (loss) includes net income, foreign currency translation adjustments, amounts relating to cash flow hedges net of tax and additional minimum pension liability adjustments net of tax. In 2003, accumulated other comprehensive loss decreased by $18.0 million, net of tax. This decrease was attributable to foreign currency translation adjustments of $17.1 million, a minimum pension liability adjustment, net of tax, of $1.0 million, and amounts relating to cash flow hedges, net of tax, of $(0.1) million. The components of accumulated other comprehensive income are a credit in foreign currency translation adjustments of $9.7 million, a minimum pension liability adjustment, net of tax, of $77.0 million, and credit relating to cash flow hedges, net of tax, of $0.7 million.

Foreign Currency: Assets and liabilities of non-U.S. entities, where the local currency is the functional currency, have been translated at year-end exchange rates and income and expenses have been translated using average-for-the-year exchange rates. Adjustments resulting from translation have been recorded in accumulated other comprehensive income and are included in net earnings only upon sale or liquidation of the underlying foreign investment.

For non-U.S. entities where the U.S. dollar is the functional currency, inventory and property balances and related income statement accounts have been translated using historical exchange rates, and resulting gains and losses have been credited or charged to net earnings.

Net foreign currency losses recorded in “Other income (expense), net” were $4.4 million, $1.1 million and $0.9 million in 2003, 2002 and 2001, respectively.

Stock-based Compensation: At December 31, 2003, the Company participated in several of IR’s stock-based employee compensation plans, which are described more fully in Note 10. IR continues to account for these plans under the recognition and measurement principles of Accounting Principles Board No. 25, “Accounting for Stock Issued to Employees.”

The following table illustrates the effect on net income of the Company if IR had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure”.

Credit Facilities: Credit facilities have been arranged with banks whereby certain of the Company’s subsidiaries may borrow on an overdraft or short-term note basis or issue bank guarantees. Such borrowings if collateralized, are primarily secured by IR guarantees and carry variable interest rates ranging from 0.0% to 4.5% at December 31, 2003. Balances outstanding were $3.9 million at both December 31, 2003 and 2002. The unused portion of these facilities was $41.7 million at December 31, 2003.

New Accounting Standards: In December 2003, the FASB issued SFAS No. 132 (revised 2003), “Employers’ Disclosure about Pensions and Other Postretirement Benefits.” The standard requires that companies provide more details about their plan assets, benefit obligations, cash flows, benefit costs and other relevant information. The guidance is effective for fiscal years ending after December 15, 2003. The Company has fully adopted this standard for the year ended December 31, 2003.

In May 2004, the FASB released FASB Staff Position No. 106-2 (FSP FAS 106-2) entitled, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act). The current accounting rules require a company to consider current changes in applicable laws when measuring its postretirement benefit costs and accumulated postretirement benefit obligations. The Company adopted FSP FAS 106-2 as of April 1, 2004, the beginning of its second quarter. The Company and its actuarial advisors determined that most benefits provided by its plan were at least actuarially equivalent to Medicare Part D. The Company remeasured the effects of the Act on the accumulated projected benefit obligation as of April 1, 2004. The effect of the federal subsidy to which the Company is entitled will be accounted for as an actuarial gain of $13.7 million in 2004. The subsidy had no effect on postretirement expense for 2003 or prior years.

Intercompany Activities: IR provides the Company with certain environmental and other risk management, internal audit, legal, tax, accounting, pension fund management, transportation services, cash management and other treasury services. Many of these activities have been transferred over time from the Company to IR since IR acquired 100% ownership in the Company. In addition, as discussed below and in Notes 10, 12 and 13, most of the Company’s employees are eligible to participate in certain IR employee benefit programs that are sponsored and/or administered by IR or its affiliates.

The Company’s use of these services and its participation in these employee benefit plans generates both direct and indirect costs to the Company. Direct costs and benefits relating to the services and benefit plans

are charged/credited to the Company and are included in cost of goods sold, and selling and administrative expenses. Indirect costs are allocated to the Company using allocation methods that management of IR and the Company believe are reasonable.

The combined financial statements reflect these indirect costs through a corporate overhead allocation. These costs amount to $10.0 million and $1.3 million for the years ended December 31, 2003, and 2002, respectively. IR allocated no costs for 2001 due to the fact that the Company was substantially stand-alone and was not utilizing extensive services from I-R. For 2002, the indirect cost allocations are made based upon employee headcount, revenue and gross assets. For 2003, the allocations were based on selling & administrative expenses, payroll expense and gross assets. Such allocations may not be the same as the costs that would have been incurred as a stand-alone entity.

The non-U.S. units of the Company have been allocated certain corporate expenses incurred by IR, which are more appropriately borne by the companies benefiting from the charges than the parent company. Such costs are allocated to the non-U.S. units of the Company on a two factor weighted average basis. The amount allocated in 2003 was $5.1 million. No amounts were allocated in 2002 and prior years.

IR provides centralized treasury functions and financing, including substantially all investing and borrowing activities for the Company. As part of this practice, surplus cash is remitted to IR and IR advances cash, as necessary, to the Company. No interest is charged or paid on the net IR investment amount. Interest is charged or credited on certain notes receivable and notes payable from/to IR affiliates.

At December 31, 2003 and 2002, the Company had outstanding receivables due from IR affiliates of $105.3 million and $78.6 million, respectively. Intercompany receivables are treated as current since they are due upon demand. At December 31, 2003 and 2002, intercompany loans receivable from IR affiliates were $122.8 million and $74.6 million, respectively. Loans outstanding at December 31, 2003 mature within one year. In accordance with the agreements, the Company accrues simple interest on these loans at interest rates ranging from 0.5% to 5.5%.

Intercompany loans payable were $14.8 million and $19.4 million at December 31, 2003 and 2002, respectively. Loans payable at December 31, 2003 mature within one year. These loans carry rates of interest from 3.5% to 8.0% at December 31, 2003.

Employee Benefit Administration: The Company’s employees participate in tax-qualified defined benefit pension plans and defined contribution savings plans sponsored and/or administered by IR or its affiliates. IR has charged to the Company its pro-rata share of administration and funding expenses incurred by IR in the operation of these plans for the benefit of employees of the Company. The Company is responsible for the cost of funding pension and savings plan benefits accrued by its employees. Welfare benefit programs are generally self-insured and experience-rated on the basis of Company employees without regard to the claims experience of employees of other affiliated companies.

Other Related Party Transactions: The Company recorded sales of $1.4 million, $1.8 million and $2.8 million to IR and its affiliates in 2003, 2002 and 2001, respectively. For the year ended December 31, 2002, the Company recorded dividends of $8.2 million dividends paid to IR by Dresser-Rand GmbH. This amount was recorded against IR’s investment included in the Company’s equity.

The Company had two investments that operated in similar lines of business at December 31, 2003. The investments in and amounts due from partially-owned equity companies, in which the Company’s ownership interest from 40% to 50%, amounted to $5.5 million and $3.6 million, respectively, at December 31, 2003 and $4.3 million and $3.6 million, respectively, at December 31, 2002. The Company’s equity in the net earnings

(losses) of its partially-owned equity companies was $(0.1) million, $(0.5) million, and $(0.6) million in 2003, 2002 and 2001, respectively, and is recorded in other income/expense, net in the accompanying statement of income. The Company received no distributions from these investments in 2003, 2002, and 2001. Sales from the Company to the partially-owned equity companies are not significant.

Summarized financial information for these partially-owned equity companies at December 31, was:

For the years ended December 31, 2002 and 2001, the Company recorded restructuring charges totaling $5.2 million and $2.1 million, respectively, for employee termination benefits in connection with reductions in workforce, closing of several non-manufacturing locations and realignment of the Company’s regional structure. No additional restructuring charges were recorded in 2003. A reconciliation of the restructuring reserve program is as follows:

As of December 31, 2003, the restructuring programs have resulted in the closure of non-manufacturing facilities, including sales offices, with a workforce reduction of 388 employees. The provision remaining at

December 31, 2003 relates to final severance payments and facility exit costs and is expected to be paid in 2004.

Effective January 1, 2002, The Company adopted Statement of Financial Accounting Standard (SFAS) No. 142, “Goodwill and Other Intangible Assets”. Under the provisions of this standard, goodwill and intangible assets deemed to have indefinite lives are no longer subject to amortization, but rather are tested for impairment at least annually. All other intangible assets are to be amortized over their estimated useful lives.

The following table sets forth the gross amount and accumulated amortization of the Company’s intangible assets at December 31:

Intangible asset amortization expense for 2003, 2002, and 2001 was $7.3 million, $6.8 million and $6.4 million, respectively. Estimated intangible asset amortization expense for each of the next five fiscal years is expected to be $7.3 million in 2004, $7.3 million in 2005, $7.3 million in 2006, $6.8 million in 2007, and $6.3 million in 2008.

In accordance with SFAS No. 142, the Company discontinued the amortization of goodwill effective December 31, 2001. Amortization expense related to goodwill in 2001 was $0.4 million.

The following is a reconciliation of previously reported financial information for the year ended December 31, 2001 to adjusted amounts excluding amortization expense relating to goodwill and other intangible assets deemed to have infinite lives, which are no longer being amortized:

The Company maintains significant operations in countries other than the United States. As a result of these global activities, the Company is exposed to changes in foreign currency exchange rates, which affect the results of operations and financial condition. The Company manages exposure to changes in foreign currency exchange rates through its normal operating and financing activities, as well as through the use of financial instruments. Generally, the only financial instruments the Company utilizes are forward exchange contracts.

The purpose of the Company’s currency hedging activities is to mitigate the impact of changes in foreign currency exchange rates. The Company attempts to hedge transaction exposures through natural offsets. To the extent that this is not practicable, major exposure areas considered for hedging include foreign currency denominated receivables and payables, intercompany loans, firm committed transactions, and forecasted sales and purchases.

SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” and its amendments, became effective for the Company on January 1, 2001. The statement requires all derivatives to be recognized as assets or liabilities on the balance sheet and measured at fair value. The estimated fair value of foreign currency forward contracts outstanding at December 31, 2003, was an unrealized gain of $1.6 million.

Included in accumulated other comprehensive income at December 31, 2003, is $0.7 million related to the fair value of derivatives qualifying as cash flow hedges, of which $0.6 million of expense is expected to be reclassified to earnings over the twelve month period ending December 31, 2004. The actual amounts that will be reclassified to earnings over the next twelve months may vary from this amount as a result of changes in market conditions. No amounts were recorded in earnings due to hedge ineffectiveness. No amounts were reclassified to earnings during 2003 in connection with forecasted transactions that were no longer considered probable of occurring. Fair values of forward contracts are based on dealer quotes at the respective reporting dates. At December 31, 2003, the maximum term of derivative instruments that hedge forecasted transactions, for foreign currency hedges, was 26 months.

The counterparties to the Company’s forward contracts consist of a number of major international financial institutions. The Company could be exposed to loss in the event of non-performance by the counterparties. However, credit ratings and concentration of risk of these financial institutions are monitored on a continuing basis and present no significant credit risk to the Company.

The carrying value of cash, accounts receivable, short-term borrowings and accounts payable are a reasonable estimate of their fair value due to the short-term nature of these instruments.

In late 2000, the Company entered into a contract with Shell Petroleum Development Corporation (SPDC) for the refurbishment of 20-year old compressor stations for the Nigerian Gas Company (NGC). These stations are located in the Warri district in the western part of Nigeria.

In August 2003, for the safety of personnel, all the Company’s workers were evacuated from Warri following consultation with independent security advisers. As of December 31, 2003, the gross outstanding accounts receivable balance with SPDC related to the NGC contract was $16.0 million. The Company fully expects to collect the balance. A reserve in the amount of $1.9 million has been provided should negotiations with SPDC result in less than full recovery. This receivable is classified as a current asset in trade accounts receivable as management expects to resolve this situation and liquidate the receivable in 2004.

The Company is involved in various litigation, claims and administrative proceedings, including environmental matters, arising in the normal course of business. In assessing its potential environmental liability, the Company bases its estimates on current technologies and does not discount its liability or assume any insurance recoveries. Amounts recorded for identified contingent liabilities are estimates, which are reviewed periodically and adjusted to reflect additional information when it becomes available. Subject to the uncertainties inherent in estimating future costs for contingent liabilities, management believes that recovery or liability with respect to these matters would not have a material effect on the financial condition, results of operations, liquidity or cash flows of the Company for any year.

In the normal course of business, the Company has issued several direct and indirect guarantees, including performance letters of credit, totaling approximately $0.5 million at December 31, 2003. Management believes these guarantees will not adversely affect the combined financial statements.

The following table represents the changes in the product warranty liability for 2003 and 2002:

Certain office and warehouse facilities, transportation vehicles and data processing equipment are leased. Total rental expense was $13.8 million in 2003, $15.5 million in 2002 and $15.4 million in 2001. Minimum lease payments required under non-cancelable operating leases with terms in excess of one year for the next five years and thereafter are as follows: $9.2 million in 2004, $5.6 million in 2005, $3.3 million in 2006, $2.0 million in 2007, $1.3 million in 2008 and $0.0 million thereafter.

Certain employees of the Company are eligible to participate in stock option plans of IR. The plans grant employees options to purchase Class A common shares of IR at prices not less than the fair market value at the date of the grant. Options become exercisable ratably over a three-year period from their date of grant and expire at the end of ten years. The plans, approved in 1998, also authorize stock appreciation rights (SARs) and stock awards, which result in compensation expense.

Under SFAS No. 123, compensation cost for the applicable provisions of the Company incentive stock plans would be determined based upon the fair value at the grant date for awards issued. The average fair values of the options granted during 2003, 2002, and 2001 were estimated at $13.10, $14.96, and $14.44, respectively, on the date of grant, using the Black-Scholes option-pricing model, which included the following assumptions:

At December 31, 2003, there were 70,980 SAR’s outstanding with no stock options attached.

The following table summarizes information concerning currently outstanding and exercisable options:

The weighted average number of shares exercisable and the weighted average exercise prices were 158,698 shares at a price of $45.67 for December 31, 2002, and 6,250 shares at a price of $39.20 for December 31, 2001.

Earnings (loss) before income taxes for the years ended December 31 were taxed within the following jurisdictions:

The provision for income taxes differs from the amount of income taxes determined by applying the applicable U.S. statutory income tax rate to pretax income, as a result of the following differences:

As of December 31, 2003 and 2002, net operating loss carry forwards of approximately $27.3 million and $34.8 million, respectively, were available to offset taxable income in future years. A portion of these carryforwards will begin to expire in 2011, while the remainder generally have unlimited carry forward periods. Valuation allowances in 2003 and 2002 of $6.1 million and $9.5 million, respectively, have been recorded for certain carryforwards, which will likely not be realized.

Deferred taxes have not been provided on undistributed earnings of $72.9 million and $74.3 million at December 31, 2003 and 2002, respectively, since these earnings have been, and under current plans, will continue to be permanently reinvested in these subsidiaries. It is not practicable to estimate the amount of additional taxes which may be payable upon distribution.

The tax expense reflected in the Combined Statement of Income related to DR UK Ltd., a United Kingdom (UK) incorporated entity, has been presented on a separate company basis as though DR UK Ltd. had filed stand-alone income tax returns. Under operation of UK tax law, tax losses incurred by IR subsidiaries may be surrendered to DR UK Ltd. since they are part of a UK affiliated group. To the extent the losses surrendered to DR UK Ltd. have reduced the actual tax liability, the amount is presented on the Combined Balance Sheet at December 31, 2003 and 2002 as an intercompany payable, not a government tax payable. No formal tax sharing agreement exists between the Company and IR.

The Company and IR sponsor a postretirement plan that covers certain eligible U.S. employees. These plans provide for health care benefits and, in some instances, life insurance benefits. Postretirement health plans generally are contributory and adjusted annually. Life insurance plans are non-contributory. In 1997, the Company amended its postretirement benefit plans for salaried and hourly employees. The amendment eliminated medical benefit coverage for all future retirees except for grandfathered employees. An eligible retiree’s health care benefit coverage is coordinated with Medicare. The Company funds the postretirement

benefit costs principally on a pay-as-you-go basis. Summary information on the Company’s plans at December 31, was as follows:

The components of net periodic postretirement benefits cost for the years ended December 31, were as follows:

The Company uses an annual measurement date of November 30 for substantially all of its postretirement benefit plans for all years presented. The sale of an IR business in February 2003 was deemed to be a significant event and required a remeasurement of the postretirement benefit plan. The weighted-average assumptions used in the February 2003 remeasurement due to the sale were a discount rate of 6.50% and increases in per capita cost of covered health care benefits of 11.00% for the year, gradually reducing to 5.25% by 2009. In the fourth quarter of 2002, IR amended its postretirement benefit plans for U.S. non-bargaining employees and retirees, effective January 1, 2003. The amendments eliminated subsidized life insurance for all future retirees. The weighted-average assumptions used in the fourth quarter of 2002 remeasurement due to plan amendments were a discount rate of 6.75% and increases in per capita cost of covered health care benefits of 11.00% for the year, gradually reducing to 5.25% by 2009.

A 1% change in the medical trend rate assumed for postretirement benefits would have the following effects at December 31, 2003 (in thousands):

Benefit payments for postretirement benefits, which reflect future service, as appropriate, are expected to be paid as follows: $12.5 million in 2004, $12.6 million in 2005, $13.1 million in 2006, $13.8 million in 2007, $14.4 million in 2008 and $77.7 million for the years 2009 to 2013.

The defined benefit plan covering salaried and hourly employees was frozen effective March 31, 1998. The plan was replaced with a defined contribution plan. The Company’s U.S. salaried plans generally provide benefits based on a final average earnings formula. The Company’s hourly pension plans provide benefits under flat formulas. Non-U.S. plans provide benefits based on earnings and years of service. Most of the non-U.S. plans require employee contributions based on the employee’s earnings. The Company’s policy is to fund an amount, which could be in excess of the pension cost expensed, subject to the limitations imposed by current statutes or tax regulations.

Information regarding the Company’s pension plans at December 31, was as follows:

The components of the Company’s pension related expense (income) for the years ended December 31, include the following:

The accumulated benefit obligation for all defined benefit pension plans was $335,271 and $303,116 at December 31, 2003 and 2002, respectively.

The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations more than plan assets were $329.9 million, $323.5 million and $260.1 million, respectively, as of December 31, 2003 and $309.5 million, $302.8 million and $236.6 million, respectively, as of December 31, 2002.

The Company uses an annual measurement date of November 30 for substantially all of its pension plans for the years presented. The expected long-term rates of return on plan assets are determined as of the measurement date. The expected long-term rates of return are projected to be the rates of return to be earned over the period until the benefits are paid. Accordingly, the long-term rates of return should reflect the rates of return on present investments, expected contributions to be received during the current year and on reinvestments over the period. The rates of return utilized reflect the expected rates of return during the periods for which the payment of benefits is deferred. The expected long-term rate of return on plan assets

used is based on what is realistically achievable based on the types of assets held by the plans and the plan’s investment policy. Historical asset return trends for the larger plans are reviewed over fifteen, ten and five years. The actual rate of return for plan assets over the last ten- and fifteen-year periods have exceeded the expected rate of return used. The Company reviews each plan and its historical returns and asset allocations to determine the appropriate expected long-term rate of return on plan assets to be used. At the end of 2002, the Company believed that it needed to revise its long-term expectations based upon the market performance experienced in 2001 and 2002.

The weighted average asset allocations of the Company’s pension plans at December 31, 2003 and 2002, by asset category are as follows:

The Company’s investment objectives in managing its defined benefit plan assets are to ensure that present and future benefit obligations to all participants and beneficiaries are met as they become due; to provide a total return that, over the long-term, maximizes the ratio of the plan assets to liabilities, while minimizing the present value of required Company contributions, at the appropriate levels of risk; and to meet any statutory requirements, laws and local regulatory agencies requirements. Key investment decisions reviewed regularly are asset allocations, investment manager structure, investment managers, investment advisors and trustees or custodians. An asset/liability modeling (ALM) study is used as the basis for global asset allocation decisions and updated approximately every five years or as required. The Company’s current strategic global asset allocation for its pension plans is 60% in equities securities and 40% in debt securities and cash. The Company sets upper limits and lower limits of plus or minus 5%. The rebalancing strategy is reviewed quarterly if cash flows are not sufficient to rebalance the plans and appropriate action is taken to bring the plans within the strategic allocation ranges.

An additional discretionary contribution of $10.6 million was made to its U.S. pension plans in 2003. The Company contributed an additional $30 million in the first quarter of 2004, $9 million of which was required. The Company’s policy is to fund an amount, which could be in excess of the pension cost expensed, subject to the limitations imposed by current tax regulations. The Company plans to fund the plans in 2004 in accordance with contributions required by funding regulations or laws. Most of the non-U.S. plans require employee contributions based on the employees’ earnings.

Pension benefit payments, which reflect future service, as appropriate, are expected to be paid as follows: $18.6 million in 2004, $19.1 million in 2005, $19.7 million in 2006, $20.3 million in 2007, $21.1 million in 2008 and $115.7 million for the years 2009 to 2013.

Most of the Company’s U.S. employees are covered by savings and other defined contribution plans. Employer contributions and costs are determined based on criteria specific to the individual plans and amounted to approximately $8.8 million, $11.4 million and $10.4 million in 2003, 2002 and 2001, respectively. The Company’s costs relating to non-U.S. defined contribution plans, insured plans and other non-U.S. benefit plans were $1.3 million, $0.5 million and $0.5 million in 2003, 2002 and 2001, respectively.

Interest income (expense) includes $1.2 million, $1.4 million and $1.4 million of charges from IR affiliates in 2003, 2002 and 2001, respectively. The amounts shown as cash paid for interest include payments on third-party borrowings only.

The Company supplies equipment and services to the oil and gas industry, which is comprised of a relatively small number of consumers. Within any given year, sales can vary greatly due to the large projects that might be underway with any given oil and gas producer. In 2003, the Company had one customer, whose sales were approximately 11% of total sales. In 2002 and 2001, no one customer comprised more than 10% of the Company’s sales volume.

The Company has operations and/or does business in various non-U.S. countries. It is possible that political instability, foreign currency devaluations or other unanticipated adverse events could materially affect the operations of the Company. The Company believes that it has controls and processes in place to minimize the impact such events, should they occur in the future.

Other income (expense), net includes certain foreign exchange gains and losses, equity in earnings of partially-owned affiliates and other miscellaneous income and expense items. Casualty losses in 2003 primarily represent a loss the Company experienced as a result of a fire at a warehouse in Nigeria. During 2002, the Company received a grant from an agency of New York State. In September 2002, the Company settled an insurance claim associated with patterns destroyed in a fire in a supplier’s facility. The fire occurred in April 2000. The final settlement resulted in a $10.1 million gain recognized in the third quarter of 2002 and a $4.1 million gain in 2001 as the initial payment on the claim.

In 2002, the Company received $10.0 million of grant funds from the New York Empire State Development Corporation (ESDC). Of this amount, $5.0 million was designated as a “capital” grant and $5.0 million was designated as a “workforce development” grant. The Company has recorded $8.0 million of these grants as income in other income (expense) and $2.0 million as a reduction in basis of property and equipment in the 2002 accounts. The grant “vested” over a five year period beginning in 2001 based on three criteria. First, the Company is required to keep three factories open in New York State. Second, the Company would move its headquarters to Olean, New York. Third, the Company would commit to certain employment levels at each year end. The vesting levels were 20% per year from 2001 to 2005. Prior to the end of 2003, the Company and ESDC restructured the grant to reflect the then existing business environment. As a result of this negotiation, the committed employments levels were adjusted from 2,500 to 2,200 and the grant was reduced from the original $10.0 million to $8.4 million. On the basis of the adjusted grant level, the Company has agreed to reimburse ESDC in the amount of $1.6 million over a three year period. The Company has recorded in the 2003 accounts $1.3 million of these grants as expense in other income (expense) and $0.3 million as a reduction in the previous adjustment of property and equipment. The repayment of the $1.6 million is to be made ratably over 36 months in the amount of $44,500 per month beginning in December 2003. Management of the Company believes that these employment levels will be achieved based on the economic outlook and overall business activity.

In September 2000, the Company sold to Volvo Aero Corporation (Volvo) the rights to provide aftermarket support for certain gas turbine engines, and certain related equipment, inventory and know-how needed for Volvo to operate the acquired aftermarket business. Under the purchase agreement, the Company is entitled to royalties to be paid by Volvo based on revenues Volvo earns from operation of aftermarket business until September 30, 2005. The royalty agreement states that Volvo shall pay to the Company 25% of the net revenues of Volvo’s 990 aftermarket business, commencing January 1, 2002.

A similar royalty will be paid for 2003, (25%), 2004 (30%) and 2005 (30%). Pursuant to the agreement described, the Company recorded income of $2.8 million in 2002 and $1.7 million in 2003. This item has been recorded as accounts receivable and “Other operating revenue.”

The Company has two reportable segments based on the engineering and production processes, and the products and services provided by each segment, identified as follows:

1) New Units — are highly engineered solutions to new client requests. The segment includes engineering, manufacturing, sales and administrative support.

2) Parts and services — consist of aftermarket support solutions for the existing population of installed equipment. The segment includes engineering, manufacturing, sales and administrative support.

We evaluate performance based on the Operating Income from each segment. Operating Income excludes Interest, Other Expense such as Currency Losses and Equity Losses, and Taxes.

A third category is shown below as “unallocable”. This category is for expenses and assets that do not belong to either reportable segment because of the nature of the expense or asset. Expenses included as “unallocable” are all Parent Company allocations, shared services, and Research & Development expenses, none of which are directly allocable to either of the two reportable segments. The only Assets that are directly allocable to either of the two reportable segments are Trade Accounts Receivable, Raw Materials & Stores Inventory, Obsolete and Slow-Moving Inventory Reserves, Work in Process Inventory, Progress Payments, and Goodwill. All other Assets such as Cash, Prepaid Expenses, Deferred Taxes, and Long Term Assets are not directly allocable to either of the two reportable segments.

D-R had one client with sales amounting to 10.8% of 2003 Revenues. Revenues were in both New units and Parts and services.

Supplemental information on geographic sales and long-lived assets is also provided.


(a)	Included in the North America caption are certain unallocable intangible assets of $264,626 at 2003 and $271,925 at 2002.

Subsequent to the balance sheet date, a legal matter that has been pending for several years was resolved in the Company’s favor. The Company had a reserve for $4.5 million relating to this lawsuit at December 31, 2003. The Company reversed the reserve in March 2004.

On October 29, 2004, Ingersoll-Rand sold the Company to a controlled affiliate (Dresser-Rand Group, Inc.) of First Reserve Corporation, a private equity group, for cash proceeds of approximately $1.13 billion. The purchase price is subject to adjustment based on certain factors. Coincident with the purchase transaction described above, Dresser-Rand Group, Inc., which is the new parent of the Company, issued $420 million of senior subordinated notes. Certain units of the Company will act as guarantors of these notes.

On January 19, 2005 Dresser-Rand Group Inc. sold its interests in a partially-owned affiliate for proceeds of approximately $10 million. The carrying value of this investment as of the date of sale was approximately $6.2 million.

The following supplemental combining condensed financial information presents the balance sheets as of December 31, 2003 and 2002 and the statements of operations and cash flows for the years ended December 31, 2003, 2002 and 2001 prior to the organizational restructuring that is expected to take place shortly before or concurrent with the sale. In the combining condensed financial statements, the Parent Company, representing the U.S. partnership of the Company, and the Subsidiary Guarantors account for their investments in their wholly-owned and majority-owned subsidiaries using the equity method.

The combined financial statements include all revenues, costs, assets and liabilities directly attributable to the Company. Allocation of costs for facilities, functions and certain services performed by IR organizations for the Company, including environmental and other risk management, internal audit, transportation services, administration of benefit and insurance programs and certain tax, legal, accounting and treasury functions have been made. All of the allocations and estimates in the combined financial statements are based on assumptions that the management of the Company and IR believe are reasonable. The Company’s financial information included herein is not necessarily indicative of the financial position, results of operations and cash flows of the Company in the future or indicative of the results that would have been reported if the Company had operated as an unaffiliated enterprise.

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, necessary to present fairly the consolidated unaudited financial statements as of September 30, 2004 and for the nine month period ended September 30, 2004 and 2003.

The accompanying combined financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2003.

At September 30, 2004, the Company participated in several of the Ingersoll-Rand (IR) stock-based employee compensation plans, which are described more fully in Note 10 of the financial statements for the year ended December 31, 2003. The Company continues to account for these plans under the recognition and measurement principles of Accounting Principles Board No. 25, “Accounting for Stock Issued to Employees.”

The following table illustrates the effect on net income of the Company if it had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure”, to stock-based employee compensation.

The following table sets forth the gross amount and accumulated amortization of the Company’s intangible assets at September 30, 2004 and December 31, 2003:

Intangible asset amortization expense of $5.5 million was recorded for the nine months ended September 30, 2004 and 2003. Estimated intangible asset amortization expense for each of the next five fiscal years is expected to be $7.3 million in 2005, $7.3 million in 2006, $6.8 million in 2007, $6.3 million in 2008, and $6.3 million in 2009.

Included in accumulated other comprehensive income at September 30, 2004, is $0.86 million related to the fair value of derivatives qualifying as cash flow hedges, of which $0.79 million of expense is expected to be reclassified to earnings over the twelve-month period ending September 30, 2005. The actual amounts that will be reclassified to earnings over the next 12 months may vary from this amount as a result of changes in market conditions. No amounts were reclassified to earnings during the period in connection with forecasted transactions that were no longer considered probable of occurring. At September 30, 2004, the maximum term of derivative instruments that hedge forecasted transactions for foreign currency hedges was 21 months.

In August 2003, for the safety of personnel, all the Company’s workers were evacuated from Warri following consultation with independent security advisers. As of September 30, 2004, the gross outstanding accounts receivable balance with SPDC related to the NGC contract was $15.7 million. The Company fully expects to collect the balance. This receivable is classified as a current asset in trade accounts receivable as management expects to resolve this situation and liquidate the receivable in the first quarter of 2005.

The Company is contingently liable for customs duties in certain non-US countries which totaled $0.7 million at September 30, 2004. In the normal course of business, the Company has issued several direct and indirect guarantees. Management believes these guarantees will not adversely affect the combined financial statements.

The following table represents the changes in the product warranty liability for the nine months ended September 30:

The Company and IR sponsor a postretirement plan that covers certain eligible U.S. employees. These plans provide for health care benefits and in some instances, life insurance benefits. Postretirement health plans generally are contributory and adjusted annually. Life insurance plans are non-contributory. The Company funds the postretirement benefit costs principally on a pay-as-you-go basis.

The components of net periodic postretirement benefits cost for the nine months ended September 30, were as follows:

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“the Act”) was enacted. The Act introduced a government provided subsidy based on a percentage of a beneficiary’s annual prescription drug benefits, within defined limits, and the opportunity for a retiree to obtain prescription drug benefits under Medicare. The Company adopted FASB Staff Position 106-2 as of April 1, 2004, the beginning of its second quarter. The Company and its actuarial advisors determined that most benefits provided by the plan were at least actuarially equivalent to Medicare Part D. The Company remeasured the accumulated benefit obligation effects of the Act as of April 1, 2004. The effect of the federal subsidy to which the Company is entitled has been accounted for as an actuarial gain of $13.7 million. The subsidy will have the effect of reducing postretirement benefit expense for 2004 by $1.7 million. The components of the reduction in expense were a decrease in the amortization of the actuarial loss of $1.0 million, a reduction in service cost of $0.1 million and a reduction in the interest cost on the benefit obligation of $0.6 million. Approximately $1.1 million was recorded in the first nine months of 2004 as a reduction in net postretirement benefit expense. Net postretirement benefit expense for the three months ended December 31, 2004 will include a similar reduction in expense due to the effects of the Act.

The assumptions used for 2004 expense are a discount rate and health care cost trend rate of 6.00% and 11.00%, respectively. The assumptions used for the first quarter of 2004 were determined to be appropriate as of April 1, 2004 when the postretirement plan was remeasured to reflect the federal subsidy. In 2003, the postretirement plan was remeasured as of the date of sale of an IR business and the discount rate used was decreased from 6.75% to 6.50%, while the health care cost trend rate remained at 11.00% for 2003.

The defined benefit plan covering salaried and hourly employees of the Company was frozen effective March 31, 1998. The plan was replaced with a defined contribution plan. The Company’s U.S. salaried plans generally provide benefits based on a final average earnings formula. The Company’s hourly pension plans provide benefits under flat formulas. Non-U.S. plans provide benefits based on earnings and years of service. Most of the non-U.S. plans require employee contributions based on the employee’s earnings. The Company’s policy is to fund an amount, which could be in excess of the pension cost expensed, subject to the limitations imposed by current statutes or tax regulations.

The components of the Company’s pension related expense (income) for the nine month periods ended September 30, include the following:

The discount rate, rate of compensation increase and the expected rate of return on plan assets used to calculate pension expense for U.S. plans for 2004 and 2003 were 6.00%, 4.00% and 8.75%, and 6.75%, 4.00% and 8.75%, respectively. The net periodic pension cost for non-U.S. plans for 2004 and 2003 are based on the benefit obligation assumptions used at December 31, 2003 and 2002.

The Company has two reportable segments based on the engineering and production processes, and the products and services provided by each segment, identified as follows:

1) New Units — are highly engineered solutions to new client requests. The segment includes engineering, manufacturing, sales and administrative support.

We evaluate performance based on the Operating Income from each segment. Operating Income excludes Interest, Other Expense such as Currency Losses and Equity Losses, and Taxes.

D-R had one client with sales amounting to 11.5% of Nine Month 2003 Revenues. Revenues were in both New units and Parts and services.

Supplemental information on geographic sales and long-lived assets is also provided.


(a)	Included in the North America caption are certain unallocable intangible assets of $259,156.

On October 29, 2004, IR sold the Company to a controlled affiliate of First Reserve Corporation, a private equity group, for cash proceeds of approximately $1.13 billion. The purchase price is subject to adjustment based on certain factors. Coincident with the transaction, the First Reserve Corporation affiliate, Dresser-Rand Group, Inc., which is the new parent of the Company, issued $420 million of senior subordinated notes. Certain units of the Company act as guarantors of these notes.

On January 19, 2005, Dresser-Rand Group, Inc. sold its interests in a partially owned affiliate for proceeds of approximately $10 million. The carrying value of this investment as of September 30, 2004 was approximately $6.2 million.

The following supplemental condensed combining financial information presents the balance sheets as of September 30, 2004 and December 31, 2003 and the statements of operations and cash flows for the nine months ended September 30, 2004 and 2003 prior to the organizational restructuring that occurred at or about the sale date. In the condensed combining financial statements, the Parent Company, representing the U.S. partnership of the Company, and the Subsidiary Guarantors, account for their investments in their wholly-owned subsidiaries using the equity method.

Until the date that is 90 days from the date of this prospectus, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters with respect to their unsold allotments or subscriptions.

Section 145 of the Delaware General Corporation Law (the “DGCL”) grants each corporation organized thereunder the power to indemnify any person who is or was a director, officer, employee or agent of a corporation or enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the corporation, by reason of being or having been in any such capacity, if he acted in good faith in a manner reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

Section 102(b)(7) of the DGCL enables a corporation in its certificate of incorporation or an amendment thereto or eliminate or limit the personal liability of a director to the corporation or its stockholders of monetary damages for violations of the directors’ fiduciary duty of care, except (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL (providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemptions) or (iv) for any transaction from which a director derived an improper personal benefit. The Certificate of Incorporation and By-Laws for Dresser-Rand Group, Inc. provide for such limitations on liability.

Section 18-108 of the Delaware Limited Liability Company Act empowers a Delaware limited liability company to indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever. In accordance with such section, the limited liability operating agreements of Dresser-Rand LLC, Dresser-Rand Power LLC and Dresser-Rand Global Services, L.L.C. each provides for the indemnification of each of its members, managers, any officers, directors, stockholders, partners, employees, affiliates, representatives or agents of any of the foregoing, and any officers, employees, representatives or agents of the limited liability company from and against any and all losses, claims, demands, liabilities, expenses, judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, in which such individual may be involved, or threatened to be involved, as a party or otherwise, by reason of its management of the affairs of the limited liability company or which relates to or arises out of the limited liability company or its property, business or affairs, except for any action or failure to act of such individual that constitutes fraud, willful misconduct, bad faith or gross negligence.

Section 40 of the New York Partnership Law provides that, subject to any agreement between the partners, the partnership must indemnify every partner in respect of payments made and personal liabilities reasonably incurred in the ordinary and proper conduct of its business, or for the preservation of its business or property. The Second Amended and Restated Partnership Agreement for Dresser-Rand Company does not limit such indemnification.

Our audits of the combined financial statements referred to in our report dated August 12, 2004, except for Notes 19 and 20, which are as of February 10, 2005, appearing elsewhere in this Registration Statement also included an audit of the financial statement schedule listed in Item 21 of this Registration Statement on Form S-4. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related combined financial statements.


	(1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:


	(i) to include any prospectus required by Section 10(a)(3) of the Securities Act;

	(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amend) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more that a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

	(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;


	(2) that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and

	(3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(b) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b) 11 or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

(c) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

(d) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Olean, State of New York, on February 11, 2005.


	By:	/s/ VINCENT R. VOLPE JR.



	Name: Vincent R. Volpe Jr.


	Title:	President, Chief Executive Officer and Director

Each person whose signature appears below authorizes Stephen A. Riordan or any of them, as his attorney in fact and agent, with full power of substitution and resubstitution, to execute, in his name and on his behalf, in any and all capacities, this Registration Statement on Form S-4 and any amendments thereto (and any additional registration statement related thereto permitted by Rule 462(b) promulgated under the Securities Act of 1933 (and all further amendments including post-effective amendments thereto)) necessary or advisable to enable the registrant to comply with the Securities Act of 1933, and any rules, regulations and requirements of the Securities and Exchange Commission, in respect thereof, in connection with the registration of the securities which are the subject of such registration statement, which amendments may make such changes in such registration statement as such attorney may deem appropriate, and with full power and authority to perform and do any and all acts and things, whatsoever which any such attorney or substitute may deem necessary or advisable to be performed or done in connection with any or all of the above-described matters, as fully as each of the undersigned could do if personally present and acting, hereby ratifying and approving all acts of any such attorney or substitute.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Each person whose signature appears below authorizes Stephen A. Riordan, as his or her attorney in fact and agent, with full power of substitution and resubstitution, to execute, in his or her name and on his or her behalf, in any and all capacities, this Registration Statement on Form S-4 and any amendments thereto (and any additional registration statement related thereto permitted by Rule 462(b) promulgated under the Securities Act of 1933 (and all further amendments including post-effective amendments thereto)) necessary or advisable to enable the registrant to comply with the Securities Act of 1933, and any rules, regulations and requirements of the Securities and Exchange Commission, in respect thereof, in connection with the registration of the securities which are the subject of such registration statement, which amendments may make such changes in such registration statement as such attorney may deem appropriate, and with full power and authority to perform and do any and all acts and things, whatsoever which any such attorney or substitute may deem necessary or advisable to be performed or done in connection with any or all of the above-described matters, as fully as each of the undersigned could do if personally present and acting, hereby ratifying and approving all acts of any such attorney or substitute.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.


*	To be filed by amendment.

EX-3.1 2 y68981exv3w1.txt EX-3.1: CERTIFICATE OF INCORPORATION EXHIBIT 3.1 State of Delaware Secretary of State Division of Corporations Delivered 02:29 PM 10/01/2004 FILED 02:29 PM 10/01/2004 SRV 040712264 - 3861720 FILE CERTIFICATE OF INCORPORATION OF DRESSER-RAND GROUP INC. FIRST: The name of the Corporation is Dresser-Rand Group Inc. (hereinafter the "CORPORATION"). SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at that address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the "GCL"). FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is 100 shares of Common Stock, each having a par value of $.01. FIFTH: The name and mailing address of the Sole Incorporator is as follows: Name Address ---- ------- Deborah M. Reusch P.O. Box 636 Wilmington, Delaware 19899 SIXTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders: (1) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. (2) The directors shall have concurrent power with the stockholders to make, alter, amend, change, add to or repeal the By-Laws of the Corporation. (3) The number of directors of the Corporation shall be as from time to time fixed by, or in the manner provided in, the By-Laws of the Corporation. Election of directors need not be by written ballot unless the By-Laws so provide. (4) No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article SIXTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. (5) In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the GCL, this Certificate of Incorporation, and any By-Laws adopted by the stockholders; provided, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted. SEVENTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to any provision contained in the GCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation. EIGHT: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. 2 I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the GCL, do make this Certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 1st day of October, 2004. /s/ Deborah M. Reusch ------------------------- Deborah M. Reusch Sole Incorporator EX-3.2 3 y68981exv3w2.txt EX-3.2: BYLAWS OF DRESSER-RAND GROUP INC. EXHIBIT 3.2 BY-LAWS OF DRESSER-RAND GROUP INC. ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office of Dresser-Rand Group Inc. (the "CORPORATION") shall be in the City of Wilmington, County of New Castle, State of Delaware. SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. SECTION 2. ANNUAL MEETINGS. The Annual Meetings of Stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which meetings the stockholders shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting. Written notice of the Annual Meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. To the fullest extent permitted by the General Corporation Law of the State of Delaware (the "DGCL"), notice shall be permitted to be provided by electronic transmission. SECTION 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or by the Certificate of Incorporation, Special Meetings of Stockholders, for any purpose or purposes, may be called by either (i) the Chairman of the Board of Directors, if there be one, or (ii) the President, (iii) any Vice President, if there be one, (iv) the Secretary or (v) any Assistant Secretary, if there be one, and shall be called by any such officer at the request in writing of a majority of the Board of Directors or at the request in writing of stockholders owning a majority of the capital stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Written notice of a Special Meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting, and only such business as is stated in such notice shall be acted upon thereat. To the fullest extent permitted by the DGCL, notice shall be permitted to be provided by electronic transmission. SECTION 4. QUORUM. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. SECTION 5. VOTING. Unless otherwise required by law, the Certificate of Incorporation or these By-Laws, any question brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat. Unless otherwise provided in the Certificate of Incorporation, each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder. Such votes may be cast in person or by proxy but no proxy shall be voted on or after three years from its date, unless such proxy provides for a longer period. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot. SECTION 6. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken at any Annual or Special Meeting of Stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than the unanimous written consent shall be given to those stockholders who have not consented in writing. 2 SECTION 7. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meetings, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held or, to the fullest extent permitted by the DGCL, on an electronic network. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. SECTION 8. STOCK LEDGER. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 7 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. ARTICLE III DIRECTORS SECTION 1. NUMBER AND ELECTION OF DIRECTORS. The Board of Directors shall consist of not less than one nor more than nine members, the exact number of which shall initially be fixed by the Incorporator and thereafter from time to time by the Board of Directors. Except as provided in Section 2 of this Article, directors shall be elected by a plurality of the votes cast at Annual Meetings of Stockholders, and each director so elected shall hold office until the next Annual Meeting and until his successor is duly elected and qualified, or until his earlier resignation or removal. Any director may resign at any time upon written notice to the Corporation. Directors need not be stockholders. SECTION 2. VACANCIES. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and qualified, or until their earlier resignation or removal. SECTION 3. DUTIES AND POWERS. The business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. 3 SECTION 4. MEETINGS. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman, if there be one, the President, or any directors. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone, telecopy or electronic transmission on twenty-four (24) hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. SECTION 5. QUORUM. Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these By-Laws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 6. ACTIONS OF BOARD. Unless otherwise provided by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. SECTION 7. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless otherwise provided by the Certificate of Incorporation or these By-Laws, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 7 shall constitute presence in person at such meeting. SECTION 8. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may 4 exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors when required. SECTION 9. COMPENSATION. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee hearings. SECTION 10. INTERESTED DIRECTORS. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if: (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or disinterested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IV OFFICERS SECTION 1. GENERAL. The officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Secretary and a Treasurer. The Board of Directors, in its discretion, may also choose a Chairman of the Board of Directors (who must be a director) and one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these By-Laws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board of Directors, need such officers be directors of the Corporation. 5 SECTION 2. ELECTION. The Board of Directors at its first meeting held after each Annual Meeting of Stockholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Any officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers of the Corporation shall be fixed by the Board of Directors. SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President, the Executive Vice President or any Vice President and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess any may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. ARTICLE V STOCK SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board of Directors, the President, the Executive Vice President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. SECTION 2. SIGNATURES. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When 6 authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable in the manner prescribed by law and in these By-Laws. Transfer of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be cancelled before a new certificate shall be issued. SECTION 5. RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 6. BENEFICIAL OWNERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. ARTICLE VI NOTICES SECTION 1. NOTICES. Whenever written notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may 7 also be given personally or by telegram, telex, cable or, to the fullest extent permitted by the DGCL, by electronic transmission. SECTION 2. WAIVERS OF NOTICE. Whenever any notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed, by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE VII GENERAL PROVISIONS SECTION 1. DIVIDENDS. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of the capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve. SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SECTION 4. CORPORATE SEAL. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII INDEMNIFICATION The Corporation shall indemnify to the full extent authorized or permitted by law (as now or hereafter in effect) any person made, or threatened to be made, a defendant or witness to any action, suit or proceeding (whether civil or criminal or otherwise) by reason of the fact that he, his testator or intestate, is or was a director or officer of the Corporation or by reason of the fact that such director or officer, at the request of the Corporation, is or 8 was serving any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, in any capacity. ARTICLE IX AMENDMENTS SECTION 1. AMENDMENT OF BY-LAWS. These By-Laws may be altered, amended or repealed, in whole or in part, or new By-Laws may be adopted by the stockholders or by the Board of Directors, provided, however, that notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice of such meeting of stockholders or Board of Directors as the case may be. All such amendments must be approved by either the holders of a majority of the outstanding capital stock entitled to vote thereon or by a majority of the entire Board of Directors then in office. SECTION 2. ENTIRE BOARD OF DIRECTORS. As used in this Article IX and in these By-Laws generally, the term "entire Board of Directors" means the total number of directors which the Corporation would have if there were no vacancies. 9 EX-3.3 4 y68981exv3w3.txt EX-3.3: CERTIFICATE OF FORMATION OF DRESSER-RAND LLC EXHIBIT 3.3 STATE OF DELAWARE CERTIFICATE OF FORMATION OF DRESSER-RAND LLC This Certificate of Formation of Dresser-Rand LLC (the "Company") is being executed by the undersigned for the purpose of creating a Delaware limited liability company pursuant to Section 18-201 of the Delaware Limited Liability Company Act. FIRST: The name of the Company is: Dresser-Rand LLC. SECOND: The address of the registered office of the Company in the State of Delaware is the Corporation Trust Company, 1209 Orange Street, Wilmington, DE 19801, County of New Castle. The name of its Registered Agent at such address is the Corporation Trust Company. THIRD: The personal liability of the directors and officers of the Company is hereby limited and eliminated to the fullest extent permitted by the laws of the State of Delaware, as the same may be amended from time to time. FOURTH: The Company shall have the power to indemnify and advance legal defense fees to its directors and officers to the fullest extent permitted by the laws of the State of Delaware, as the same may be amended from time to time. IN WITNESS WHEREOF, the undersigned, an authorized person, has executed this Certificate of Formation or Dresser-Rand LLC this 26th day of October, 2004. DR HOLDING CORP., authorized person and sole organizer of Dresser-Rand LLC By: /s/ Barbara Santoro ---------------------------------- Name: Barbara Santoro Its: Secretary State of Delaware Secretary of State Division of Corporations Delivered 09:05 PM 10/26/2004 FILED 08:10 PM 10/26/2004 SRV 040773856 - 3872952 FILE EX-3.4 5 y68981exv3w4.txt EX-3.4: AMENDED AND RESTATED OPERATING AGREEMENT OF DRESSER-RAND LLC EXHIBIT 3.4 AMENDED AND RESTATED OPERATING AGREEMENT OF DRESSER-RAND LLC THIS AMENDED AND RESTATED OPERATING AGREEMENT (the "Agreement") of Dresser-Rand LLC (the "Company") dated and effective as of this 29th day of October, 2004, is adopted, executed and entered into by Dresser-Rand Group Inc., as the sole member of the Company (the "Member"). This Amended and Restated Operating Agreement amends and restates that certain Operating Agreement of Dresser-Rand LLC dated as of October, 29 2004. RECITAL The Company has been formed pursuant to the Delaware Limited Liability Company Act, 6 Del. C. Section 18-101 et seq. (as from time to time amended and including any successor statute of similar import, the "Act") and the Certificate of Formation (as defined herein) has been filed in the Office of the Secretary of State of the State of Delaware in conformity with the Act. ARTICLE 1 The Limited Liability Company 1.1 Formation. The Company has been organized as a limited liability company pursuant to the provisions of the Act. A certificate of formation for the Company as described in Section 18-201 of the Act (the "Certificate of Formation") has been filed in the Office of the Secretary of State of the State of Delaware in conformity with the Act. 1.2 Name. The name of the Company shall be "Dresser-Rand LLC" and its business shall be carried on in such name with such variations and changes as the Member shall determine or deem necessary to comply with requirements of the jurisdictions in which the Company's operations are conducted. 1.3 Business Purpose; Powers. The Company is formed for the purpose of engaging in any lawful business, purpose or activity for which limited liability companies may be formed under the Act. The Company shall possess and may exercise all the powers and privileges granted by the Act or by any other law or by this Agreement, together with any powers incidental thereto, so far as such powers and privileges are necessary or convenient to the conduct, promotion or attainment of the business purposes or activities of the Company. 1.4 Registered Office and Agent. The location of the registered office of the Company shall be 1209 Orange Street, Wilmington, Delaware 19801. The Company's Registered Agent at such address shall be Corporation Trust Company. 1.5 Term. Subject to the provisions of Article 6 below, the Company shall have perpetual existence. ARTICLE 2 The Member 2.1 The Member. The name and address of the Member is as follows:

2.2 Actions by the Member; Meetings. The Member may approve a matter or take any action at a meeting or without a meeting by the written consent of the Member. Meetings of the Member may be called at any time by the Member. 2.3 Liability of the Member. All debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Member shall not be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a member. 2.4 Power to Bind the Company. The Member (acting in its capacity as such) shall have the authority to bind the Company to any third party with respect to any matter. 2 2.5 Admission of Members. New members shall be admitted only upon the approval of the Member. ARTICLE 3 Management by the Member 3.1 Management. The management of the Company is fully reserved to the Member, and the Company shall not have "managers," as that term is used in the Act. The powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the direction of, the Member, who shall make all decisions and take all actions for the Company. In managing the business and affairs of the Company and exercising its powers, the Member shall act through resolutions adopted in written consents. Decisions or actions taken by the Member in accordance with this Agreement shall constitute decisions or action by the Company and shall be binding on the Company. 3.2 Officers and Related Persons. The Member shall have the au- thority to appoint and terminate officers of the Company and retain and terminate employees, agents and consultants of the Company and to delegate such duties to any such officers, employees, agents and consultants as the Member deems appropriate, including the power, acting individually or jointly, to represent and bind the Company in all matters, in accordance with the scope of their respective duties. ARTICLE 4 Capital Structure and Contributions 4.1 Capital Structure. The capital structure of the Company shall consist of one class of common interests (the "Common Interests"), which shall initially consist of one hundred common interests. All Common Interests shall be identical with each other in every respect. The Member shall own all of the Common Interests issued and outstanding. The Company hereby irrevocably elects that all membership interests in the Company shall be securities governed by Article 8 of the Uniform Commercial Code. Each certificate evidencing membership interests in the Company shall bear the following legend: "This certificate evidences an interest in Dresser-Rand Power LLC and shall be a security for purposes of Article 8 of the Uniform Commercial Code." This provision shall not be amended, and any purported 3 amendment to this provision shall, without the consent of the assignee, not take effect until all outstanding certificates have been surrendered for cancellation. 4.2 Capital Contributions. From time to time, the Member may determine that the Company requires capital and may make capital contribution(s) in an amount determined by the Member. A capital account shall be maintained for the Member, to which contributions and profits shall be credited and against which distributions and losses shall be charged. ARTICLE 5 Profits, Losses and Distributions 5.1 Profits and Losses. For financial accounting and tax purposes, the Company's net profits or net losses shall be determined on an annual basis in accordance with the manner determined by the Member. In each year, profits and losses shall be allocated entirely to the Member. 5.2 Distributions. The Member shall determine profits available for distribution and the amount, if any, to be distributed to the Member, and shall authorize and distribute on the Common Interests, the determined amount when, as and if declared by the Member. The distributions of the Company shall be allocated entirely to the Member. ARTICLE 6 Events of Dissolution The Company shall be dissolved and its affairs wound up upon the occurrence of any of the following events (each, an "Event of Dissolution"): (a) The Member votes for dissolution; or (b) A judicial dissolution of the Company under Section 18-802 of the Act. 4 ARTICLE 7 Transfer of Interests in the Company The Member may sell, assign, transfer, convey, gift, exchange or otherwise dispose of any or all of its Common Interests and, upon receipt by the Company of a written agreement executed by the person or entity to whom such Common Interests are to be transferred agreeing to be bound by the terms of this Agreement, such person shall be admitted as a member. ARTICLE 8 Exculpation and Indemnification 8.1 Exculpation. Notwithstanding any other provisions of this Agreement, whether express or implied, or any obligation or duty at law or in equity, none of the Member, or any officers, directors, stockholders, partners, employees, affiliates, representatives or agents of any of the Member, nor any officer, employee, representative or agent of the Company (individually, a "Covered Person" and, collectively, the "Covered Persons") shall be liable to the Company or any other person for any act or omission (in relation to the Company, its property or the conduct of its business or affairs, this Agreement, any related document or any transaction or investment contemplated hereby or thereby) taken or omitted by a Covered Person in the reasonable belief that such act or omission is in or is not contrary to the best interests of the Company and is within the scope of authority granted to such Covered Person by the Agreement, provided such act or omission does not constitute fraud, willful misconduct, bad faith, or gross negligence. 8.2 Indemnification. To the fullest extent permitted by law, the Company shall indemnify and hold harmless each Covered Person from and against any and all losses, claims, demands, liabilities, expenses, judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative ("Claims"), in which the Covered Person may be involved, or threatened to be involved, as a party or otherwise, by reason of its management of the affairs of the Company or which relates to or arises out of the Company or its property, business or affairs. A Covered Person shall not be entitled to indemnification under this Section 8.2 with respect to (i) any Claim with respect to which such Covered Person has engaged in fraud, willful misconduct, bad faith or gross negligence or (ii) any Claim initiated by such Covered Person unless such Claim (or part thereof) (A) was brought to enforce such Covered Person's rights to indemnification hereunder or (B) was authorized or consented to by 5 the Member. Expenses incurred by a Covered Person in defending any Claim shall be paid by the Company in advance of the final disposition of such Claim upon receipt by the Company of an undertaking by or on behalf of such Covered Person to repay such amount if it shall be ultimately determined that such Covered Person is not entitled to be indemnified by the Company as authorized by this Section 8.2. 8.3 Amendments. Any repeal or modification of this Article VIII by the Member shall not adversely affect any rights of such Covered Person pursuant to this Article VIII, including the right to indemnification and to the advancement of expenses of a Covered Person existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification. ARTICLE 9 Miscellaneous 9.1 Tax Treatment. To the extent the Member is the sole member of the Company, unless otherwise determined by the Member, the Company shall be treated as an entity that is disregarded as an entity separate from its owner for all tax purposes, and the Member and the Company shall timely make any and all necessary elections and filings for the Company to be so treated. 9.2 Amendments. Amendments to this Agreement and to the Certificate of Formation shall be approved in writing by the Member. An amendment shall become effective as of the date specified in the approval of the Member or if none is specified as of the date of such approval or as otherwise provided in the Act. 9.3 Severability. If any provision of this Agreement is held to be invalid or unenforceable for any reason, such provision shall be ineffective to the extent of such invalidity or unenforceability; provided, however, that the remaining provisions will continue in full force without being impaired or invalidated in any way unless such invalid or unenforceable provision or clause shall be so significant as to materially affect the expectations of the Member regarding this Agreement. Otherwise, any invalid or unenforceable provision shall be replaced by the Member with a valid provision which most closely approximates the intent and economic effect of the invalid or unenforceable provision. 9.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of laws thereof. 6 9.5 Limited Liability Company. The Member intends to form a limited liability company and does not intend to form a partnership under the laws of the State of Delaware or any other laws. 7 IN WITNESS WHEREOF, the undersigned has duly executed this Agree- ment as of the day first above written. Dresser-Rand Group Inc. By: /s/ Thomas R. Denison ----------------------------------- Name: Thomas R. Denison Title: Authorized Person EX-3.7 8 y68981exv3w7.txt EX-3.7: BUSINESS CERTIFICATE FOR PARTNERS OF DRESSER-RAND COMPANY EXHIBIT 3.7 STATE OF NEW YORK, COUNTY OF CATTARAUGUS S8. I, James K. Griffith, Clerk of the County of Cattaraugus of the County Court of said County and of the Supreme Court, both being Courts of Record having a common seal. DO HEREBY CERTIFY that I have compared this copy with the original filed, recorded, filed and recorded, filed and entered, or entered in the office and that the same is a correct transcript thereof and of the whole of said original. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Seal of said County and Courts on Date 12-17-04 [ALAN (illegible) SIGNATURE] Clerk ____________ ____________________________________ X 74- Certificate of Conducting COPYRIGHT 1973 BY JULIUS BLUMBERG, INC. Business as Partners. LAW BLANK PUBLISHERS Individual - Corporation. 80 EXCHANGE PL. AT BROADWAY, N.Y.C. 10004 BUSINESS CERTIFICATE FOR PARTNERS The undersigned do hereby certify that they are Partners business as members of a partnership under the name or designation of DRESSER-RAND COMPANY at 1101 Senica Ave., Olean, New York 14760 and N. Fifth St., P.O. Box 560 in the County of Cattaraugus, Sate of New York, and Olean, New York 14760 DRESSER INDUSTRIES, INC. 1600 Pacific Ave. Dallas, Texas 75221 INGERSOLL-RAND COMPANY 200 Chestnut Ridge Rd. Woodcliff Lake, New Jersey 07675 WE DO FURTHER CERTIFY that we are ________________________ the person or persons heretofore using such name or names to carry on or conduct or transact business. IN WITNESS WHEREOF, We have this 23 day of December 1987 made and signed this certificate. (SEAL) DRESSER INDUSTRIES, INC. ______________________________________ By: /s/ M.S. Nickson, Jr. ______________________________________ M.S. Nickson, Jr., Vice President ______________________________________ INGERSOLL-RAND COMPANY ______________________________________ By: ROBERT D. KUEONNE ______________________________________ Vice President ______________________________________ /s/ Kathie Brundage ______________________________________ Notary Public State of TEXAS County of DALLAS ss: CORPORATE ACKNOWLEDGMENT On this 23 day of December 1987, before me personally appeared M. S. Nickson, Jr. to me known, who being by me duly sworn, did depose and say, that he resides in that he is the Vice President of DRESSER INDUSTRIES, INC. the corporation described in and which executed the foregoing certificate that he knows the seal of said corporation; that the seal affixed to said certificate is such corporate seal; that it was so affixed by order of the Board of DIRECTORS of said corporation, and that he signed his name thereto by like order. /s/ Kathi Brundage --------------------- [SEAL] NOTARY PUBLIC KATHI BRUNDAGE, Notary Public in and for the State of Texas My Commission Expires November 13, 1988 INDEX No. - --------------------------------------- CERTIFICATE OF PARTNERS CONDUCTING BUSINESS UNDER THE NAME OF - --------------------------------------- State of New Jersey County of Bergen ss: Corporate Acknowledgment On this 28th day of December 1987, before me personally appeared Robert D. Krumme to me known, who being by me duly sworn, did depose and says, that he resides in Larchmont, New York that he is the Vice-President of INGERSOLL-RAND COMPANY the corporation described in and which executed the foregoing certificate; that he knows the seal of said corporation; that the seal affixed to said certificate is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. /s/ Myra ??? [Illegible] --------------------- [SEAL] Notary Public Myra ???[Illegible] NOTARY PUBLIC, NEW JERSEY My Commission Expires June 29, ???? EX-3.8 9 y68981exv3w8.txt EX-3.8: SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT OF DRESSER-RAND COMPANY EXHIBIT 3.8 SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT This SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT (this "Agreement") is entered into as of October 29, 2004 between Dresser-Rand Group Inc., a Delaware corporation ("Group"), and Dresser-Rand LLC ("D-R LLC"), a Delaware limited liability company. WHEREAS, the Partnership (as defined below) was formed pursuant to that certain Partnership Agreement (the "Original Partnership Agreement"), dated as of December 31, 1986, by and between Ingersoll-Rand Company, a New Jersey Corporation ("IR"), and Dresser Industries, Inc., a Delaware corporation ("Dresser"); WHEREAS, the Original Partnership Agreement was amended and restated in its entirety pursuant to that certain Amended and Restated Partnership Agreement (the "Amended Partnership Agreement"), dated as of October 1, 1992, between IR and Dresser; WHEREAS, pursuant that certain Transaction Agreement, dated as of December 30, 1999, by and among IR, Dresser and D-R Acquisition LLC, Dresser assigned all of its interests in the Partnership (as defined below) to IR; WHEREAS, pursuant to that certain Equity Purchase Agreement (the "Purchase Agreement"), dated as of August 25, 2004, between Dresser-Rand Holdings, LLC (f/k/a FRC Acquisitions LLC) ("Holdings"), on behalf of itself and the other buyers set forth on Exhibit A thereto, and Ingersoll-Rand Company Limited, a company organized under the laws of Bermuda, on behalf of itself and the other sellers set forth on Exhibit A thereto, Holdings has agreed to acquire (the "Acquisition") from such sellers, and the sellers have agreed to sell to Holdings and such buyers, the Acquired Interests (as defined in the Purchase Agreement) including the equity interests in D-R LLC and Dresser-Rand Company; and WHEREAS, in connection with the Acquisition, the parties hereto desire to amend and restate in its entirety the Amended Partnership Agreement in order to provide for the governing of the affairs of the Partnership (as defined below) and the conduct of its business. 1. NAME AND BUSINESS: The parties (individually a "Partner" and jointly the "Partners") hereby continue (and, only in the event the partnership cannot be continued for any reason, form) a general partnership formed (the "Partnership") under the firm name of Dresser-Rand Company to engage in any lawful business, purpose or activity for which partnerships may be formed under the Partnership Law of the State of New York. 2. PLACE OF BUSINESS: The principle place of business of the Partnership shall be located at Olean, New York or at such other location as may be approved by the Partners from time to time. 3. TERM: The Partnership shall continue until dissolved by the will of the Partners or by operation of law. 4. OFFICERS AND RELATED PERSONS: The Partners shall have the authority to appoint and terminate officers of the Partnership and to retain and terminate employees, agents and consultants of the Partnership and delegate any Partner's duties to any such officers, employees, agents and consultants as the Partners deem appropriate, including the power, acting individually or jointly, to represent and bind the Partnership in all matters, in accordance with scope of their respective duties. 5. PERCENTAGE INTERESTS: The Partners shall have the following undivided percentage interests in the Partnership, and unless otherwise agreed to in writing by the Partners, the Partners shall share in the profits or losses of the Partnership according to such percentage interests: D-R LLC (51%) and Group (49%). 6. TAX TREATMENT: Unless otherwise determined by the Partners, the Partnership shall be treated as an entity that is disregarded as an entity separate from its owners for all tax purposes, and the Partnership and the Partners shall timely make any and all necessary elections and filings for the Partnership to be so treated. 7. CAPITAL CONTRIBUTIONS: From time to time, a Partner may determine that the Partnership requires capital and may make capital contribution(s) in an amount determined by the Partner. A capital account shall be maintained for each Partner, to which contributions and profits shall be credited and against which distributions and losses shall be charged. 8. MANAGEMENT DUTIES: Each Partner shall devote as reasonably required its attention to the business of the Partnership and shall have equal rights in the management of the Partnership business. 9. RESTRICTIONS: Neither Partner shall, without the consent of the other, borrow money in the firm name, for any purpose, including firm purposes, or utilize collateral owned by the Partnership as security for such loans. Neither Partner shall, without the consent of the other, assign, transfer, compromise or release any claim of the Partnership except upon payment in full of the amount due, nor shall either Partner, without the consent of the other, arbitrate or consent to the arbitration of any disputes in which the Partnership is involved. Neither Partner shall, without the consent of the other, execute any document including, but not limited to, assignments for the benefit of creditors, bonds, confessions of judgment, chattel mortgages, deeds, guarantees, indemnity bonds or contracts of sale, that compromises the Partnership ownership of substantially all of the property of the Partnership. Neither Partner shall, without the consent of the other, lease or mortgage any real property or any interest in real property belonging to the Partnership, nor shall either party in any manner transfer any interest in the Partnership to anyone else, except for the other party to this agreement. 10. BOOKS: Accurate books of account of all firm business shall be kept, and shall be open to the inspection of either Partner at all times. 11. ACCOUNTING BASIS: The books of account shall be kept on a cash basis. 12. FISCAL YEAR: The fiscal year of the firm shall commence on January 1st of each year, and end on the next following December 31st, at which time the books of account shall be closed and balanced, and audited by a certified public accountant. 13. ADMISSION OF NEW PARTNERS: No new Partners may be admitted to the firm except upon the consent of the Partners. 14. CONTINUATION OF BUSINESS: In the event a Partner withdraws, the remaining Partner shall have the right to continue the business of the Partnership under the present name, either alone or in connection with any other individuals the remaining Partner may select. However, the remaining Partner shall pay to the withdrawing Partner the value of the interest of the withdrawing Partner as provided for in this Agreement. 15. BUY-OUT PROVISION: The value of a Partner's interest in the business of the Partnership shall be determined by the sum of that Partner's capital account; any unpaid loans due such Partner; the value of such Partner's share of undistributed, accrued net profits; and such Partner's interest in the appreciated value of the Partnership property. 16. DISSOLUTION: In the event that the remaining Partner does not elect to purchase the interest of the withdrawing Partner, or in the event that the Partners mutually agree to dissolve the Partnership, the Partnership shall wind-up and the Partners shall proceed to liquidate the business of the Partnership. Partnership assets shall be used in the following order: (a) to pay all Partnership debts; (b) all undistributed funds in the drawing accounts are to be paid to the Partners entitled to them; (c) all accrued net profits and losses are to be credited or debited from the date of the last accounting to the date of termination; (d) the remaining assets shall be divided according to the proportionate interest of the Partners on the basis of their respective capital accounts as they stood on the date of such termination. 17. NOTICES: All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by facsimile or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and shall be deemed given when so delivered by hand or sent by facsimile, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows: (a) if to Group: Dresser-Rand Group Inc. Paul Clark Drive P.O. Box 560 Olean, NY 14760 USA Attention: Vincent R. Volpe Fax: (716) 375-3178 with copies to: Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, NY 10036 Attention: Howard L. Ellin Fax: (212) 735-2000 and First Reserve Corporation One Lafayette Place Greenwich, CT 06830 Attention: Thomas R. Denison Fax: (203) 661-6729 (b) if to D-R LLC: Dresser-Rand LLC Paul Clark Drive P.O. Box 560 Olean, NY 14760 USA Attention: Vincent R. Volpe Fax: (716) 375-3178 with copies to: Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, NY 10036 Attention: Howard L. Ellin Fax: (212) 735-2000 and First Reserve Corporation One Lafayette Place Greenwich, CT 06830 Attention: Thomas R. Denison Fax: (203) 661-6729 18. GOVERNING LAW: This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of law principles thereof. 19. COUNTERPARTS: This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. Any counterpart may be executed by facsimile signature and such facsimile signature shall be deemed an original. 20. 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. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed, in each case as of the day and year first above written. DRESSER-RAND GROUP INC. By: /s/ Thomas R. Denison --------------------- Name: Thomas R. Denison Title: President DRESSER-RAND LLC By: Dresser-Rand Group Inc., its sole member By: /s/ Thomas R. Denison --------------------- Name: Thomas R. Denison Title: President EX-3.9 10 y68981exv3w9.txt EX-3.9: AMENDED AND RESTATED CERTIFICATE OF FORMATION OF DRESSER-RAND GLOBAL SERVICES LLC EXHIBIT 3.9 State of Delaware Secretary of State Division of Corporations Delivered 03:27 PM 10/29/2004 FILED 03:27 PM 10/29/2004 SRV 040783421 - 2945491 FILE AMENDED AND RESTATED CERTIFICATE OF FORMATION OF DRESSER-RAND GLOBAL SERVICES, L.L.C. Pursuant to Section 18-208 of the Delaware Limited Liability Company Act 1. The name of the limited liability company is Dresser-Rand Global Services, L.L.C. (the "Company"). The original Certificate of Formation of the Company was filed on September 16, 1998. 2. The Certificate of Formation of the Company is hereby amended and restated in its entirety as follows: "1. The name of the limited liability company is Dresser-Rand Global Services, L.L.C. 2. The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company." IN WITNESS WHEREOF, the undersigned authorized person has duly executed this Certificate of Amendment this 29th day of October, 2004. DRESSER-RAND GLOBAL SERVICES, L.L.C. By: Dresser-Rand Company, its sole member By: Dresser-Rand Group Inc., its general partner By: /s/ Thomas R. Denison -------------------------------------------- Name: Thomas R. Denison Title: President By: Dresser-Rand LLC, its general partner By: Dresser-Rand Group Inc., its sole member By: /s/ Thomas R. Denison -------------------------------------------- Name: Thomas R. Denison Title: President EX-3.10 11 y68981exv3w10.txt EX-3.10: AMENDED AND RESTATED OPERATING AGREEMENT OF DRESSER-RAND GLOBAL SERVICES, L.L.C. EXHIBIT 3.10 AMENDED AND RESTATED OPERATING AGREEMENT OF DRESSER-RAND GLOBAL SERVICES, L.L.C. THIS AMENDED AND RESTATED OPERATING AGREEMENT (the "Agreement") of Dresser-Rand Global Services, L.L.C. (the "Company") dated as of this 29 day of October, 2004, by Dresser-Rand Company, as the sole member of the Company (the "Member"). This Amended and Restated Operating Agreement amends and restates those certain Regulations of Dresser-Rand Global Services, L.L.C. dated as of September 17, 1998. RECITAL The Company has been formed pursuant to the Delaware Limited Liability Company Act, 6 Del. C. Section 18-101 et seq. (as from time to time amended and including any successor statute of similar import, the "Act") and the Certificate of Formation (as defined herein) has been filed in the Office of the Secretary of State of the State of Delaware in conformity with the Act. ARTICLE 1 The Limited Liability Company 1.1 Formation. The Member has previously formed the Company as a limited liability company pursuant to the provisions of the Act. A certificate of formation for the Company as described in Section 18-201 of the Act (the "Certificate of Formation") has been filed in the Office of the Secretary of State of the State of Delaware in conformity with the Act. 1.2 Name. The name of the Company shall be "Dresser-Rand Global Services, L.L.C." and its business shall be carried on in such name with such variations and changes as the Board (as hereinafter defined) shall determine or deem necessary to comply with requirements of the jurisdictions in which the Company's operations are conducted. 1.3 Business Purpose; Powers. The Company is formed for the purpose of engaging in any lawful business, purpose or activity for which limited liability companies may be formed under the Act. The Company shall possess and may exercise all the powers and privileges granted by the Act or by any other law or by this Agreement, together with any powers incidental thereto, so far as such powers and privileges are necessary or convenient to the conduct, promotion or attainment of the business purposes or activities of the Company. 1.4 Registered Office and Agent. The location of the registered office of the Company shall be 1209 Orange Street, Wilmington, Delaware 19801. The Company's Registered Agent at such address shall be Corporation Trust Company. 1.5 Term. Subject to the provisions of Article 6 below, the Company shall have perpetual existence. ARTICLE 2 The Member 2.1 The Member. The name and address of the Member is as follows:

N.A. means not applicable. * This Cross Reference Table is not part of the Indenture. TABLE OF CONTENTS

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-iv- EXHIBITS Exhibit A FORM OF GLOBAL NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF SUPPLEMENTAL INDENTURE -v- INDENTURE dated as of October 29, 2004 among Dresser-Rand Group Inc., a Delaware corporation (the "Company"), the Guarantors (as defined) and Citibank, N.A., a national association, as trustee. The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined) of (a) the $420,000,000 aggregate principal amount of the Company's 7-3/8% Senior Subordinated Notes due 2014 (the "Initial Notes"), (b) any Additional Notes (as defined herein) that may be issued after the date hereof and (c) if and when issued pursuant to the Registration Rights Agreement (as defined herein), the Company's Exchange Notes (as defined herein) issued in the Registered Exchange Offer (as defined herein) in exchange for any outstanding Initial Notes or Additional Notes (all such securities in clauses (a), (b) and (c) being referred to collectively as the "Notes"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions. "144A Global Note" means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Acquired Debt" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Additional Interest" means all Additional Interest then owing pursuant to the Registration Rights Agreement. "Additional Notes" means additional Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the Initial Notes. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings. "Agent" means any Registrar, co-registrar, Paying Agent or additional paying agent. "Applicable Premium" means, with respect to any Note on any redemption date, the greater of: (1) 1.0% of the principal amount of the Note; or (2) the excess of: (a) the present value at the redemption date of (i) the redemption price of the Note at November 1, 2009, (such redemption price being set forth in the table appearing in Section 3.07(c) hereof) plus (ii) all required interest payments due on the Note through November 1, 2009, (excluding accrued but unpaid interest to the applicable redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the principal amount of the Note. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "Asset Acquisition" means: (1) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; or (2) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprise any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by Section 4.15 hereof and/or Section 5.01 hereof and not by Section 4.10 hereof; and (2) the issuance or sale of Equity Interests in any of the Company's Restricted Subsidiaries. -2- Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale: (1) any single transaction or series of related transactions that involves assets or Equity Interests of any Restricted Subsidiary having a Fair Market Value of less than $5.0 million; (2) a transfer of assets between or among the Company and any of its Restricted Subsidiaries; (3) an issuance or sale of Equity Interests by a Restricted Subsidiary of the Company to the Company or to another Restricted Subsidiary of the Company; (4) the sale or lease of inventory, products or services or the lease, assignment or sub-lease of any real or personal property in the ordinary course of business; (5) the sale or discounting of accounts receivable in the ordinary course of business; (6) any sale or other disposition of damaged, worn-out, obsolete or no longer useful assets or properties in the ordinary course of business; (7) any sale of assets received by the Company or any of its Restricted Subsidiaries upon the foreclosure on a Lien; (8) the sale or other disposition of cash, Cash Equivalents or Marketable Securities; (9) a sale of accounts receivable and related assets of the type specified in the definition of "Receivables Financing" to a Receivables Subsidiary in a Qualified Receivables Financing; (10) a transfer of accounts receivable and related assets of the type specified in the definition of "Receivables Financing" (or a fractional undivided interest therein) by a Receivables Subsidiary in a Qualified Receivables Financing; (11) a Restricted Payment that does not violate Section 4.07 hereof or any Permitted Investment; (12) any sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary; (13) the granting of Liens not otherwise prohibited by this Indenture; (14) the surrender, or waiver of contract rights or settlement, release or surrender of contract, tort or other claims; and -3- (15) any exchange of assets related to a Permitted Business of comparable market value, as determined in good faith by the Company. "Bank Agent" means the agent for the lenders under the Credit Agreement or its successors as agent for the lenders under the Credit Agreement. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning. "Board of Directors" means: (1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board; (2) with respect to (i) a limited partnership, the Board of Directors or other governing body of the general partner of the partnership and (ii) with respect to a general partnership, the general partners or other persons authorized to act as such pursuant to the partnership agreement; (3) with respect to a limited liability company, the Board of Directors or other governing body, and in the absence of the same, the manager or board of managers or the managing member or members or any controlling committee thereof; and (4) with respect to any other Person, the board or committee of such Person serving a similar function. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Business Day" means a day other than a Saturday, Sunday or other day on which banking institutions are authorized or required by law to close in New York State. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet (excluding the footnotes thereto) prepared in accordance with GAAP. "Capital Stock" means: (1) in the case of a corporation, corporate stock; -4- (2) in the case of an association or business entity that is not a corporation, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock. "Cash Contributions" means the aggregate amount of cash contributions made to the capital of the Company or any Guarantor described in the definition of "Contribution Indebtedness." "Cash Equivalents" means: (1) United States dollars or, in the case of any Foreign Subsidiary, such local currencies held by it from time to time in the ordinary course of business; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than one year from the date of acquisition; (3) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a rating at the time of acquisition thereof of P-1 or better from Moody's or A-1 or better from S&P; (4) repurchase obligations for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper having one of the two highest ratings obtainable from Moody's or S&P and, in each case, maturing within one year after the date of acquisition; (6) securities issued or fully guaranteed by any state or commonwealth of the United States, or by any political subdivision or taxing authority thereof having one of the two highest ratings obtainable from Moody's or S&P, and, in each case, maturing within one year after the date of acquisition; (7) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition; -5- (8) Indebtedness or Preferred Stock issued by Persons with a rating of "A" or higher from S&P or "A-2" from Moody's; and (9) in the case of any Foreign Subsidiary, investments denominated in the currency of the jurisdiction in which that Foreign Subsidiary is organized or has its principal place of business, which are similar to and have similar ratings from similar rating agencies to the items specified in clauses (2), (3), (4), (6), (7), and (8). "Change of Control" means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, in each case, taken as a whole, to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act), other than the Permitted Holders; (2) the adoption of a plan relating to the liquidation or dissolution of the Company; (3) the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that any "person" or "group" (as such terms are used in sections 13(d) and 14(d) of the Exchange Act), other than the Permitted Holders, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the voting power of the Voting Stock of the Company; or (4) the first day on which a majority of the members of the Board of Directors of Holdings or the Company are not Continuing Directors. "Clearstream" means Clearstream Banking, S.A. and any successor thereto. "Company" means Dresser-Rand Group Inc., a Delaware corporation and any and all successors thereto. "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period (A) plus, without duplication to the extent the same was excluded in calculating Consolidated Net Income: (1) provision for taxes based on income, profits or capital of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (2) the Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income; plus (3) depreciation, amortization (including amortization of intangibles, deferred financing fees and any amortization expense included in pension, OPEB or other employee benefit expenses) and other non-cash expenses (including without limitation -6- write-downs and impairment of property, plant, equipment and intangibles and other long-lived assets and the impact of purchase accounting on such Person and its Restricted Subsidiaries for such period) to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus (4) the amount of any restructuring charges (which, for the avoidance of doubt, shall include retention, severance, systems establishment cost or excess pension, other post employment benefits, curtailment or other excess charges); plus (5) the minority interest expense consisting of subsidiary income attributable to minority equity interests of third parties in any non-wholly-owned subsidiary in such period or any prior period, except to the extent of dividends declared or paid on Equity Interests held by third parties; plus (6) the amount of management, consulting, monitoring and advisory fees and related expenses paid to the Permitted Holders (or any accruals related to such fees and related expenses) during such period; provided that such amount shall not exceed in any four quarter period the greater of (x) $5.0 million and (y) 2% of Consolidated Cash Flow of the Company and its Restricted Subsidiaries for each period; plus (7) equity earnings losses in affiliates; plus (8) other non-operating expenses; plus (9) accretion of asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations, and any similar accounting in prior periods; minus (B) (1) non-cash items increasing such Consolidated Net Income for such period, other than any items which represent the reversal in such period of any accrual of, or cash reserve for, anticipated charges in any prior period where such accrual or reserve is no longer required; (2) an amount representing non-cash income from the reversal of the Equistar legal reserve of $4.5 million in the first quarter of 2004; and (3) an additional amount not to exceed $3.6 million in the fourth quarter of 2003 in each case determined in accordance with GAAP. "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) any net after-tax extraordinary, unusual or nonrecurring gains or losses (less all fees and expenses relating thereto) or income or expense or charge (including, without limitation, income and expenses from the New York state grant, SFAS 106 expense, pension expense, excess corporate and tax department allocations from Ingersoll-Rand, casualty losses, severance expenses, relocation expenses, other restructuring expenses, special provisions to increase the obsolete and slow-moving inventory reserve, and losses on contracts in Nigeria), including, without limitation, any -7- severance expense, and fees, expenses or charges related to any offering of Equity Interests of such Person, any Investment, acquisition or Indebtedness permitted to be incurred hereunder (in each case, whether or not successful), including all fees, expenses, charges and change in control payments related to the Transactions, in each case shall be excluded; (2) any net after-tax income or loss from discontinued operations and any net after-tax gain or loss on disposal of discontinued operations shall be excluded; (3) any net after-tax gains or losses (less all fees and expenses or charges relating thereto) attributable to business dispositions or asset dispositions other than in the ordinary course of business (as determined in good faith by the Board of Directors of the Company) shall be excluded; (4) any net after-tax income or loss (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of indebtedness and Hedging Obligations shall be excluded; (5) (A) the Net Income for such period of any Person that is not a Restricted Subsidiary, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions or other payments in respect of equity that are actually paid in cash (or to the extent converted into cash) by the referent Person to the Company or a Restricted Subsidiary thereof in respect of such period and (B) the Net Income for such period shall include any dividend, distribution or other payments in respect of equity paid in cash by such Person to the Company or a Restricted Subsidiary thereof in excess of the amount included in clause (A); (6) any non-cash charges from the application of the purchase method of accounting in connection with the Transactions or any future acquisition, to the extent that any such charges are deducted in computing such Consolidated Net Income, shall be excluded; (7) accruals and reserves that are established within twelve months after the acquisition's Closing Date (as defined in Purchase Agreement) and that are so required to be established in accordance with GAAP shall be excluded; (8) any non-cash impairment charges resulting from the application of Statements of Financial Accounting Standards No. 142 and No. 144 and the amortization of intangibles pursuant to Statement of Financial Accounting Standards No. 141 shall be excluded; (9) any long-term incentive plan accruals and any non-cash compensation expense realized from grants of stock appreciation or similar rights, stock options or other rights to officers, directors and employees of such Person or any of its Restricted Subsidiaries shall be excluded; (10) solely for the purpose of determining the amount available for Restricted Payments under Section 4.07(a)(C)(i) hereof, the Net Income of any Restricted -8- Subsidiary that is not a Guarantor will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders or members, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that Consolidated Net Income of such Person shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) by such Person to the Company or another Restricted Subsidiary thereof in respect of such period, to the extent not already included therein; and (11) the cumulative effect of a change in accounting principles will be excluded. "Contingent Obligations" means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness ("primary obligations") of any other Person in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent: (1) to purchase any such primary obligation or any property constituting direct or indirect security thereof, (2) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or (3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such obligation against loss in respect thereof. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company or any Parent, as the case may be, who: (1) was a member of such Board of Directors on the date of this Indenture, or (2) was nominated for election or elected to such Board of Directors by one or more of the Equity Investors or with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Contribution Indebtedness" means Indebtedness of the Company or any Guarantor in an aggregate principal amount not greater than twice the aggregate amount of cash contributions (other than Excluded Contributions) made to the equity capital of the Company or such Guarantor after the date of this Indenture, provided that: -9- (1) if the aggregate principal amount of such Contribution Indebtedness is greater than one times such cash contributions to the equity capital of the Company or such Guarantor, as applicable, the amount in excess shall be Indebtedness (other than secured Indebtedness) with a Stated Maturity later than the Stated Maturity of the Notes, and (2) such Contribution Indebtedness (x) is incurred within 180 days after the making of such cash contributions and (y) is designated as Contribution Indebtedness pursuant to an Officers' Certificate on the incurrence date thereof. "Corporate Trust Office of the Trustee" will be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means that certain credit agreement, dated the Issue Date, by and among the Company, the guarantors named therein, Citicorp North America, Inc., as administrative agent, Citigroup Global Markets Inc., as joint lead arranger and joint book manager, Morgan Stanley Senior Funding, Inc., as joint lead arranger, joint book manager and co-syndication agent, UBS Securities LLC, as joint lead arranger and joint book manager, UBS AG, Stamford Branch, as co-syndication agent, and each of the other lender parties thereto, providing for $395 million of term loans and up to $300 million of revolving credit borrowings and letters of credit, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and, in each case, as amended, restated, modified, renewed, refunded, replaced (whether upon or after termination or otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in part from time to time in one or more agreements or indentures (in each case with the same or new lenders or institutional investors), including any agreement or indenture extending the maturity thereof or otherwise restructuring all or any portion of the Indebtedness thereunder or increasing the amount loaned or issued thereunder or altering the maturity thereof. "Credit Facilities" means one or more debt facilities (including, without limitation, the Credit Agreement) or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced (whether upon or after termination or otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in part from time to time in one or more agreement or indentures (in each case with the same or new lenders or institutional investors), including any agreement or indenture extending the maturity thereof or otherwise restructuring all or any portion of the indebtedness thereunder or increasing the amount loaned or issued thereunder or altering the maturity thereof. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. -10- "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Designated Non-cash Consideration" means the Fair Market Value of non-cash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as "Designated Non-cash Consideration" pursuant to an Officers' Certificate, setting forth the basis of such valuation, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of such Designated Non-cash Consideration. "Designated Preferred Stock" means Preferred Stock of the Company or any Parent (other than Disqualified Stock) that is issued for cash (other than to the Company or any of its Subsidiaries or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officers' Certificate, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in Section 4.07(a)(C)(ii) hereof. "Designated Senior Indebtedness" means (1) any Indebtedness under the Credit Agreement and (2) any other Indebtedness constituting Senior Indebtedness that, at the date of determination, has an aggregate principal amount outstanding of at least $25 million and that is specifically designated by the Company in the instrument creating or evidencing such Senior Indebtedness as "Designated Senior Indebtedness" or, in the alternative, as to which the Trustee is given written notice that such Indebtedness is "Designated Senior Indebtedness." "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock will not constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale. The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Indenture will be the maximum amount that the Company and its Restricted Subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends. The term "Disqualified Stock" shall also include any options, warrants or other rights that are convertible into Disqualified Stock or that are redeemable at the option of the holder or required to be redeemed, prior to the date that is 91 days after the date on which the Notes mature. -11- "Domestic Subsidiary" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia. "Dresser-Rand Holdings, LLC Agreement" means the limited liability company agreement of Dresser-Rand Holdings, LLC. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Investors" means First Reserve Corporation and its Affiliates. "Equity Offering" means (i) an offer and sale of Capital Stock (other than Disqualified Stock) of the Company or any Parent (to the extent the net proceeds therefrom are contributed to the equity capital of the Company) pursuant to (x) a registration statement that has been declared effective by the SEC pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company or any Parent), or (y) a private issuance exempt from registration under the Securities Act. "Euroclear" means Euroclear Bank, S.A./N.V., as operator of the Euroclear system, and any successor thereto. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the Notes issued in the Registered Exchange Offer pursuant to Section 2.06(f) hereof. "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Excluded Contributions" means the net cash proceeds received by the Company after the date of this Indenture from: (1) contributions to its common equity capital, and (2) the sale (other than to a Subsidiary of the Company) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Company, in each case designated as "Excluded Contributions" pursuant to an Officers' Certificate of the Company, the net cash proceeds of which are excluded from the calculation set forth in Section 4.07(a)(C)(ii) hereof. "Fair Market Value" means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the Directors of the Company (unless otherwise provided in this Indenture) for transactions valued at, or in excess of, $10.0 million; provided that, if the -12- Company or any Restricted Subsidiary is required by any antitrust authority to sell any asset, the consideration received upon such Asset Sale shall be deemed to be the "Fair Market Value" of such asset. "Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases, redeems, defeases or otherwise discharges any Indebtedness (other than (i) ordinary working capital borrowings and (ii) in the case of revolving credit borrowings or revolving advances under any Qualified Receivables Financing, in which case interest expense will be computed based upon the average daily balance of such Indebtedness during the applicable period) or issues, repurchases or redeems preferred equity subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment, repurchase, redemption, defeasance or other discharge of Indebtedness, or such issuance, repurchase or redemption of preferred equity, and the use of the proceeds therefrom, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio, Asset Acquisitions, dispositions, mergers, consolidations and discontinued operations (as determined in accordance with GAAP), and any related financing transactions, that the specified Person or any of its Restricted Subsidiaries has both determined to make and made after the date of this Indenture and during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Calculation Date shall be calculated on a pro forma basis assuming that all such Asset Acquisitions, dispositions, mergers, consolidations and discontinued operations (and the change of any associated Fixed Charges and the change in Consolidated Cash Flow resulting therefrom) had occurred on the first day of the four-quarter reference period, including any pro forma expense and cost reductions and other operating improvements that have occurred or are reasonably expected to occur, in the reasonable judgment of the chief financial officer of the Company (regardless of whether these cost savings or operating improvements could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any other regulation or policy of the SEC related thereto). Any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period, and if, since the beginning of the four-quarter reference period, any Person that subsequently became a Restricted Subsidiary or was merged with or into the Company or any of its other Restricted Subsidiaries since the beginning of such period shall have made any acquisition, Investment, disposition, merger, consolidation or discontinued operation, in each case with respect to an operating unit of a business, that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be adjusted giving pro forma effect thereto for such period as if such Asset Acquisition, disposition, discontinued operation, merger or consolidation had occurred at the beginning of the applicable four-quarter reference period. Any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period. -13- For purposes of this definition, whenever pro forma effect is to be given to any transaction, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness if such Hedging Obligation has a remaining term in excess of 12 months). Interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Company to be the rate of interest implicit in such Capital Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Company may designate. Any such pro forma calculation may include adjustments appropriate, in the reasonable determination of the Company as set forth in an Officers' Certificate, to reflect operating expense reductions reasonably expected to result from any acquisition or merger. "Fixed Charges" means, with respect to any specified Person for any period, the sum, without duplication, of: (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, excluding amortization of debt issuance costs and the expensing of any bridge or other financing fees, but including original issue discount, non-cash interest payments, the interest component of any deferred payment obligations (classified as Indebtedness under the Indenture), the interest component of all payments associated with Capital Lease Obligations and net of the effect of all payments made or received pursuant to Hedging Obligations in respect of interest rates; plus (2) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; plus (3) all cash dividend payments or other cash distributions on any series of preferred equity of such Person and all other dividend payments or other distributions on the Disqualified Stock of such Person; less (4) interest income; in each case, on a consolidated basis and in accordance with GAAP. "Foreign Subsidiary" means any Restricted Subsidiary of the Company other than a Domestic Subsidiary. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified -14- Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of this Indenture. "Global Note Legend" means the legend set forth in Section 2.06(g)(2) hereof, which is required to be placed on all Global Notes issued under this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes deposited with or on behalf of and registered in the name of the Depository or its nominee, substantially in the form of Exhibit A hereto and that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2) or 2.06(f) hereof. "Government Securities" means securities that are direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged. "guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise). "Guarantors" means each of: (1) the subsidiaries of the Company that execute this Indenture on the Issue Date; and (2) any other Subsidiary of the Company that becomes a Guarantor in accordance with the provisions of this Indenture, and their respective successors and assigns, in each case, until the Note Guarantee of such Person has been released in accordance with the provisions of this Indenture. "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements; (2) other agreements or arrangements designed to manage interest rates or interest rate risk; and (3) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices. -15- "Holder" means a Person in whose name a Note is registered. "Holdings" means D-R Interholding, LLC. "Holdings LLC Agreement" means the limited liability company agreement of Holdings. "IAI Global Note" means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors. "Immaterial Subsidiary" means any Subsidiary that is not a Material Subsidiary. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker's acceptances; (4) representing Capital Lease Obligations; (5) representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed; (6) representing any Hedging Obligations; or (7) to the extent not otherwise included, with respect to the Company and its Restricted Subsidiaries, the amount then outstanding (i.e., advanced, and received by, and available for use by, the Company or any of its Restricted Subsidiaries) under any Receivables Financing (as set forth in the books and records of the Company or any Restricted Subsidiary and confirmed by the agent, trustee or other representative of the institution or group providing such Receivables Financing), if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes (i) all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person); provided, however, that the amount of such Indebtedness shall be the lesser of (x) the Fair Market Value of such asset as of such date of determination and (y) the amount of such Indebtedness of such other Person; and (ii) to the extent not otherwise included, the guarantee by the specified Person of any Indebtedness of any other Person. -16- Notwithstanding the foregoing, "Indebtedness" shall not include (a) accrued expenses, royalties and Trade Payables; (b) Contingent Obligations incurred in the ordinary course of business; and (c) asset retirement obligations and obligations in respect of reclamation and workers' compensation (including pensions and retiree medical care) that are not overdue by more than 90 days. "Indenture" means this Indenture, as amended or supplemented from time to time. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" has the meaning assigned to it in the preamble to this Indenture. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's of BBB- (or the equivalent) by S&P or, if either such entity ceases to rate the Notes for reasons outside of the control of the Company, the equivalent investment grade credit rating from any other Rating Agency. "Investment Grade Securities" means: (1) securities issued or directly and fully guaranteed or insured by the U.S. government or any agency or instrumentality thereof (other than Cash Equivalents) and in each case with maturities not exceeding two years from the date of acquisition; (2) investments in any fund that invests exclusively in investments of the type described in clause (1) which fund may also hold immaterial amounts of cash pending investment and/or distribution; and (3) corresponding instruments in countries other than the United States customarily utilized for high quality investments and in each case with maturities not exceeding two years from the date of acquisition. "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including guarantees or other obligations), advances or capital contributions (excluding accounts receivable, trade credit and advances to customers and commission, travel and similar advances to officers, employees and consultants made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company will be deemed to have made an Investment on the date of any such sale or disposition -17- equal to the Fair Market Value of the Company's Investments in such Subsidiary that were not sold or disposed of in an amount determined as provided in Section 4.07(c) hereof. "Issue Date" means October 29, 2004. "Legended Regulation S Global Note" means a Global Note in the form of Exhibit A bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount at maturity of the Notes initially sold in reliance on Rule 903 of Regulation S. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Registered Exchange Offer. "Lien" means, with respect to any asset (except in connection with a Qualified Receivables Financing), any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Management Notes" means any notes evidencing Indebtedness which, by their terms, are expressly subordinated to the Notes, that are issued by the Company, any Subsidiary or any Parent to existing or former employees, officers, consultants, or directors of the Company or any Subsidiary or any Parent in consideration for such person's Equity Interests of the Company, any Subsidiary or any Parent. "Marketable Securities" means, with respect to any Asset Sale, any readily marketable equity securities that are (i) traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market; and (ii) issued by a corporation having a total equity market capitalization of not less than $250.0 million; provided that the excess of (A) the aggregate amount of securities of any one such corporation held by the Company and any Restricted Subsidiary over (B) ten times the average daily trading volume of such securities during the 20 immediately preceding trading days shall be deemed not to be Marketable Securities, as determined on the date of the contract relating to such Asset Sale. "Material Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture, provided, however, that all references to "10 percent" in such definition shall be replaced with "5 percent." "Moody's" means Moody's Investors Service, Inc. and its successors and assigns. "Net Income" means, with respect to any Person for any period, (i) the net income (loss) of such Person for such period, determined in accordance with GAAP and before any reduction in respect of dividends on preferred interests, excluding, however, (a) any gain or loss, -18- together with any related provision for taxes on such gain or loss, realized in connection with (1) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (2) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries and (b) any extraordinary or nonrecurring gain or loss, together with any related provision for taxes on such extraordinary or nonrecurring gain or loss. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any Designated Non-cash Consideration received in any Asset Sale and any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding the assumption by the acquiring Person of Indebtedness relating to the disposed assets or other consideration received in any non-cash form), net of the direct costs relating to such Asset Sale and the sale of such Designated Non-cash Consideration, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale or taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness, other than Indebtedness under a Credit Facility, secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP, including without limitation, pension and post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction. "Non-Recourse Debt" means Indebtedness: (1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) other than a pledge of the Equity Interest of any Unrestricted Subsidiaries, (b) is directly or indirectly liable (as a guarantor or otherwise) other than by virtue of a pledge of the Equity Interests of any Unrestricted Subsidiaries, or (c) constitutes the lender; and (2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit, upon notice, lapse of time or both, any holder of any other Indebtedness (other than the Notes offered hereby) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity. "Non-U.S. Person" means a Person who is not a U.S. Person. "Note Guarantee" means the guarantee by each Guarantor of the Company's obligations under this Indenture and the Notes. -19- "Notes" has the meaning assigned to it in the preamble to this Indenture. The Initial Notes, any Additional Notes and any Exchange Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes, any Additional Notes and any Exchange Notes. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages, costs, expenses and other liabilities payable under the documentation governing any Indebtedness. "Offering Memorandum" means that certain offering memorandum, dated October 14, 2004, relating to the initial offering of the Notes. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Senior Vice President, any Vice President or any Assistant Vice President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by at least two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 13.05 hereof. "Opinion of Counsel" means an opinion from legal counsel that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Company or any Subsidiary of the Company. "Parent" means any direct or indirect parent company of the Company. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "Permitted Business" means the businesses of the Company and its Subsidiaries engaged in on the date of this Indenture and any other activities that are similar, ancillary or reasonably related to, or a reasonable extension, expansion or development of, such businesses or ancillary thereto. "Permitted Holders" means the Equity Investors and Related Parties. Any person or group whose acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of this Indenture will thereafter, together with its Affiliates, constitute an additional Permitted Holder. "Permitted Investments" means: (1) any Investment in the Company or in a Restricted Subsidiary of the Company; -20- (2) any Investment in cash, Cash Equivalents, Marketable Securities or Investment Grade Securities; (3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of the Company; or (b) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (5) any Investment the payment for which consists of Equity Interests (other than Disqualified Stock) of the Company or any Parent (which Investment, in the case of any Parent, is contributed to the common equity capital of the Company; provided that any such contribution shall be excluded from Section 4.07(a)(4)(C)(ii) hereof); (6) any Investments received (i) in compromise or resolution of (A) obligations of trade creditors or customers that were incurred in the ordinary course of business of the Company or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (B) litigation, arbitration or other disputes; or (ii) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; (7) Investments represented by Hedging Obligations; (8) loans or advances to officers, directors and employees made in the ordinary course of business of the Company or any Restricted Subsidiary of the Company in an aggregate principal amount not to exceed $2.5 million at any one time outstanding; (9) repurchases of the Notes; (10) Investments in Permitted Businesses, joint ventures or Unrestricted Subsidiaries having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (10) that are at that time outstanding, not to exceed the greater of (x) $70.0 million and (y) 5% of Total Assets at the time of such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (11) any Investment in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person in connection with a Qualified Receivables -21- Financing, including Investments of funds held in accounts permitted or required by the arrangements governing such Qualified Receivables Financing or any related Indebtedness; provided, however, that any Investment in a Receivables Subsidiary is in the form of a Purchase Money Note, contribution of additional receivables or an equity interest; (12) any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with the provisions of Section 4.11(b) hereof (except for transactions described in clauses (6), (8), (10) and (12) of Section 4.11(b)); (13) guarantees issued in accordance with Section 4.09 and Section 4.17 hereof; (14) any Investment existing on the date of this Indenture and any Investment that replaces, refinances or refunds an existing Investment; provided that the new Investment is in an amount that does not exceed the amount replaced, refinanced or refunded, and is made in the same Person as the Investment replaced, refinanced or refunded; (15) Investments consisting of purchases and acquisitions of inventory, supplies, materials and equipment or purchases of contract rights or licenses or leases of intellectual property, in each case in the ordinary course of business; and (16) additional Investments by the Company or any Restricted Subsidiary having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), taken together with all other Investments made pursuant to this clause (16) that are at the time outstanding not to exceed 2.0% of Total Assets; provided, however, that if any Investment pursuant to this clause (16) is made in a Person that is not a Restricted Subsidiary of the Company at the date of the making of such Investment and such Person becomes a Restricted Subsidiary of the Company after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) above and shall cease to have been made pursuant to this clause (16) for so long as such Person continues to be a Restricted Subsidiary; provided, however, that with respect to any Investment, the Company may, in its sole discretion, allocate all or any portion of any Investment to one or more of the above clauses (1) through (16) so that the entire Investment would be a Permitted Investment. "Permitted Junior Securities" means: (1) Equity Interests in the Company; or (2) debt securities that are subordinated to all Senior Indebtedness and any debt securities issued in exchange for Senior Indebtedness to substantially the same extent as, or to a greater extent than, the Notes are subordinated to Senior Indebtedness under this Indenture. -22- "Permitted Liens" means: (1) Liens securing Indebtedness and other Obligations under Credit Facilities incurred pursuant to Section 4.09 hereof and/or securing Hedging Obligations related thereto; (2) Liens in favor of the Company or any of its Restricted Subsidiaries; (3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary; (4) Liens on property (including Capital Stock) existing at the time of acquisition of the property by the Company or any Subsidiary of the Company; provided that such Liens were in existence prior to, such acquisition, and not incurred in contemplation of, such acquisition and do not extend to any property other than the property so acquired by the Company or such Restricted Subsidiary; (5) Liens or deposits to secure the performance of statutory or regulatory obligations, or surety, appeal, indemnity or performance bonds, warranty and contractual requirements or other obligations of a like nature incurred in the ordinary course of business; (6) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof; (7) Liens to secure Indebtedness (including Capital Lease Obligations) permitted to be incurred pursuant to Section 4.09(b)(4) hereof covering only the assets acquired with or financed by such Indebtedness; (8) Liens securing Indebtedness permitted to be incurred pursuant to Section 4.09(b)(15) hereof; (9) Liens existing on the date of this Indenture; (10) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor; (11) Liens created for the benefit of (or to secure) the Notes (or the Note Guarantees); -23- (12) Liens securing Indebtedness or other obligations incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed 5% of Total Assets at any one time outstanding; (13) Liens on accounts receivable and related assets of the type specified in the definition of "Receivables Financing" incurred in connection with a Qualified Receivables Financing; (14) licenses of intellectual property in the ordinary course of business; (15) Liens to secure a defeasance trust; (16) Liens on equipment of the Company or any Restricted Subsidiary granted in the ordinary course of business to clients of which such equipment is located; (17) Liens imposed by law (including, without limitation, Liens in favor of customers for equipment under order or in respect of advances paid in connection therewith), such as carriers', warehousemen's, landlord's, lessor's, suppliers, banks, repairmen's and mechanics' Liens, and Liens of landlords securing obligations to pay lease payments that are not yet due and payable or in default, in each case, incurred in the ordinary course of business; (18) Liens securing the aggregate amount of Indebtedness (including Acquired Debt) incurred in connection with (or at any time following the consummation of) an Asset Acquisition made in accordance with this Indenture equal to, at the time of incurrence, the net increase in inventory, accounts receivable and net property, reserves, plant and equipment attributable to such Asset Acquisition from the amounts reflected on the Company's historical consolidated balance sheet as of the end of the full fiscal quarter ending on or prior to the date of such Asset Acquisition, calculated after giving effect on a pro forma basis to such Asset Acquisition (which amount may, but need not, be incurred in whole or in part under the Credit Agreement) less the amount of Indebtedness incurred in connection with such Asset Acquisition secured by Liens pursuant to clause (4) or (7) above; (19) Liens incurred or deposits made in the ordinary course of business to secure payment of workers' compensation or to participate in any fund in connection with workmen's compensation, unemployment insurance, old-age pensions or other social security programs; (20) easements, rights of way zoning and similar restrictions, reservations (including severances, leases or reservations of oil, gas, coal, minerals or water rights), restrictions or encumbrances in respect of real property or title defects that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties (as such properties are used by the Company or its Subsidiaries) or materially impair their use in the operation of the business of the Company and its Subsidiaries; -24- (21) Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under this Indenture; provided, however, that: (a) the new Lien shall be limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and accessions to such property or proceeds or distributions thereof); and (b) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge; (22) Liens arising from precautionary Uniform Commercial Code financing statement filings regarding operating leases entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business; (23) judgment Liens not giving rise to an Event of Default so long as any appropriate legal proceedings that may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such legal proceedings may be initiated shall not have expired; (24) Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or other obligations of such Unrestricted Subsidiary; (25) leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Company and its Restricted Subsidiaries; and (26) Liens securing insurance premium financing arrangements, provided that such Lien is limited to the applicable insurance contracts. "Permitted Payments to Parent" means, without duplication as to amounts: (1) payments to any Parent in amounts equal to the amounts required for any direct payment of the Company to pay fees and expenses (including franchise or similar taxes) required to maintain its corporate existence, customary salary, bonus and other benefits payable to officers and employees of any direct parent of the Company and general corporate overhead expenses of any direct parent of the Company to the extent such fees and expenses are attributable to the ownership or operation of the Company and its Subsidiaries; (2) for so long as the Company is a member of a group filing a consolidated or combined tax return with any Parent, payments to any Parent in respect of an allocable portion of the tax liabilities of such group that is attributable to the Company and its Subsidiaries ("Tax Payments"). The Tax Payments shall not exceed the lesser of (i) the amount of the relevant tax (including any penalties and interest) that the Company would -25- owe if the Company were filing a separate tax return (or a separate consolidated or combined return with its Subsidiaries that are members of the consolidated or combined group), taking into account any carryovers and carrybacks of tax attributes (such as net operating losses) of the Company and such Subsidiaries from other taxable years and (ii) the net amount of the relevant tax that such Parent actually owes to the appropriate taxing authority. Any Tax Payments received from the Company shall be paid over to the appropriate taxing authority within 30 days of any Parent's receipt of such Tax Payments or refunded to the Company; and (3) dividends or distributions paid to any Parent, if applicable, in amounts equal to amounts required for any Parent, if applicable, to pay interest and/or principal on Indebtedness the proceeds of which have been contributed to the Company or any of its Restricted Subsidiaries and that has been guaranteed by, or is otherwise considered Indebtedness of, the Company incurred in accordance with Section 4.09 hereof. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries (other than Disqualified Stock) issued in exchange for, or the net proceeds of which are used to extend, renew, refund, refinance, replace, defease or discharge other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, renewed, refunded, refinanced, replaced, defeased or discharged (plus any premium required to be paid on the Indebtedness being so renewed, refunded, replaced, defeased or discharged, plus the amount of all fees and expenses incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of, the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged; provided that this clause (2) shall not apply to debt under the Credit Facilities; (3) if the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the Notes or the Note Guarantees, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged; (4) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is pari passu in right of payment with the Notes or any Note Guarantees, such Permitted Refinancing Indebtedness is pari passu in right of payment with, or subordinated in right of payment to, the Notes or such Note Guarantees; and -26- (5) such Permitted Refinancing Indebtedness shall not include Indebtedness of the Company or a Restricted Subsidiary that refinance Indebtedness of an Unrestricted Subsidiary. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Placement Agents" means Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc., UBS Securities LLC, Bear, Stearns & Co. Inc., Natexis Bleichroeder Inc., Daiwa Securities America Inc. and Sovereign Securities Corporation, LLC. "Private Placement Legend" means the legend set forth in Section 2.06(g)(1) hereof to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Purchase Agreement" means the Purchase Agreement as of August 25, 2004 between Dresser-Rand Holdings, LLC (formerly FRC Acqusitions LLC) and Ingersoll-Rand Company Limited. "Purchase Money Note" means a promissory note of a Receivables Subsidiary evidencing a line of credit, which may be irrevocable, from the Company or any Subsidiary of the Company to a Receivables Subsidiary in connection with a Qualified Receivables Financing, which note is intended to finance that portion of the purchase price that is not paid by cash or a contribution of equity. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Receivables Financing" means any Receivables Financing of a Receivables Subsidiary that meets the following conditions: (1) the Board of Directors of the Company will have determined in good faith that such Qualified Receivables Financing (including financing terms, covenants, termination events and other provisions) is in the aggregate economically fair and reasonable to the Company and the Receivables Subsidiary, (2) all sales of accounts receivable and related assets to the Receivables Subsidiary are made at Fair Market Value (as determined in good faith by the Company), and (3) the financing terms, covenants, termination events and other provisions thereof will be market terms (as determined in good faith by the Company) and may include Standard Securitization Undertakings. The grant of a security interest in any accounts receivable of the Company or any of its Restricted Subsidiaries (other than a Receivables Subsidiary) to secure a Credit Facility will not be deemed a Qualified Receivables Financing. For purposes of this Indenture, a receivables facility whether now in existence or arising in the future (and any replacement -27- thereof with substantially similar terms in the aggregate) will be deemed to be a Qualified Receivables Financing that is not recourse to the Company (except for Standard Securitization Undertakings). "Rating Agency" means each of S&P and Moody's, or if S&P or Moody's or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating organization or organizations, within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by the Company as a replacement agency or agencies for S&P or Moody's, or both, as the case may be. "Receivables Financing" means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell, convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of a transfer by the Company or any of its Subsidiaries), and (b) any other Person (in the case of a transfer by a Receivables Subsidiary), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable and any Hedging Obligations entered into by the Company or any such Subsidiary in connection with such accounts receivable. "Receivables Repurchase Obligation" means any obligation of a seller of receivables in a Qualified Receivables Financing to repurchase receivables arising as a result of a breach of a representation, warranty or covenant or otherwise, including as a result of a receivable or portion thereof becoming subject to any asserted defense, dispute, off-set or counterclaim of any kind as a result of any action taken by, any failure to take action by or any other event relating to the seller. "Receivables Subsidiary" means a Wholly-Owned Restricted Subsidiary of the Company (or another Person formed for the purposes of engaging in a Qualified Receivables Financing with the Company in which the Company or any Subsidiary of the Company makes an Investment and to which the Company or any Subsidiary of the Company transfers accounts receivable and related assets) which engages in no activities other than in connection with the financing of accounts receivable of the Company and its Subsidiaries, all proceeds thereof and all rights (contractual or other), collateral and other assets relating thereto, and any business or activities incidental or related to such business, and which is designated by the Board of Directors of the Company (as provided below) as a Receivables Subsidiary and: (1) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any other Subsidiary of the Company (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is recourse to or obligates the Company or any other Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings, or (iii) subjects any property or asset of -28- the Company or any other Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, (2) with which neither the Company nor any other Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms which the Company reasonably believes to be no less favorable to the Company or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, and (3) to which neither the Company nor any other Subsidiary of the Company has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. "Registered Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Registration Rights Agreement" means the registration rights agreement to be dated the date of this Indenture, among the Company, the Guarantors and the Placement Agents. "Related Party" means: (1) any controlling stockholder, partner, member, 50% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Equity Investor; (2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding a 50% or more controlling interest of which consist of any one or more Equity Investors and/or such other Persons referred to in the immediately preceding clause; or (3) any Person with whom an Equity Investor or a Related Party (under clauses (1) or (2) of the definition of Related Party) may be deemed as part of a "group" within the meaning of Section 13(d)(3) of the Exchange Act. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Legended Regulation S Global Note or an Unlegended Regulation S Global Note, as appropriate. "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate -29- trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject, in each case having direct responsibility for the administration of this Indenture. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Period" means the 40-day distribution compliance period as defined in Regulation S. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "S&P" means Standard & Poor's Ratings Services and its successors and assigns. "Senior Indebtedness" means the following obligations of the Company or any Guarantor, whether outstanding on the Issue Date or thereafter incurred: (1) all Indebtedness and all other monetary obligations (including, without limitation, expenses, fees, principal, interest, reimbursement obligations under letters of credit and indemnities payable in connection therewith) under (or in respect of) the Credit Agreement or Hedging Obligation relating to the Indebtedness under the Credit Agreement and (2) all other Indebtedness and all other monetary obligations of the Company or any Guarantor (other than the Notes and any Note Guarantee), including principal and interest on such Indebtedness, unless such Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued, is pari passu with, or subordinated in right of payment to, the Notes or any Note Guarantee; provided that the term "Senior Indebtedness" shall not include (a) any Indebtedness of the Company or any Guarantor that, when incurred, was without recourse to the Company or such Guarantor, (b) any Indebtedness of the Company or any Guarantor to a Subsidiary of the Company, or to a joint venture in which the Company or any Restricted Subsidiary has an interest, (c) any Indebtedness of the Company or any Guarantor, to the extent not permitted by Section 4.09 or Section 4.06 hereof; provided that Indebtedness under the Credit Agreement shall be deemed Senior Indebtedness if the Company or any Guarantor, as the case may be, believed in good faith at the time of incurrence that it was permitted to incur such Indebtedness under this Indenture and delivers an Officers' Certificate to the lenders under the Credit Agreement to such effect, (d) any repurchase, redemption or other obligation in respect of -30- Disqualified Stock, (e) any Indebtedness to any employee of the Company or any of its Subsidiaries, (f) any liability for taxes owed or owing by the Company or any Guarantor, or (g) any Trade Payables. "Senior Subordinated Obligations" means any principal of, premium, if any, or interest on the Notes payable pursuant to the terms of the Notes or any Note Guarantee or upon acceleration, including any amounts received upon the exercise of rights of rescission or other rights of action (including claims for damages) or otherwise, to the extent relating to the purchase price of the Notes or amounts corresponding to such principal, premium, if any, or interest on the Notes. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture. "Standard Securitization Undertakings" means representations, warranties, covenants, indemnities and guarantees of performance entered into by the Company or any Subsidiary of the Company which the Company has determined in good faith to be customary in a Receivables Financing including, without limitation, those relating to the servicing of the assets of a Receivables Subsidiary, it being understood that any Receivables Repurchase Obligation shall be deemed to be a Standard Securitization Undertaking. "Stated Maturity" means, with respect to any installment of principal on any series of Indebtedness, the date on which the final payment of principal was scheduled to be paid in the documentation governing such Indebtedness as of the date of this Indenture, and will not include any contingent obligations to repay, redeem or repurchase any such principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders' agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general -31- partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). "TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C. Sections 77aaa-77bbbb). "Total Assets" means the total consolidated assets of the Company and its Restricted Subsidiaries, as shown on the most recent balance sheet of the Company. "Trade Payables" means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services. "Transactions" means, collectively, (1) the acquisition by Dresser-Rand Holdings, LLC of all of the equity interests in Dresser-Rand Company and each of Dresser-Rand Company's direct and indirect subsidiaries pursuant to the Purchase Agreement, (2) the completion of and borrowings under the Credit Agreement as described in the Offering Memorandum and (3) the offering of the Notes and, with respect to each of (1), (2) and (3), the transactions contemplated thereby. "Treasury Rate" means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to November 1, 2009; provided, however, that if the period from the redemption date to November 1, 2009, is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used. "Trustee" means Citibank, N.A. until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unlegended Regulation S Global Note" means a permanent Global Note in the form of Exhibit A bearing the Global Note Legend, deposited with or on behalf of and registered in the name of the Depositary or its nominee and issued upon expiration of the Restricted Period. "Unrestricted Definitive Note" means a Definitive Note that does not bear and is not required to bear the Private Placement Legend. "Unrestricted Global Note" means a Global Note that does not bear and is not required to bear the Private Placement Legend. -32- "Unrestricted Subsidiary" means: (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Company in the manner provided below; and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that the Subsidiary to be so designated and its Subsidiaries do not at the time of designation have and do not thereafter incur any Non-recourse Debt (other than guarantees of performance of the Unrestricted Subsidiary in the ordinary course of business, excluding guarantees of Indebtedness for borrowed money); provided further, however, that either: (a) the Subsidiary to be so designated has total consolidated assets of $1,000 or less; or (b) if such Subsidiary has consolidated assets greater than $1,000, then such designation would be permitted under Section 4.07 hereof. The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation: (x) (1) the Company could incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test described in Section 4.09 hereof or (2) the Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries would be greater than such ratio for the Company and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation, and (y) no Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Person" means a U.S. Person as defined in Rule 902(k) promulgated under the Securities Act. "Voting Stock" of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. -33- "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness. "Wholly-Owned Restricted Subsidiary" of any specified Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) will at the time be owned by such Person or by one or more Wholly-Owned Restricted Subsidiaries of such Person. Section 1.02 Other Definitions.

Section 1.03 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. -34- The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes and the Note Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Note Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04 Rules of Construction. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and in the plural include the singular; (v) "will" shall be interpreted to express a command; (vi) provisions apply to successive events and transactions; and (vii) references to sections of or rules under the Securities Act will be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE 2 THE NOTES Section 2.01 Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication will be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or -35- endorsements required by law, stock exchange rule or usage. Each Note will be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form will be substantially in the form of Exhibit A hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form will be substantially in the form of Exhibit A hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note will represent such of the outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Regulation S Global Notes. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Legended Regulation S Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, as custodian for The Depository Trust Company ("DTC") in New York, New York, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as hereinafter provided. Following the termination of the Restricted Period, beneficial interests in the Legended Regulation S Global Note shall be exchanged for beneficial interests in Unlegended Regulation S Global Notes pursuant to Section 2.06 and the Applicable Procedures. Simultaneously with the authentication of Unlegended Regulation S Global Notes, the Trustee shall cancel the Legended Regulation S Global Note. The aggregate principal amount of the Regulation S Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (d) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Clearstream. -36- Section 2.02 Execution and Authentication. At least one Officer must sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will nevertheless be valid. A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee will, upon receipt of a written order of the Company signed by two Officers of the Company (an "Authentication Order"), authenticate Notes for original issue that may be validly issued under this Indenture, including any Additional Notes and any Exchange Notes. The aggregate principal amount of Notes outstanding at any time may not exceed the aggregate principal amount of Notes authorized for issuance by the Company pursuant to one or more Authentication Orders, except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03 Registrar and Paying Agent. The Company will maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar will keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company will notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints DTC to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. Section 2.04 Paying Agent to Hold Money in Trust. The Company will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all -37- money held by the Paying Agent for the payment of principal, premium or Additional Interest, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) will have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee will serve as Paying Agent for the Notes. Section 2.05 Holder Lists. The Trustee will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company will furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). Section 2.06 Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if: (1) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and in each case a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary; (2) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Legended Regulation S Global Note be exchanged by the Company for Definitive Notes prior to the expiration of the Restricted Period and the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act; or (3) there shall have occurred and be continuing an Event of Default with respect to the Notes. Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections -38- 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes will be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (1) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Legended Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than a Placement Agent). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1). (2) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either: (A) both: (i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and (ii) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or -39- (B) both: (i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and (ii) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Legended Regulation S Global Note prior to the expiration of the Restricted Period and the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of a Registered Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(2) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (3) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Legended Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable. -40- (4) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above and: (A) such exchange or transfer is effected pursuant to the Registered Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. -41- Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (1) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate upon receipt of an Authentication Order in accordance with Section 2.02 hereof and deliver to the Person designated in the instructions a Definitive Note in the -42- appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (2) Beneficial Interests in Legended Regulation S Global Note to Definitive Notes. Notwithstanding Sections 2.06(c)(1)(A) and (C) hereof, a beneficial interest in the Legended Regulation S Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act; except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (3) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Registered Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; -43- and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (4) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee will cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company will execute and the Trustee will authenticate upon receipt of an Authentication Order in accordance with Section 2.02 hereof and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(4) will be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(4) will not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (1) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with -44- Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(d) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note. (2) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Registered Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or -45- (ii) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (3) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (2)(B), (2)(D) or (3) above at a time when an Unrestricted Global Note has not yet been issued, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (1) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: -46- (A) if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (2) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Registered Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (ii) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on -47- transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (3) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Registered Exchange Offer. Upon the occurrence of the Registered Exchange Offer in accordance with the Registration Rights Agreement, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate: (1) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes accepted for exchange in the Registered Exchange Offer by Persons that certify in the applicable Letters of Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a distribution of the Exchange Notes and (C) they are not affiliates (as defined in Rule 144) of the Company; and (2) Unrestricted Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Registered Exchange Offer by Persons that certify in the applicable Letters of Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a distribution of the Exchange Notes and (C) they are not affiliates (as defined in Rule 144) of the Company. Concurrently with the issuance of such Notes, the Trustee will cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company will execute and the Trustee will authenticate upon receipt of an Authentication Order in accordance with Section 2.02 hereof and deliver to the Persons designated by the Holders of Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends will appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (1) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR -48- BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHED TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR -49- OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS, OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS NOTE PURSUANT TO CLAUSE 2(F) ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraph (b)(4), (c)(3), (c)(4), (d)(2), (d)(3), (e)(2), (e)(3) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) will not bear the Private Placement Legend. (2) Global Note Legend. Each Global Note will bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS -50- PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN." (3) Regulation S Global Note Legend. The Regulation S Global Note shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN)." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (1) To permit registrations of transfers and exchanges, the Company will execute and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrar's request. (2) No service charge will be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or -51- similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.10, 4.15 and 9.05 hereof). (3) The Registrar will not be required to register the transfer of or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (4) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes will be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (5) Neither the Registrar nor the Company will be required: (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection; (B) to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. (6) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (7) The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (8) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.07 Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company will issue and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any -52- authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for their expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08 Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(a) hereof. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee and the Registrar receive proof satisfactory to it that the replaced Note is held by a protected purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay all principal, premium and accrued interest with respect to the outstanding Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of Section 10 hereof, then on and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue interest. Section 2.09 Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, request, waiver or consent in the exercise of any discretion, power or authority (whether contained in this Indenture or vested by operation of law) which the Trustee is required, expressly or impliedly, to exercise in or by reference to the interests of the Holders or any of them, Notes owned by the Company or any Guarantor, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any Guarantor, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee knows are so owned will be so disregarded. Section 2.10 Temporary Notes. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, will authenticate temporary -53- Notes. Temporary Notes will be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as may be reasonably acceptable to the Trustee. Without unreasonable delay, the Company will prepare and the Trustee will authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes will be entitled to all of the benefits of this Indenture. Section 2.11 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will dispose of such canceled Notes in its customary manner (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes will be delivered to the Company. The Company may not issue new Notes to replace Notes that it has redeemed, purchased or paid or that have been delivered to the Trustee for cancellation. Section 2.12 Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it will pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company will fix or cause to be fixed each such special record date and payment date; provided that no such special record date may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) will mail or cause to be mailed to Holders a notice prepared by the Company that states the special record date, the related payment date and the amount of such interest to be paid. Section 2.13 CUSIP Numbers. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the "CUSIP" numbers. -54- ARTICLE 3 REDEMPTION AND PREPAYMENT Section 3.01 Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it must furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth: (1) the clause of this Indenture pursuant to which the redemption shall occur; (2) the redemption date; (3) the principal amount of Notes to be redeemed; (4) the redemption price; (5) applicable CUSIP Numbers; and (6) a statement that the conditions precedent to such redemption have been satisfied. Section 3.02 Selection of Notes to Be Redeemed. If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes for redemption or purchase as follows: (1) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (2) if the Notes are not listed on any national securities exchange, on a pro rata basis. In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased will be selected, unless otherwise provided herein, not less than 30 days nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee will promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed. Notes and portions of Notes selected will be in amounts of $1,000 or whole multiples of $1,000; provided that no Notes of $1,000 or less shall be redeemed in part. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. -55- Section 3.03 Notice of Redemption. (a) At least 30 days but not more than 60 days before a redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of redemption to the Trustee and each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 12 hereof. The notice will identify the Notes (including CUSIP Numbers) to be redeemed and will state: (1) the redemption date; (2) the redemption price; (3) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note or with respect to a Global Note a notation shall be made on Schedule A thereto to reduce the principal amount of the Global Note to an amount equal to the unredeemed portion of the Global Note surrendered; (4) the name and address of the Paying Agent; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (7) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee will give the notice of redemption in the Company's name and at their expense; provided, however, that the Company has delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04 Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. -56- Section 3.05 Deposit of Redemption Price. One Business Day prior to the redemption date, the Company will deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest and Additional Interest, if any, on all Notes to be redeemed on that date. The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest and Additional Interest, if any, on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest will cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption is not so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06 Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company will issue and, upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered. Section 3.07 Optional Redemption. (a) At any time prior to November 1, 2007, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture (including additional notes issued after Issue Date) at a redemption price of 107.375% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to, but not including, the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that: (1) at least 65% of the aggregate principal amount of Notes issued under this Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and (2) the redemption occurs within 180 days of the date of the closing of such Equity Offering. (b) Except pursuant to Section 3.07(a) or as otherwise set forth below, the Notes will not be redeemable at the Company's option prior to November 1, 2009; provided, however, the Company may acquire the Notes by means other than a redemption, whether -57- pursuant to a tender offer, open market purchase or otherwise, so long as such acquisition does not violate the terms of this Indenture. (c) On or after November 1, 2009, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, on the Notes to be redeemed to, but not including, the applicable redemption date, if redeemed during the twelve-month period beginning on November 1 of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:

(d) At any time prior to November 1, 2009, the Company may also redeem all or a part of the Notes at a redemption price equal to 100% of the principal amount of Notes to be redeemed, plus the Applicable Premium (as calculated by the Company) as of, and accrued and unpaid interest and Additional Interest, if any, to, but not including, the redemption date, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. (e) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date. Section 3.08 Mandatory Redemption. The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. Section 3.09 Intentionally Omitted. ARTICLE 4 COVENANTS Section 4.01 Payment of Notes. The Company will pay or cause to be paid the principal of, premium, if any, and interest and Additional Interest, if any, on, the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Additional Interest, if any will be -58- considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal of, premium, if any, and interest and Additional Interest, if any, then due. The Company will pay all Additional Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company will pay interest on overdue principal at the rate specified therefor in the Notes, and it shall pay interest on overdue installments of interest at the same rate borne by the Notes to the extent lawful. Section 4.02 Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof. Section 4.03 Reports. (a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company will provide to the Trustee, if not filed electronically with the SEC, all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its consolidated Subsidiaries), and, with respect to the annual information only, a report thereon by the Company's certified independent accountants. -59- Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). The Trustee is under no duty to examine such reports, information or documents to ensure compliance with the provisions of this Indenture or to ascertain the correctness or otherwise of the information or the statements contained therein. The Trustee is entitled to assume such compliance and correctness unless a Responsible Officer of the Trustee is informed otherwise. All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. Following the consummation of the Registered Exchange Offer contemplated by the Registration Rights Agreement, whether or not required by the rules and regulations of the SEC, the Company will file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing). (b) For so long as any Notes remain outstanding, if at any time they are not required to file with the SEC the reports required by paragraph (a) of this Section 4.03, the Company and the Guarantors will furnish to the Holders and to prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Section 4.04 Compliance Certificate. (a) The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with Section 314(a)(4) of the TIA. (b) So long as any of the Notes are outstanding, the Company will deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05 Intentionally Omitted. Section 4.06 Limitation on Incurrence of Senior Subordinated Indebtedness. The Company will not, and will not permit any Guarantor to, incur any Indebtedness that is subordinated in right of payment to any Senior Indebtedness unless such Indebtedness is pari passu with, or subordinated in right of payment to, the Notes or any Note Guarantee, as applicable; provided that the foregoing limitation shall not apply to distinctions -60- between categories of Senior Indebtedness that exist by reason of any Liens or guarantees arising or created in respect of some but not all such Senior Indebtedness. Section 4.07 Restricted Payments. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company and other than dividends or distributions payable to the Company or a Restricted Subsidiary of the Company); (2) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any Parent or any Restricted Subsidiary held by Persons other than the Issuer or any of its Restricted Subsidiaries; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value, any Indebtedness of any Parent, the Company or any Guarantor that is contractually subordinated to the Notes or to any Note Guarantee (excluding (x) any intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries or (y) the purchase, repurchase, or other acquisition of Indebtedness that is contractually subordinated to the notes or to any Note Guarantee, as the case may be, purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition), except a payment of interest or principal at the Stated Maturity thereof; or (4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (A) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment; (B) the Company would, after giving pro forma effect to such Restricted Payment as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a); and (C) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries since the date of this Indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (5) (only to the extent of one-half of the amounts paid pursuant to such clause), (6), (8), (9), -61- (10), (11), (12), (14), (15), (16) and (17) of Section 4.07(b) hereof), is less than the sum, without duplication, of: (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing prior to the date of this Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus (ii) 100% of the aggregate net proceeds, including cash and the Fair Market Value of property other than cash, received by the Company since the date of this Indenture (x) as a contribution to its common equity capital or (y) from the issue or sale of Equity Interests of the Company or any Parent (other than Disqualified Stock, Designated Preferred Stock, Excluded Contributions or Cash Contributions) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company); plus (iii) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, 100% of the aggregate amount received in cash and the Fair Market Value of property other than cash received; plus (iv) to the extent that any Unrestricted Subsidiary of the Company designated as such after the date of this Indenture is redesignated as a Restricted Subsidiary after the date of this Indenture or has been merged into, consolidated or amalgamated with or into, or transfers or conveys its assets to, the Company or a Restricted Subsidiary of the Company, 100% of the Fair Market Value of the Company's Investment in such Subsidiary as of the date of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable) after deducting any Indebtedness associated with the Unrestricted Subsidiary so designated or combined or any Indebtedness associated with the assets so transferred or conveyed); plus (v) 100% of any dividends or distributions received by the Company or a Restricted Subsidiary of the Company after the date of this Indenture from an Unrestricted Subsidiary of the Company, to the extent that such dividends or distributions were not otherwise included in the Consolidated Net Income of the Company for such period. -62- (b) The provisions of Section 4.07(a) hereof will not prohibit: (1) the payment of any dividend or distribution or the consummation of any redemption within 60 days after the date of declaration of the dividend or distribution or giving of the redemption notice, as the case may be, if, at the date of declaration or notice, the dividend, distribution or redemption payment would have complied with the provisions of this Indenture; (2) the making of any Restricted Payment in exchange for, or out of the net cash proceeds received by the Company of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company or any Parent (other than Disqualified Stock) or from the substantially concurrent contribution of such proceeds to the capital of the Company in any form other than Disqualified Stock or Indebtedness; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (C)(ii) of Section 4.07(a) hereof; (3) the repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness of the Company or any Restricted Subsidiary of the Company that is contractually subordinated to the Notes or to any Note Guarantee with the net cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness; (4) the payment of any dividend (or, in the case of any partnership or limited liability company, any similar distribution) by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis; (5) the repurchase, redemption or other acquisition or retirement (or dividends or distributions to any Parent to finance any such repurchase, redemption or other acquisition or retirement) for value of any Equity Interests of the Company, any Parent or any Restricted Subsidiary of the Company held by any current or former officer, director, consultant or employee of the Company, any Parent or any Restricted Subsidiary of the Company pursuant to any equity subscription agreement, stock option agreement, shareholders' or members' agreement or similar agreement, plan or arrangement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $4.0 million in any calendar year (with unused amounts in any calendar year being permitted to be carried over into succeeding calendar years); provided further that the amount in any calendar year may be increased by an amount not to exceed: (a) the cash proceeds received by the Company or any of its Restricted Subsidiaries from the sale of Equity Interests (other than Disqualified Stock) of the Company or any Parent (to the extent contributed to the capital of the Company or any Restricted Subsidiary in any form other than Disqualified Stock or Indebtedness) to members of management, directors or consultants of the Company and its Restricted Subsidiaries or any Parent that occurs after the date of this Indenture (provided that the amount of such cash proceeds utilized for any -63- such repurchase, retirement, other acquisition, or dividend or distribution will not increase the amount available for Restricted Payments under clause (C) of Section 4.07(a) and to the extent such cash proceeds have not otherwise been applied to the payment of Restricted Payments); plus (b) the cash proceeds of key man life insurance policies received by the Company or any Parent (to the extent such cash proceeds are contributed to the capital of the Company in any form other than Disqualified Stock or Indebtedness) and its Restricted Subsidiaries after the date of this Indenture, less any amounts previously applied to the payment of Restricted Payments pursuant to this clause (5); (provided that the Company may elect to apply all or any portion of the aggregate increase contemplated by clauses (a) and (b) above in any single calendar year; provided further, however, notwithstanding the foregoing, to the extent such repurchase, redemption or other acquisition or retirement is effected through the issuance of Indebtedness to such officer, director, consultant or employee the payment under this provision will be deemed to have been made on the date of repayment of such Indebtedness); (6) the repurchase of Equity Interests deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of those stock options; (7) the declaration and payment of regularly scheduled or accrued dividends or distributions to holders of any class or series of Disqualified Stock of the Company or any Restricted Subsidiary of the Company issued on or after the date of this Indenture in accordance with the Fixed Charge Coverage Ratio test described in Section 4.09 hereof; (8) Permitted Payments to Parent; (9) purchases of receivables pursuant to a Receivables Repurchase Obligation in connection with a Qualified Receivables Financing; (10) the declaration and payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued after the date of this Indenture and the declaration and payment of dividends to any Parent, the proceeds of which will be used to fund the payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of any Parent issued after the date of this Indenture; provided, however, that (A) for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance (and the payment of dividends or distributions) on a pro forma basis, the Company could incur an additional $1.00 of Indebtedness pursuant to the Fixed Charge Coverage Ratio, and (B) the aggregate amount of dividends declared and paid pursuant to this clause (10) does not exceed the net cash proceeds actually received by the Company (including any such proceeds contributed to -64- the capital of the Company in any form other than Disqualified Stock or Indebtedness by any Parent) from any such sale of Designated Preferred Stock (other than Disqualified Stock) issued after the date of this Indenture; (11) any payments made in connection with the consummation of the Transactions (as such term is described in the Offering Memorandum); (12) Investments that are made with Excluded Contributions; (13) other Restricted Payments in an aggregate amount not to exceed $25.0 million since the date of this Indenture; (14) the satisfaction of change of control obligations once the Company has fulfilled its obligations under this Indenture with respect to a Change of Control; (15) the repayment of intercompany debt that was permitted to be incurred under this Indenture; (16) cash dividends or other distributions on the Company's Capital Stock used to, or the making of loans to any Parent to, fund the payment of fees and expenses owed by the Company or its Restricted Subsidiaries to Affiliates, to the extent permitted by Section 4.11 hereof; (17) the payment of dividends or distributions on the Company's common equity (or the payment of dividends or distributions to any Parent to fund the payment by such Parent of dividends or distributions on its common equity) of up to 5.0% per calendar year of the net cash proceeds received by the Company from any public Equity Offering or contributed to the capital of the Company in any form other than Disqualified Stock or Indebtedness by any Parent from any public Equity Offering; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (C)(ii) of Section 4.07(a) hereof; (18) any payments in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries that does not violate the provisions of Section 5.01 hereof; (19) payments of principal of, and interest on, any Management Notes; and (20) the distribution, as a dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to Dresser-Rand Holdings, LLC, Holdings, the Company or a Restricted Subsidiary of the Company by, Unrestricted Subsidiaries; provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clause (10) or (17) of this Section 4.07(b), no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof. (c) The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be -65- transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. Section 4.08 Dividend and Other Payment Restrictions Affecting Subsidiaries. (a) the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries; (2) make loans or advances to the Company or any of its Restricted Subsidiaries; or (3) sell, lease or transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. (b) The restrictions in Section 4.08(a) hereof will not apply to encumbrances or restrictions existing under or by reason of: (1) agreements governing Indebtedness outstanding on the date of this Indenture, the Credit Agreement and Credit Facilities as in effect on the date of this Indenture and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that such amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not, in the good faith judgment of the Company's Board of Directors, materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of this Indenture; (2) this Indenture, the notes and the Note Guarantees; (3) applicable law, rule, regulation, order, approval, license, permit or similar restriction; (4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred or issued in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred; -66- (5) non-assignment provisions or subletting restrictions in contracts, leases and licenses entered into in the ordinary course of business; (6) purchase money obligations for property (including Capital Stock) acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature described in clause (3) of Section 4.08(a) hereof; (7) any agreement for the sale or other disposition of the Capital Stock or assets of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending closing of the sale or other disposition; (8) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not, in the good faith judgment of the Company's Board of Directors, materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (9) Liens permitted to be incurred under Section 4.12 hereof that limit the right of the debtor to dispose of the assets securing such Indebtedness; (10) provisions limiting the disposition or distribution of assets or property or transfer of Capital Stock in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements, limited liability company organizational documents, and other similar agreements entered into (A) in the ordinary course of business, consistent with past practice or (B) with the approval of the Company's Board of Directors, which limitation is applicable only to the assets, property or Capital Stock that are the subject of such agreements; (11) any encumbrance or restriction of a Receivables Subsidiary effected in connection with a Qualified Receivables Financing; provided, however, that such restrictions apply only to such Receivables Subsidiary; (12) restrictions on cash, Cash Equivalents, Marketable Securities or other deposits or net worth imposed by customers or lessors under contracts or leases entered into in the ordinary course of business; (13) other Indebtedness of Restricted Subsidiaries (i) that are Guarantors that is incurred subsequent to the date of this Indenture pursuant to Section 4.09 hereof or (ii) that is incurred subsequent to the date of this Indenture pursuant to clauses (4) and (15) of Section 4.09(b) hereof; (14) encumbrances on property that exist at the time the property was acquired by the Company or a Restricted Subsidiary; (15) contractual encumbrances or restrictions in effect on the Issue Date, and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, -67- restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not, in the good faith judgment of the Company's Board of Directors, materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of this Indenture; or (16) any encumbrances or restrictions imposed by any amendments or refinancings of the contracts, instruments or obligations referred to above in clauses (1) through (15); provided that such amendments or refinancings are not, in the good faith judgment of the Company's Board of Directors, materially more restrictive, taken as a whole, than such encumbrances and restrictions prior to such amendment or refinancing. Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Equity. (a) the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company will not issue any Disqualified Stock and the Company will not permit any of its Restricted Subsidiaries to issue any Disqualified Stock or preferred equity; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and the Company or any Restricted Subsidiary of the Company may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock or preferred equity, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or such preferred equity is issued, as the case may be, would have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock or the preferred equity had been issued, as the case may be, at the beginning of such four-quarter period. (b) The provisions of Section 4.09(a) hereof will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (1) the incurrence by the Company, the Guarantors or any of the Company's Restricted Subsidiaries of additional Indebtedness and letters of credit and bankers' acceptances thereunder under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and any Guarantors and any Restricted Subsidiaries thereunder) not to exceed $895 million; (2) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness to the extent outstanding on the date of this Indenture; (3) the incurrence by the Company and the Guarantors (including any future Guarantor) of Indebtedness represented by the notes and the related Note Guarantees to -68- be issued on the date of this Indenture and the exchange notes and the related Note Guarantees to be issued pursuant to the Registration Rights Agreement; (4) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings, industrial revenue bonds, purchase money obligations or other Indebtedness or preferred stock, or synthetic lease obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of design, development, construction, installation or improvement of property (real or personal and including Capital Stock), plant or equipment used in the business of the Company or any of its Restricted Subsidiaries (in each case, whether through the direct purchase of such assets or the Equity Interests of any Person owning such assets), in an aggregate principal amount not to exceed, immediately after giving effect to any such incurrence, the greater of (x) $70.0 million and (y) 5.0% of Total Assets; (5) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under Section 4.09(a) hereof or clause (2), (3), (4), (5), (12), (15) or (16) of this Section 4.09(b); (6) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that: (A) if the Company or any Guarantor is the obligor on such Indebtedness and the payee is not the Company or a Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor; and (B) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company, and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary of the Company, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the issuance by any of the Company's Restricted Subsidiaries to the Company or to another Restricted Subsidiary of shares of preferred equity or Disqualified Stock; provided, however, that: (A) any subsequent issuance or transfer of Equity Interests that results in any such preferred equity or Disqualified Stock being held by a Person other than the Company or a Restricted Subsidiary of the Company, and -69- (B) any sale or other transfer of any such preferred equity or Disqualified Stock to a Person that is not either the Company or a Restricted Subsidiary of the Company, will be deemed, in each case, to constitute an issuance of such preferred equity or Disqualified Stock by such Restricted Subsidiary that was not permitted by this clause (7); (8) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations other than for speculative purposes; (9) the guarantee by any Restricted Subsidiary of the Company of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.09 (including Section 4.09(a) hereof); provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the Notes, then the guarantee thereof shall be subordinated or pari passu, as applicable, to the same extent as the Indebtedness so guaranteed; (10) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of workers' compensation claims, payment obligations in connection with health or other types of social security benefits, unemployment or other insurance or self-insurance obligations, reclamation, statutory obligations, bankers' acceptances, performance, surety or similar bonds and letters of credit or completion or performance guarantees or equipment leases (including, without limitation, performance guarantees and reimbursement obligations arising under or in accordance with the terms of the Purchase Agreement), or other similar obligations in the ordinary course of business or consistent with past practice; (11) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds; (12) Indebtedness, Disqualified Stock or preferred equity of Persons that are acquired by the Company or any of its Restricted Subsidiaries or merged into a Restricted Subsidiary in accordance with the terms of this Indenture; provided, however, that such Indebtedness, or Disqualified Stock or preferred equity is not incurred or issued in contemplation of such acquisition or merger or to provide all or a portion of the funds or credit support required to consummate such acquisition or merger; provided further, however, that, for any such Indebtedness, Disqualified Stock or preferred equity outstanding under this clause (12) in excess of $10.0 million on the date such Person is acquired by the Company or a Restricted Subsidiary, after giving effect to such acquisition and the incurrence or issuance of such Indebtedness, Disqualified Stock or preferred equity either: (A) the Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence of this Section 4.09; or -70- (B) the Fixed Charge Coverage Ratio, on the date of and after giving pro forma effect to such acquisition and such incurrence or issuance, would not be reduced as a result of such acquisition; (13) Indebtedness incurred by a Receivables Subsidiary in a Qualified Receivables Financing that is Non-Recourse Debt to the Company or any Restricted Subsidiary of the Company other than such Receivables Subsidiary (except for Standard Securitization Undertakings); (14) the incurrence of Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price, earn outs, or similar obligations, in each case, incurred or assumed in connection with the disposition or acquisition of any business, assets or a Subsidiary in accordance with the terms of this Indenture, other than guarantees of Indebtedness incurred or assumed by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; (15) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness or the issuance of Disqualified Stock or preferred equity in an aggregate principal amount (or accreted value, as applicable) or having an aggregate liquidation preference at any time outstanding not to exceed $85.0 million (it being understood that any Indebtedness, Disqualified Stock or preferred equity incurred pursuant to this clause (15) shall cease to be deemed incurred or outstanding for purposes of this Section 4.09 from and after the date on which the Company could have incurred such Indebtedness or Disqualified Stock or preferred equity under Section 4.09(a) hereof without reliance upon this clause (15)); (16) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness arising out of advances on exports, advances on imports, advances on trade receivables, factoring of receivables, customer prepayments and similar transactions in the ordinary course of business and consistent with past practice; (17) the incurrence of additional Indebtedness by a Foreign Subsidiary in an aggregate principal amount which does not exceed the greater of (a) $50 million or (b) 3.5% of the Total Assets at any one time outstanding (which amount may, but need not, be incurred in whole or in part under a Credit Facility); (18) Indebtedness of the Company or any of its Restricted Subsidiaries in respect of the Management Notes; and (19) Contribution Indebtedness. For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness, Disqualified Stock or preferred equity meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (19) above or is entitled to be incurred pursuant to Section 4.09(a) hereof, the Company will be permitted to classify such item of Indebtedness, Disqualified Stock or preferred equity on the date of its incurrence and will only be required to include the amount and type of such Indebtedness, -71- Disqualified Stock or preferred equity in one of the above clauses, although the Company may divide and classify an item of Indebtedness, Disqualified Stock or preferred equity in one or more of the types of Indebtedness, Disqualified Stock or preferred equity and may later reclassify all or a portion of such item of Indebtedness, Disqualified Stock or preferred equity, in any manner that complies with this Section 4.09. The accrual of interest or dividends, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the reclassification of preferred equity as Indebtedness due to a change in accounting principles, and the payment of dividends on Disqualified Stock or preferred equity in the form of additional shares of the same class of Disqualified Stock or preferred equity will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock or preferred equity for purposes of this Section 4.09; provided, in each such case (other than preferred stock that is not Disqualified Stock), that the amount of any such accrual, accretion or payment is included in Fixed Charges of the Company as accrued. Notwithstanding any other provision of this Section 4.09, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may incur pursuant to this Section 4.09 shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values. The amount of any Indebtedness outstanding as of any date will be: (1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; (2) the principal amount of the Indebtedness, in the case of any other Indebtedness; and (3) in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of: (A) the Fair Market Value of such assets at the date of determination; and (B) the amount of the Indebtedness of the other Person. Section 4.10 Asset Sales. The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) The Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of; and (2) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash, Cash Equivalents or Marketable Securities. For purposes of this provision, each of the following shall be deemed to be cash: -72- (A) any liabilities of the Company or any Restricted Subsidiary of the Company (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Note Guarantee) that are assumed by the transferee of any such assets and as a result of which, the Company or such Restricted Subsidiary of the Company are released from any further liability in connection therewith; (B) any securities, notes, other obligations or assets received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents within 180 days of the receipt thereof, to the extent of the cash or Cash Equivalents received in that conversion; (C) any Designated Non-cash Consideration received by the Company or any of its Restricted Subsidiaries in such Asset Sale; provided that the aggregate Fair Market Value of such Designated Non-cash Consideration, taken together with the Fair Market Value at the time of receipt of all other Designated Non-cash Consideration received pursuant to this clause (C) less the amount of Net Proceeds previously realized in cash from prior Designated Non-cash Consideration is less than the greater of (x) 2.50% of Total Assets at the time of the receipt of such Designated Non-cash Consideration (with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value) and (y) $35.0 million; and (D) any Capital Stock or assets of the kind referred to in clause (2) or (4) of the next paragraph of this Section 4.10. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company (or the applicable Restricted Subsidiary, as the case may be) may: (a) apply such Net Proceeds, at its option: (1) to repay (w) Indebtedness and other Obligations constituting Senior Indebtedness, (x) any Indebtedness that was secured by the assets sold in such Asset Sale, (y) other pari passu Indebtedness (provided that the Company shall also equally and ratably reduce Indebtedness under the Notes by making an offer (in accordance with the procedures set forth below for an Asset Sale) to all Holders to purchase at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, the pro rata principal amount of Notes), or (z) Indebtedness of a Restricted Subsidiary that is not a Guarantor, in each case other than Indebtedness owed to any Parent, the Company or any of their respective Affiliates; (2) to acquire all or substantially all of the assets of, or any Capital Stock of, another Permitted Business; provided that in the case of any such -73- acquisition of Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary of the Company; (3) to make a capital expenditure; or (4) to acquire other assets that are not classified as current assets under GAAP and that are used or useful in a Permitted Business; or (b) enter into a binding commitment to apply the Net Proceeds pursuant to clause (a) (2), (3) or (4) above, provided that such binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment until the earlier of (x) the date on which such acquisition or expenditure is consummated, and (y) the 180th day following the expiration of the aforementioned 365 day period. Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the second paragraph of this Section 4.10 will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15.0 million, within ten Business Days thereof, the Company will make an offer to all holders of Notes (an "Asset Sale Offer") and all holders of other Indebtedness that is pari passu with the notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of the principal amount of the Notes and such other pari passu Indebtedness plus accrued and unpaid interest and Additional Interest, if any, on the Notes and such other pari passu Indebtedness, to, but excluding, the date of purchase and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of this Indenture by virtue of such compliance. Not later than the date upon which written notice of an Asset Sale Offer is delivered to the Trustee as provided above, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Excess Proceeds, (ii) the allocation of the Net Proceeds from the Asset Sales pursuant to which such Asset Sale Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.10. Upon the expiration of the period for which the Asset Sale Offer remains open (the "Offer Period"), the Company shall -74- deliver to the Trustee for cancellation the Notes or portions thereof that have been properly tendered to and are to be accepted by the Company. Upon receipt from the Company of the purchase price for the Notes accepted for payment, the Trustee shall promptly (but in any case not later than the Business Day after the Trustee receives such amounts) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase. In the event that the Excess Proceeds delivered by the Company to the Trustee is greater than the purchase price of the Notes tendered, the Trustee shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section 4.10. Holders electing to have a Note purchased shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" attached to the Note duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note which was delivered by the Holder for purchase and a statement that such Holder is withdrawing his election to have such Note purchased. If at the end of the Offer Period more Notes are tendered pursuant to an Asset Sale Offer than the Company is required to purchase, selection of such Notes for purchase shall be made by the Trustee in accordance with Section 3.02 hereof; provided that no Notes of $1,000 or less shall be purchased in part. Notices of an Asset Sale Offer shall be mailed by first class mail, postage prepaid, at least 30 but not more than 60 days before the purchase date to each Holder at such Holder's registered address. If any Note is to be purchased in part only, any notice of purchase that relates to such Security shall state the portion of the principal amount thereof that is to be purchased. A new Note in principal amount equal to the unpurchased portion of any Note purchased in part shall be issued in the name of the Holder thereof upon cancellation of the original Note in accordance with Section 2.02 hereof. On and after the purchase date, unless the Company defaults in payment of the purchase price, interest shall cease to accrue on Notes or portions thereof purchased. Section 4.11 Transactions with Affiliates. (a) the Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Company (each, an "Affiliate Transaction"), involving aggregate consideration in excess of $1.0 million, unless: (1) the Affiliate Transaction is on terms that are not materially less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and -75- (2) the Company delivers to the Trustee: (A) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, a resolution of the Board of Directors of the Company certifying that such Affiliate Transaction complies with this Section 4.11 and that such Affiliate Transaction has been approved by a majority of the disinterested members, if any, of the Board of Directors of the Company; and (B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $25.0 million, an opinion as to the fairness to the Company or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. (b) The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of Section 4.11(a) hereof: (1) any employment agreement, employee benefit plan, officer or director indemnification agreement or any similar arrangement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business or consistent with past practice and payments pursuant thereto; (2) transactions (including a merger) between or among the Company and/or any of its Restricted Subsidiaries; (3) transactions with a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of the Company solely because the Company owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person; (4) payment of reasonable fees to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any of its Restricted Subsidiaries or any Parent; (5) any issuance of Equity Interests (other than Disqualified Stock) of the Company to Affiliates of the Company or to any director, officer, employee or consultant of the Company or any Parent, and the granting and performance of registration rights; (6) Restricted Payments and Investments that do not violate Section 4.07 hereof; (7) the entering into any agreement to pay, and the payment of, customary annual management, consulting, monitoring and advisory fees to the Equity Investors in an amount not to exceed in any four quarter period the greater of (x) $5.0 million and (y) 2.0% of Consolidated Cash Flow of the Company and its Restricted Subsidiaries for such period; -76- (8) loans or advances to employees or consultants in the ordinary course of business or consistent with past practice not to exceed $2.5 million in the aggregate at any one time outstanding; (9) any transaction effected as part of a Qualified Receivables Financing; (10) any transaction in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an accounting, appraisal or investment banking firm of national standing stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or that such transaction meets the requirements of clause (1) of Section 4.11(a); (11) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, any acquisition agreements or members' or stockholders agreement or related documents to which it is a party as of the date of this Indenture and any amendment thereto or similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under, any future amendment to any such existing agreement or under any similar agreement entered into after the date of this Indenture shall only be permitted by this clause (11) to the extent that the terms of any such existing agreement, together with all amendments thereto, taken as a whole, or such new agreement are not, in the good faith judgment of the Company's Board of Directors, otherwise more disadvantageous to the Holders of the Notes taken as a whole than the original agreement as in effect on the date of this Indenture; (12) transactions with Unrestricted Subsidiaries, customers, clients, suppliers, joint venture partners or purchasers or sellers of goods or services, or lessors or lessees of property, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture which are, in the aggregate (taking into account all the costs and benefits associated with such transactions), materially no less favorable to the Company or its Restricted Subsidiaries than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person, in the good faith judgment of the Company's Board of Directors or senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; (13) (x) guarantees of performance by the Company and its Restricted Subsidiaries of Unrestricted Subsidiaries of the Company in the ordinary course of business, except for guarantees of Indebtedness in respect of borrowed money, and (y) pledges of Equity Interests of Unrestricted Subsidiaries of the Company for the benefit of lenders of Unrestricted Subsidiaries of the Company; (14) if such Affiliate Transaction is with a Person in its capacity as a holder of Indebtedness or Capital Stock of the Company or any Restricted Subsidiary where such Person is treated no more favorably than the holders of Indebtedness or Capital Stock of the Company or any Restricted Subsidiary; -77- (15) transactions effected pursuant to agreements in effect on the Issue Date and any amendment, modification or replacement of such agreement (so long as such amendment or replacement is not, in the good faith judgment of the Company's Board of Directors, materially more disadvantageous to the Holders of the Notes, taken as a whole, than the original agreement as in effect on the Issue Date); (16) payments to the Equity Investors made for any financial advisory, financing or other investment banking activities, including without limitation, in connection with acquisitions or divestitures, which payments are approved by a majority of the Company's Board of Directors; (17) any restructuring or similar transactions contemplated to be effected pursuant to the terms of the Holdings LLC Agreement or the Dresser-Rand Holdings, LLC Agreement; and (18) the issuance of Management Notes. Section 4.12 Liens. The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind securing Indebtedness (other than Permitted Liens) that ranks pari passu with or is subordinated to the Notes or the Note Guarantees upon any of their property or assets, now owned or hereafter acquired, unless all payments due under this Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured (or, in the case of subordinated Indebtedness, contractually prior or senior thereto, with the same relative priority as the Notes shall have with respect to such subordinated Indebtedness) until such time as such obligations are no longer secured by a Lien. Section 4.13 Business Activities. the Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. Section 4.14 Intentionally Omitted. Section 4.15 Offer to Repurchase upon Change of Control. (a) Upon the occurrence of a Change of Control, the Company will make an offer (a "Change of Control Offer") to each Holder of the Notes to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that Holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Additional Interest, if any, on the Notes repurchased to, but not including, the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date (the "Change of Control Payment"). Within 30 days following any Change of Control, except to the extent that the Company has exercised its right to redeem the Notes in accordance with Article 3 of this Indenture the Company will mail a notice -78- to each Holder describing the transaction or transactions that constitute the Change of Control and stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" attached to the Notes completed, or transfer by book-entry transfer, to the Trustee at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Trustee receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change in Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.15 hereof, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached their obligations under this Section 4.15 by virtue of such compliance. (b) On the Change of Control Payment Date, the Company will, to the extent lawful: (1) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer; -79- (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and (3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company. The Paying Agent will promptly mail or wire transfer to each Holder properly tendered and so accepted the Change of Control Payment for such Notes. The Company will execute and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, that each new note will be in a principal amount of $1,000 or an integral multiple of $1,000. Any Note so accepted for payment will cease to accrue interest on and after the Change of Control Payment Date. The Company will publicly announce the results of the Change of Control Offer on or as soon as reasonably practicable after the Change of Control Payment Date. (c) Notwithstanding anything to the contrary in this Section 4.15, the Company will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given pursuant to Section 3.07 hereof, unless and until there is a default in payment of the applicable redemption price. Section 4.16 Payments for Consent. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Section 4.17 Additional Note Guarantees. If the Company or any of its Restricted Subsidiaries acquires or creates another wholly-owned Domestic Subsidiary on or after the date of this Indenture, then that newly acquired or created Domestic Subsidiary, if such Subsidiary guarantees any Indebtedness of the Company (unless such Subsidiary is a Receivables Subsidiary), shall become a Guarantor (which Note Guarantee shall be senior to or pari passu with such Restricted Subsidiary's guarantee of such other Indebtedness unless such other Indebtedness is Senior Indebtedness, in which case the Note Guarantee may be subordinated to the guarantee of such Senior Indebtedness to the same extent as the Notes are subordinated to such Senior Indebtedness) and execute a supplemental indenture and deliver an Opinion of Counsel satisfactory to the Trustee within 30 days of the date on which it was acquired or created; provided that any Domestic Subsidiary that constitutes -80- an Immaterial Subsidiary need not become a Guarantor until such time as it (i) ceases to be an Immaterial Subsidiary or (ii) guarantees the Credit Agreement. The form of such supplemental indenture is attached hereto as Exhibit E hereto. Section 4.18 Designation of Restricted and Unrestricted Subsidiaries. The Board of Directors of the Company may designate any Restricted Subsidiary, other than the Company, to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary designated as Unrestricted shall be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under Section 4.07 hereof or under one or more clauses of such definition of Permitted Investments, as determined by the Company. That designation will only be permitted if such Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if that redesignation would not cause a Default. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a certified copy of a resolution of the Board of Directors of the Company giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09 hereof, the Company will be in default of such covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary, and such designation will only be permitted if (1) (x) the Company could incur such Indebtedness pursuant to the Fixed Charge Coverage Ratio test, described in Section 4.09(a) hereof, or (y) the Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries would be greater than such ratio for the Company and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation; and (2) no Default or Event of Default would be in existence following such designation. Section 4.19 Changes in Covenants upon Notes Being Rated Investment Grade. If on any date following the Issue Date: (i) the Notes are assigned an Investment Grade Rating from both of the Rating Agencies and (ii) no Default or Event of Default shall have occurred and be continuing, then the Company shall provide written notice to such effect to the Trustee and, beginning on that day, the covenants contained in Sections 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.13 and 4.18 hereof, and clause (4) of Section 5.01 shall terminate (provided that -81- failure to provide such notice shall not result in a Default or Event of Default or the Company having to comply with such provisions). ARTICLE 5 SUCCESSORS Section 5.01 Merger, Consolidation, or Sale of Assets. The Company will not, directly or indirectly, consolidate or merge with or into another Person; or sell, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets (determined on a consolidated basis for the Company and its Restricted Subsidiaries), in one or more related transactions to another Person, unless: (1) either: (A) the Company is the surviving entity; or (B) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation, partnership or limited liability company organized or existing under the laws of the United States, any state of the United States or the District of Columbia; (2) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement, in each case, pursuant to agreements reasonably satisfactory to the Trustee; (3) immediately after such transaction, no Default or Event of Default exists; and (4) (a) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and to any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) hereof; or (b) the Fixed Charge Coverage Ratio for the successor entity and its Restricted Subsidiaries, on the date of and after giving pro forma effect to such acquisition and such incurrence or issuance, would not be less than such ratio for the Company and its Restricted Subsidiaries immediately prior to such transaction. -82- In addition, the Company may not, directly or indirectly, lease all or substantially all of the properties and assets (determined on a consolidated basis for the Company and its Restricted Subsidiaries), in one or more related transactions, to any other Person. This Section 5.01 will not apply to: (1) a merger of the Company with an Affiliate solely for the purpose of reincorporating the Company in another jurisdiction; or (2) any consolidation or merger, or any sale, assignment, transfer, conveyance, lease or other disposition of assets between or among the Company and any of its Restricted Subsidiaries. Section 5.02 Successor Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the properties or assets of the Company in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the successor Person formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor Person and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all or substantially all of the Company's properties or assets in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof. ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01 Events of Default. Each of the following is an "Event of Default": (1) default for 30 days in the payment when due of interest on, or Additional Interest, if any, with respect to the Notes, whether or not such payment is prohibited by the provisions described in Article 10 hereof; (2) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on the Notes, whether or not such payment is prohibited by the provisions described in Article 10 hereof; (3) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions of Sections 4.15 or 5.01 hereof; -83- (4) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice to the Company by the Trustee or the holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class to comply with any of the other agreements in this Indenture; (5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Significant Subsidiaries or group of Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture (but excluding Indebtedness owing to the Company or a Restricted Subsidiary), if that default: (A) is caused by a failure to pay principal on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness upon the Stated Maturity of such Indebtedness (a "Payment Default"); or (B) results in the acceleration of such Indebtedness prior to its Stated Maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $25.0 million or more; (6) failure by the Company or any of its Significant Subsidiaries, or group of Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary, to pay final and non-appealable judgments entered by a court or courts of competent jurisdiction aggregating in excess of $25.0 million (net of any amounts which are covered by insurance or bonded), which judgments are not paid, waived, satisfied, discharged or stayed for a period of 60 days; (7) the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a custodian of it or for all or substantially all of its property, or (D) makes a general assignment for the benefit of its creditors. -84- (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary in an involuntary case; (B) appoints a custodian of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary; or (C) orders the liquidation of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; and (9) except as permitted by this Indenture, any Note Guarantee of any Significant Subsidiary or group of Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect (other than in accordance with the terms of such Note Guarantee and this Indenture), or any Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee and such Default continues for 10 days. Section 6.02 Acceleration. In the case of an Event of Default specified in clause (7) or (8) of Section 6.01 hereof, with respect to the Company, any Restricted Subsidiary of the Company that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; provided that any such declaration of acceleration shall not become effective until the earlier of (x) five Business Days after receipt of the acceleration notice by the Bank Agent and the Company or (y) acceleration of the Indebtedness under the Credit Agreement; provided further that such acceleration shall be automatically rescinded and annulled without any further action required on the part of the Trustee or the Holders in the event that any and all Events of Default specified in the acceleration notice under this Indenture shall have been cured, waived or otherwise remedied as provided in this Indenture prior to the expiration of the period referred to in the preceding clauses (x) and (y). -85- Upon any such declaration, the Notes shall become due and payable immediately. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may, on behalf of all of the Holders, rescind an acceleration and its consequences, if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium or Additional Interest, if any, that has become due solely because of the acceleration) have been cured or waived. In the event of any Event of Default specified in clause (5) of Section 6.01, such Event of Default and all consequences thereof (excluding, however, any resulting payment default) will be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders of the Notes, if within 20 days after such Event of Default arose the Company delivers an Officers' Certificate to the Trustee stating that (x) the Indebtedness or guarantee that is the basis for such Event of Default has been discharged or (y) the Holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default or (z) the default that is the basis for such Event of Default has been cured, it being understood that in no event shall an acceleration of the principal amount of the Notes as described above be annulled, waived or rescinded upon the happening of any such events. Section 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium and Additional Interest, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04 Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes rescind an acceleration or waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Additional Interest, if any, or interest on, the Notes (including in connection with an offer to purchase). Upon any such rescission or waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. -86- Section 6.05 Control by Majority. Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. Section 6.06 Limitation on Suits. A Holder may pursue a remedy with respect to this Indenture or the Notes only if: (1) such Holder has previously given the Trustee written notice that an Event of Default is continuing; (2) Holders of at least 25% in aggregate principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer and, if requested, provide to the Trustee security or indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of such security or indemnity; and (5) during such 60-day period, Holders of a majority in aggregate principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with such request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07 Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Additional Interest, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08 Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or (2) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Additional Interest, if any, and interest remaining unpaid on, the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs -87- and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09 Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable and documented compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expenses, disbursements and liabilities incurred by the Trustee, its counsel and agents and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Additional Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Additional Interest, if any and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct in writing. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. -88- Section 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable and documented attorneys' fees and expenses against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding Notes. ARTICLE 7 TRUSTEE Section 7.01 Duties of Trustee. (a) The Trustee, prior to the occurrence of an Event of Default of which a Responsible Officer of the Trustee shall have actual knowledge and after the curing of all such Events of Defaults which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. If an Event of Default of which a Responsible Officer of the Trustee shall have actual knowledge has occurred and is continuing, the Trustee will exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (1) the duties of the Trustee will be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, with respect to certificates or opinions specifically required by any provision hereof to be furnished to it, the Trustee will examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture; provided, however, that the Trustee shall not be responsible for the accuracy or content of any resolution, certificate, statement, opinion, report, document, order or other instrument furnished to it hereunder. -89- (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (2) the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability for the performance of any of its duties hereunder or the exercise of any of its rights or powers. The Trustee will be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (e) The Trustee will not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02 Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel of its own selection and the advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may execute any of the trusts or powers hereunder and perform any duties hereunder either directly or through its attorneys and agents and will not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. -90- (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company will be sufficient if signed by an Officer of the Company. (f) The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity or security satisfactory to it against the losses, liabilities and expenses that might be incurred by it in compliance with such request or direction. (g) in no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action; (h) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture; (i) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder; (j) the Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded; and (k) The right of the Trustee to perform any discretionary act enumerated in this Indenture shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of such act. Section 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee (if this Indenture has been qualified under the TIA) or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04 Trustee's Disclaimer. The Trustee will not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's -91- use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it will not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture or the legality or validity of the Notes or this Indenture other than its certificate of authentication. Section 7.05 Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee will mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium or Additional Interest, if any, or interest on, any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06 Reports by Trustee to Holders of the Notes. (a) Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee will mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also will comply with TIA Section 313(b)(2). The Trustee will also transmit by mail all reports as required by TIA Section 313(c). (b) A copy of each report at the time of its mailing to the Holders of Notes will be mailed by the Trustee to the Company and filed by the Trustee with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company will promptly notify the Trustee when the Notes are listed on any stock exchange or delisted therefrom. Section 7.07 Compensation and Indemnity. (a) The Company will pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation will not be limited by any law on compensation of a trustee of an express trust. The Company will reimburse the Trustee promptly upon request for all reasonable and documented disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses will include the reasonable and documented compensation, disbursements and expenses of the Trustee's agents and counsel. (b) The Company and each Guarantor, jointly and severally, will indemnify the Trustee and any director, officer, employee or agent of the Trustee against any and all losses, liabilities, claims, damages or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including, without limitation, the reasonable and documented costs and expenses of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company, the Guarantors, any Holder or any other Person) or liability in -92- connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its own negligence, bad faith or willful misconduct. The Trustee will notify the Company promptly of any claim of which a Responsible Officer has received written notice for which it may seek indemnity. Failure by the Trustee to so notify the Company will not relieve the Company or any of the Guarantors of their obligations hereunder. The Company or such Guarantor will defend the claim and the Trustee will cooperate in the defense. The Trustee may have separate counsel and the Company and the Guarantors, as applicable, will pay the reasonable and documented fees and expenses of such counsel provided, however that the Company and any Guarantor shall not be required to pay such fees and expenses if it assumes such indemnified parties' defense and, in such indemnified parties' reasonable judgment, there is no conflict of interest between the Company and the Guarantors, as applicable, and such parties in connection with such defense. Neither the Company nor any Guarantor need pay for any settlement made without its consent, which consent will not be unreasonably withheld. (c) The obligations of the Company and the Guarantors under this Section 7.07 will survive the satisfaction and discharge of this Indenture. (d) To secure the Company's and the Guarantors' payment obligations in this Section 7.07, the Trustee will have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien will survive the satisfaction and discharge of this Indenture. (e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(7) or (8) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. (f) The Trustee will comply with the provisions of TIA Section 313(b)(2) to the extent applicable. Section 7.08 Replacement of Trustee. (a) A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. (b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in aggregate principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10 hereof; (2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (3) a custodian or public officer takes charge of the Trustee or its property; or -93- (4) the Trustee becomes incapable of acting. (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in aggregate principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. (d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in aggregate principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, such Holder may petition at the expense of the Company any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee will mail a notice of its succession to Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof will continue for the benefit of the retiring Trustee. Section 7.09 Successor Trustee by Merger, Etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act will be the successor Trustee. Section 7.10 Eligibility; Disqualification. There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50.0 million as set forth in its most recent published annual report of condition. This Indenture will always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). -94- Section 7.11 Preferential Collection of Claims Against the Company. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance. The Company may at any time, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes and Note Guarantees upon compliance with the conditions set forth below in this Article 8. Section 8.02 Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and each of the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes (including the Note Guarantees) on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company and the Guarantors will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes (including the Note Guarantees), which will thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes, the Note Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which will survive until otherwise terminated or discharged hereunder: (1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on, such Notes when such payments are due from the trust referred to in Section 8.04 hereof; (2) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof; (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith; and (4) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. -95- Section 8.03 Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and each of the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of their obligations under the covenants contained in Sections 4.03, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18 and 4.19 and clauses (3) and (4) of Section 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, "Covenant Defeasance"), and the Notes will thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes will not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes and Note Guarantees, the Company and the Guarantors may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes and Note Guarantees will be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(3) through 6.01(6) hereof will not constitute Events of Default. Section 8.04 Conditions to Legal or Covenant Defeasance. In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof: (1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm, or firm of independent public accountants, to pay the principal of, premium and Additional Interest, if any, and interest on, the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to such stated date for payment or to a particular redemption date; (2) in the case of an election under Section 8.02 hereof, the Company must deliver to the Trustee an Opinion of Counsel confirming that: (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, -96- in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) in the case of an election under Section 8.03 hereof, the Company must deliver to the Trustee an Opinion of Counsel confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from, or arising in connection with, the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing); (5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound, including the Credit Agreement; (6) the Company is not prohibited from making payments in respect of the Notes by the provisions described in Article 10 hereof; (7) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and (8) the Company must deliver to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Section 8.05 Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Additional Interest, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. -97- The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06 Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or Additional Interest, if any, or interest on, any Note and remaining unclaimed for two years after such principal, premium or Additional Interest, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) will be discharged from such trust; and the Holder of such Note will thereafter be permitted to look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company causes to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which will not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 8.07 Reinstatement. If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantors' obligations under this Indenture and the Notes and the Note Guarantees will be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium or Additional Interest, if any, or interest on, any Note following the reinstatement of its obligations, the Company will be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. -98- ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes. Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes or the Note Guarantee without the consent of any Holder: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes; (3) to provide for the assumption of the Company's or a Guarantor's obligations to the Holders of the Notes and Note Guarantees by a successor to the Company or such Guarantor pursuant to Article 5 or Article 11 hereof; (4) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights hereunder of any Holder; (5) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (6) to conform the text of this Indenture or the Notes to any provision of the "Description of the Notes" section of the Offering Memorandum, to the extent that such provision in that "Description of the Notes" was intended to be a verbatim recitation of a provision of this Indenture, the Note Guarantees or the Notes; (7) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date hereof; (8) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the Notes and to release Guarantors from the Note Guarantee in accordance with the terms of this Indenture; (9) to comply with the rules of any applicable securities depositary; or (10) to provide for a successor Trustee in accordance with the terms of this Indenture or to otherwise comply with any requirement of this Indenture. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee will not -99- be obligated to enter into such amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02 With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture (including, without limitation, Sections 4.10 and 4.15 hereof) and the Notes or the Note Guarantee with the consent of the Company and Holders of at least a majority in aggregate principal amount of the then outstanding Notes voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium or Additional Interest, if any, or interest on, the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes or the Note Guarantee may be waived with the consent of the Company and Holders of a majority in aggregate principal amount of the then outstanding Notes (including, without limitation, Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company and the Guarantors in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but will not be obligated to, enter into such amended or supplemental Indenture. It is not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement, waiver or consent, but it is sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company will mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes or the Note Guarantees. However, without the consent of the Company and each Holder affected, an amendment, supplement or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): -100- (1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (except as provided above with respect to Sections 4.10 and 4.15 hereof); (3) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (4) waive a Default or Event of Default in the payment of principal of, or premium or Additional Interest, if any, or interest on, the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (5) make any Note payable in money other than that stated in the Notes; (6) make any change in the provisions of this Indenture relating to waivers of past Defaults or impair the rights of Holders to receive payments of principal of, or interest or premium or Additional Interest, if any, on, the Notes; (7) waive a redemption payment with respect to any Note (other than a payment required by Sections 4.10 or 4.15 hereof); (8) release any Guarantor that is a Significant Subsidiary from any of its obligations under its Note Guarantee or this Indenture, except in accordance with the terms of this Indenture; (9) impair the right to institute suit for the enforcement of any payment on or with respect to the Notes or any Note Guarantees; (10) modify the subordination provisions of this Indenture in any manner adverse to the Holders; or (11) make any change in the preceding amendment and waiver provisions. Section 9.03 Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes will be set forth in a amended or supplemental indenture that complies with the TIA as then in effect. Section 9.04 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or -101- subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective. After an amendment, supplement or waiver becomes effective in accordance with its terms, it thereafter binds every Holder. Section 9.05 Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver. Section 9.06 Trustee to Sign Amendments, Etc. The Trustee will sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amended or supplemental indenture until the Board of Directors of the Company approves it. In executing any amended or supplemental indenture, the Trustee will be provided with and (subject to Section 7.01 hereof) will be fully protected in relying upon, in addition to the documents required by Section 13.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10 SUBORDINATION Section 10.01 Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full in cash or Cash Equivalents of all Obligations due in respect of existing and future Senior Indebtedness. In addition, until all Obligations due with respect to Senior Indebtedness are paid in full in cash or Cash Equivalents (including, with respect to Senior Indebtedness, any interest accruing after the commencement of any proceeding described in Section 10.02 at the rate specified in the applicable Designated Senior Indebtedness, whether or not interest is an allowed claim enforceable against the Company in such proceeding), any such distribution to which Holders would be entitled shall be made to the holders of Senior Indebtedness (except that Holders may receive and retain Permitted Junior Securities and payments made from any trust described under Articles 8 or 12 hereof). -102- Section 10.02 Liquidation; Dissolution; Bankruptcy. The holders of Senior Indebtedness shall be entitled to receive payment in full in cash or Cash Equivalents of all Obligations due in respect of Senior Indebtedness (including with respect to Designated Senior Indebtedness, any interest accruing after the commencement of any proceeding described in this Section 10.02 at the rate specified in the applicable Designated Senior Indebtedness whether or not interest is an allowed claim enforceable against the Company in such proceeding) before the Holders shall be entitled to receive any payment on account of Senior Subordinated Obligations or any payment to acquire any of the Notes for cash, properties or securities, or any distribution with respect to the Notes of any cash, property, or securities (except that Holders may receive and retain Permitted Junior Securities and payments made from any trust described under Articles 8 and 12 hereof), in the event of any distribution to creditors of the Company in (a) any liquidation or dissolution of the Company; (b) a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property; (c) an assignment for the benefit of its creditors; or (d) any marshaling of the Company's assets and liabilities. Section 10.03 Default on Designated Senior Indebtedness. (a) The Company shall not make any payment in respect of any Senior Subordinated Obligations (except in Permitted Junior Securities or from any trust described under Articles 8 and 12 hereof) if: (i) a payment default on Designated Senior Indebtedness occurs and is continuing; or (ii) any other default (a "non-payment default") occurs and is continuing on any series of Designated Senior Indebtedness that permits holders of that series of Designated Senior Indebtedness to accelerate its maturity and a Responsible Officer of the Trustee receives actual notice of such default (a "Payment Blockage Notice") from the trustee or other representative for the holders of any Designated Senior Indebtedness, or the holders of at least a majority of the outstanding principal amount of such Designated Senior Indebtedness. (b) Payments on the Notes may and shall be resumed: (i) in the case of a payment default in respect of Designated Senior Indebtedness, upon the date on which such default is cured or waived; and (ii) in the case of a non-payment default in respect of Designated Senior Indebtedness, upon the earlier of (x) the date on which such non-payment default is cured or waived or (y) 179 days after the date on which the applicable Payment Blockage Notice is received. No new Payment Blockage Notice may be delivered unless and until 360 days have elapsed since the delivery of the immediately prior Payment Blockage Notice and all scheduled payments of principal, interest and premium and Additional Interest, if any, on the Notes that have come due have been paid in full in cash. -103- (c) No non-payment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice. (d) If the Trustee or any Holder receives a payment in respect of the Notes (except in Permitted Junior Securities or from the trust described under Articles 8 or 12 hereof) when (i) the payment is prohibited by this Article 10 and (ii) the Trustee or the Holder has actual knowledge that the payment is prohibited, the Trustee or the Holder, as the case may be, shall hold the payment in trust for the benefit of the holders of Senior Indebtedness. Upon the proper written request of the holders of Senior Indebtedness, the Trustee or the Holder, as the case may be, shall deliver the amounts in trust to the holders of Senior Indebtedness or their proper representative. Section 10.04 Acceleration of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness and the Trustee shall promptly notify the Bank Agent of the acceleration. Section 10.05 When Distribution Must Be Paid Over. In the event that the Trustee or any Holder receives any payment in respect of the Notes (except in Permitted Junior Securities or from any trust described under Articles 8 or 12 hereof) when (x) the payment is prohibited by this Article 10 and (y) a Responsible Officer of the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by this Article 10, such payment shall be held by the Trustee or such Holder, as applicable, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to the holders of Senior Indebtedness as their interests may appear or their representative. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 10.06 Notice by the Company. The Company shall promptly notify the Trustee and the Paying Agent in writing of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article 10, but failure to give such notice shall not affect the subordination of the Notes to the Senior Indebtedness as provided in this Article 10. -104- Section 10.07 Subrogation. After all Senior Indebtedness is paid in full and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Indebtedness. A distribution made under this Article 10 to holders of Senior Indebtedness that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on the Notes. Section 10.08 Relative Rights. This Article 10 defines the relative rights of Holders and holders of Senior Indebtedness. Nothing in this Indenture shall: (i) impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (ii) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Indebtedness; or (iii) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distributions and payments otherwise payable to Holders. If the Company fails because of this Article 10 to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. Section 10.09 Subordination May Not Be Impaired by the Company. No right of any holder of Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. Section 10.10 Rights of Trustee and Paying Agent. Notwithstanding this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article 10. Only the Company may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. -105- The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. Section 10.11 Authorization to Effect Subordination. Each Holder, by the Holder's acceptance of the Notes, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the lenders under the Credit Agreement are hereby authorized to file an appropriate claim for and on behalf of the Holders. ARTICLE 11 NOTE GUARANTEES Section 11.01 Guarantee. (a) Subject to this Article 11, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (1) the principal of, premium and Additional Interest, if any, and interest on, the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (2) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. (b) The Guarantors hereby agree that their obligations hereunder are unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against -106- the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Note Guarantee will not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. (c) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, will be reinstated in full force and effect. (d) Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) will forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors will have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Note Guarantee. Section 11.02 Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will be limited to the maximum amount that will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance. -107- Section 11.03 Intentionally Omitted. Section 11.04 Guarantors May Consolidate, Etc., on Certain Terms. Except as otherwise provided in this Section 11.04, no Guarantor may sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Company or another Guarantor, unless: (1) immediately after giving effect to such transaction, no Default or Event of Default exists; and (2) either: (a) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger assumes all the obligations of that Guarantor under this Indenture, its Note Guarantee and the Registration Rights Agreement on the terms set forth herein or therein, pursuant to a supplemental indenture in the form attached hereto as Exhibit E; or (b) in the case of any such sale or disposition (including by way of any such consolidation or merger), the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee, of the Note Guarantee and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person will succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. All the Note Guarantees so issued will in all respects have the same legal rank and benefit under this Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses 2(a) and (b) above, nothing contained in this Indenture or in any of the Notes will prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or will prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. Section 11.05 Releases. The Note Guarantee of a Guarantor will be released: (1) in connection with any sale, disposition or transfer of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) the Company or -108- a Restricted Subsidiary of the Company, if the sale, disposition or transfer does not violate the first paragraph of Section 4.10 hereof; (2) in connection with any sale, disposition or transfer of all of the Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary of the Company, if the sale, disposition or transfer does not violate the first paragraph of Section 4.10 hereof; (3) if the Company designates any Restricted Subsidiary that is a Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of this Indenture; (4) upon Legal Defeasance in accordance with Article 8 hereof or satisfaction and discharge of this Indenture in accordance with Article 12 hereof; or (5) upon the release of such Guarantor's guarantee under the Credit Agreement or such other Indebtedness requiring such Guarantor to provide a Note Guarantee as provided in Section 4.17 hereof. Any Guarantor not released from its obligations under its Note Guarantee as provided in this Section 11.05 will remain liable for the full amount of principal of and interest and premium and Additional Interest, if any, on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 11. Section 11.06 Subordination of Note Guarantee Payments under the Note Guarantees shall be subordinated to the prior payment in full of all Senior Indebtedness of such Guarantor, including Senior Indebtedness incurred after the date of this Indenture, on the same basis as the payments by the Company on the Notes are subordinated to the prior payment in full of Senior Indebtedness of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 10. ARTICLE 12 SATISFACTION AND DISCHARGE Section 12.01 Satisfaction and Discharge. This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when: -109- (1) either: (a) all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or (b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Additional Interest, if any, and accrued interest to the date of maturity or redemption; (2) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound; (3) the Company or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and (4) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or on the redemption date, as the case may be. In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section 12.01, the provisions of Sections 12.02 and 8.06 hereof will survive such satisfaction and discharge. In addition, nothing in this Section 12.01 will be deemed to discharge those provisions of Section 7.07 hereof, that, by their terms, survive the satisfaction and discharge of this Indenture. Section 12.02 Application of Trust Money. Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 12.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium and Additional Interest, -110- if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 12.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and any Guarantor's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 12.01 hereof; provided that if the Company has made any payment of principal of, premium or Additional Interest, if any, or interest on, any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent. ARTICLE 13 MISCELLANEOUS Section 13.01 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties will control. Section 13.02 Notices. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or by first class mail (registered or certified, return receipt requested), facsimile transmission or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company and/or any Guarantor: Dresser-Rand Group Inc. Paul Clark Drive Olean, NY 14760 Facsimile No.: (716) 375-3178 Attention: Chief Financial Officer With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036-6522 Facsimile No.: (212) 735-2000 Attention: Robert M. Chilstom -111- If to the Trustee: Citibank, N.A. 388 Greenwich Street, 14th Floor New York, NY 10013 Facsimile No.: (212) 816-5527 Attention: Citibank Agency and Trust - Dresser-Rand The Company, any Guarantor or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder will be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication will also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it will not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it will mail a copy to the Trustee and each Agent at the same time. Section 13.03 Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 13.04 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture (other than in connection with the Authentication Order, dated the date hereof, and delivered to the Trustee in connection with the issuance of the Initial Notes), the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and -112- (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 13.05 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) must comply with the provisions of TIA Section 314(e) and must include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 13.06 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders. No past, present or future director, manager, officer, employee, incorporator, stockholder or member of the Company, any Parent or any Subsidiary, as such, will have any liability for any obligations of the Company or the Guarantors under the Notes, this Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. Section 13.08 Governing Law. THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. -113- Section 13.09 Successors. All agreements of the Company in this Indenture and the Notes will bind its successors. All agreements of the Trustee in this Indenture will bind its successors. All agreements of each Guarantor in this Indenture will bind its successors, except as otherwise provided in Section 11.04 hereof. Section 13.10 Severability. In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby. Section 13.11 Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy will be an original, but all of them together represent the same agreement. Section 13.12 Table of Contents, Headings, Etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and will in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] -114- Dated as of October 29, 2004 SIGNATURES DRESSER-RAND GROUP INC. By: /s/ Stephen A. Riordan ------------------------------------- Name: Stephen A. Riordan Title: Chief Financial Officer DRESSER-RAND LLC By: /s/ Stephen A. Riordan ------------------------------------- Name: Stephen A. Riordan Title: Chief Financial Officer DRESSER-RAND POWER LLC By: /s/ Stephen A. Riordan ------------------------------------- Name: Stephen A. Riordan Title: Chief Financial Officer DRESSER-RAND COMPANY By: /s/ Stephen A. Riordan ------------------------------------- Name: Stephen A. Riordan Title: Chief Financial Officer DRESSER-RAND GLOBAL SERVICES, LLC By: /s/ Stephen A. Riordan ------------------------------------ Name: Stephen A. Riordan Title: Chief Financial Officer S-1 CITIBANK, N.A., as Trustee By: /s/ Louis Piscitelli ---------------------------------- Name: Louis Piscitelli Title: Vice President S-2 EXHIBIT A [Face of Note] THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE A-1 COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHED TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS, OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS NOTE PURSUANT TO CLAUSE 2(F) ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. [ADDITIONAL LANGUAGE FOR REGULATION S NOTE TO BE INSERTED AFTER PARAGRAPH 1] THE RIGHTS ATTACHING TO THIS REGULATION S GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). A-2 CUSIP/ISIN [ ] 7-3/8% Senior Subordinated Notes due 2014 No. ___ $____________ DRESSER-RAND GROUP INC. promise to pay to CEDE & CO. or registered assigns, the principal sum of __________________________________________________________ DOLLARS on November 1, 2014. Interest Payment Dates: May 1 and November 1, commencing May 1, 2005 Record Dates: April 15 and October 15 Dated: October 29, 2004 DRESSER-RAND GROUP INC. By: _____________________________________ Name: Title: A-3 Dated: October 29, 2004 This is one of the Notes referred to in the within-mentioned Indenture: Citibank, N.A., as Trustee By: ___________________________________ Authorized Signatory A-4 [Back of Note] 7-3/8% Senior Subordinated Notes due 2014 Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. (1) INTEREST. Dresser-Rand Group Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 7-3/8% per annum from October 29, 2004 until maturity and shall pay the Additional Interest, if any, payable pursuant to Section 8 of the Registration Rights Agreement referred to below. The Company will pay interest and Additional Interest, if any, semi-annually in arrears on May 1 and November 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from October 29, 2004 until the principal hereof is due. The first Interest Payment Date shall be May 1, 2005. The Company will pay interest on overdue principal at the rate borne by the Notes, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. (2) METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of business on the April 15 or October 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. If a Holder has given wire transfer instructions to the Paying Agent on behalf of the Issuer, the Paying Agent will remit all principal, interest and premium and Additional Interest, if any, on that Holder's Notes in accordance with these instructions. All other payments on the Notes will be made by mailing a check to the registered address of each Holder thereof. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. (3) PAYING AGENT AND REGISTRAR. Initially, Citibank, N.A., as the Trustee, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. (4) INDENTURE. The Company issued the Notes under an Indenture dated as of October 29, 2004 (the "Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the TIA. Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all the terms and provisions of the Indenture, and Holders are referred to the Indenture and the TIA for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. A-5 The Notes are unsecured senior subordinated obligations of the Company. This Note is one of the Initial Notes referred to in the Indenture. The Notes include the Initial Notes, any Additional Notes and any Exchange Notes issued in exchange for Initial Notes or Additional Notes pursuant to the Indenture. The Initial Notes, any Additional Notes and any Exchange Notes are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur Indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, issue or sell shares of capital stock of the Company and such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or Incur Liens and make asset sales. The Indenture also imposes limitations on the ability of the Company and each Guarantor to consolidate or merge with or into any other Person or convey, transfer or lease all or substantially all of its property. To guarantee the due and punctual payment of the principal and interest on the Notes and all other amounts payable by the Company under the Indenture and the Notes when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Notes and the Indenture, the Guarantors have, jointly and severally, unconditionally guaranteed the Obligations of the Company under the Notes on an unsecured senior subordinated basis pursuant to the terms of the Indenture. (5) SUBORDINATION. The Notes, and the guarantees thereof, are general senior subordinated unsecured obligations of the Company and the Guarantors, subordinated in right of payment to the prior payment in full, in cash or Cash Equivalents, of all Obligations due in respect of existing or future Senior Indebtedness of the Company or a Guarantor, as applicable, as set forth in Articles 10 and 11, respectively, of the Indenture. Each Holder by its acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purposes. (6) OPTIONAL REDEMPTION. (a) Except as set forth in subparagraphs (b) and (c) of this Paragraph 6, the Company will not have the option to redeem the Notes prior to November 1, 2009. On or after November 1, 2009, the Company may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, on the Notes to be redeemed to, but not including, the applicable redemption date, if redeemed during the twelve-month period beginning on November 1 of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date: A-6

Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date. (b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 6, at any time prior to November 1, 2007, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture (including any additional notes issued after the Issue Date) at a redemption price of 107.375% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to, but not including the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that (1) at least 65% in aggregate principal amount of the Notes issued under the Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption and (2) that such redemption occurs within 180 days of the date of the closing of such Equity Offering. (c) At any time prior to November 1, 2009, the Company may also redeem all or a part of the Notes, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each Holder's registered address, at a redemption price equal to 100% of the principal amount of Notes to be redeemed, plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to, but not including, the date of redemption, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. (7) MANDATORY REDEMPTION. The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. (8) NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class mail at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction or discharge of the Indenture. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date. (9) REPURCHASE AT THE OPTION OF HOLDER. (a) If there is a Change of Control, the Company will make an offer (a "Change of Control Offer") to each Holder to repurchase all or any part (equal to $1,000 or an A-7 integral multiple of $1,000) of that Holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Additional Interest, if any, on the Notes repurchased to, but not including, the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control, the Company will mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Restricted Subsidiary of the Company consummates any Asset Sales, within ten Business Days of each date on which the aggregate amount of Excess Proceeds exceeds $15.0 million, the Company will commence an offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") pursuant to Section 4.10 of the Indenture to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, thereon to, but excluding, the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that, any Excess Proceeds remain after the consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" attached to the Notes. (10) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. (11) PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. (12) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes or the Note Guarantees may be amended or supplemented with the consent of the Company and Holders of at least a majority in aggregate principal amount of the then outstanding Notes, including Additional Notes, if any, voting as a single A-8 class, and any existing Default or Event or Default or compliance with any provision of the Indenture or the Notes or the Note Guarantees may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes, including Additional Notes, if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes or the Note Guarantees may be amended or supplemented (i) to cure any ambiguity, defect or inconsistency, (ii) to provide for uncertificated Notes in addition to or in place of certificated Notes, (iii) to provide for the assumption of the Company's or a Guarantor's obligations to Holders of the Notes and Note Guarantees in case of a merger or consolidation or sale of all or substantially all of the Company's or such Guarantor's assets, as applicable, (iv) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder, (v) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA, (vi) to conform the text of the Indenture or the Notes to any provision of the "Description of the Notes" section of the Company's Offering Memorandum dated October 14, 2004, to the extent that such provision in that "Description of the Notes" was intended to be a verbatim recitation of a provision of the Indenture, the Note Guarantees or the Notes, (vii) to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture; (viii) to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Note Guarantee with respect to the Notes and to release Guarantors from the Note Guarantee in accordance with the terms of the Indenture; (ix) to comply with the rules of any applicable securities depositary; or (x) to provide for a successor Trustee in accordance with the terms of the Indenture or to otherwise comply with any requirement of the Indenture. (13) DEFAULTS AND REMEDIES. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, any Restricted Subsidiary of the Company that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of the Holders of all of the Notes, rescind an acceleration or waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or premium or Additional Interest, if any, on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. (14) DISCHARGE AND DEFEASANCE. Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Notes, the Note Guarantees and the Indenture if the Company deposits with the Trustee money or Government Securities for the payment of principal of and interest on the Notes to redemption or maturity, as the case may be. A-9 (15) TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. (16) NO RECOURSE AGAINST OTHERS. A director, manager, officer, employee, incorporator, member or stockholder of the Company, any Parent or any Subsidiary, as such, will not have any liability for any obligations of the Company or the Guarantors under the Notes, the Note Guarantees or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. (17) AUTHENTICATION. This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. (18) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). (19) ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes will have all the rights set forth in the Registration Rights Agreement dated as of October 29, 2004, among the Company, the Guarantors and the Placement Agents named therein or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes will have the rights set forth in one or more registration rights agreements, if any, among the Company, the Guarantors and the other parties thereto, relating to rights given by the Company and the Guarantors to the purchasers of any Additional Notes (collectively, the "Registration Rights Agreement"). (20) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon. (21) GOVERNING LAW. THE LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THIS NOTE AND THE NOTE GUARANTEES. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Dresser-Rand Group Inc. Paul Clark Drive A-10 Olean, NY 14760 Attention: Chief Financial Officer A-11 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: __________________________________ (Insert assignee's legal name) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _______________ Your Signature: _________________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $________________ Date: _______________ Your Signature: _________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: _________________________ Signature Guarantee*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-13 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE [TO BE INSERTED FOR RULE 144A GLOBAL NOTE] The following exchanges of a part of this Rule 144A Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Rule 144A Global Note, have been made:

[TO BE INSERTED FOR REGULATION S GLOBAL NOTE] The following exchanges of a part of this Regulation S Global Note for an interest in another Global Note or of other Restricted Global Notes for an interest in this Regulation S Global Note, have been made:

A-14 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Dresser-Rand Group Inc. Paul Clark Drive Olean, NY 14760 Citibank, N.A. 388 Greenwich Street, 14th Floor New York, NY 10013 Attention: Citibank Agency and Trust - Dresser-Rand Re: 7-3/8% Senior Subordinated Notes due 2014 Reference is hereby made to the Indenture, dated as of October 29, 2004 (the "Indenture"), among Dresser-Rand Group Inc., as issuer (the "Company"), the Guarantors party thereto and Citibank, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to ___________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A, and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN A LEGENDED REGULATION S GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO B-1 REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Legended Regulation S Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144, Rule 903 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global B-2 Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Restricted Definitive Notes and in the Indenture and the Securities Act. 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. B-3 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. _________________________________________ [Insert Name of Transferor] By: _____________________________________ Name: Title: Dated: _______________________ B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP _________), or (ii) [ ] Regulation S Global Note (CUSIP _________), or (iii) [ ] IAI Global Note (CUSIP _________); or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP _________), or (ii) [ ] Regulation S Global Note (CUSIP _________), or (iii) [ ] IAI Global Note (CUSIP _________); or (iv) [ ] Unrestricted Global Note (CUSIP _________); or (b) [ ] a Restricted Definitive Note; or (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Dresser-Rand Group Inc. Paul Clark Drive Olean, NY 14760 Citibank, N.A. 388 Greenwich Street, 14th Floor New York, NY 10013 Attention: Citibank Agency and Trust - Dresser-Rand Re: 7-3/8% Senior Subordinated Notes due 2014 (CUSIP ____________) Reference is hereby made to the Indenture, dated as of October 29, 2004 (the "Indenture"), among Dresser-Rand Group Inc., as issuer (the "Company"), the Guarantors party thereto and Citibank, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without C-1 transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] [ ] 144A Global Note, Regulation S Global Note, IAI [ ] Global Note with an equal principal amount, the Owner [ ] hereby certifies (i) the beneficial interest is being acquired for the Owner's own C-2 account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. _______________________________ [Insert Name of Transferor] By: ___________________________ Name: Title: Dated: ______________________ C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Dresser-Rand Group Inc. Paul Clark Drive Olean, NY 14760 Citibank, N.A. 388 Greenwich Street, 14th Floor New York, NY 10013 Attention: Citibank Agency and Trust - Dresser-Rand Re: 7-3/8% Senior Subordinated Notes due 2014 Reference is hereby made to the Indenture, dated as of October 29, 2004 (the "Indenture"), among Dresser-Rand Group Inc., as issuer (the "Company"), the guarantors party thereto and Citibank, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) [ ] a beneficial interest in a Global Note, or (b) [ ] a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in D-1 compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any Person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. _________________________________________ [Insert Name of Accredited Investor] By: _____________________________________ Name: Title: Dated: _______________________ D-2 EXHIBIT E [FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS] SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, 200__, among __________________ (the "New Guarantor"), a subsidiary of Dresser-Rand Group Inc., a Delaware corporation ("the Company"), and Citibank, N.A., as trustee under the Indenture referred to below (the "Trustee"). WITNESSETH WHEREAS, the Company and the existing Guarantors have heretofore executed and delivered to the Trustee an indenture (as amended, supplemented or otherwise modified, the "Indenture"), dated as of October 29, 2004 providing for the issuance of 7-3/8% Senior Subordinated Notes due 2014 (the "Notes"); WHEREAS, Section 4.17 of the Indenture provides that under certain circumstances the New Guarantor shall execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Note Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee, the Company and the existing Guarantors are authorized to execute and deliver this Supplemental Indenture. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor, the Company and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. DEFINED TERMS. Defined terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The New Guarantor hereby agrees, jointly and severally with all existing Guarantors (if any), to provide an unconditional guarantee on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture, including the provisions relating the subordination of such guarantee set forth in Article 11, and the Notes and to perform all of the obligations and agreements of a Guarantor under the Indenture. 3. NO RECOURSE AGAINST OTHERS. No past, present or future director, manager, officer, employee, incorporator, stockholder or member of the Company, any parent entity of the Company or any Subsidiary, as such, will have any liability for any obligations of the Company or the Guarantors under the Notes, this Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver E-1 and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. 4. NOTICES. All notices or other communications to the New Guarantor shall be given as provided in Section 13.02 of the Indenture. 5. RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURES PART OF INDENTURE. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. 6. GOVERNING LAW. THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 7. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 8. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 9. TRUSTEE MAKES NO REPRESENTATION. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. E-2 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: _______________, 20___ [NEW GUARANTOR] By: _____________________________________ Name: Title: DRESSER-RAND GROUP INC. By: _____________________________________ Name: Title: CITIBANK, N.A. as Trustee By: _____________________________________ Authorized Signatory E-3 EX-4.2 13 y68981exv4w2.txt EX-4.2: REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.2 EXECUTION COPY REGISTRATION RIGHTS AGREEMENT REGISTERED EXCHANGE OFFER DRESSER-RAND GROUP INC. $420,000,000 7 3/8% SENIOR SUBORDINATED NOTES DUE 2014 REGISTRATION RIGHTS AGREEMENT October 29, 2004 Morgan Stanley & Co. Incorporated Citigroup Global Markets Inc. UBS Securities LLC Bear, Stearns & Co. Inc. Natexis Bleichroeder Inc. Sovereign Securities Corporation, LLC Daiwa Securities America Inc. c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Ladies and Gentlemen: Dresser-Rand Group Inc., a corporation organized under the laws of Delaware (the "Company"), proposes to issue and sell to certain purchasers (the "Placement Agents"), for whom Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc., UBS Securities LLC, Bear, Stearns & Co. Inc., Natexis Bleichroeder Inc., Sovereign Securities Corporation, LLC and Daiwa Securities America Inc. (collectively, the "Representatives") are acting as representatives, $420,000,000 aggregate principal amount of its 7 3/8% Senior Subordinated Notes due 2014 (the "Notes") upon the terms set forth in the Purchase Agreement among the Company and the Representatives, dated October 14, 2004 (the "Purchase Agreement"), relating to the initial placement (the "Initial Placement") of the Notes. As of the date hereof, the Company's obligations under the Notes will be guaranteed (the "Guarantees") by its direct and indirect domestic subsidiaries that guarantee its obligations under the Credit Agreement (as defined in the Indenture) (collectively, the "Guarantors"). References herein to the "Issuers" refer to the Company and the Guarantors, collectively. References herein to the "Securities" refer to the Notes and the Guarantees, collectively. To induce the Placement Agents to enter into the Purchase Agreement and to satisfy a condition to your obligations thereunder, the Issuers agree with you for your benefit and the benefit of the holders from time to time of the Securities (including the Placement Agents) (each a "Holder" and, collectively, the "Holders"), as follows: 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: "Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. -2- "Affiliate" shall have the meaning specified in Rule 405 under the Act and the term "controlling" shall have a meaning correlative thereto. "Broker-Dealer" shall mean any broker or dealer registered as such under the Exchange Act. "Business Day" shall mean a day other than a Saturday, a Sunday or a legal holiday or day on which banking institutions or trust companies are authorized or required by law to close in New York City. "Closing Date" shall mean the date of the first issuance of the Securities. "Commission" shall mean the Securities and Exchange Commission. "Company" shall have the meaning set forth in the preamble hereto. "Deferral Period" shall have the meaning set forth in Section 4(k)(ii) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Offer Registration Period" shall mean the period of 180 days following the consummation of the Registered Exchange Offer, exclusive of any period during which any stop order shall be in effect suspending the effectiveness of the Exchange Offer Registration Statement. "Exchange Offer Registration Statement" shall mean a registration statement of the Issuers on an appropriate form under the Act with respect to the Registered Exchange Offer, all amendments and supplements to such registration statement, including post-effective amendments thereto, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchanging Dealer" shall mean any Holder (which may include any Placement Agent) that is a Broker-Dealer and elects to exchange for New Securities any Securities that it acquired for its own account as a result of market-making activities or other trading activities (but not directly from any Issuer or any Affiliate of any Issuer) for New Securities. "Final Memorandum" shall mean the offering memorandum, dated October 14, 2004, relating to the Securities, including any and all exhibits thereto and any information incorporated by reference therein as of such date. "Guarantee" shall have the meaning set forth in the preamble hereto. "Guarantors" shall have the meaning set forth in the preamble hereto. "Holder" shall have the meaning set forth in the preamble hereto. -3- "Indenture" shall mean that certain Indenture relating to the Securities, dated as of October 29, 2004, among the Issuers and Citibank, N.A., as trustee, as the same may be amended from time to time in accordance with the terms thereof. "Initial Placement" shall have the meaning set forth in the preamble hereto. "Losses" shall have the meaning set forth in Section 6(d) hereof. "Majority Holders" shall mean, on any date, Holders of a majority of the aggregate principal amount of Securities and New Securities registered under a Registration Statement. "Managing Underwriters" shall mean the investment banker or investment bankers and manager or managers who administer an underwritten offering, if any, under a Registration Statement. "NASD Rules" shall mean the Conduct Rules and the By-laws of the National Association of Securities Dealers, Inc. "New Securities" shall mean debt securities of the Company and Guarantees by the Guarantors, in each case identical in all material respects to the Securities (except that the transfer restrictions shall be modified or eliminated, as appropriate) to be issued under the New Securities Indenture. "New Securities Indenture" shall mean the Indenture or an indenture among the Issuers and the New Securities Trustee, identical in all material respects to the Indenture (except that the transfer restrictions shall be modified or eliminated, as appropriate), which may be the Indenture if in the terms thereof appropriate provision is made for the New Securities. "New Securities Trustee" shall mean the Trustee or a bank or trust company reasonably satisfactory to the Placement Agents, as trustee with respect to the New Securities under the New Securities Indenture. "Notes" shall have the meaning set forth in the preamble hereto. "Placement Agents" shall have the meaning set forth in the preamble hereto. "Prospectus" shall mean the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Securities or the New Securities covered by such Registration Statement, and all amendments and supplements thereto, including any and all exhibits thereto and any information incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble hereto. -4- "Registered Exchange Offer" shall mean the proposed offer of the Issuers to issue and deliver to the Holders of the Securities that are not prohibited by any law or policy of the Commission from participating in such offer, in exchange for the Securities, a like aggregate principal amount of the New Securities. "Registrable Securities" shall mean (i) Securities other than those that have been (A) registered under a Registration Statement and disposed of in accordance therewith or (B) distributed to the public pursuant to Rule 144 under the Act or any successor rule or regulation thereto that may be adopted by the Commission and (ii) any New Securities the resale of which by the Holder thereof requires compliance with the prospectus delivery requirements of the Act. "Registration Default Damages" shall have the meaning set forth in Section 8 hereof. "Registration Statement" shall mean any Exchange Offer Registration Statement or Shelf Registration Statement that covers any of the Securities or the New Securities pursuant to the provisions of this Agreement, any amendments and supplements to such registration statement, including post-effective amendments (in each case including the Prospectus contained therein), all exhibits thereto and all material incorporated by reference therein. "Securities" shall have the meaning set forth in the preamble hereto. "Shelf Registration Period" shall have the meaning set forth in Section 3(b)(ii) hereof. "Shelf Registration" shall mean a registration effected pursuant to Section 3 hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Issuers pursuant to the provisions of Section 3 hereof which covers some or all of the Securities or New Securities, as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission promulgated thereunder. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. "Underwriter" shall mean any underwriter of Securities in connection with an offering thereof under a Shelf Registration Statement. 2. Registered Exchange Offer. (a) The Issuers shall prepare and, not later than 210 days following the Closing Date (or if such 210th day is not a Business Day, the next -5- succeeding Business Day), shall use commercially reasonable efforts to file with the Commission the Exchange Offer Registration Statement with respect to the Registered Exchange Offer. The Issuers shall use commercially reasonable efforts to cause the Exchange Offer Registration Statement to become effective under the Act within 270 days of the Closing Date (or if such 270th day is not a Business Day, the next succeeding Business Day). (b) Upon the effectiveness of the Exchange Offer Registration Statement, the Issuers shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for New Securities (assuming that such Holder (i) is not an Affiliate of any of the Issuers, (ii) acquires the New Securities in the ordinary course of such Holder's business, (iii) has no arrangements with any person to participate in the distribution of the New Securities, (iv) is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer and (v) is not a Placement Agent holding Securities that have the status of an unsold allotment remaining from the initial distribution of the Securities) to trade such New Securities from and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. (c) In connection with the Registered Exchange Offer, the Issuers shall: (i) mail or cause to be mailed to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Registered Exchange Offer open for not less than 20 Business Days after the date notice thereof is mailed to the Holders (or, in each case, longer if required by applicable law); (iii) use their commercially reasonable efforts to keep the Exchange Offer Registration Statement continuously effective under the Act, supplemented and amended as required under the Act, to ensure that it is available for sales of New Securities by Exchanging Dealers during the Exchange Offer Registration Period; (iv) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan in New York City, which may be the Trustee, the New Securities Trustee or an Affiliate of either of them; (v) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last Business Day on which the Registered Exchange Offer is open; (vi) prior to effectiveness of the Exchange Offer Registration Statement, provide a supplemental letter to the Commission (A) stating that the Issuers are conducting the Registered Exchange Offer in reliance on the position of the Commission in Exxon Capital Holdings Corporation (pub. avail. May 13, 1988), Morgan Stanley & Co., Inc. (pub. avail. June 5, 1991) and (B) including a representation that the Issuers have not entered into any arrangement or understanding with any person to distribute the New Securities to be received in the Registered Exchange Offer and that, to the best of -6- the Issuers' information and belief, each Holder participating in the Registered Exchange Offer is acquiring the New Securities in the ordinary course of business and has no arrangement or understanding with any person to participate in the distribution of the New Securities; and (vii) comply in all respects with all laws applicable to the Registered Exchange Offer. (d) As soon as practicable after the close of the Registered Exchange Offer, the Issuers shall: (i) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (ii) deliver to the Trustee for cancellation in accordance with Section 4(r) hereof all Securities so accepted for exchange; and (iii) cause the New Securities Trustee promptly to authenticate and deliver to each Holder of Securities a principal amount of New Securities equal to the principal amount of the Securities of such Holder so accepted for exchange. (e) Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Registered Exchange Offer to participate in a distribution of the New Securities (x) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission in Exxon Capital Holdings Corporation (pub. avail. May 13, 1988) and Morgan Stanley & Co., Inc. (pub. avail. June 5, 1991), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993 and similar no-action letters and (y) must comply with the registration and prospectus delivery requirements of the Act in connection with any secondary resale transaction, which must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K under the Act if the resales are of New Securities obtained by such Holder in exchange for Securities acquired by such Holder directly from any Issuer or any Affiliate of any Issuer. Accordingly, each Holder participating in the Registered Exchange Offer shall be required to represent to the Issuers that, at the time of the consummation of the Registered Exchange Offer: (i) any New Securities received by such Holder shall be acquired in the ordinary course of business; (ii) such Holder shall have no arrangement or understanding with any person to participate in the distribution within the meaning of the Act of the Securities or the New Securities; (iii) such Holder is not an Affiliate of any Issuer; and (iv) if such Holder is an Exchanging Dealer, then such Holder will deliver a Prospectus in connection with a sale of any New Securities received by such Holder pursuant to the Registered Exchange Offer. -7- (f) If any Placement Agent determines that it is not eligible to participate in the Registered Exchange Offer with respect to the exchange of Securities constituting any portion of an unsold allotment, at the request of such Placement Agent, the Issuers shall issue and deliver to such Placement Agent or the person purchasing New Securities registered under a Shelf Registration Statement as contemplated by Section 3 hereof from such Placement Agent, in exchange for such Securities, a like principal amount of New Securities. The Issuers shall use their reasonable best efforts to cause the CUSIP Service Bureau to issue the same CUSIP number and International Securities Identification Number ("ISIN") for such New Securities as for New Securities issued pursuant to the Registered Exchange Offer. 3. Shelf Registration. (a) If (i) due to any change in law or applicable interpretations thereof by the Commission's staff, the Issuers determine upon advice of their outside counsel that they are not permitted to effect the Registered Exchange Offer as contemplated by Section 2 hereof; (ii) for any other reason the Registered Exchange Offer is not consummated within 300 days of the Closing Date; (iii) any Placement Agent so requests with respect to Securities that are not eligible to be exchanged for New Securities in the Registered Exchange Offer and that are held by it following consummation of the Registered Exchange Offer; (iv) any Holder (other than a Placement Agent) is not eligible to participate in the Registered Exchange Offer; or (v) in the case of any Placement Agent that participates in the Registered Exchange Offer or acquires New Securities pursuant to Section 2(f) hereof, such Placement Agent does not receive freely tradeable New Securities in exchange for Securities constituting any portion of an unsold allotment (it being understood that (x) the requirement that a Placement Agent deliver a Prospectus containing the information required by Item 507 or 508 of Regulation S-K under the Act in connection with sales of New Securities acquired in exchange for such Securities shall result in such New Securities being not "freely tradeable"; and (y) the requirement that an Exchanging Dealer deliver a Prospectus in connection with sales of New Securities acquired in the Registered Exchange Offer in exchange for Securities acquired as a result of market-making activities or other trading activities shall not result in such New Securities being not "freely tradeable"), the Issuers shall file and use their commercially reasonable efforts to cause to become and keep effective a Shelf Registration Statement in accordance with subsection (b) below. (b) (i) The Issuers shall as promptly as practicable, but in no event later than 210 days after such filing obligation arises, use their commercially reasonable efforts to file with the Commission and shall use their commercially reasonable efforts to cause to be declared effective under the Act within 270 days after such filing obligation arises, a Shelf Registration Statement relating to the offer and sale of the Securities or the New Securities, as applicable, by the Holders thereof from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement; provided, however, that no Holder (other than a Placement Agent) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder; and provided further that with respect to New Securities received by a Placement Agent in exchange for Securities constituting any portion of an unsold allotment, the Issuers may, if permitted by current interpretations by the Commission's staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Item 507 or 508 of Regulation S-K, as applicable, in satisfaction of their obligations under this subsection with respect thereto, and any -8- such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. (ii) The Issuers shall use their commercially reasonable efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required by the Act, in order to permit the Prospectus forming part thereof to be usable by Holders for a period from the date the Shelf Registration Statement is declared effective by the Commission until the earliest of: (A) the second anniversary of the Closing Date, (B) the date upon which all the Securities or New Securities, as applicable, covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or (C) the date upon which the Securities or New Securities, as applicable, covered by the Shelf Registration Statement become eligible for resale, without regard to volume, manner of sale or other restrictions contained in Rule 144 under the Act pursuant to paragraph (k) thereof (in any such case, the "Shelf Registration Period"). The Issuers shall be deemed not to have used their commercially reasonable efforts to keep the Shelf Registration Statement effective during the Shelf Registration Period if they voluntarily take any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities at any time during the Shelf Registration Period, unless such action is (x) required by applicable law or otherwise taken by the Issuers in good faith and for valid business reasons (not including avoidance of the Issuers' obligations hereunder), including the acquisition or divestiture of assets and (y) permitted pursuant to Section 4(k)(ii) hereof. (iii) The Issuers shall cause the Shelf Registration Statement and the related Prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement or such amendment or supplement, (A) to comply in all material respects with the applicable requirements of the Act and (B) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading. 4. Additional Registration Procedures. In connection with any Shelf Registration Statement and, to the extent applicable, any Exchange Offer Registration Statement, the following provisions shall apply. (a) The Issuers shall: (i) furnish to counsel for the Representatives and to counsel for the Holders, not less than two (2) Business Days prior to the filing thereof with the Commission, a copy of any Exchange Offer Registration Statement and any Shelf Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein (including all documents incorporated by reference therein after the initial filing) and shall use their commercially reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as counsel to the Holders or counsel for the Representatives reasonably propose; (ii) include the information set forth in Annex A hereto on the facing page of the Exchange Offer Registration Statement, in Annex B hereto in the -9- forepart of the Exchange Offer Registration Statement in a section setting forth details of the Exchange Offer, in Annex C hereto in the underwriting or plan of distribution section of the Prospectus contained in the Exchange Offer Registration Statement and in Annex D hereto in the letter of transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by a Placement Agent, include the information required by Item 507 or 508, as applicable, of Regulation S-K in the Prospectus contained in the Exchange Offer Registration Statement or Shelf Registration Statement; and (iv) in the case of a Shelf Registration Statement, include the names of the Holders that propose to sell Securities pursuant to the Shelf Registration Statement as selling security holders. (b) The Issuers shall use their commercially reasonable efforts to ensure that: (i) any Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act; and (ii) any Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Issuers shall advise the Representatives, the Holders of Securities covered by any Shelf Registration Statement and any Exchanging Dealer under any Exchange Offer Registration Statement that has provided in writing to the Issuers a telephone or facsimile number and address for notices, and, if requested by any Representative or any such Holder or Exchanging Dealer, shall confirm such advice in writing (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the Issuers shall have remedied the basis for such suspension): (i) when a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission after the effective date for any amendment or supplement to the Registration Statement or the Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution of any proceeding for that purpose; -10- (iv) of the receipt by any Issuer of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the institution or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires any change in the Registration Statement or the Prospectus so that, as of such date, they (A) do not contain any untrue statement of a material fact and (B) do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading. (d) The Issuers shall use their commercially reasonable efforts to prevent the issuance of any order suspending the effectiveness of any Registration Statement or the qualification of the securities therein for sale in any jurisdiction and, if issued, to obtain as soon as possible the withdrawal thereof. (e) The Issuers shall furnish to each Holder of Securities covered by any Shelf Registration Statement, without charge, at least one (1) copy of such Shelf Registration Statement and any post-effective amendment thereto, including all material incorporated therein by reference, and, if the Holder so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein). (f) The Issuers shall, during the Shelf Registration Period, deliver to each Holder of Securities covered by any Shelf Registration Statement, without charge, as many copies of the Prospectus (including the Preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request. The Issuers consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Securities in connection with the offering and sale of the Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. (g) The Issuers shall furnish to each Exchanging Dealer which so requests, without charge, at least one (1) conformed copy of the Exchange Offer Registration Statement and any post-effective amendments thereto, including all material incorporated by reference therein, and, if the Exchanging Dealer so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein). (h) The Issuers shall promptly deliver to each Placement Agent, each Exchanging Dealer and each other person required to deliver a Prospectus during the Exchange Offer Registration Period, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendments or supplements thereto as any such person may reasonably request. The Issuers consent to the use of the Prospectus or any amendments or supplements thereto by any Placement Agent, any Exchanging Dealer and any such other person that may be required to deliver a Prospectus following the Registered Exchange Offer in connection with the offering -11- and sale of the New Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Exchange Offer Registration Statement. (i) Prior to the Registered Exchange Offer or any other offering of Securities pursuant to any Registration Statement, the Issuers shall arrange, if necessary, for the registration or qualification of the Securities or the New Securities for sale under the laws of such jurisdictions as any Holder shall reasonably request and shall maintain such qualification in effect so long as required; provided that in no event shall any Issuer be obligated to qualify to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the Initial Placement, the Registered Exchange Offer or any offering pursuant to a Shelf Registration Statement, in any such jurisdiction where it is not then so subject or to subject itself to taxation in excess of a nominal amount in respect of doing business in such jurisdiction. (j) The Issuers shall cooperate with the Holders of Securities to facilitate the timely preparation and delivery of certificates representing New Securities or Securities to be issued or sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request in writing at least three (3) Business Days prior to the closing date of any sales of New Securities. (k) (i) Upon the occurrence of any event contemplated by subsections (c) (ii) through (v) above, the Issuers shall promptly (or within the time period provided for by clause (ii) of this subsection (k), if applicable) prepare a post-effective amendment to the applicable Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to the Placement Agents of the Securities included therein, the Prospectus shall not include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In such circumstances, the period of effectiveness of the Exchange Offer Registration Statement provided for in Section 2 hereof shall be extended by the number of days from and including the date of the giving of a notice of suspension pursuant to Section 4(c) hereof to and including the date when the Placement Agents, the Holders of the Securities and any known Exchanging Dealer shall have received such amended or supplemented Prospectus pursuant to this Section 4(k). (ii) Upon the occurrence or existence of any pending corporate development or any other material event that, in the reasonable judgment of the Issuers, makes it appropriate to suspend the availability of a Shelf Registration Statement and the related Prospectus, the Issuers shall give notice (without notice of the nature or details of such events) to the Holders that the availability of the Shelf Registration is suspended and, upon actual receipt of any such notice, each Holder agrees not to sell any Registrable Securities pursuant to the Shelf Registration until such Holder's receipt of copies of the supplemented or amended Prospectus provided for in Section 3(a)(i) hereof, or until it is advised in writing -12- by the Issuers that the Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. The period during which the availability of the Shelf Registration and any Prospectus is suspended (the "Deferral Period") (1) shall not exceed 60 consecutive days, (2) shall not occur more than three (3) times during any calendar year and (3) shall extend the number of days the Shelf Registration or any Prospectus is required to be available by an amount equal to the Deferral Period. Any Registration Default Damages payable pursuant to Section 8(a)(iii) shall cease to accrue during any Deferral Period. (l) Not later than the effective date of any Registration Statement, the Issuers shall provide a CUSIP number and ISIN for the Securities or the New Securities, as the case may be, registered under such Registration Statement, and provide the Trustee with printed certificates for such Securities or New Securities, in a form eligible for deposit with The Depository Trust Company. (m) The Issuers shall comply in all material respects with all applicable rules and regulations of the Commission and shall make generally available to their security holders earnings statements satisfying the provisions of Section 11(a) of the Act as soon as practicable after the effective date of the applicable Registration Statement. (n) The Issuers shall cause the Indenture or any New Securities Indenture to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (o) The Issuers may require each Holder of Securities to be sold pursuant to any Shelf Registration Statement to furnish to the Issuers such information regarding the Holder and the distribution of such Securities as the Issuers may from time to time reasonably require for inclusion in such Registration Statement. The Issuers may exclude from such Shelf Registration Statement the Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request. (p) In the case of any Shelf Registration Statement, upon the request of the Majority Holders, the Issuers shall enter into customary agreements (including, if requested, one underwriting agreement in customary form) and take all other appropriate actions, if any, as the Majority Holders shall reasonably request in order to expedite or facilitate the registration or the disposition of the Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 6 hereof. (q) In the case of any Shelf Registration Statement, the Issuers shall: (i) make reasonably available for inspection at a location where they are normally kept and during normal business hours by the Majority Holders of Securities to be registered thereunder, any underwriter participating in any disposition pursuant to such Registration Statement and any attorney, accountant or other agent retained by such Holders or any such underwriter all relevant -13- financial and other records and pertinent corporate documents of the Issuers and their subsidiaries; (ii) use its commercially reasonable efforts to cause its officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant or agent (each, an "Inspector") in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that such Inspector shall first agree in writing with the Issuers that any information that is reasonably and in good faith designated by the Issuers in writing as confidential at the time of delivery of such information shall be kept confidential by such Inspector, unless (1) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (2) disclosure of such information is required by law (including any disclosure requirements pursuant to federal securities laws in connection with the filing of such Registration Statement or the use of any Prospectus), (3) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard such information by such person or (4) such information becomes available to such Inspector from a source other than the Issuers and such source is not known, after due inquiry, by the relevant Holder to be bound by a confidentiality agreement or is not otherwise under a duty of trust to the Issuers; (iii) make such representations and warranties to the Holders of Securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings; (iv) obtain opinions of counsel to the Issuers and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (v) obtain "comfort" letters and updates thereof from the independent certified public accountants of Holdings (and, if necessary, any other independent certified public accountants of any subsidiary of Holdings or of any business acquired by Holdings for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling Holder of Securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "comfort" letters in connection with primary underwritten offerings; and (vi) deliver such documents and certificates as may be reasonably requested by the Majority Holders or the Managing Underwriters, if any, including those to evidence compliance with Section 4(k) hereof and with any -14- customary conditions contained in the underwriting agreement or other agreement entered into by the Issuers. (r) If a Registered Exchange Offer is to be consummated, upon delivery of the Securities by Holders to the Company (or to such other person as directed by the Company) in exchange for the New Securities, the Company shall mark, or caused to be marked, on the Securities so exchanged that such Securities are being cancelled in exchange for the New Securities. In no event shall the Securities be marked as paid or otherwise satisfied. (s) The Issuers shall use their commercially reasonable best efforts to take all other steps necessary to effect the registration of the Securities or the New Securities, as the case may be, covered by a Registration Statement. 5. Registration Expenses. The Issuers shall bear all expenses incurred in connection with the performance of their obligations under Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, shall reimburse the Holders for the reasonable fees and disbursements of one firm or counsel (which shall initially be Shearman & Sterling LLP, but which may be another nationally recognized law firm experienced in securities matters designated by the Majority Holders) to act as counsel for the Holders in connection therewith, and, in the case of any Exchange Offer Registration Statement, shall reimburse the Placement Agents for the reasonable fees and disbursements of counsel acting in connection therewith, in each case which counsel shall be approved by the Issuer (such approval not to be unreasonably withheld). Each Holder shall pay all expenses of its counsel other than as set forth in the preceding sentence, underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Securities or New Securities. 6. Indemnification and Contribution. (a) The Issuers, jointly and severally, agree to indemnify and hold harmless each Holder of Securities or New Securities, as the case may be, covered by any Registration Statement, each Placement Agent and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer, the directors, officers and Affiliates of each such Holder, Placement Agent or Exchanging Dealer and each person who controls any such Holder, Placement Agent or Exchanging Dealer within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any preliminary Prospectus or the Prospectus, in the light of the circumstances under which they were made) not misleading, and agree (subject to the limitations set forth in the provisos to this sentence) to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Issuers will not be liable in any such case to the -15- extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Issuers by or on behalf of the party claiming indemnification specifically for inclusion therein; provided further that with respect to any such untrue statement or alleged untrue statement or omission or alleged omission from any preliminary Prospectus, the indemnity agreement contained in this paragraph (a) shall not inure to the benefit of any Holder, Placement Agent or Exchanging Dealer or any of their respective directors, officers and Affiliates or control persons, from whom such person asserting such loss, claim, damage or liability purchased the New Securities concerned, to the extent that both (i) a copy of the final Prospectus was not sent or given to such person at or prior to the written confirmation of the sale of the Securities or New Securities to such person and (ii) the untrue statement in or omission from such preliminary Prospectus was corrected in the final Prospectus unless, in either case, such failure to deliver the final Prospectus was a result of non-compliance by the Issuer with the provisions of Section 4 hereof. This indemnity agreement shall be in addition to any liability that the Issuers may otherwise have. The Issuers shall not be liable under this Section 6 to any indemnified party regarding any settlement or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent is consented to by the Issuers, which consent shall not be unreasonably withheld. (b) Each Holder of securities covered by a Registration Statement (including each Placement Agent that is a Holder, in such capacity) severally and not jointly agrees to indemnify and hold harmless the Issuers, each of their respective directors, each of their respective officers who sign such Registration Statement and each person who controls any Issuer within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Issuers to each such Holder, but only with reference to written information relating to such Holder furnished to the Issuers by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability that any such Holder may otherwise have. (c) Promptly after receipt by an indemnified party under this Section 6 or notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section, notify the indemnifying party in writing of the commencement thereof; but the failure to so notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel (including local counsel) of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel, other than local counsel if not appointed by the indemnifying party, retained by the indemnified party or parties except as set forth below); provided, however, that -16- such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel (including local counsel) to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest (based on the advice of counsel to the indemnified person); (ii) such action includes both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded (based on the advice of counsel to the indemnified person) that there may be legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. It is understood and agreed that the indemnifying party shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for all indemnified parties. Any such separate firm for any Placement Agent, its directors, officers and Affiliates and any control person shall be designated in writing by CGMI and any such separate firm for any of the Issuers, its respective directors, officers and Affiliates and any control person shall be designated in writing by the Company. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and does not include any statement as to, or any concessions of, fault, culpability or failure to act by or on behalf of any indemnified party. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending any loss, claim, liability, damage or action) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the Registration Statement which resulted in such Losses; provided, however, that in no case shall any Placement Agent be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Security, or in the case of a New Security, applicable to the Security that was exchangeable into such New Security, as set forth in the Final Memorandum, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such -17- relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Issuers shall be deemed to be equal to the total net proceeds from the Initial Placement (before deducting expenses) as set forth in the Final Memorandum. Benefits received by the Placement Agents shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Memorandum, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Securities or New Securities, as applicable, registered under the Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission and any other equitable considerations appropriate in the circumstances. The parties agree that it would not be just and equitable if the amount of such contribution were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls any Issuer within the meaning of either the Act or the Exchange Act, each officer of any Issuer who shall have signed the Registration Statement and each director of any Issuer shall have the same rights to contribution as the Issuers, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Issuers or any of the indemnified persons referred to in this Section 6, and will survive the sale by a Holder of securities covered by a Registration Statement. 7. Underwritten Registrations. (a) If any of the Securities or New Securities, as the case may be, covered by any Shelf Registration Statement are to be sold in an underwritten offering, the Managing Underwriters, if any, shall be selected by the Majority Holders subject to the consent of the Issuer (which shall not be unreasonably withheld), and the Holders of Securities or New Securities covered by such Shelf Registration Statement shall be responsible for all underwriting commissions and discounts. (b) No person may participate in any underwritten offering pursuant to any Shelf Registration Statement, unless such person (i) agrees to sell such person's Securities or New Securities, as the case may be, on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting -18- agreements and other documents reasonably required under the terms of such underwriting arrangements. 8. Registration Defaults. (a) If any of the following events shall occur, then the Company shall pay liquidated damages (the "Registration Default Damages") to the Holders of Securities in respect of the Securities as follows: (i) if (a) neither (x) the Registered Exchange Offer is completed within 300 days of the Closing Date, nor (y) if required, the Shelf Registration Statement is declared effective within 270 days of the date the filing obligation arises with respect to such Shelf Registration Statement, then Registration Default Damages shall accrue on the Registrable Securities at a rate of 0.25% per annum on the principal amount of such Registrable Securities for the first 90 days from and including such specified date and increasing by an additional 0.25% per annum at the beginning of each subsequent 90-day period thereafter; provided that Registration Default Damages in the aggregate under this Section 8 may not exceed 1.0% per annum of the principal amount of such Registrable Securities; or (ii) subject to the last sentence of Section 4(k)(ii) above, if the Shelf Registration Statement required by Section 3(a) of this Agreement has been declared effective but thereafter ceases to be effective at any time at which it is required to be effective under this Agreement and such failure to remain effective exists for more than 30 consecutive days or more than 60 days (whether or not consecutive) during the period for which the Shelf Registration Statement is required, then commencing on the 31st day or 61st day, as applicable, following the date on which such Shelf Registration Statement ceases to be effective, Registration Default Damages shall accrue on the Registrable Securities at a rate of 0.25% per annum of the principal amount of such Registrable Securities for the first 90 days from and including such 31st day or 61st day, as applicable, following the date on which such Shelf Registration Statement ceases to be effective and increasing by an additional 0.25% per annum at the beginning of each subsequent 90-day period thereafter; provided that Registration Default Damages in the aggregate under this Section 8 may not exceed 1.0% per annum of the principal amount of such Registrable Securities; provided, however, that upon (1) the completion of the Exchange Offer (in the case of paragraph (i) above) and (2) the effectiveness of the Shelf Registration Statement which had ceased to remain effective (in the case of paragraph (ii) above), Registration Default Damages shall cease to accrue. (b) The Issuers shall notify the Trustee within one Business Day after each and every date on which an event occurs in respect of which Registration Default Damages are required to be paid and within one Business Day after such Registration Default Damages cease to accrue. Any amounts of Registration Default Damages due pursuant to paragraphs (i) or (ii) of this Section 8(a) will be payable in cash on each interest payment date specified by the Indenture to the record holder entitled to receive the interest payment to be made on such date, commencing with the first such date occurring after any such Registration Default Damages commences to accrue. -19- (c) The parties hereto agree that the liquidated damages in the form of Registration Default Damages provided for in this Section 8 constitute a reasonable estimate of and are intended to constitute the sole damages payable under this Agreement that will be suffered by Holders of Securities by reason of the failure of (i) the Registered Exchange Offer to be completed; (ii) the Shelf Registration Statement, if required hereby, to be declared effective, or (iii) the Shelf Registration Statement to remain effective (and the prospectus contained therein to remain usable), in each case to the extent required by this Agreement. 9. No Inconsistent Agreements. No Issuer has entered into, and each Issuer agrees not to enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or that otherwise conflicts with the provisions hereof. 10. Amendments and Waivers. The provisions of this Agreement may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Issuers have obtained the written consent of the Holders of a majority of the aggregate principal amount of the Registrable Securities outstanding; provided that, with respect to any matter that directly or indirectly affects the rights and obligations of any Placement Agent hereunder, the Issuers shall obtain the written consent of each such Placement Agent against which such amendment, qualification, supplement, waiver or consent is to be effective; provided further that no amendment, qualification, supplement, waiver or consent with respect to Section 8 hereof shall be effective as against any Holder of Registered Securities unless consented to in writing by such Holder; and provided further that the provisions of this Article 10 may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Issuers have obtained the written consent of the Placement Agents and each Holder. Notwithstanding the foregoing (except the foregoing provisos), a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities or New Securities, as the case may be, are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of Securities or New Securities, as the case may be, being sold rather than registered under such Registration Statement. 11. Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier or air courier guaranteeing overnight delivery: (a) if to a Holder, at the most current address given by such Holder to the Issuers in accordance with the provisions of this Section 11, which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar (as such term is defined in the Indenture) under the Indenture; (b) if to the Representatives, initially at the address or addresses set forth in the Purchase Agreement; and (c) if to any Issuer, initially at its address set forth in the Purchase Agreement. -20- All such notices and communications shall be deemed to have been duly given when received. The Placement Agents or the Issuers by notice to the other parties may designate additional or different addresses for subsequent notices or communications. 12. Remedies. Each Holder, in addition to being entitled to exercise all rights provided to it herein, in the Indenture or in the Purchase Agreement or granted by law, including recovery of liquidated or other damages, will be entitled to specific performance of its rights under this Agreement. The Issuers agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by them of the provisions of this Agreement and hereby agree to waive in any action for specific performance the defense that a remedy at law would be adequate. 13. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their respective successors and assigns, including, without the need for an express assignment or any consent by the Issuers thereto, subsequent Holders of Securities and the New Securities, and the indemnified persons referred to in Section 6 hereof. The Issuers hereby agree to extend the benefits of this Agreement to any Holder of Securities and the New Securities, and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. 14. Counterparts. This Agreement may be signed in one or more counterparts which may be delivered in original form or by telecopier, each of which when so executed shall constitute an original and all of which together shall constitute one and the same agreement. 15. Headings. The section headings used herein are for convenience only and shall not affect the construction hereof. 16. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. The parties hereto each hereby waive any right to trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement. 17. Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. 18. Securities Held by any Issuer, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities or New Securities is required hereunder, Securities or New Securities, as applicable, held by any Issuer or their Affiliates (other than subsequent Holders of Securities or New Securities if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Securities or New Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. [Signature pages follow.] -22- If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement by and among the Issuers and the several Placement Agents. Very truly yours, DRESSER-RAND GROUP INC. By: /s/ Elizabeth C. Powers ---------------------------------------- Name: Elizabeth C. Powers Title: Vice President DRESSER-RAND LLC By: /s/ Elizabeth C. Powers ---------------------------------------- Name: Elizabeth C. Powers Title: Vice President DRESSER-RAND COMPANY By: /s/ Elizabeth C. Powers ---------------------------------------- Name: Elizabeth C. Powers Title: Vice President DRESSER-RAND POWER LLC By: /s/ Elizabeth C. Powers ---------------------------------------- Name: Elizabeth C. Powers Title: Vice President DRESSER-RAND GLOBAL SERVICES, LLC By: /s/ Elizabeth C. Powers ---------------------------------------- Name: Elizabeth C. Powers Title: Vice President -23- The foregoing Agreement is hereby confirmed and accepted as of the date first above written: Morgan Stanley & Co. Incorporated Citigroup Global Markets Inc. UBS Securities LLC Bear, Stearns & Co. Inc. Natexis Bleichroeder Inc. Sovereign Securities Corporation, LLC Daiwa Securities America Inc. As Representatives of the Placement Agents By: Morgan Stanley & Co. Incorporated By: /s/ Bryan W. Andrzejewski ---------------------------------------- Name: Bryan W. Andrzejewski Title: Executive Director ANNEX A Each broker-dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it shall deliver a prospectus in connection with any resale of such New Securities. The Letter of Transmittal states that by so acknowledging and by delivering a Prospectus, a broker-dealer shall not be deemed to admit that it is an "underwriter" within the meaning of the Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Issuers have agreed that, for a period of 180 days after consummation of the Registered Exchange Offer, they shall make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." A-1 ANNEX B Each broker-dealer that receives New Securities for its own account in exchange for Securities, where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it shall deliver a Prospectus in connection with any resale of such New Securities. See "Plan of Distribution." B-1 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives New Securities for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a Prospectus in connection with any resale of such New Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Issuers have agreed that, for a period of 180 days after the consummation of the Registered Exchange Offer, they will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until __________, 20___, all dealers effecting transactions in the New Securities may be required to deliver a Prospectus. The Issuers will not receive any proceeds from any sale of New Securities by brokers-dealers. New Securities received by broker-dealers for their own account pursuant to the Registered Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Securities. Any broker-dealer that resells New Securities that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such New Securities may be deemed to be an "underwriter" within the meaning of the Act and any profit of any such resale of New Securities and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a Prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Act. For a period of 180 days after the consummation of the Registered Exchange Offer, the Issuers will promptly send additional copies of this Prospectus and any amendments or supplements to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Issuers have agreed to pay all expenses incident to the Registered Exchange Offer (including the expenses of one counsel for the holder of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Act. [If applicable, add information required by Regulation S-K Items 507 and/or 508.] C-1 ANNEX D LANGUAGE TO BE INCLUDED IN LETTER OF TRANSMITTAL 1. PLEASE FILL IN YOUR NAME AND ADDRESS BELOW IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ___________________________ Address: ___________________________ ___________________________ 2. If the undersigned is not a Broker-Dealer, the undersigned represents that it acquired the New Securities in the ordinary course of its business, it is not engaged in, and does not intend to engage in, a distribution of New Securities and it has no arrangements or understandings with any person to participate in a distribution of the New Securities. If the undersigned is a Broker-Dealer that will receive New Securities for its own account in exchange for Securities, it represents that the Securities to be exchanged for New Securities were acquired by it as a result of market-making activities or other trading activities and acknowledges that it shall deliver a Prospectus in connection with any resale of such New Securities; however, by so acknowledging and by delivering a Prospectus, the undersigned shall not be deemed to admit that it is an "underwriter" within the meaning of the Act. D-1 EX-5.1 14 y68981exv5w1.txt EX-5.1: OPINION OF SIMPSON THACHER & BARTLETT LLP Exhibit 5.1 February 11, 2005 Dresser-Rand Group Inc. Paul Clark Drive Olean, New York 14760 Ladies and Gentlemen: We have acted as counsel to Dresser-Rand Group Inc., a Delaware corporation (the "Company"), and to Dresser-Rand Company, a New York general partnership, Dresser-Rand LLC, a Delaware limited liability company, Dresser-Rand Power LLC, a Delaware limited liability company and Dresser-Rand Global Services, L.L.C., a Delaware limited liability company (individually, a "Guarantor" and collectively, the "Guarantors") in connection with the Registration Statement on Form S-4 (the "Registration Statement") filed by the Company and the Guarantors with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, relating to the issuance by the Company of $420,000,000 aggregate principal amount of 7 3/8% Senior Subordinated Notes due 2014 (the "Exchange Securities") and the issuance by the Guarantors of guarantees (the "Guarantees") with respect to the Exchange Securities. The Exchange Securities and the Guarantees will be issued under an indenture dated as of October 29, 2004 (the "Indenture") among the Company, the Guarantors and Citibank N.A., as trustee (the "Trustee"). The Exchange Securities will be offered by the Company in exchange for $420,000,000 aggregate principal amount of its outstanding 7 3/8% Senior Subordinated Notes due 2014 (the "Securities"). We have examined the Registration Statement and the Indenture, which has been filed with the Commission as an exhibit to the Registration Statement. We also have examined the originals, or duplicates or certified or conformed copies, of such corporate records, agreements, 2 documents and other instruments and have made such other investigations as we have deemed relevant and necessary in connection with the opinions hereinafter set forth. As to questions of fact material to this opinion, we have relied upon certificates or comparable documents of public officials and of officers and representatives of the Company and the Guarantors. In rendering the opinions set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies and the authenticity of the originals of such latter documents. We also have assumed that the Indenture is the valid and legally binding obligation of the Trustee. Based upon the foregoing, and subject to the qualifications, assumptions and limitations stated herein, we are of the opinion that: 1. When the Exchange Securities have been duly executed, authenticated, issued and delivered in accordance with the provisions of the Indenture upon the exchange, the Exchange Securities will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms. 2. When (a) the Exchange Securities have been duly executed, authenticated, issued and delivered in accordance with the provisions of the Indenture upon the exchange and (b) the Guarantees have been duly issued, the Guarantees will constitute valid and legally binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms. Our opinions set forth above are subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing. We do not express any opinion herein concerning any law other than the law of the State of New York, the Delaware Limited Liability Company Act and the Delaware General Corporation Law (including the statutory provisions, all applicable provisions of the Delaware Constitution and reported judicial decisions interpreting the foregoing). 3 We hereby consent to the filing of this opinion letter as Exhibit 5 to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus included in the Registration Statement. Very truly yours, /s/ Simpson Thacher & Bartlett LLP SIMPSON THACHER & BARTLETT LLP EX-10.1 15 y68981exv10w1.txt EX-10.1: EQUITY PURCHASE AGREEMENT EXHIBIT 10.1 EXECUTION COPY EQUITY PURCHASE AGREEMENT Between FRC ACQUISITIONS LLC On Behalf of Itself and the other Buyers Named Herein and INGERSOLL-RAND COMPANY LIMITED On Behalf of Itself and the other Sellers Named Herein dated as of August 25, 2004 TABLE OF CONTENTS

ARTICLE IV CONDITIONS TO SELLERS' OBLIGATION 4.1 Representations and Warranties.......................................................... 34 4.2 Performance............................................................................. 35 4.3 Officer's Certificate................................................................... 35 4.4 Consents and Approvals.................................................................. 35 4.5 Injunctions............................................................................. 35 4.6 Guarantees.............................................................................. 35 ARTICLE V CONDITIONS TO BUYERS' OBLIGATION 5.1 Representations and Warranties.......................................................... 36 5.2 Performance............................................................................. 36 5.3 Officer's Certificate................................................................... 36 5.4 Consents and Approvals.................................................................. 36 5.5 Injunctions............................................................................. 36 5.6 Satisfaction and Release of Encumbrances................................................ 37 5.7 Material Adverse Effect................................................................. 37 5.8 French Offer Letter..................................................................... 37 5.9 Interim Financials...................................................................... 37 ARTICLE VI COVENANTS AND AGREEMENTS 6.1 Conduct of Business by Dresser-Rand Group............................................... 37 6.2 Access to Books and Records; Cooperation................................................ 39 6.3 Filings and Consents.................................................................... 40 6.4 Tax Matters; Cooperation; Preparation of Returns; Tax Elections......................... 41 6.5 Tax Indemnity........................................................................... 43 6.6 Procedures Relating to Indemnification for Taxes........................................ 45 6.7 Refunds and Tax Benefits................................................................ 47 6.8 Employees; Benefit Plans................................................................ 47 6.9 Labor Matters........................................................................... 55 6.10 Covenant to Satisfy Conditions.......................................................... 55 6.11 Contact With Customers and Suppliers.................................................... 55 6.12 Projections............................................................................. 55 6.13 No Hire................................................................................. 56 6.14 Use of Names............................................................................ 56 6.15 Environmental Rights and Responsibilities After Execution of Agreement.................. 57 6.16 Intercompany Debt....................................................................... 64 6.17 Substitute Guarantees................................................................... 64 6.18 Plaintiff Actions....................................................................... 65 6.19 Financing............................................................................... 65 6.20 Pending Insurance Claim................................................................. 67 6.21 Transfers of Non-U.S. Interests......................................................... 68 6.22 Real Property Deeds..................................................................... 68 6.23 Estimated Customer Prepayments Statement................................................ 69 6.24 Currency Conversion..................................................................... 69 6.25 Insurance............................................................................... 69 ARTICLE VII TERMINATION 7.1 Termination............................................................................. 70

ii 7.2 Procedure and Effect of Termination..................................................... 71 ARTICLE VIII INDEMNIFICATION 8.1 Indemnification......................................................................... 71 ARTICLE IX MISCELLANEOUS 9.1 Fees and Expenses; Transfer Taxes....................................................... 76 9.2 Governing Law........................................................................... 77 9.3 Amendment............................................................................... 77 9.4 No Assignment........................................................................... 77 9.5 Waiver.................................................................................. 77 9.6 Notices................................................................................. 77 9.7 Complete Agreement...................................................................... 78 9.8 Counterparts............................................................................ 79 9.9 Publicity............................................................................... 79 9.10 Certain Definitions..................................................................... 79 9.11 Headings................................................................................ 81 9.12 Severability............................................................................ 81 9.13 Third Parties........................................................................... 81 9.14 CONSENT TO JURISDICTION................................................................. 81 9.15 WAIVER OF JURY TRIAL.................................................................... 81 9.16 Specific Enforcement.................................................................... 82 9.17 Guarantee of Seller Obligations......................................................... 82

EXHIBITS Exhibit A - Buyers and Sellers Exhibit B - Dresser-Rand Restructuring Steps Exhibit C - Form of Transition Services Agreement Exhibit D - Form of License Agreement Exhibit E - Environmental Reporting Procedures iii EQUITY PURCHASE AGREEMENT This Equity Purchase Agreement (this "Agreement"), dated as of August 25, 2004, is entered into by and among FRC Acquisitions LLC, Delaware limited liability company ("FRC"), on behalf of itself and the other buyers set forth on Exhibit A hereto (collectively with FRC, the "Buyers") and Ingersoll-Rand Company Limited, a company organized under the laws of Bermuda ("IR"), on behalf of itself and the other sellers set forth on Exhibit A hereto (collectively with IR, the "Sellers"). WHEREAS, IR indirectly owns all of the issued and outstanding capital stock or partnership interests of each other Seller; WHEREAS, the Sellers (other than IR) directly own capital stock or other equity interests (the "Acquired Interests") in the entities which are not at the time of the Closing a subsidiary of another member of the Dresser-Rand Group (as defined in Section 2.2), including as set forth on Exhibit A hereto; WHEREAS, the Dresser-Rand Group is in the business of, among other things, the design, manufacture, sale, maintenance and repair of gas and steam compression equipment (including centrifugal and reciprocating compressors and steam and gas turbines), all as currently conducted by the Dresser-Rand Group (the "Business"; provided that, the "Business" shall not include IR and its subsidiaries' high-capacity hoists and winch business); and WHEREAS, the Sellers wish to sell, and the Buyers wish to buy, the Acquired Interests, upon the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the parties hereto agree as follows: ARTICLE I PURCHASE AND SALE OF INTERESTS 1.1 Transfers by Sellers of the Acquired Interests. On the Closing Date (as defined in Section 1.3) and subject to the terms and conditions set forth in this Agreement, the Sellers shall sell, assign and transfer to Buyers all of the Sellers' right, title and interest in and to the Acquired Interests in accordance with the restructuring steps and others transactions set forth on Exhibit B hereto, free and clear of all options, pledges, mortgages, security interests, liens, restrictions on voting or transfer, or other encumbrances of any nature (collectively, "Encumbrances"), other than such as may be created by or on behalf of the Buyers; provided, however, that with respect to entities in the Dresser-Rand Group incorporated or organized under the laws of any jurisdiction outside of the United States ("Non-U.S. Acquired Interests"), the purchase and sale thereof shall be effected in accordance with Section 6.21 to the extent the parties so agree. No transfer of partnership interests pursuant to the terms of this Agreement shall cause such partnership to dissolve or terminate. 1.2 Consideration. (a) On the Closing Date and subject to the terms and conditions set forth in this Agreement, in consideration of the sale, assignment and transfer of the Acquired Interests, FRC, on behalf of the Buyers, will pay to the Sellers cash in the amount of (A) One Billion Two Hundred Million dollars ($1,200,000,000), plus (B) the Estimated Net Cash Amount (as defined in Section 1.2(b)), minus (C) the EBITDA Adjustment Amount (as defined in Section 1.2(d)) (the "Initial Purchase Price", and as further adjusted pursuant to the provisions of this Agreement, the "Purchase Price"). The parties hereto agree that the Initial Purchase Price in respect of particular Non-U.S. Acquired Interests may be paid by the applicable Buyer to the applicable Seller under a Local Transfer Agreement (as defined in Section 6.21(b)), if applicable. (b) As of a date reasonably proximate (which is intended to be the third (3rd) business day preceding the anticipated Closing Date) to the Closing Date, IR shall provide Buyers a schedule setting forth reasonably estimated Cash (as defined in Section 1.4(f)) of the Dresser-Rand Group by entity as of the Closing. No later than three (3) business days prior to the anticipated Closing Date, IR shall prepare, or cause to be prepared, a statement (the "Estimated Net Cash Statement") containing IR's good faith estimate of the Net Cash Amount (the "Estimated Net Cash Amount"), which shall be prepared in accordance with the definition of Net Cash Amount in Section 1.4(f) and the methodologies set forth in Section 1.2(b) of the disclosure schedule being delivered by the Sellers to the Buyers simultaneously with the execution of this Agreement and forming a part of this Agreement (the "Disclosure Schedule"). IR shall provide the Buyers and their accountants' reasonable access to all relevant books, records, facilities and employees of the Dresser-Rand Group and to any other information reasonably necessary to review and understand the Estimated Net Cash Statement. The Estimated Net Cash Statement prepared in accordance with this Section 1.2(b) shall be final and not subject to objection from Buyers for purposes of calculating the Initial Purchase Price at the Closing. (c) The Buyers shall, following written notice to Sellers, who shall have an opportunity to review and understand such notice, (i) withhold and deduct from the Purchase Price or any other payment made by the Buyers pursuant to this Agreement any and all amounts required to be withheld and paid over to any Taxing Authority (as defined in Section 2.12(a)) as a result of the transactions contemplated by this Agreement, (ii) pay over to the applicable Taxing Authority any amounts required to be so withheld and (iii) promptly deliver to the Sellers any withheld amounts remaining thereafter in Buyer's custody (including, without limitation, any withheld amounts subsequently refunded to Buyer). Such notice shall set forth in reasonable detail the basis for such withholding or deduction. Any amounts withheld and paid over to any applicable Taxing Authority in accordance with the first sentence above (other than Transfer Taxes, which shall be governed by Section 9.1(b)) shall be treated as having been received by Sellers for all purposes of this Agreement. Notwithstanding the foregoing, if Buyers 2 determine that they are required to withhold and deduct any amounts under this Section 1.2(c) from payments made under this Agreement, Buyers shall reasonably cooperate with Sellers to consider and implement alternative structures that would permit such payments to be made without such withholding or deduction and otherwise would not, in Buyers' reasonable judgment, alter the economics or practicability of the transactions contemplated by this Agreement. If such withholding or deduction is nonetheless required, Buyers shall use reasonable best efforts to provide Sellers certified copies of receipts (or other evidence reasonably satisfactory to Sellers) evidencing payment of such withheld amounts as soon as reasonably possible after making such payments. (d) For purposes of this Agreement, the following terms shall have the following meanings: "Business EBITDA" shall mean operating income plus depreciation and amortization of the Dresser-Rand Group and the Business for the twelve months ended June 30, 2004, as set forth in the applicable financial statements of the Dresser-Rand Group and the Business, calculated in accordance with the methodology set forth in Section 1.2(d) of the Disclosure Schedule. "EBITDA Adjustment Amount" shall mean an amount, if any, equal to eight times the EBITDA Deficiency. "EBITDA Deficiency" shall mean, only if a positive number, (1) Business EBITDA calculated based on the financial statements, as set forth in Section 1.2(d) of the Disclosure Schedule, minus (2) Business EBITDA calculated based on the SAS Financial Statements and Audited Financial Statements, minus (3) $6.6 million. 1.3 The Closing. (a) Closing. Unless this Agreement shall have been terminated and the transactions contemplated herein shall have been abandoned pursuant to Article VII, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom, 4 Times Square, New York, NY 10036, on the third business day following the satisfaction or waiver of all of the conditions set forth in Articles IV and V hereof (the "Closing Date"), or at such other place and time as may be agreed upon by the Sellers and the Buyers, and shall be effective as of 11:59 P.M. local time on the Closing Date. The parties will use commercially reasonable efforts to schedule the Closing to occur effective as of 11:59 P.M. local time on October 31, 2004. (b) Deliveries by the Sellers. At the Closing, the Sellers shall deliver or cause to be delivered to the Buyers the following: (i) stock certificates (or local legal equivalent) evidencing those Acquired Interests that are certificated securities, duly endorsed in blank, or accompanied by stock powers duly executed in blank and with any required stock transfer tax stamps affixed; 3 (ii) a receipt from IR, on behalf of itself and the other Sellers, for the Initial Purchase Price paid to the Sellers; (iii) IR shall pay by wire transfer of immediately available funds to an account or accounts, which are designated by Buyers to IR not less than two (2) business days prior to the Closing, cash in the amount equal to the sum of the following (the "Closing Payment"): (A) the Estimated Customer Prepayments Amount (as defined in Section 6.23) as set forth on the Estimated Customer Prepayments Statement (as defined in Section 6.23), plus (B) $17,000,000; (iv) the Transaction Agreements (as defined below) to which each Seller is a party, duly executed by each relevant Seller; (v) copies of the resolutions (or local equivalent) of the boards of directors and, where required, the stockholders of each Seller, authorizing and approving this Agreement and the Transaction Agreements and the transactions contemplated hereby and thereby, certified by the respective corporate secretaries (or local equivalent) of the applicable Sellers to be true and complete and in full force and effect and unmodified as of the Closing Date; (vi) the Consents listed in Section 2.7 of the Disclosure Schedule; (vii) a duly executed certificate of non-foreign status (a "FIRPTA Certificate") from each of the Sellers in a form and manner that complies with Section 1445 of the Code and the Treasury Regulations promulgated thereunder, provided, however, that if a FIRPTA Certificate is unable to be furnished by a Seller, then such Seller may instead provide a certificate (an "Alternate Certificate") pursuant to which such Seller certifies under penalties of perjury that it is not disposing of any United States real property interest (as defined in Section 897(c) of the Code and the Treasury Regulations promulgated thereunder). Notwithstanding anything to the contrary contained herein, if any Seller fails to provide to Buyer a FIRPTA Certificate or Alternate Certificate, Buyer shall be entitled to withhold from the Purchase Price or any other payment made pursuant to this Agreement the amount required to be withheld pursuant to Section 1445 of the Code and the Treasury Regulations promulgated thereunder; (viii) the certificate required by Section 5.3 hereof; (ix) written resignations, effective as of the Closing Date, of the directors, officers and the foreign equivalents of 4 members of the Dresser-Rand Group that are employed by IR following the Closing; and (x) such other documents and certificates duly executed as may be reasonably required to be delivered by the Sellers pursuant to the terms of this Agreement or as may be reasonably requested by Buyers prior to the Closing Date. For purposes of this Agreement, "Transaction Agreements" shall mean (a) with respect to the Acquired Interests, such instruments of sale, conveyance, transfer and assignment, and such other agreements or documents, if any, in each case in form and substance reasonably satisfactory to IR and the Buyers, as shall be necessary in order to transfer all right, title and interest of the applicable Sellers in such Acquired Interests in accordance with the terms hereof, (b) the Transition Services Agreement substantially in the form attached as Exhibit C hereto (the "Transition Services Agreement"), (c) the License Agreement substantially in the form attached as Exhibit D hereto (the "License Agreement"), (d) the French Offer Letter and (e) any Local Transfer Agreements. (c) Deliveries by the Buyers. At the Closing, the Buyers shall deliver or cause to be delivered to or for the benefit of the Sellers the following: (i) the Initial Purchase Price by wire transfer of immediately available funds to an account or accounts, which are designated by IR to the Buyers not less than two (2) business days prior to the Closing; (ii) a receipt from FRC, on behalf of itself and the other Buyers, evidencing receipt of the Acquired Interests and the Closing Payment; (iii) copies of the resolutions of the board of directors (or comparable governing body) of each Buyer authorizing and approving this Agreement and the Transaction Agreements and the transactions and agreements contemplated hereby and thereby, certified by the corporate secretary of each Buyer to be true and complete and in full force and effect and unmodified as of the Closing Date; (iv) the Transaction Agreements to which each Buyer is a party, duly executed by such Buyer; (v) the Consents listed in Section 2.7 of the Disclosure Schedule; (vi) the certificate required by Section 4.3 hereof; (vii) the Guarantees (as defined in Section 4.6) described in Section 4.6 hereof; and 5 (viii) such other documents and certificates duly executed as may be reasonably required to be delivered by the Buyers pursuant to the terms of this Agreement or as may be reasonably requested by Sellers prior to the Closing Date. (d) All instruments and documents executed and delivered to the Buyers pursuant hereto shall be in form and substance, and shall be executed in a manner, reasonably satisfactory to the Buyers. All instruments and documents executed and delivered to the Sellers pursuant hereto shall be in form and substance, and shall be executed in a manner, reasonably satisfactory to the Sellers. 1.4 Post-Closing Purchase Price Adjustment. (a) Within ninety (90) days after the Closing Date, Sellers will prepare, or cause to be prepared, (i) a statement (the "Closing Working Capital Statement") containing calculations of the net working capital of the Dresser-Rand Group as of 11:59 P.M. local time on the Closing Date (the "Closing Net Working Capital Amount"); (ii) a statement (the "Closing Net Cash Statement") containing a calculation of the Net Cash Amount (the "Closing Net Cash Amount"), which shall be prepared in accordance with the definition of Net Cash Amount in Section 1.4(f) and the methodologies set forth in Section 1.2(b) of the Disclosure Schedule; and (iii) a statement (the "Closing Customer Prepayments Statement" and, together with the Closing Working Capital Statement and the Closing Net Cash Statement, the "Closing Statements") containing a calculation of the Customer Prepayments Amount (as defined in Section 6.23) (the "Closing Customer Prepayments Amount"), which shall be prepared in accordance with the methodologies set forth on Section 6.23 of the Disclosure Schedule. The Closing Working Capital Statement shall be prepared on a combined basis in conformity with accounting principles generally accepted in the United States of America ("GAAP"), applied on a basis consistent with the Audited Financial Statements, and shall be prepared on a basis consistent with, and reflecting all adjustments reflected on, the statement of net working capital of the Dresser-Rand Group as set forth in Section 1.4(a) of the Disclosure Schedule (the "Benchmark Net Working Capital Statement"). Buyers will assist and cooperate fully with the Sellers in the preparation of the Closing Statements, including by providing the Sellers and their accountants reasonable access to all relevant books, records, facilities and employees of the Dresser-Rand Group and to any other information reasonably necessary to prepare the Closing Statements. (b) The Buyers shall, within thirty (30) days after the delivery by the Sellers of the Closing Statements, complete their review of such statements and the calculation of the Closing Net Working Capital Amount, the Closing Net Cash Amount and the Closing Customer Prepayments Amount. In the event that the Buyers determine that the Closing Net Working Capital Amount, the Closing Net Cash Amount or the Closing Customer Prepayments Amount have not been determined on a basis consistent with the requirements of Section 1.4(a), on or before the last day of such 30-day period Buyers shall inform the Sellers in writing (the "Objection"), setting forth a specific description of the basis of the Objection, the adjustments to the Closing Net Working Capital Amount, the Closing Net Cash Amount and the Closing Customer Prepayments 6 Amount which Buyers believe should be made, and Buyers' calculation of the Closing Net Working Capital Amount, the Closing Net Cash Amount and the Closing Customer Prepayments Amount. Buyers shall be deemed to have accepted any items in the Closing Working Capital Statement, the Closing Net Cash Statement and the Closing Customer Prepayments Statement and the calculation of the Closing Net Working Capital Amount, the Closing Net Cash Amount and the Closing Customer Prepayments Amount not specifically disputed in the Objection. For the avoidance of doubt, any dispute shall be limited to the dollar amounts of the Closing Net Working Capital Amount, the Closing Net Cash Amount and the Closing Customer Prepayments Amount identified in the Objection as a subject of dispute. Failure to deliver to the Sellers a timely written Objection satisfying the requirements of this Section 1.4(b) shall constitute acceptance and approval of the Sellers' calculation of the Closing Net Working Capital Amount, the Closing Net Cash Amount and the Closing Customer Prepayments Amount. (c) The Sellers shall have thirty (30) days from the date they receive the Objection to review and respond to the Objection. If the Sellers and Buyers are unable to resolve all of their disagreements with respect to the determination of the disputed items within thirty (30) days following the completion of the Sellers' review of the Objection, after having used their good faith efforts to reach a resolution, they shall refer their remaining differences to Deloitte & Touche LLP or another internationally recognized firm of independent public accountants as to which the Sellers and Buyers mutually agree (the "CPA Firm"), who shall, acting as experts in accounting and not as arbitrators, determine on a basis consistent with the requirements of Section 1.4(a), and only with respect to the specific remaining accounting related differences so submitted, whether and to what extent, if any, the Closing Net Working Capital Amount, the Closing Net Cash Amount or the Closing Customer Prepayments Amount require adjustment. In resolving any remaining accounting related differences, the CPA Firm may not assign a value to any disputed item greater than the greatest value for such item claimed by either party or less than the lowest value for such item claimed by either party. The Sellers and Buyers shall request the CPA Firm to use its best efforts to render its determination within 45 days. The CPA Firm's determination shall be conclusive and binding upon the Sellers and Buyers. The Sellers and Buyers shall make reasonably available to the CPA Firm all relevant books and records, any work papers (including those of the parties' respective accountants, subject to any customary agreements or documentation required by such accounting firms) and supporting documentation relating to the Closing Statements, the calculation of the Closing Net Working Capital Amount, the calculation of the Closing Net Cash Amount, the calculation of the Closing Customer Prepayments Amount and all other items reasonably requested by the CPA Firm. The "Final Net Working Capital Amount" shall ultimately be equal to (i) the Closing Net Working Capital Amount as shown on the Closing Working Capital Statement in the event that (x) no Objection is delivered to the Sellers during the initial 30-day period specified above, (y) the Objection delivered to the Sellers does not set forth any dispute with respect to the Closing Net Working Capital Amount or (z) the Sellers and Buyers so agree, (ii) the Closing Net Working Capital Amount as adjusted in accordance with the Objection, in the event that (x) the Sellers do not respond to the Objection within the specified 30-day period following receipt by the Sellers of the Objection or (y) the Sellers and Buyers so agree, or (iii) the Closing Net Working Capital Amount as adjusted by either (x) the 7 agreement of the Sellers and Buyers or (y) the CPA Firm. The "Final Net Cash Amount" shall ultimately be equal to (i) the Closing Net Cash Amount as shown on the Closing Net Cash Statement in the event that (x) no Objection is delivered to the Sellers during the initial 30-day period specified above, (y) the Objection delivered to the Sellers does not set forth any dispute with respect to the Closing Net Cash Amount or (z) the Sellers and Buyers so agree, (ii) the Closing Net Cash Amount as adjusted in accordance with the Objection, in the event that (x) the Sellers do not respond to the Objection within the specified 30-day period following receipt by the Sellers of the Objection or (y) the Sellers and Buyers so agree, or (iii) the Closing Net Cash Amount as adjusted by either (x) the agreement of the Sellers and Buyers or (y) the CPA Firm. The "Final Customer Prepayments Amount" shall ultimately be equal to (i) the Closing Customer Prepayments Amount as shown on the Closing Customer Prepayments Statement in the event that (x) no Objection is delivered to the Sellers during the initial 30-day period specified above, (y) the Objection delivered to the Sellers does not set forth any dispute with respect to the Closing Customer Prepayments Amount or (z) the Sellers and Buyers so agree, (ii) the Closing Customer Prepayments Amount as adjusted in accordance with the Objection, in the event that (x) the Sellers do not respond to the Objection within the specified 30-day period following receipt by the Sellers of the Objection or (y) the Sellers and Buyers so agree, or (iii) the Closing Customer Prepayments Amount as adjusted by either (x) the agreement of the Sellers and Buyers or (y) the CPA Firm. All fees and disbursements of the CPA Firm, if any, shall be shared equally by the Sellers, on the one hand, and the Buyers, on the other hand. (d) (i) If the Final Net Working Capital Amount is less than One Hundred Forty-Nine Million Six Hundred Seventy-Seven Thousand dollars ($149,677,000) (the "Base Amount"), the Sellers shall pay an amount equal to (x) the amount of such deficiency, plus (y) interest computed at the Prime Rate (as defined in Section 1.4(f)) for the period from the Closing Date to the date of such payment of such deficiency amount. Such payment shall be made in immediately available funds to the Buyers within three (3) business days after the ultimate determination of the Final Net Working Capital Amount as provided in this Section 1.4. If the Final Net Working Capital Amount is greater than the Base Amount, the Buyers shall pay to the Sellers an amount equal to (x) the amount of such excess, plus (y) interest computed at the Prime Rate for the period from the Closing Date to the date of such payment of such excess amount. Such payment shall be made in immediately available funds to the Sellers within three (3) business days after the ultimate determination of the Final Net Working Capital Amount as provided in this Section 1.4. (ii) If the Final Net Cash Amount is greater than the Estimated Net Cash Amount, the Buyers shall pay to the Sellers an amount equal to (x) the amount of such excess, plus (y) interest computed at the Prime Rate for the period from the Closing Date to the date of such payment of such excess amount. Such payment shall be made in immediately available funds to the Sellers within three (3) business days after the ultimate determination of the Final Net Cash Amount as provided in this Section 1.4. If the Final Net Cash Amount is less than the Estimated Net Cash Amount, the Sellers shall pay to the Buyers an 8 amount equal to (x) the amount of such deficiency, plus (y) interest computed at the Prime Rate for the period from the Closing Date to the date of such payment of such deficiency amount. Such payment shall be made in immediately available funds to the Buyers within three (3) business days after the ultimate determination of the Final Net Cash Amount as provided in this Section 1.4. (iii) If the Final Customer Prepayments Amount is less than the Estimated Customer Prepayments Amount, the Buyers shall pay to the Sellers an amount equal to (x) the amount of such deficiency, plus (y) interest computed at the Prime Rate for the period from the Closing Date to the date of such payment of such deficiency amount. Such payment shall be made in immediately available funds to the Sellers within three (3) business days after the ultimate determination of the Final Customer Prepayments Amount as provided in this Section 1.4. If the Final Customer Prepayments Amount is greater than the Estimated Customer Prepayments Amount, the Sellers shall pay to the Buyers an amount equal to (x) the amount of such excess, plus (y) interest computed at the Prime Rate for the period from the Closing Date to the date of such payment of such excess amount. Such payment shall be made in immediately available funds to the Buyers within three (3) business days after the ultimate determination of the Final Customer Prepayments Amount as provided in this Section 1.4. (e) Any amount paid pursuant to this Section 1.4, Section 1.3, Section 1.8, or Section 6.8(n)(ii) shall be deemed to be an adjustment to the Purchase Price. (f) For purposes of this Agreement, the following terms shall have the following meanings: "Cash" shall mean the sum of cash, cash equivalents and liquid investments, plus all deposited but uncleared bank deposits and less all outstanding checks of the Dresser-Rand Group, in each case with foreign currency converted in accordance with the Currency Conversion Rules. "Debt Obligations" shall, as applied to any Person, mean, without duplication, (a) all indebtedness for borrowed money, (b) all obligations evidenced by a note, bond, debenture or similar instrument, (c) that portion of obligations with respect to capital leases that is properly classified as a liability on a balance sheet in conformity with GAAP, applied on a consistent basis with the Audited Financial Statements and (d) any obligation owed for all or any part of the deferred purchase price for the purchase of a business, in each case with foreign currency converted in accordance with the Currency Conversion Rules. For clarification, it is understood that letters of credit and similar credit support obligations shall not constitute "Debt Obligations" hereunder. 9 "Net Cash Amount" shall mean an amount, positive or negative, equal to (A) Cash minus (B) the sum of (x) aggregate Debt Obligations and (y) $20,000,000, in each case as of 11:59 P.M. local time on the Closing Date, determined on a combined basis in accordance with GAAP, applied on a basis consistent with the Audited Financial Statements (except that foreign currency will be converted in accordance with the Currency Conversion Rules). "Prime Rate" means the rate of interest declared from time to time by JP Morgan Chase Bank as its "base rate." 1.5 Pre-Closing Inventory. Within thirty (30) calendar days prior to the Closing Date, unless the Buyers and Sellers agree otherwise, representatives of the Buyers and the Sellers shall jointly conduct a physical count of the inventory of the Dresser-Rand Group (such physical count to be performed on a basis consistent with the past practices of the Dresser-Rand Group). 1.6 Further Assurances. (a) After the Closing, each party hereto shall from time to time, at the request of another party, execute and deliver such other instruments of conveyance and transfer and take such other actions as such other party may reasonably request in order to more effectively consummate the transactions contemplated hereby and to vest in the Buyers good and valid title to the Acquired Interests. (b) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to sell, convey, assign, sublease or transfer any asset, contract or agreement if any attempted sale, conveyance, assignment, sublease or transfer of such asset, contract or agreement, without the Consent of another Person to such transfer, would constitute a breach by the Sellers or the Buyers with respect to such asset. Except with respect to the Consents required to be delivered at the Closing pursuant to Section 1.3(b)(vi), in the event that any required Consent is not obtained on or prior to the Closing, IR and the applicable Seller will use their commercially reasonable efforts to (i) provide to the applicable Buyer the benefits of the applicable asset, contract or agreement, (ii) cooperate in any reasonable and lawful arrangement designed to provide such benefits to the applicable Buyer and (iii) enforce at the request of the applicable Buyer and for the account of the applicable Buyer any rights of the applicable Seller arising from any such contract or agreement (including the right to elect to terminate such contract or agreement in accordance with the terms thereof upon the request of the applicable Buyer). 1.7 Purchase Price Allocation. (a) The Buyers and the Sellers agree that the portion of the total consideration (including, for all purposes of this Section 1.7, any liabilities that are treated as having been assumed for Tax purposes) that is attributable to the Acquired Interests in any acquired entity shall not be less than the book value represented by such Acquired Interests as of June 30, 2004 (to be adjusted as appropriate to reflect any 10 substantial changes in book value prior to Closing). The portion of the total consideration allocated to Dresser Rand S.A. is set forth on Section 1.7 of the Disclosure Schedule. (b) The Buyers and the Sellers shall endeavor in good faith to agree, prior to the Closing, on an allocation of the total consideration among the Acquired Interests of each acquired entity, which allocation shall incorporate, reflect and be consistent with Section 1.7(a) (the "Entity-Level Purchase Price Allocation"). If the Buyers and the Sellers are unable to agree on such Entity-Level Purchase Price Allocation by September 30, 2004, the matter shall be submitted to the CPA Firm whose determination shall be binding on the parties. The costs of such arbitration shall be shared equally. (c) With respect to the Acquired Interests in each acquired entity that is disregarded for U.S. federal income Tax purposes or for which an election is made pursuant to Section 338(h)(10) of the Code or any subsidiary of such an acquired entity that is subject to similar treatment for Tax purposes, the Buyers and the Sellers shall endeavor in good faith to agree, prior to the Closing, to the extent possible, and in any event within 75 days after the Closing Date (or, if longer, within 75 days after the CPA Firm determines the Entity-Level Purchase Price Allocation), on a further allocation among the assets held by such entity, which allocation shall incorporate, reflect and be consistent with Section 1.7(a) and the Entity-Level Purchase Price Allocation (the "Asset-Level Purchase Price Allocation"). If the Buyers and the Sellers are unable to agree on such Asset-Level Purchase Price Allocation within such time period, the matter shall be submitted to the CPA Firm whose determination shall be binding on the parties. The costs of such arbitration shall be shared equally. (d) In the event the total consideration is adjusted hereunder subsequent to the Closing, the Buyers and the Sellers agree to allocate the adjustment in the revised Entity-Level Purchase Price Allocation and the Asset-Level Purchase Price Allocation (collectively, the "Purchase Price Allocation") based upon the item or entity to which such adjustment is attributable, and, to the extent consistent with Sections 338 and 1060 of the Code and the rules and Treasury Regulations promulgated thereunder, any adjustment that is not identified as attributable to a particular item or entity shall be allocated entirely among the Acquired Interests of entities incorporated or organized under the laws of the United States or any state thereof or the District of Columbia. (e) The Buyers and the Sellers shall report the Tax consequences of the transactions contemplated by this Agreement in a manner consistent with the Purchase Price Allocation, as may be revised from time to time in accordance with Section 1.7(d), and shall not take any position inconsistent therewith in preparing any Tax Returns, IRS Forms 8594 and any other Tax forms or filings, as well as in preparing any published financial statements in accordance with GAAP, applied on a consistent basis with the Audited Financial Statements, and neither the Buyers nor the Sellers shall take any position inconsistent therewith upon examination of any Tax Return, in any Tax refund claim, or in any Tax litigation, investigation or other proceeding, without the prior written consent of the other party or unless required to do so pursuant to a determination 11 (as defined in Section 1313(a) of the Code or any corresponding or similar provision of state, local or foreign law). (f) The Buyers and the Sellers shall promptly inform one another of any challenge by any Taxing Authority to any allocation made pursuant to this Section 1.7 and agree to consult and keep one another informed with respect to the status of, and any discussion, proposal or submission with respect to, such challenge. 1.8 AIM Program Payment. No later than 60 days after the Closing Date, IR shall prepare, or cause to be prepared, a statement (the "AIM Calculations Statement") containing IR's determination of (A) the amount (the "AIM Program Payment Amount") equal to the pro rata portion as of 11:59 P.M. local time on the Closing Date of the annual bonuses payable to Dresser-Rand Group Employees (as defined in Section 2.13(a)) pursuant to the Annual Incentive Management Program for the calendar year 2004 as in effect on the date hereof (the "AIM Program"), determined in accordance with the terms of the AIM Program and based upon financial performance and/or results determined by IR and employee performance determined by the Dresser-Rand Group (which information Buyer will cause the Dresser-Rand Group to provide as soon as practicable after the Closing Date) and (B) the federal, state, local and foreign payroll and other similar Taxes other than Social Security Taxes payable by the Buyers and the members of the Dresser-Rand Group as a result of the payment to Dresser-Rand Group Employees of bonuses under the AIM Program in the amount of AIM Program Payment Amount (the "Payroll Tax Amount"). In determining the AIM Program Payment Amount, the employee performance portion provided by the Dresser-Rand Group shall be subject to review and approval by IR, which shall not be unreasonably withheld. IR and FRC shall each provide the other party and their accountants reasonable access to all relevant books, records, facilities and employees of the Dresser-Rand Group and to any other information reasonably necessary to prepare, review and understand the AIM Calculations Statement (subject to reasonable restrictions imposed by IR or FRC, as the case may be, based on confidentiality concerns). Buyer shall have 15 days from receipt to review and comment upon the calculations set forth in the AIM Calculations Statement. In the event that Buyers, upon completion of their review of the AIM Calculations Statement, determine that the AIM Program Payment Amount or the Payroll Tax Amount have not been accurately calculated or have not been determined on a basis consistent with this Section 1.8, Buyers and IR shall cooperate in good faith to resolve such dispute. In the event that Buyers and IR are unable to resolve such dispute, the CPA Firm dispute resolution provisions of Section 1.4(c) hereof shall apply to resolve such dispute. Upon final determination of the AIM Program Payment Amount and the Payroll Tax Amount pursuant to this Section 1.8, but in no event more than three (3) business days thereafter, IR shall pay by wire transfer of immediately available funds to an account or accounts which are designated by Buyers to IR not more than two (2) business days following final determination thereof, cash in an amount equal to: (a) the AIM Program Payment Amount plus (b) the Payroll Tax Amount. 12 ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS The Sellers, jointly and severally, hereby represent and warrant to the Buyers, as of the date of this Agreement, as follows: 2.1 Organization of Certain Sellers. (a) IR is a company duly organized, validly existing and in good standing under the laws of Bermuda. IR has all requisite corporate power and authority to own its assets and to carry on its business as now being conducted and is duly qualified or licensed to do business and is in good standing in the jurisdictions in which the ownership of its property or the conduct of its business requires such qualification or license, except jurisdictions in which the failure to be so qualified or licensed would not have or reasonably be expected to have, individually or in the aggregate, a material adverse effect on the abilities of the Sellers to consummate the transactions contemplated by this Agreement and the Transaction Agreements to which such Seller is a party. (b) DR Holding Corp. ("DR Holding") is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware. DR Holding has all requisite corporate power and authority to own its assets and to carry on its business as now being conducted and is duly qualified or licensed to do business and is in good standing in the jurisdictions in which the ownership of its property or the conduct of its business requires such qualification or license, except jurisdictions in which the failure to be so qualified or licensed would not have or reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of the Sellers to consummate the transactions contemplated by this Agreement and the Transaction Agreements to which such Seller is a party. (c) Ingersoll-Rand Company ("IRNJ") is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey. IRNJ has all requisite corporate power and authority to own its assets and to carry on its business as now being conducted and is duly qualified or licensed to do business and is in good standing in the jurisdictions in which the ownership of its property or the conduct of its business requires such qualification or license, except jurisdictions in which the failure to be so qualified or licensed would not have or reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of the Sellers to consummate the transactions contemplated by this Agreement and the Transaction Agreements to which such Seller is a party. 2.2 Subsidiaries. Section 2.2(a) of the Disclosure Schedule sets forth for Dresser-Rand Company, a New York general partnership (the "Partnership"), Dresser-Rand Canada, Inc., a corporation organized under the laws of Canada ("D-R Canada") and each direct and indirect subsidiary of the Partnership (together with the Partnership, D-R Canada and each entity contemplated to be formed in accordance with Exhibit B as and when formed, the "Subsidiaries"; and all of the Subsidiaries sometimes being 13 referred to collectively as the "Dresser-Rand Group"; for clarification, for purposes of this Article II and Section 6.1, the Dresser-Rand Group shall not include the entities in which the Dresser-Rand Group has an equity interest that are set forth in Section 2.2(b) of the Disclosure Schedule (the "Minority Interests")) and for each Minority Interest (i) its structure (i.e., corporation, partnership, limited liability company, etc.), name and jurisdiction of incorporation, formation or organization, as applicable, (ii) the number of authorized, issued and outstanding shares of each class of its capital stock or other authorized, issued and outstanding equity interests, as applicable, the names of the holders thereof, and the number of shares or percentage interests, as applicable, held by each such holder and (iii) its entity classification for United States federal income Tax purposes. Except as set forth in Section 2.2(a) of the Disclosure Schedule, the members of the Dresser-Rand Group do not own any shares of any class of capital stock of any corporation or ownership or other equity interest in any other Person (other than their Subsidiaries and Minority Interests and other than immaterial investments). Each Subsidiary is duly formed or organized, validly existing and, where applicable, in good standing under the laws of its jurisdiction of incorporation, formation or organization, as applicable, has the requisite corporate or similar power and authority to own its assets and to carry on its business as now being conducted, and where applicable, is duly qualified or licensed to do business and is in good standing in the jurisdictions in which the ownership of its property or the conduct of its business requires such qualification or license, except jurisdictions in which the failure to be so qualified or licensed would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (as defined below). For purposes of this Agreement, a "Material Adverse Effect" shall mean any change, occurrence or development that has a materially adverse effect on the business, operations, results of operations, assets, liabilities (except to the extent assumed or retained by the Sellers hereunder) or condition (financial or otherwise) of the Business, taken as a whole, except that a "Material Adverse Effect" does not include any effect caused by a change, occurrence or development in (i) events affecting the United States, European or global economy or capital or financial markets generally, (ii) conditions in the industries in which the Dresser-Rand Group conducts business, except to the extent such changes, occurrences or developments impact the Business in a materially disproportionate fashion, (iii) laws, regulations or GAAP, or in the authoritative interpretations thereof or in regulatory guidance related thereto, (iv) earthquakes or similar catastrophes, or acts of war, sabotage, terrorism, hostilities, military action or any escalation or worsening thereof (other than actual damage or casualty loss to any member of the Dresser-Rand Group or their properties or assets) or (v) this Agreement, the announcement thereof and the consummation of the transactions contemplated by this Agreement. All the outstanding shares of capital stock or other equity interests of such Subsidiaries are duly authorized and validly issued and outstanding, fully paid and nonassessable (where applicable), were issued free of any pre-emptive rights and owned by the Persons set forth in Section 2.2(a) of the Disclosure Schedule, free and clear of all Encumbrances. Except as set forth in Section 2.2(a) of the Disclosure Schedule, there are no options, subscriptions, warrants, calls, commitments, agreements, contracts, understandings, restrictions, pre-emptive rights, arrangements or rights of any character with respect to the securities of the Subsidiaries or the issuance of additional securities of the Subsidiaries or the conversion or exchange of any security 14 into, or equity security of, any Subsidiary. Complete and correct copies of the charter documents (or equivalent organizational documents) and all amendments thereto and the minute books of each of the Subsidiaries have been made available to the Buyers on or prior to the date of this Agreement. 2.3 Ownership of Acquired Interests. Each Seller is the legal and beneficial owner of, and has good and marketable title to, the Acquired Interests being sold by such Seller hereunder, as set forth in Section 2.2 of the Disclosure Schedule, free and clear of all Encumbrances, and such good and marketable title may be transferred to the Buyers on the Closing Date free and clear of all Encumbrances, other than such as may be created by or on behalf of any of the Buyers. 2.4 Authorization, Etc. Each Seller has full corporate or partnership power and authority to execute and deliver this Agreement and the Transaction Agreements to which it is a party and to carry out and consummate the transactions contemplated hereby to be carried out and consummated by it. This Agreement has been duly and validly authorized and no other corporate action or proceeding is necessary to authorize the execution, delivery and performance of this Agreement by IR or any Seller. This Agreement has been duly and validly executed by IR and, assuming this Agreement constitutes the legal, valid and binding agreement of FRC, constitutes a legal, valid and binding agreement of IR, enforceable against IR in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 2.5 Financial Statements. Section 2.5 of the Disclosure Schedule sets forth (i) the audited combined balance sheet of the Dresser-Rand Group and the Business at December 31, 2003 (the "2003 Balance Sheet") and the related combined statements of income and cash flows, in each case, including notes thereto for the year ended December 31, 2003 (collectively, the "Audited Financial Statements") and (ii) the unaudited combined balance sheet of the Dresser-Rand Group and the Business as of June 30, 2004 (the "Interim Balance Sheet") and the related unaudited combined statements of income and cash flows for the six month period ended June 30, 2004 (collectively, the "Interim Financial Statements"). Such financial statements have been prepared from the books and records of the Dresser-Rand Group and the Business in conformity with GAAP, applied on a consistent basis, as in effect during the periods indicated, subject in the case of the Interim Financial Statements to the absence of notes and normal year end adjustments. The foregoing income statements and statements of cash flows, including notes in respect of the Audited Financial Statements, present fairly in all material respects the combined results of operations and cash flows of the Dresser-Rand Group and the Business for the respective periods covered, and the balance sheets, including notes in respect of the Audited Financial Statements, present fairly in all material respects the combined financial position of the Dresser-Rand Group and the Business, as of their respective dates, prepared in conformity with GAAP, applied on a consistent basis, as in effect during the periods indicated. 15 2.6 Absence of Undisclosed Liabilities. To the Knowledge of the Sellers, the Dresser-Rand Group is not subject to any liabilities or obligations of any kind whatsoever (whether absolute, accrued, contingent or otherwise, and whether due or to become due), other than liabilities and obligations (i) reflected in the 2003 Balance Sheet (or disclosed in the notes thereto) or the Interim Balance Sheet, (ii) arising after June 30, 2004, in the ordinary course of business and consistent with past practices, (iii) which would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (iv) obligations and liabilities otherwise expressly disclosed in Section 2.6(a) of the Disclosure Schedule or recognizable as a potential liability and disclosed in any other section of the Disclosure Schedule attached hereto. To the actual knowledge (without any duty of inquiry) of the individuals listed in Section 9.10(e) of the Disclosure Schedule, (A) except as set forth in Section 2.6(b) of the Disclosure Schedule, there are no material Proceedings pending against any of the Minority Interests, (B) no change, occurrence or development in respect of the Minority Interests exists which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and (C) none of the Minority Interests are subject to any liabilities or obligations of any kind whatsoever (whether absolute, accrued, contingent or otherwise, and whether due or to become due), other than liabilities and obligations which would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 2.7 No Approvals or Conflicts. Except as set forth in Section 2.7 of the Disclosure Schedule, the execution, delivery and performance by the Sellers of this Agreement and the consummation by the Sellers of the transactions contemplated hereby will not (i) violate, conflict with or result in a breach by any Seller or Subsidiary of any provision of any partnership agreement, charter, bylaws or equivalent formation or governance document of such Seller or Subsidiary, (ii) violate, conflict with or result in a breach of any provision of, or constitute a default by any Seller or Subsidiary (or create an event which, with notice or lapse of time or both, would constitute such a default) or give rise to any right of termination, cancellation or acceleration under, or result in the creation of any Encumbrance upon any of the properties of any Subsidiary under, any material note, bond, mortgage, indenture, deed of trust, license, franchise, permit, lease, contract, agreement or other instrument or understanding to which any Seller, any Subsidiary or any of their respective properties may be bound, (iii) violate or result in a breach, in any material respect, of any order, injunction, judgment, ruling, constitution, treaty, statute, law, rule or regulation (each, and collectively, "Law") of any United States or foreign federal, state, provincial or local government or other political subdivision thereof, any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of any such government or political subdivision, and any supranational organization of sovereign states exercising such functions for such sovereign states (each, and collectively, "Governmental Authority") applicable to any Seller, any Subsidiary or any of their respective properties or (iv) except for applicable requirements of the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and any other Law that is designed or intended to prohibit, restrict or regulate (a) foreign investment or (b) antitrust, monopolization, restraint of trade or competition ("Competition/Investment Law") and in each case as set forth in Section 2.7 of the Disclosure Schedule, require any material order, consent, clearance, approval or 16 authorization of, or notice to, or declaration, filing, application, qualification or registration with, any Governmental Authority. 2.8 Compliance with Law; Governmental Authorizations. Except as set forth in Section 2.8 of the Disclosure Schedule, to the Knowledge of the Sellers, the Business has been conducted since January 1, 2001 in all material respects in compliance with all Laws. Except as set forth in Section 2.8 of the Disclosure Schedule, to the Knowledge of the Sellers, no member of the Dresser-Rand Group is in violation of any order, injunction, judgment, ruling, Law or regulation of any court or Governmental Authority applicable to the property of the Dresser-Rand Group or the Business. Each member of the Dresser-Rand Group has all licenses, Consents, permits and other governmental authorizations ("Permits") necessary to conduct its business as currently conducted (all of which are valid and in full force and effect), except where the failure to have such Permits would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 2.9 Litigation. Except as set forth in Section 2.9 of the Disclosure Schedule, there are no material suits, actions, proceedings or investigations (collectively, "Proceedings") pending or, to the Knowledge of the Sellers, threatened against any Seller or any member of the Dresser-Rand Group before any arbitrator, court or Governmental Authority. Except as set forth in Section 2.9 of the Disclosure Schedule, the Sellers have not received any notice that any Seller or any member of the Dresser-Rand Group or any of their respective assets are subject to any decree, order or judgment which would have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or a material adverse effect on the ability of the Sellers to consummate the transactions contemplated by this Agreement or the Transaction Agreements or materially delay the consummation of the transactions contemplated hereby or thereby. 2.10 Personal Property Assets. Except as set forth in Section 2.10 of the Disclosure Schedule, on June 30, 2004, the Dresser-Rand Group had and, except with respect to personal property assets disposed of or acquired in the ordinary course of business consistent with past practice since such date, the Dresser-Rand Group now has, good and valid title to, or holds by valid and existing lease or license, all the personal property assets reflected as assets of the Dresser-Rand Group on the Interim Balance Sheet or which would have been reflected on the Interim Balance Sheet if acquired prior to such date, free and clear of all Encumbrances, except for (i) Encumbrances which secure indebtedness or obligations which are properly reflected on the Interim Balance Sheet; (ii) liens for Taxes (as defined in Section 2.12) not yet payable or being contested in good faith by appropriate proceedings; (iii) immaterial liens arising as a matter of law in the ordinary course of business, provided that the obligations secured by such liens are not delinquent or are being contested in good faith; and (iv) other Encumbrances which do not adversely affect the use of the applicable asset as currently used (collectively, "Permitted Encumbrances"). Except as set forth in Section 2.10 of the Disclosure Schedule, the tangible personal property assets owned by or leased by the Dresser-Rand Group, together with the rights under the Transaction Agreements, constitute, all material tangible personal property assets used by the Dresser-Rand Group in the operation or the conduct of the Business, as currently conducted, and all such assets are in reasonably 17 good maintenance, operating condition and repair, normal wear and tear excepted, other than machinery and equipment under repair or out of service in the ordinary course of business. 2.11 Absence of Certain Changes. Except as set forth in Section 2.11 of the Disclosure Schedule or as otherwise specifically provided herein, since December 31, 2003, (i) the Business has been conducted only in the ordinary course consistent with past practice in all material respects, and (ii) there has not been any event, occurrence or development of a state of circumstances or facts which has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Without limiting the generality of the foregoing, except as set forth in Section 2.11 of the Disclosure Schedule or as otherwise specifically provided herein, and except for the transactions contemplated hereby, from June 30, 2004 through the date of this Agreement, there has not been: (a) any damage, destruction or loss (whether or not covered by insurance) materially affecting the operation of the Business; (b) any option, sale, purchase, subscription, warrant, call, commitment contracts, understandings, restrictions, arrangements, rights or agreement of any character granted or made by any member of the Dresser-Rand Group in respect of its capital stock or other equity interests; (c) any issuance, declaration, setting aside or payment of any dividend or other distribution of cash or property on any of the capital stock or other equity interests of any member of the Dresser-Rand Group (excluding distributions by Subsidiaries to other Subsidiaries), or any direct or indirect redemption, purchase or other acquisition of any shares of capital stock or other equity interests of any member of the Dresser-Rand Group; (d) any strikes, work stoppages or other material labor disputes involving employees of the Dresser-Rand Group; (e) any amendment, termination, waiver or cancellation of any material term of any Material Contract (as defined in Section 2.16), or of any material right or claim of any member of the Dresser-Rand Group under any Material Contract; (f) any sale, transfer or other disposition of assets of the Dresser-Rand Group having an aggregate value exceeding two million dollars ($2,000,000), excluding sales of assets in the ordinary course of business consistent with past practice; (g) any (i) general increase in the compensation of employees of the Dresser-Rand Group other than in the ordinary course of business consistent with past practice, (ii) increase in any compensation (other than salary compensation) payable to any officer or other member of senior management of the Dresser-Rand Group, whether or not in the ordinary course of business consistent with past practice or (iii) loan or commitment therefor made by any member of the Dresser-Rand Group to any officer or 18 other member of senior management of the Dresser-Rand Group or to any of the Sellers or any of their officers, directors or Affiliates (other than the Dresser-Rand Group); (h) any material change in the accounting methods or practices followed by any member of the Dresser-Rand Group (other than such as have been required by applicable law or GAAP); (i) in each case, with respect to any member of the Dresser-Rand Group, (i) any material adoption or change in any election relating to Taxes, (ii) any material adoption or change in any accounting period or any accounting method relating to Taxes, (iii) any entering into a material closing agreement, (iv) any settling of any material Tax claim or assessment or (v) any other similar action relating to Taxes; or (j) any agreement or commitment by or on behalf of the Dresser-Rand Group to do any of the foregoing. 2.12 Tax Matters. (a) For purposes of this Agreement, the following terms shall have the following meanings: "Code" shall mean the Internal Revenue Code of 1986, as amended. "Tax" or "Taxes" shall mean (x) any taxes of any kind, including but not limited to those on or measured by or referred to as income, gross receipts, capital, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, escheat, value added, property or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any governmental authority, domestic or foreign; (y) any liability for the payment of any amounts described in (x) as a result of being a member of an affiliated, consolidated, combined, unitary or similar group or as a result of transferor or successor liability, and (z) any liability for the payment of any amounts as a result of being a party to any tax-allocation or tax-sharing agreement or as a result of any express or implied obligation to indemnify any other Person with respect to the payment of any amounts of the type described in clause (x) or (y). "Taxing Authority" shall mean, with respect to any Tax, the government entity or political subdivision thereof that imposes such Tax and the agency (if any) charged with the collection of such Tax for such entity or subdivision. "Tax Return" shall mean any return, report or statement required to be filed with any governmental authority with respect to Taxes, including any schedule or attachment thereto or amendment thereof. "Treasury Regulations" shall mean the Treasury Regulations promulgated under the Code. 19 (b) Except as set forth in Section 2.12 of the Disclosure Schedule: (i) All material Tax Returns required to be filed prior to or on the Closing Date by or on behalf of any member of the Dresser-Rand Group (separately or as part of an affiliated, consolidated, combined or unitary group) (A) have been or shall be timely filed (subject to permitted extensions applicable to such filing) and (B) are true, correct and complete in all material respects; and all Taxes of the members of the Dresser-Rand Group shown as due or payable on such Tax Returns have been or shall be paid within the prescribed period or any extension thereof, other than Taxes that are being contested in good faith for which adequate reserves have been established. (ii) No claim for unpaid Taxes has become a lien against the assets or any property of any member of the Dresser-Rand Group or is being asserted against any member of the Dresser-Rand Group except for liens for Taxes not yet due and payable for which adequate reserves have been established. (iii) There are no (w) examinations, audits, actions, proceedings, investigations or disputes pending, (x) claims asserted in writing for Taxes, (y) waivers or extensions of statutes of limitation with respect to Taxes currently in effect or (z) closing agreements, or similar agreements entered into or issued by any Taxing Authority, in each case, with respect to any member of the Dresser-Rand Group that may, in each case, increase any material Taxes of any member of the Dresser-Rand Group. (iv) No member of the Dresser-Rand Group has been a member of an affiliated, consolidated, combined or unitary group as set forth in Section 1504 of the Code or any corresponding or similar provision of state, local or foreign law other than a group the common parent of which is IRNJ, DR Holding or Dresser-Rand Company. No member of the Dresser-Rand Group is liable for Taxes of any taxpayer other than IR and its Affiliates under Treasury Regulation Section 1.1502-6 (or any corresponding or similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise. (v) No member of the Dresser-Rand Group (A) is a party to any material tax-allocation or tax-sharing agreement or (B) to the Knowledge of the Sellers, is a party to any other tax-allocation or tax-sharing agreement. (vi) No member of the Dresser-Rand Group has reported any "reportable transaction" as defined in Treasury Regulation 1.6011-4 or any transaction that is required to be reported to any Taxing 20 Authority pursuant to any corresponding or similar provision of state, local or foreign law. (vii) No member of the Dresser-Rand Group has been a "distributing corporation" or a "controlled corporation" in a transaction pursuant to Section 355 of the Code within the last three years. 2.13 Employee Benefits. (a) Section 2.13(a) of the Disclosure Schedule sets forth a list of each material "employee benefit plan" (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and each severance, change in control or employment plan, program or agreement, and vacation, incentive, bonus, stock option, stock purchase, and restricted stock plan or policy sponsored or maintained by each member of the Dresser-Rand Group or by IRNJ, in which present or former employees of any member of the Dresser-Rand Group (the "Dresser-Rand Group Employees") participate (excluding any IRNJ plan or policy under which no Dresser-Rand Group Employee is currently accruing or has any right to accrue benefits) (collectively, the "Dresser-Rand Group Plans"). Dresser-Rand Group Plans which are sponsored or maintained by IRNJ or members of the Dresser-Rand Group that are domiciled in the United States of America shall hereinafter be referred to as "U.S. Dresser-Rand Group Plans" and Dresser-Rand Group Plans which are not U.S. Dresser-Rand Group Plans shall hereinafter be referred to as "Non-U.S. Dresser-Rand Group Plans". (b) The Dresser-Rand Group Plans are in compliance in all material respects with their terms and applicable requirements of ERISA, the Code, and other applicable laws. Each U.S. Dresser-Rand Group Plan which is intended to be qualified within the meaning of Section 401 of the Code has received a favorable determination letter as to its qualification, and to the Knowledge of the Sellers, nothing has occurred that could reasonably be expected to affect such qualification. (c) No liability under Title IV of ERISA or Section 412 of the Code (including any liability relating to an "accumulated funding deficiency") has been incurred by any member of the Dresser-Rand Group or by any other trade or business, whether or not incorporated, that together with any member of the Dresser-Rand Group would be deemed a "single employer" for purposes of Sections 414(b), (c), (m) or (o) of the Code (a "Dresser-Rand ERISA Affiliate"), that, if due and payable, has not been satisfied in full, and, to the Knowledge of the Sellers, as of the Closing Date no member of the Dresser-Rand Group is reasonably likely to incur material liability on or after the Closing Date under Title IV of ERISA or Section 412 of the Code for the Dresser-Rand Group Plans or, by reason of their membership in a controlled group under Section 414 (b), (c), (m) or (o) of the Code, for the plans of any Dresser-Rand ERISA Affiliate, in any case, other than liability for premiums due to the Pension Benefit Guaranty Corporation. (d) No member of the Dresser-Rand Group has incurred, directly or indirectly, any liability in respect of any multiemployer plan (as defined in Section 21 3(37) of ERISA or Section 414(f) of the Code (a "Multiemployer Plan")) on account of any "withdrawal", "partial withdrawal", "Reorganization" or "Insolvency" (all such terms within the meaning of Title IV of ERISA), which remain unsatisfied and would have, or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. With respect to all Dresser-Rand Group Plans that are Multiemployer Plans to which the Dresser-Rand Group makes contributions, the aggregate withdrawal liability of the Dresser-Rand Group computed as if a complete withdrawal by all members of the Dresser-Rand Group had occurred under each such Multiemployer Plans on the date hereof, would not have, or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (e) Except as set forth in Section 2.13(e) of the Disclosure Schedule, no Dresser-Rand Group Employee is a party to, or entitled to the benefit of, any U.S. Dresser-Rand Group Plan which would provide such employee any payment or benefit (or accelerated payment or vesting thereof) upon the consummation of the transactions contemplated hereby or, following such consummation, upon the occurrence of some other event, whether or not subject to Section 280G of the Code. The transactions contemplated by this Agreement constitute a transfer of less than one-third of the total gross fair market value of all of the assets of Sellers and all members of Seller's affiliated group (as defined in Section 1504 of the Code, determined without regard to Section 1504(b) of the Code), immediately prior to the Closing. (f) There are no pending or, to the Knowledge of the Sellers, threatened claims or litigations with respect to any U.S. Dresser-Rand Group Plans, other than claims for benefits by participants and beneficiaries, except as set forth in Section 2.13(f) of the Disclosure Schedule. (g) With respect to each Dresser-Rand Group Plan, the Sellers have made available to the Buyers (to the extent applicable, and with respect to the Non-U.S. Dresser-Rand Group Plans to the Knowledge of the Sellers) (i) a complete and accurate copy of each such plan (including the most recent summary plan description prepared with respect to such plan); (ii) the most recent copy of the annual report form (Form 5500 Series) of each such plan for which such form is required (including any schedules thereto); (iii) the most recent actuarial report for each such plan, and (iv) the most recent copy of its favorable determination letter. (h) To the Knowledge of the Sellers, (i) each of the Non-U.S. Dresser-Rand Group Plans has been granted a Tax-favorable status by the applicable Taxing Authority, to the extent required under local Law, (ii) such Tax treatment to the extent granted has not been withdrawn by the applicable Taxing Authority, and (iii) no fact exists that would reasonably be expected to result in the withdrawal of such Tax treatment. 2.14 Labor Relations. Except as set forth in Section 2.14 of the Disclosure Schedule, (i) no member of the Dresser-Rand Group is a party to any collective bargaining agreement, work rules or practices, or any other labor-related agreements or arrangements with any labor union, labor organization or works council 22 applicable to employees of any member of the Dresser-Rand Group, nor is any such contract or work rules or practices, or any other labor related agreement presently being negotiated; (ii) there is no unfair labor practice charge or complaint pending or, to the Knowledge of the Sellers, threatened against or otherwise affecting any member of the Dresser-Rand Group; (iii) there is no material grievance, arbitration hearing, or arbitration award pending or, to the Knowledge of the Sellers, threatened against or otherwise affecting any member of the Dresser-Rand Group; (iv) to the Knowledge of the Sellers, none of the members of the Dresser-Rand Group is in breach of any collective bargaining agreement; (v) there is no labor strike, slowdown, work stoppage, or lockout in effect, or, to the Knowledge of the Sellers, threatened against or otherwise affecting any member of the Dresser-Rand Group, and no member of the Dresser-Rand Group has experienced any such labor controversy within the past three years; (vi) no member of the Dresser-Rand Group is a party to, or otherwise bound by, any consent decree with, or citation by, any governmental authority relating to employees or employment practices; and (vii) each member of the Dresser-Rand Group is in compliance with its obligations pursuant to the Worker Adjustment and Retraining Notification Act of 1988 ("WARN Act"), and all other notification and bargaining obligations arising under any collective bargaining agreement, statute or otherwise. To the Knowledge of the Sellers, there is no effort to organize employees of any member of the Dresser-Rand Group which is pending or threatened. 2.15 Intellectual Property. "Intellectual Property" shall mean all (i) patents; (ii) inventions, discoveries, technology, processes, formulae, designs, models, industrial designs, know-how, confidential information, proprietary information and trade secrets, whether or not patented or patentable; (iii) trademarks, service marks, trade names, brand names, trade dress, slogans, logos and internet domain names; (iv) copyrights and other copyrightable works and works in progress, data, databases and software; (v) all other intellectual property rights and foreign equivalent or counterpart rights and forms of protection of a similar or analogous nature or having similar effect in any jurisdiction throughout the world; (vi) any renewals, extensions, continuations, divisionals, reexaminations or reissues or equivalent or counterpart of any of the foregoing in any jurisdiction throughout the world; and (vii) all registrations and applications for registration of any of the foregoing. Section 2.15 of the Disclosure Schedule lists all patent, copyright, domain names, trademark and service mark registrations or applications for such registrations owned by the members of the Dresser-Rand Group. Except as would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or as otherwise set forth in Section 2.15 of the Disclosure Schedule, (i) the members of the Dresser-Rand Group own or have the sole and exclusive right to use all Intellectual Property necessary to operate the Business as currently conducted ("Dresser-Rand Group Intellectual Property") free and clear of all Encumbrances, other than Permitted Encumbrances; (ii) to the Knowledge of the Sellers, the Dresser-Rand Group Intellectual Property, and the use thereof, does not infringe, and is not being infringed by, the Intellectual Property of any Person (including IR and its Affiliates); (iii) no suit, action, proceeding, judgment, order, injunction, stipulation or decree is pending, outstanding or threatened in writing that (a) challenges the validity or sole ownership of, or any right of any member of the Dresser-Rand Group to use, any Dresser-Rand Group Intellectual Property, (b) asserts that any aspect of the Business 23 infringes or has otherwise violated any third party's Intellectual Property rights, or (c) asserts that any third party is infringing or otherwise violating the Dresser-Rand Group Intellectual Property; and (iv) the Dresser-Rand Group takes commercially reasonable actions to protect and maintain the Dresser-Rand Group Intellectual Property. 2.16 Contracts. (a) Section 2.16 of the Disclosure Schedule sets forth, as of the date of this Agreement (or the date noted in Section 2.16 of the Disclosure Schedule, as applicable), a complete list of each of the following contracts, instruments, leases, deeds and agreements to which any member of the Dresser-Rand Group is a party or by which any of them is bound other than contracts, instruments, leases, deeds and agreements to which other members of the Dresser-Rand Group are the only other parties (collectively, including the real property leases described on Section 2.19(a) of the Disclosure Schedule, the "Material Contracts"): (i) indentures, mortgages, loan agreements, letters of credit, surety bonds and foreign exchange forward contracts, in each case with a face amount in excess of two million dollars ($2,000,000), capital leases, security agreements or other agreements or commitments for the borrowing of money or the deferred purchase price of assets; (ii) purchase or sales orders and other contracts for the sales of goods and services by the Dresser-Rand Group, excluding any such orders or contracts not involving payments to the Dresser-Rand Group exceeding an aggregate of five million dollars ($5,000,000) in any instance; (iii) contracts involving the expenditure by the Dresser-Rand Group of more than three million dollars ($3,000,000) in any instance for the purchase of material, supplies, equipment or services; excluding any thereof that are terminable by such member of the Dresser-Rand Group without penalty on not more than ninety (90) days notice or are related to owned or leased real property; (iv) contracts not otherwise described in this paragraph (a) that involve the expenditure by the Dresser-Rand Group of more than one million dollars ($1,000,000), excluding any thereof that are terminable by the Dresser-Rand Group without penalty on not more than ninety (90) days notice or are related to owned or leased real property; (v) guarantees of the obligations of third parties, excluding guarantees involving the potential expenditure by the Dresser-Rand Group of less than two hundred thousand dollars ($200,000) in any instance and one million dollars ($1,000,000) in the aggregate; 24 (vi) agreements which restrict the Dresser-Rand Group from competing with any other specific Person or entity or from conducting its business in any geographic area; (vii) contracts or agreements (other than employment agreements or other Dresser-Rand Group Plans) with officers or other members of the executive leadership team of the Dresser-Rand Group; (viii) material license agreements (as licensor or licensee) with third parties (excluding end-user licenses granted to customers of the Dresser-Rand Group), (ix) agreements under which any member of the Dresser-Rand Group has licensed material Intellectual Property to or from any other Person (including Affiliates of the Dresser-Rand Group); (x) partnership, limited liability company, joint venture agreements or other agreements involving a sharing of profits or expenses by the Dresser-Rand Group; (xi) contracts relating to the acquisition of any business enterprise or the assets thereof since January 1, 2001; and (xii) exclusive distributor, dealer, sales representative or similar contracts. (b) True and correct copies (or, if oral, written summaries) of each of the Material Contracts (or, in respect of distributor, dealer and sales representative contracts, the applicable standard form therefor) and the Partnership's standard form of product warranty have been made available to the Buyers. (c) Except as set forth in Section 2.16 of the Disclosure Schedule, each Material Contract is in full force and effect, and is a valid and binding agreement of the applicable member or members of the Dresser-Rand Group, enforceable against them in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. Except as set forth in Section 2.16 of the Disclosure Schedule, no condition exists or event has occurred that (whether with or without notice or lapse of time or both) would constitute a material default by any member of the Dresser-Rand Group to any Material Contract. (d) As of the date hereof, except as set forth in Section 2.16(d) of the Disclosure Schedule (which guarantees shall be released (without any further obligation or liability) on or prior to the Closing Date), there are no outstanding guarantees made by any member of the Dresser-Rand Group of any liabilities or 25 obligations of IR or any of its Affiliates (other than members of the Dresser-Rand Group). 2.17 Environmental Matters. (a) For purposes of this Agreement, the following terms shall have the following meanings: "Environmental Claim" means any written notice, claim, demand, action, suit, complaint or proceeding by any Person, or investigation by any Governmental Authority, alleging liability or potential liability (including, without limitation, liability or potential liability for investigative costs, cleanup costs, governmental response costs, natural resource damages, property damages, personal injury, fines or penalties) under any Environmental Laws arising out of, based on or resulting from (a) the presence, or Release into the environment, of any Hazardous Material at any location, whether or not owned or operated by Dresser-Rand Group or any of its Subsidiaries or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. "Environmental Laws" means all applicable foreign, federal, state, interstate, and local statutes, common law, regulations, ordinances, orders and decrees as in effect on the Closing Date relating to pollution or protection of human health or safety (to the extent relating to exposure to Hazardous Materials) or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), including, without limitation, such laws and regulations relating to emissions, discharges, Releases or threatened Releases of Hazardous Materials, or otherwise relating to the manufacture, distribution, use, treatment, storage, disposal, or transport of Hazardous Materials, or the transfer of real property or other assets (as to such transfers, only with respect to environmental investigation or environmental remediation). "Hazardous Materials" means all materials defined or regulated as "hazardous substances" or "hazardous wastes," pollutants, contaminants, wastes, or any other term of similar import under any Environmental Law, including, without limitation, petroleum (including crude oil or any fraction thereof), friable asbestos, and polychlorinated biphenyls. "Release" shall have the meaning provided in 42 U.S.C. section 9601(22), including threats thereof. "Release" shall also include the matters excluded from the definition thereof in 42 U.S.C. sections 9601(22)(A), (B), (C) and (D). (b) Except as set forth in Section 2.17 of the Disclosure Schedule, to the Knowledge of the Sellers as of the date of this Agreement (it being understood that, for purposes of this Section 2.17, such knowledge shall not include any knowledge based on documents or other information in Sellers' possession solely as a result of Buyers' due diligence): (i) The Business conducts, and since January 1, 2001 (other than noncompliance in the conduct of its operations that has 26 been fully resolved) has, in all material respects, conducted its operations in compliance with all Environmental Laws; (ii) No member of the Dresser-Rand Group has received any Environmental Claim which remains unresolved or any unresolved written threat of an Environmental Claim, in each case against any member of the Dresser-Rand Group or against any person or entity whose liability for any Environmental Claim the Dresser Rand Group has or is asserted to have retained or assumed either contractually or by operation of law; (iii) No member of the Dresser-Rand Group has entered into, has agreed to, or is subject to any decree or order or other similar requirement of any governmental authority under any Environmental Laws; (iv) No member of the Dresser-Rand Group has Released Hazardous Materials into the environment in violation of Environmental Laws or in a manner that would reasonably be expected to result in liability under Environmental Laws, and no other Person has Released Hazardous Materials into the environment at any property currently owned or operated by any member of the Dresser-Rand Group in violation of Environmental Laws or in a manner that would reasonably be expected to result in liability under Environmental Laws; (v) No disposal or arranging for disposal of any Hazardous Materials has occurred at any offsite location in a manner and under circumstances that would reasonably be expected to result in an Environmental Claim against any member of the Dresser Rand Group or against any person or entity whose liability for any Environmental Claim Sellers, Dresser Rand Group or any of its Subsidiaries, has or is asserted to have retained or assumed either contractually or by operation of law; and (vi) The representations and warranties included in this Section 2.17 shall constitute the sole and exclusive representations and warranties of Sellers relating to any Environmental Laws or Hazardous Materials. 2.18 Insurance. Section 2.18 of the Disclosure Schedule lists all insurance policies held in the names of the members of the Dresser-Rand Group covering the assets, employees, operations or businesses of the Dresser-Rand Group as of the date hereof, specifying the insurer, amount of coverage and type of insurance. All such policies are in full force and effect, all premiums due thereon have been paid by the Dresser-Rand Group and the applicable member(s) of the Dresser-Rand Group have complied in all material respects with the provisions of such policies and have not received any notice from any of their insurance brokers or carriers that such broker or carrier has cancelled or terminated coverage or will not be willing or able to renew their 27 existing coverage. All insurance policies not held in the names of the members of the Dresser-Rand Group but which cover the assets, employees and operations of the Dresser-Rand Group as of the date hereof are in full force and effect and will remain in full force and effect until the Closing Date, at which time, subject to Section 6.25, coverage thereunder will be discontinued with respect to the Dresser-Rand Group. 2.19 Real Property. (a) Leased Properties. Section 2.19(a) of the Disclosure Schedule sets forth a complete list and the location of all material real property leased or subleased by any member of the Dresser-Rand Group (the "Leased Real Property"). The Sellers have made available to the Buyers correct and complete copies of the leases and subleases (and all amendments, supplements, side letters, and other written agreements related thereto) covering the properties listed in Section 2.19(a) of the Disclosure Schedule (as amended to the date of this Agreement). With respect to each lease and sublease and except as otherwise specified in Section 2.19(a) of the Disclosure Schedule or where the failure of any of the following to be true and correct would not have, or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect: (i) (A) no member of the Dresser-Rand Group is in default beyond any applicable notice, grace or cure period and (B) no member of the Dresser-Rand Group has received a notice of default with respect to such lease or sublease; (ii) no member of the Dresser-Rand Group owes any brokerage commissions or finder's fees with respect to any lease or sublease, other than as is reflected in the calculation of Closing Net Working Capital Amount; (iii) a member of the Dresser-Rand Group has a valid and subsisting leasehold estate in and the right to quiet enjoyment of the Leased Real Property; and (iv) no such lease or sublease has been assigned, sublet, mortgaged, deeded in trust or otherwise encumbered by the Dresser-Rand Group. (b) Owned Properties. Section 2.19(b) of the Disclosure Schedule lists all real property owned by any member of the Dresser-Rand Group (the "Owned Real Property", and together with Leased Real Property, the "Real Property"). With respect to each such parcel of Owned Real Property listed in Section 2.19(b) of the Disclosure Schedule, except as otherwise specified in Section 2.19(b) of the Disclosure Schedule and except where the failure of any the following to be true and correct would not have, or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect: 28 (i) the identified owner has good and marketable title to the parcel of real property, free and clear of any Encumbrances, except for (A) liens for real estate taxes not yet due and payable, (B) installments of special assessments not yet delinquent, (C) easements, covenants, rights-of-way, claims, restrictions and other encumbrances of record, including, without limitation, the exceptions to title set forth in the title insurance commitments for the Owned Real Properties delivered by Sellers, (D) any state of facts which would be shown on a current, accurate survey or physical inspection of the Owned Real Properties and (E) zoning, building and other similar restrictions; (ii) there are no pending or, to the Knowledge of the Sellers, threatened condemnation or other proceedings, disputes or lawsuits that would be reasonably expected to curtail or interfere with the use of the Owned Real Property; and (iii) there are no leases, subleases, licenses, concessions, or other agreements, granting to any party or parties the right of use or occupancy of any Owned Real Property or any portion thereof. 2.20 Product Liability and Product Warranty. (a) Except as set forth in Section 2.20(a) of the Disclosure Schedule, no member of the Dresser-Rand Group has received written notice of any material pending claim against such member of the Dresser-Rand Group or any predecessor thereof, or involving the Business concerning personal injury or property damage (other than damage to the Products) arising from an alleged defect in design, manufacture, materials or workmanship, an alleged failure to exercise reasonable care in repair, service or maintenance, an alleged failure to warn, an alleged failure to provide adequate warnings or an alleged noncompliance with applicable Laws, in each case in respect of any Products (as defined below) shipped prior to the Closing Date. As used in this Agreement, "Products" means any and all products shipped by any member of the Dresser-Rand Group or any predecessor thereof. (b) The reserve for product warranty claims set forth in the Interim Balance Sheet was calculated in conformity with GAAP applied on a consistent basis with the 2003 Balance Sheet. Section 2.20(b) of the Disclosure Schedule sets forth the estimated aggregate annual cost to the Dresser-Rand Group of performing warranty obligations for customers for each of the three (3) preceding fiscal years and the current fiscal year through June 30, 2004. 2.21 No Brokers' or Other Fees. Except for Greenhill & Co., LLC, whose fees and expenses will be paid by the Sellers, no broker, finder or investment banker is entitled to any fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Sellers or any member of the Dresser-Rand Group. 29 2.22 Relations with Governments. To the Knowledge of the Seller, no member of the Dresser-Rand Group, nor any director, officer, agent or employee of the Dresser-Rand Group or any of its subsidiaries, has (a) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity, (b) made any unlawful payment or unlawfully offered anything of value to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or (c) violated any applicable export control, money laundering or anti-terrorism law or regulation, nor have any of them otherwise taken any action which would cause the Dresser-Rand Group or any of its subsidiaries to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, any act enforced by the Office of Foreign Asset Control of the U.S. Department of Treasury, or any applicable law of similar effect. 2.23 No Other Representations or Warranties. Except for the representations and warranties contained in this Article II, neither of the Sellers nor any other Person or entity makes any other express or implied representation or warranty to Buyers. ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYERS The Buyers, jointly and severally, hereby represent and warrant to the Sellers, as of the date of this Agreement, as follows: 3.1 Organization. Each Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Each Buyer has all requisite corporate power and authority to own its assets and to carry on its business as now being conducted and is duly qualified or licensed to do business and is in good standing in the jurisdictions in which the ownership of its property or the conduct of its business requires such qualification or license, except jurisdictions in which the failure to be so qualified or licensed would not have or reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of the Buyers to consummate the transactions contemplated by this Agreement and the Transaction Agreements to which it is a party. 3.2 Authorization, Etc. Each Buyer has full corporate power and authority to execute and deliver this Agreement and the Transaction Agreements to which it is a party and to carry out and consummate the transactions contemplated hereby to be carried out and consummated by it. This Agreement and the French Offer Letter have been duly and validly authorized and no other corporate or other action or proceeding is necessary to authorize the execution, delivery or performance of this Agreement and the French Offer Letter by FRC or any Buyer. This Agreement and the French Offer Letter have been duly and validly executed by FRC and, assuming this Agreement constitute the legal, valid and binding agreement of IR, constitute a legal, valid and binding agreement of FRC, enforceable against FRC in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other 30 similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 3.3 No Approvals or Conflicts. The execution, delivery and performance by the Buyers of this Agreement and the French Offer Letter and the consummation by the Buyers of the transactions contemplated hereby will not (i) violate, conflict with or result in a breach by the Buyers of any provision of the certificates of incorporation or by laws of the Buyers, (ii) violate, conflict with or result in a breach of any provision of, or constitute a default by the Buyers (or create an event which, with notice or lapse of time or both, would constitute a default) or give rise to any right of termination, cancellation or acceleration under, or result in the creation of any Encumbrance upon any of the Buyers' properties under, any material note, bond, mortgage, indenture, deed of trust, license, franchise, permit, lease, contract, agreement or other instrument or understanding to which the Buyers or any of their properties may be bound, (iii) violate or result in a breach in any material respect of any Law applicable to any Buyer or any of their respective properties, or (iv) except for applicable requirements of the HSR Act or any other Competition/Investment Law and, in each case, as set forth in Section 3.3 of the disclosure schedule being delivered by the Buyers to the Sellers simultaneously with the execution of this Agreement and forming a part of this Agreement (the "Buyers' Disclosure Schedule"), require any material order, consent, clearance, approval or authorization of, or notice to, or declaration, filing, application, qualification or registration with, any Governmental Authority. 3.4 Financing. Attached hereto as Section 3.4(a) of the Buyers' Disclosure Schedule is a true and complete copy of the commitment letter, dated as of August 25, 2004 (the "Debt Financing Commitment"), between Buyer and Citicorp North America, Inc., Citigroup Global Markets Inc. (together "Citigroup"), Morgan Stanley Senior Funding, Inc. ("Morgan Stanley"), UBS Loan Finance LLC and UBS Securities LLC (together, "UBS"), pursuant to which Citigroup, Morgan Stanley and UBS have agreed, subject to the conditions set forth therein, to lend the amount set forth in the Debt Financing Commitment to the Buyers for the purpose, among other things, of consummating the transactions contemplated by this Agreement (the "Debt Financing"). Attached hereto as Section 3.4(b) of the Buyers' Disclosure Schedule are true and complete copies of the commitment letters, dated as of August 25, 2004, between Buyer, First Reserve Fund IX, L.P. and First Reserve Fund X, L.P. (the "Equity Financing Commitment" and, together with the Debt Financing Commitment, the "Financing Commitments"), pursuant to which First Reserve Fund IX, L.P. and First Reserve Fund X, L.P. have committed, subject to the conditions set forth therein, to invest the amount set forth therein to purchase equity interests in FRC (the "Equity Financing" and, together with the Debt Financing, the "Financing"). None of the Financing Commitments has been amended or modified prior to the date of this Agreement, and the respective commitments contained in the Financing Commitments have not been withdrawn or rescinded in any respect. The Financing Commitments are in full force and effect. There are no conditions precedent or other contingencies related to the funding of the full amount of the Financing, other than as set forth in or contemplated by the Financing Commitments. Buyers have no reason as of the date hereof to believe that any of the 31 conditions to the Financing contemplated by the Financing Commitments within the control of Buyers will not be satisfied or that the Financing will not be made available to Buyers on the Closing Date. 3.5 No Brokers' or Other Fees. Except as set forth in Section 3.5 of the Buyers' Disclosure Schedule, the fees and expenses in respect of which will be paid by the Buyers, no broker, finder or investment banker is entitled to any fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Buyers. 3.6 Unregistered Equity. Each Buyer acknowledges that it has been advised by the Sellers that the Acquired Interests have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"). Each Buyer is an accredited investor as that term is defined in Regulation D under the Securities Act. The Acquired Interests are being acquired by each Buyer for its own account for investment and without a view to resale. 3.7 No Other Representations or Warranties. Except for the representations and warranties contained in this Article III, neither of the Buyers nor any other Person or entity makes any other express or implied representation or warranty to Sellers. ARTICLE IV CONDITIONS TO SELLERS' OBLIGATION The obligation of the Sellers to effect the Closing under this Agreement is subject to the satisfaction, at or prior to the Closing, of each of the following conditions, unless validly waived in writing by IR on behalf of the Sellers. 4.1 Representations and Warranties. (a) The representations and warranties made by the Buyers in this Agreement shall be true, complete and correct in all respects (determined without regard to any materiality or material adverse effect qualifier therein) as of the Closing Date as though such representations and warranties were made on such date, except that any representations and warranties that are made as of a specified date shall be true, complete and correct in all respects (determined as aforesaid) as of such date, and except for such breaches of representations or warranties (determined as aforesaid) that would not have, or reasonably be expected to have, in the aggregate, a material adverse effect on the ability of the Buyers to consummate the transactions contemplated by this Agreement. (b) The representations and warranties made by the Buyers in the first sentence of Section 3.1 (Organization) and in Section 3.2 (Authorization, Etc.) shall be true, complete and correct in all respects as of the Closing Date. 32 4.2 Performance. The Buyers shall have performed and complied in all material respects with all agreements and obligations required by this Agreement to be so performed or complied with by them prior to the Closing. 4.3 Officer's Certificate. FRC, on behalf of itself and the other Buyers, shall have delivered to the Sellers a certificate, dated as of the Closing Date and executed by an executive officer of FRC, certifying to the fulfillment of the conditions specified in Sections 4.1 and 4.2 hereof. 4.4 Consents and Approvals. Each governmental and other consent, approval, authorization, waiver, certificate, exemption, order, registration, declaration, clearance, filing or notice of, with or to any Person, or the expiration or termination of the waiting period under any Competition/Investment Law, in each case required to permit the consummation of any of the transactions contemplated hereby (each, a "Consent"), in each case listed in Section 4.4 of the Disclosure Schedule, shall have been obtained and all conditions relating to such Consents shall have been satisfied, including the completion of any sale, divestiture or disposition of assets or businesses as may be required under Section 6.3. 4.5 Injunctions. On the Closing Date there shall not be in effect any Law or any judgment, order, writ, injunction, decree, stipulation, agreement, determination or award entered or issued by or with any Governmental Authority (each, a "Governmental Order") which restrains, prohibits or declares illegal the consummation of the transactions contemplated by this Agreement and no Governmental Authority of competent jurisdiction shall have instituted a Proceeding seeking to impose any such restraint or prohibition. 4.6 Guarantees. The Buyers shall have delivered one or more substitute standby letters of credit or other guarantees (collectively, "Guarantees"), in form and substance satisfactory to the respective banks or other counterparties, to support the obligations of the Sellers under all standby letters of credit, guarantees, indemnity bonds and other credit support instruments heretofore issued by the Sellers and their Affiliates on behalf of any member of the Dresser-Rand Group, outstanding as of the Closing Date and notified by IR in writing to FRC at least five (5) business days prior to the Closing Date ("Seller Credit Support Instruments"). Such Guarantees shall be in an aggregate face amount at least equal to the aggregate face amount under the Seller Credit Support Instruments in U.S. dollars determined in accordance with Currency Conversion Rules. ARTICLE V CONDITIONS TO BUYERS' OBLIGATION The obligation of the Buyers to effect the Closing under this Agreement is subject to the satisfaction, at or prior to the Closing, of each of the following conditions, unless validly waived in writing by FRC on behalf of the Buyers. 33 5.1 Representations and Warranties. (a) The representations and warranties made by the Sellers in this Agreement shall be true, complete and correct (determined without regard to any materiality or Material Adverse Effect qualifier therein) as of the Closing Date as though such representations and warranties were made on such date, except that any representations and warranties that are made as of a specified date shall be true, complete and correct in all respects (determined as aforesaid) as of such date, and except for such breaches of representations and warranties (determined as aforesaid) that would not have, or reasonably be expected to have, in the aggregate, a Material Adverse Effect. (b) The representations and warranties made by the Sellers in Section 2.1 (Organization of Certain Sellers), the first sentence of Section 2.3 (Ownership of Acquired Interests) and Section 2.4 (Authorization, Etc.), shall be true, complete and correct in all respects as of the Closing Date. 5.2 Performance. The Sellers shall have performed and complied in all material respects with all agreements and obligations required by this Agreement to be so performed or complied with by the Sellers at or prior to the Closing. 5.3 Officer's Certificate. IR, on behalf of itself and the other Sellers, shall have delivered to the Buyers a certificate, dated as of the Closing Date and executed by an executive officer of IR, certifying to the fulfillment of the conditions specified in Sections 5.1 and 5.2 hereof. 5.4 Consents and Approvals. Each governmental and other Consent, in each case listed in Section 4.4 of the Disclosure Schedule, shall have been obtained and all conditions relating to such Consents shall have been satisfied, including the completion of any sale, divestiture or disposition of assets or businesses as may be required under Section 6.3. 5.5 Injunctions. On the Closing Date there shall not be in effect any Law or Governmental Order which restrains, prohibits or declares illegal the consummation of the transactions contemplated by this Agreement and no Governmental Authority of competent jurisdiction shall have instituted a Proceeding seeking to impose any such restraint or prohibition. 5.6 Satisfaction and Release of Encumbrances. The Sellers shall have delivered to the Buyers, in form and substance reasonably satisfactory to the Buyers, evidence of the release of all Encumbrances on the Acquired Interests (other than (i) applicable transfer restrictions pursuant to federal, state or foreign securities or antitrust laws and (ii) those Encumbrances created by the Buyers) as well as UCC-3 Termination Statements, payoff letters and any other documentation in form and substance reasonably satisfactory to the Buyers evidencing the release of all such Encumbrances. 5.7 Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any change, occurrence or development which has had, or would 34 reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 5.8 French Offer Letter. The French Offer Letter shall have been accepted by the relevant Seller. 5.9 Interim Financials. On or about 60 days prior to the Closing Date, IR shall have delivered to FRC copies of the unaudited combined balance sheet of the Dresser-Rand Group and the Business as of June 30, 2003 and 2004 and the related unaudited combined statements of income and cash flows for the six month periods ended June 30, 2003 and 2004 (the "Six-Month Financial Statements"), in each case which have been subject to SAS 100 Review (as so modified, the "SAS Financial Statements") by Sellers' independent accountants. ARTICLE VI COVENANTS AND AGREEMENTS 6.1 Conduct of Business by Dresser-Rand Group. Except (i) as otherwise expressly contemplated by this Agreement or (ii) as provided in Section 6.1 of the Disclosure Schedule, the Sellers, jointly and severally, covenant that without the consent of FRC, which consent shall not be unreasonably withheld or delayed, from and after the date of this Agreement and until the Closing Date the Sellers shall and shall cause the Dresser-Rand Group to: (a) use commercially reasonable efforts consistent with good business judgment to (i) preserve intact the present business organization of the members of the Dresser-Rand Group and operate the Business in the ordinary course of business consistent with past practice and (ii) maintain and preserve intact the Business and to maintain satisfactory relationships with licensors, suppliers, creditors, distributors, customers, key employees and others having business relationships with the Business; (b) notify the Buyers of any material change in the normal course of business or operations of the Business and of any governmental complaints, investigations or hearings of which the Sellers or any member of the Dresser-Rand Group are notified (or communications received by the Sellers or any member of the Dresser-Rand Group indicating that the same may be contemplated), or the institution or settlement of any Proceeding, in each case involving any member of the Dresser-Rand Group or the Business, and to keep the Buyers informed of such events; and (c) not: (i) cause to be issued or sold any debt or equity securities of any member of the Dresser-Rand Group or issue, grant or enter into any options, warrants, rights, subscription agreements or commitments of any kind with respect thereto; (ii) directly or indirectly cause to be purchased, redeemed or otherwise acquired or disposed of any equity of any member of the Dresser-Rand Group; (iii) split, combine or reclassify any of its outstanding capital stock or equity interest of any member of the Dresser-Rand Group; (iv) adopt a plan of complete or partial liquidation, dissolution, 35 merger, consolidation, restructuring, recapitalization or other reorganization with respect to any member of the Dresser-Rand Group; (v) declare, set aside or pay any dividend (other than cash dividends) or other distribution except for the distribution, as a capital account reduction, of all amounts owed by the Sellers to the Dresser-Rand Group; (vi) in the case of any member of the Dresser-Rand Group, incur, assume or guarantee any Debt Obligations other than in the ordinary course of business consistent with past practice, (vii) subject any material assets of the Dresser-Rand Group (real, personal or mixed, tangible or intangible) to any Encumbrance; (viii) permit or allow the sale, lease, transfer or disposition of any material assets of the Dresser-Rand Group (real, personal or mixed, tangible or intangible), other than sales of inventory in the ordinary course of business; (ix) assume, guarantee, or otherwise become responsible for the obligations of, or make any loans or advances to, any other Person (other than other members of the Dresser-Rand Group); (x) waive or release any rights of material value, or cancel, compromise, release or assign any material Debt Obligations owed to any member of the Dresser-Rand Group; (xi) except for capital expenditures not to exceed two million dollars ($2,000,000) in the aggregate, make any investment or expenditure of a capital nature either by purchase of stock or securities, contributions to capital, property transfer or otherwise, or by the purchase of any property or assets of any other Person; (xii) make or change any material election relating to Taxes, change an accounting period or adopt or change any accounting method relating to Taxes, file any material amended Tax Return, enter into any material closing agreement, settle any material Tax claim or assessment relating to any member of the Dresser-Rand Group, surrender any material right to claim a refund, offset or credit of Taxes, consent to any material extension or waiver of the limitation period applicable to any Tax claim or assessment relating to any member of the Dresser-Rand Group, or take any other similar action relating to Taxes; (xiii) cancel or terminate any insurance policy naming any member of the Dresser-Rand Group as a beneficiary or a loss payable payee; (xiv) enter into any collective bargaining agreements, except for renewals or extensions of existing collective bargaining agreements, and with respect to such renewals and extensions: (A) the Sellers shall keep the Buyers informed as to the status of, and shall consult with Buyers as to the strategy for, all such negotiations and (B) the Sellers shall act prudently and reasonably in such negotiations (consistent with the Sellers' obligations under applicable law); (xv) other than in the ordinary course of business, in the case of new hires, as required by any agreement in effect as of the date hereof (including this Agreement) or as required by law (A) increase the compensation or fringe benefits of any officer who is then a current Dresser-Rand Group Employee (other than pursuant to the Sale Incentive Program) or (B) enter into, adopt or amend any employment agreement or employee benefit plan with or for the benefit of any Dresser-Rand Group Employee (other than pursuant to the Sale Incentive Program, and excluding any such actions that do not affect any Dresser-Rand Group Employee); (xvi) amend any member of the Dresser-Rand Group's organization documents; (xvii) make any material change in the accounting methods or practices followed by the Business (other than such changes that have been required by Law or GAAP); (xviii) enter into any contract that restricts in any material respect any member of the Dresser-Rand Group after the date of this Agreement from engaging in any line of business in any geographic area or competing with any Person; (xix) enter into any partnership, limited liability company or joint venture agreement between any member of the Dresser-Rand Group and any other 36 Person; (xx) terminate or make any material amendment to a Material Contract; (xxi) compromise, settle, grant any waiver or release relating to or otherwise adjust any right or claim or Proceeding having a value in the aggregate in excess of one million dollars ($1,000,000), or that imposes non-monetary relief that has, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect other than in the ordinary course of business and other than any Proceeding the liability in respect of which shall be assumed or retained by the Sellers and their Affiliates following the Closing; or (xxii) offer, propose, authorize, agree or commit to do any of the foregoing. 6.2 Access to Books and Records; Cooperation. (a) The Sellers shall cause the books and records (including Tax books and records), contracts, documents and other information (in whatever form) of the members of the Dresser-Rand Group, and the books and records (including Tax books and records), contracts, documents and other information (in whatever form) that primarily relate to the Business to be in the sole possession and control of the members of the Dresser-Rand Group at or as soon as practicable after the Closing. To the extent that books and records (including Tax books and records), contracts, documents and other information of the Sellers relevant to or affecting the Business and necessary to the operation of the Business after the Closing Date relate partially to the Sellers or their Affiliates other than the members of the Dresser-Rand Group, the Sellers shall provide the Buyers with reasonable access to the portions of such information pertaining to the Business. Except as otherwise provided in Section 6.4, the Buyers and Sellers, as the case may be, agree that from the Closing Date and until the seventh anniversary of the Closing Date, during normal business hours, they shall permit, at no cost to the others and without disruption of the business of the others or their subsidiaries, such other parties and their respective counsel, accountants and other authorized representatives to have reasonable access upon reasonable advance notice, to the officers, directors, employees, accountants and other advisors and agents, properties, books, records and contracts of the Dresser-Rand Group, and the right (at the requesting party's expense) to make copies and extracts from such books, records and contracts, in each case to the extent necessary to investigate and defend any threatened or actual litigation relating to the Dresser-Rand Group prior to the Closing Date. (b) The Buyers agree not to, and to cause their subsidiaries not to, destroy at any time any files or records which are subject to Section 6.2(a) without giving written notice to the Sellers, and giving the Sellers thirty (30) days following receipt of such notice to request in writing that all or a portion of the records intended to be destroyed be delivered to the Sellers at the Sellers' expense. (c) During the period commencing on the date hereof and ending on the Closing Date, the Sellers will, and will cause the Dresser-Rand Group to, upon reasonable request, afford to the Buyers and their counsel, accountants and other authorized representatives access at all reasonable times upon reasonable advance notice to the officers, directors, employees, accountants and other advisors and agents, properties, books, records and contracts, of the Dresser-Rand Group, and the right to make copies and extracts from such books, records and contracts, and to furnish the 37 Buyers with all financial, operating and other data and information concerning the Dresser-Rand Group as Buyers and their advisors may reasonably request; provided that Buyers shall not be allowed to perform any invasive or destructive sampling or testing of structures or environmental media except in accordance with the provisions of Section 6.15(b). The parties agree that the provisions of the Confidentiality Agreement, dated as of April 8, 2004, between IR and First Reserve Corporation (the "Confidentiality Agreement") shall continue in full force and effect following the execution and delivery of this Agreement. 6.3 Filings and Consents. Each of the Sellers and the Dresser-Rand Group on the one hand, and each of the Buyers on the other hand, shall use their reasonable best efforts to obtain and to cooperate in obtaining any governmental approval or other Consent required in connection with the execution, delivery or performance of this Agreement or the Transaction Agreements. The parties agree to cause to be made all appropriate filings under the HSR Act as promptly as practicable following the date of this Agreement and to diligently pursue termination of the waiting period under such act. The parties agree to take any and all reasonable steps necessary to avoid or eliminate each and every impediment under any Competition/Investment Law that is asserted by any governmental entity with respect to the transfer of the Acquired Interests so as to enable the transfer of the Acquired Interests to occur as expeditiously as possible, including but not limited to, proposing, negotiating, committing to and effecting, by consent decree, hold separate order or otherwise, the sale, divestiture or disposition of such assets or businesses (or otherwise taking or committing to take any action that limits the freedom of action with respect to, or its ability to retain, any businesses, product lines, or assets) as may be required in order to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order, or other order in any suit or proceeding, which would otherwise have the effect of preventing or delaying the consummation of the transfer of the Acquired Interests. Buyers agree that the obtaining of required consents and approvals of parties to contracts with members of the Dresser-Rand Group is primarily the responsibility of Buyers and that Buyers shall use their commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to obtain any consents and approvals of parties to contracts with members of the Dresser-Rand Group as are required in connection with the consummation of the transactions contemplated hereby. Without limiting the foregoing, promptly following the date of this Agreement, the Sellers and the Buyers shall use reasonable best efforts to undertake that all Laws are complied with in respect of informing and consulting Non-U.S. Employees in respect of the transactions contemplated by this Agreement and the French Offer Letter. 6.4 Tax Matters; Cooperation; Preparation of Returns; Tax Elections. (a) The Buyers and the Sellers agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Dresser-Rand Group (including, without limitation, access to books and records, employees, contractors and representatives) as is reasonably necessary for the filing of all Tax Returns, the making of any election related to Taxes, the preparation for any audit by any Taxing Authority, and the prosecution or defense of any 38 claim, suit or proceeding relating to any Tax Return; provided, however, that if such requested information is contained within a document containing any unrelated information, only portions pertaining to such relevant information shall be furnished. The Buyers and the Sellers shall retain all books and records with respect to Taxes pertaining to the Dresser-Rand Group until the expiration of all relevant statutes of limitations (and, to the extent notified by Sellers or Buyers, any extensions thereof). At the end of such period, each party shall provide the other with at least thirty (30) days prior written notice before destroying any such books and records, during which period the party receiving such notice can elect to take possession, at its own expense, of such books and records. (b) The Sellers shall prepare, or cause to be prepared, all Tax Returns in respect of each member of the Dresser-Rand Group (including any affiliated, consolidated, combined or unitary Tax Returns) in a manner consistent with past practices (unless required to do otherwise in accordance with applicable law) for any taxable period ending on or before the Closing Date. The Sellers shall timely pay to the relevant Taxing Authority all Taxes due in connection with any such Tax Return; provided, however, that Buyers shall pay to Sellers any non-income Taxes reflected thereon to the extent such Taxes are reflected as a liability in the calculation of the Final Net Working Capital Amount. (c) The Buyers shall prepare, or cause to be prepared, all Tax Returns in respect of each member of the Dresser-Rand Group for any taxable period ending after the Closing Date which began before the Closing Date (a "Straddle Period") in a manner consistent with past practices (unless required to do otherwise in accordance with applicable law) and on the basis that the relevant taxable period ended as of the close of business on the Closing Date (unless the relevant Taxing Authority will not accept a Tax Return filed on that basis). The Buyers shall provide IR with a copy of a substantially final draft of each Straddle Period Tax Return (and such additional information regarding such Straddle Period Tax Return as may reasonably be requested by IR) for its review and comment (i) at least fifteen (15) days prior to the filing of such Tax Return or (ii) in the case of a Tax Return that is required to be filed within twenty (20) days of the Closing Date, the Buyers shall use their reasonable best efforts to afford the Sellers a reasonable opportunity to review such Straddle Period Tax Return prior to filing such Tax Return. The Buyers shall pay the amount shown to be due on any such Tax Returns. In advance of the filing of such Tax Returns, the Sellers shall pay to the Buyers their share of any such Taxes, determined in accordance with Section 6.5. The Buyers shall timely prepare and file all other Tax Returns in respect of the members of the Dresser-Rand Group for any taxable period that begins after the Closing Date, and the Buyers shall timely pay to the relevant Taxing Authority all Taxes due in connection with any such Tax Returns. (d) The Buyers shall not (i) file an or cause to be filed an amended Tax Return or claim for Tax refund, (ii) consent to the waiver or extension of the statute of limitations relating to Taxes, (iii) take any Tax position on any Tax Return or (iv) compromise or settle any Tax liability, in each case with respect to any member of the Dresser-Rand Group if such action would have the effect of increasing the Tax liability or 39 reducing any Tax assets of the Sellers in respect of any taxable period (or portion thereof in the case of a Straddle Period) ending on or before the Closing Date, in each case without the Sellers' written consent (which consent may not be unreasonably withheld or delayed). The Sellers shall not (i) file an or cause to be filed an amended Tax Return or claim for Tax refund, (ii) consent to the waiver or extension of the statute of limitations relating to Taxes of any member of the Dresser-Rand Group, (iii) take any Tax position on any Tax Return or (iv) compromise or settle any Tax liability, in each case if such action would have the effect of increasing the Tax liability or reducing any Tax assets of the Buyers in respect of any taxable period (or portion thereof in the case of a Straddle Period) after the Closing Date, in each case without the Buyers' written consent (which consent may not be unreasonably withheld or delayed). (e) Prior to the Closing Date, the Sellers shall terminate any tax-allocation or tax-sharing agreements between the Sellers (and their Affiliates) and the members of the Dresser-Rand Group, and no liabilities with respect thereto will exist as of the Closing. (f) Section 338 Elections. (i) The Sellers agree to furnish or cause to be furnished such information and assistance and take such actions necessary, at the Buyers' request, to enable the Buyers to make an election under section 338(g) of the Code (or any corresponding or similar provision of state, local or foreign law) with respect to any Non-U.S. Acquired Interests. (ii) At Buyers' request, the Sellers agree to join in making an election under section 338(h)(10) of the Code (or any corresponding or similar provision of state, local or foreign law) with respect to any entities in the Dresser-Rand Group for which such an election is available and shall file IRS Form 8023 and any other Tax forms or filings necessary to effect such election. In the event that Sellers do not undertake all of the transactions set forth in steps 2 and 3 of Exhibit B, Sellers covenant and agree that an election under section 338(h)(10) of the Code will be available for each of Dresser-Rand Holding Company and Dresser-Rand Power, Inc. (g) The Buyers and Sellers shall be responsible for jointly preparing and timely filing (and cooperating with one another in preparing and filing) any Tax Returns required with respect to any sales, use, real property transfer, real property gains, transfer, stamp, registration, documentary, recording or similar Taxes, fees and costs, together with any interest thereon, penalties, fines, costs, fees, additions to tax or additional amounts with respect thereto incurred in connection with the transactions (other than the transactions set forth in steps 1, 2, 3 and 4 of Exhibit B) contemplated by this Agreement ("Transfer Taxes"); provided, however, that the term Transfer Taxes shall not include any income or franchise Taxes imposed with respect to income or any withholding Taxes imposed with respect to such income or franchise Taxes. The Buyer 40 and Sellers shall provide to one another a true copy of each such Tax Return as filed and evidence of the timely filing thereof. 6.5 Tax Indemnity. (a) The Sellers shall, jointly and severally, indemnify the Buyers and their Affiliates (including the members of the Dresser-Rand Group) and each of their respective officers, directors, partners, stockholders, employees, agents and representatives and hold them harmless against (i) all Tax liabilities of the members of the Dresser-Rand Group (other than non-income taxes to the extent reflected as a liability in the calculation of the Final Net Working Capital Amount) for all taxable periods (or portions thereof in the case of a Straddle Period) ending on and including or before the Closing Date and (ii) all Tax liabilities of the Sellers and their Affiliates (other than the Dresser-Rand Group) for all taxable periods (or portions thereof in the case of a Straddle Period) ending on and including or before the Closing Date, (iii) all Tax liabilities imposed on any of the Sellers and their Affiliates (including the Dresser-Rand Group) under Section 1.1502-6 of the Treasury Regulations (or any corresponding or similar provision of state, local or foreign law) as a result of being a member of any affiliated, consolidated, combined, unitary or similar group prior to the Closing or pursuant to any tax-allocation or tax-sharing agreement in existence prior to the Closing, (iv) all Tax liabilities arising out of or due to any breach of any covenant, undertaking or other agreement of the Sellers contained in this Agreement or any certificate delivered pursuant to this Agreement, (v) all Taxes resulting from or attributable to any reduction in the Tax basis of the assets of Dresser-Rand Holding Company or Dresser-Rand Power, Inc. or any of their Subsidiaries (including, without limitation, the Tax basis in the stock of any such Subsidiaries) pursuant to Section 732(f) of the Code and the Treasury Regulations promulgated thereunder (or any corresponding or similar provision of state, local or foreign law) as a result of the transactions set forth in step 2 of Exhibit B (provided that the indemnity contained in this subclause (v) shall not apply with respect to the directly held assets of Dresser-Rand Holding Company and the directly held assets of Dresser-Rand Power, Inc. to the extent that (A) within the two year period following the Closing (1) Buyers cause Dresser-Rand Holding Company or Dresser-Rand Power, Inc. to be taxed as a corporation for U.S. federal income tax purposes or (2) Buyers cause Dresser-Rand Holding Company or Dresser-Rand Power, Inc. to transfer any of such directly held assets to a related entity that is a corporation for U.S. federal income tax purposes and (B) the action referred to in subclause (A) above results in Buyers' having a basis in such directly held assets that is less than the basis the Buyers would have had in such assets in the absence of the action referred to in subclause (A) above), (vi) any Taxes resulting from or attributable to any insurance recoveries with respect to the Pending Insurance Claim, and (vii) all reasonable out-of-pocket expenses (including, without limitation, reasonable fees and expenses of counsel) arising out of or incidental to the imposition, assessment or assertion of a Tax described in subclauses (i) through (vi) above. The Tax indemnity provided under this Section 6.5(a) shall not cover Tax liabilities resulting from any transaction of a member of the Dresser-Rand Group not in the ordinary course of business (other than the transactions contemplated hereunder) that occurs on the Closing Date but after the Closing. 41 (b) The Buyers, jointly and severally, and the members of the Dresser-Rand Group shall indemnify the Sellers and their Affiliates and each of their respective officers, directors, employees and agents and hold them harmless against (i) all Tax liabilities of the members of the Dresser-Rand Group with respect to any taxable period (or portions thereof in the case of a Straddle Period) that begins after the Closing Date and that are imposed on or in respect of a member of the Dresser-Rand Group and (ii) all Tax liabilities arising out of or due to any breach of any covenant or other agreement of the Buyers contained in this Agreement. (c) For purposes of this Section 6.5, in the case of any Taxes that are imposed on a periodic basis and are payable for a Straddle Period, the portion of such Tax related to the portion of such Straddle Period ending on and including the Closing Date shall (i) in the case of any Taxes other than gross receipts, sales or use taxes and Taxes based upon or related to income, be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the taxable period ending on and including the Closing Date and the denominator of which is the number of days in the entire taxable period, and (ii) in the case of any Tax based upon or related to income and gross receipts, sales or use taxes, be deemed equal to the amount which would be payable if the relevant taxable period ended on and included the Closing Date. The portion of any credits relating to the portion of a Straddle Period ending on and including the Closing Date shall be determined on a per diem basis in accordance with subclause (i) above. All determinations necessary to give effect to the foregoing allocations shall be made in a manner consistent with the past practice of the members of the Dresser-Rand Group. (d) Payment by the indemnitor of any amount due under this Section 6.5 shall be made within ten (10) business days following written notice by the indemnitee that payment of such amounts to the appropriate Taxing Authority or other third party is due, provided that the indemnitor shall not be required to make any payment earlier than five (5) business days before it is due to the appropriate Taxing Authority or other third party. In the case of any written notice by any of the Buyers indicating that Taxes are due for a Straddle Period Tax Return, such notice shall set forth in reasonable detail the calculations regarding the Sellers' share of such Taxes, and if within ten (10) business days after receipt of such notice, the Sellers notify the Buyers in writing that they disagree with the computation of their share of such Taxes and pay to the Buyers the portion of the Sellers' share of such Taxes that is not disputed, the Sellers and the Buyers shall proceed in good faith to determine the Sellers' share of such Taxes. If the Sellers do not so notify the Buyers and make payment of such undisputed portion in accordance with the immediately preceding sentence, the Sellers shall be deemed to have agreed to the Buyers' calculation of the Sellers' share of such Taxes. If the Sellers and Buyers cannot agree in good faith on such share within thirty (30) days after the Sellers' receipt of such notice, the Sellers' share of such Taxes shall be determined pursuant to Section 6.5(f), and the Sellers' remaining payment, if any, to the Buyers shall be due three (3) business days after the amount payable by the Sellers is determined by agreement between the Sellers and the Buyers or pursuant to Section 6.5(f), subject to the proviso in the first sentence of this Section 6.5(d). In the case of a Tax that is contested in accordance with the provisions of Section 6.6 below, payment of the Tax to the 42 appropriate Taxing Authority shall not be considered to be due earlier than the date a final determination to such effect is made by the appropriate Taxing Authority or court. (e) Notwithstanding any provision in this Agreement to the contrary, the obligations of a party to indemnify and hold harmless another party pursuant to this Section 6.5 shall terminate at the close of business on the day following the expiration of the applicable statute of limitations with respect to the liabilities in question (giving effect to any waiver, mitigation, tolling or extension thereof); provided, however, that in the event written notice of any bona fide claim for indemnification pursuant to this Section 6.5 shall have been given in accordance herewith within the applicable survival period, the rights and obligations that are the subject of such claim for indemnification shall survive with respect to such claim until such time as such claim is fully and finally resolved. (f) Any disputes between the parties with respect to the Tax matters shall be resolved by the CPA Firm, whose fees and expenses shall be shared equally between the Sellers and the Buyers. 6.6 Procedures Relating to Indemnification for Taxes. (a) If notice of any claim, assessment, or dispute is received by the Buyers or the Sellers, as the case may be, or any of their Affiliates, which, if successful, would result in an indemnity payment pursuant to Section 6.5 to the Buyers or the Sellers, as the case may be (a "Tax Claim"), the Buyers or the Sellers, as the case may be, shall promptly notify the Sellers or the Buyers, as the case may be, in writing of such Tax Claim stating the nature and basis of such Tax Claim and the amount thereof, to the extent known by the Buyers or the Sellers, as the case may be, provided that the Buyers shall not submit a notification to the Sellers for Tax Claims for any Taxes that are not imposed on or measured with respect to income (a "Non-Income Tax Claim") more than one time per calendar year unless the Non-Income Tax Claims with respect to which no previous claim has been made are in the aggregate greater than two hundred thousand dollars ($200,000); provided, further, that the failure to provide prompt notice as provided herein will relieve the Buyers or Sellers, as the case may be, of their obligations hereunder only to the extent that such failure prejudices the Buyers' or Sellers', as the case may be. (b) With respect to any Tax Claim that relates to a taxable period ending on or before the Closing Date, the Sellers shall control at their expense all proceedings taken in connection with such Tax Claim (including selection of counsel) and, without limiting the foregoing, may in their sole discretion pursue or forego any and all administrative appeals, proceedings, hearings and conferences with any Taxing Authority with respect thereto and may, in their sole discretion, either pay the Tax claimed and sue for a refund where applicable Law permits such refund suits or contest the Tax Claim in any permissible manner. (c) With respect to any Tax Claim that relates to a Straddle Period (a "Straddle Period Tax Claim"), the Sellers and the Buyers shall jointly agree on the 43 conduct of any proceedings taken in connection with such Straddle Period Tax Claim (including selection of counsel) and shall share expenses arising therefrom. Neither the Sellers nor the Buyers (nor any of their Affiliates) shall be entitled in any way to compromise, release, waive, settle, modify or pay any Straddle Period Tax Claim without the prior written consent of such other party or parties, which consent shall not be unreasonably withheld or delayed. Notwithstanding anything in the two preceding sentences to the contrary, with respect to a Straddle Period Tax Claim for a Tax item which solely relates to the portion of the Straddle Period that is prior to and including the Closing Date the Sellers shall control at their expense all proceedings taken in connection with such Straddle Period Tax Claim (including selection of counsel) and, with respect to a Straddle Period Tax Claim for a Tax item which solely relates to the portion of the Straddle Period that is after the Closing Date the Buyers shall control at their expense all proceedings taken in connection with such Straddle Period Tax Claim (including selection of counsel). (d) With respect to any Tax Claim that relates to a taxable period beginning after the Closing Date, the Buyers shall control at their expense all proceedings taken in connection with such Tax Claim (including selection of counsel) and, without limiting the foregoing, may in their sole discretion pursue or forego any and all administrative appeals, proceedings, hearings and conferences with any Taxing Authority with respect thereto and may, in their sole discretion, either pay the Tax claimed and sue for a refund where applicable Law permits such refund suits or contest the Tax Claim in any permissible manner. 6.7 Refunds and Tax Benefits. (a) Any Tax refunds that are received by the Buyers, or a member of the Dresser-Rand Group, and any amounts credited against Tax to which either the Buyers or a member of the Dresser-Rand Group becomes entitled, that are refunds of Taxes paid with respect to, or credits carried over from, taxable periods (or portions thereof in the case of a Straddle Period) ending on or before the Closing Date (except to the extent any such refund or credit was reflected as an asset in the calculation of the Final Net Working Capital Amount) shall be for the account of the Sellers, and the Buyers shall pay over to the Sellers the net amount of any such refund or any such credit (except to the extent any such refund or credit was reflected as an asset in the calculation of the Final Net Working Capital Amount) within fifteen (15) days after such refund or credit is actually realized in accordance with the principles of Section 8.1(c). The Buyers agree that they shall not, without the Sellers' consent (which shall not be unreasonably withheld), cause or permit the members of the Dresser-Rand Group to carry back to any taxable period ending on or prior to the Closing Date any net operating loss, loss from operations or other Tax attribute, and further agrees that the Sellers have no obligation under this Agreement to return or remit any refund or other Tax benefit attributable to a breach by the Buyers of the foregoing undertaking. Any refunds of Taxes paid with respect to taxable periods (or portions thereof in the case of a Straddle Period) ending after the Closing Date shall be for the account of the Buyers. 44 (b) The Buyers and the Sellers agree to treat any amounts payable pursuant to this Section 6.7 as an adjustment to the Purchase Price (unless required to do otherwise pursuant to a determination (as defined in Section 1313(a) of the Code or any corresponding or similar provision of state, local or foreign law). 6.8 Employees; Benefit Plans. (a) Continuation of Comparable Benefit Plans. Commencing as of the Closing, subject to Section 6.8(e), the Dresser-Rand Group Employees shall cease to participate in the employee benefit plans, policies, programs and arrangements of the Sellers. Subject to Sections 6.8(c)(i), (h), (i) and (j), for not less than two (2) years following the Closing Date, the Buyers shall maintain, or shall cause the Dresser-Rand Group to maintain, (A) salaries and bonuses for each active Dresser-Rand Group Employee at levels no less favorable than the salary and bonus rates in effect immediately prior to the Closing Date for each such Dresser-Rand Group Employee and (B) employee benefit plans and arrangements (other than any (x) equity compensation plans or arrangements and (y) special bonus or incentive arrangements not in the ordinary course) for Dresser-Rand Group Employees (other than such employees who are subject to a collective bargaining agreement ("Union Employees")) that, in the aggregate, are no less favorable than the Dresser-Rand Group Plans in effect immediately prior to the Closing Date, except for such changes as may be required by law including, without limitation, any applicable qualification requirements of Section 401(a) of the Code. (b) Defined Benefit Plans. (i) On or prior to the Closing Date, the Dresser-Rand Group shall assume sponsorship from IRNJ of the Pension Plan for Employees of Dresser-Rand Company (the "D-R Defined Benefit Plan") and, with respect to such D-R Defined Benefit Plan, the plan assets, liabilities and obligations accrued through the Closing Date. On or prior to the Closing Date, the Sellers shall cause the trustee of the Ingersoll-Rand Company Collective Trust (the "IR Master Trust") to transfer the assets of the D-R Defined Benefit Plan (accrued through the date of transfer) to a stand-alone trust established or designated for this purpose by the Sellers, and as of the date of such transfer the Dresser-Rand Group shall cease to participate in the IR Master Trust. (ii) Except as set forth in Sections 6.8(n) and (o), commencing as of the Closing Date, the Sellers shall have no liability whatsoever (under this Agreement or otherwise) and Buyers shall indemnify and hold the Sellers harmless with respect to liability relating to or arising out of or in connection with the D-R Defined Benefit Plan. (iii) The Buyers and the Sellers shall use their reasonable best efforts to provide the other party with all information reasonably necessary to ensure the proper administration of the D-R 45 Defined Benefit Plan and the defined benefit pension plans maintained by Sellers. (c) Defined Contribution Plans. (i) On or prior to the Closing Date, the Dresser-Rand Group shall assume sponsorship from IRNJ of the Dresser-Rand Company Retirement Savings Plan, the Dresser-Rand Company Retirement Savings Plan-B and the Dresser-Rand Company 401(k) Plan for Union Employees (the "D-R Defined Contribution Plans"), and, with respect to such D-R Defined Contribution Plans, the plan assets, liabilities and obligations accrued through the Closing Date. From and after the Closing Date, the Buyers shall, or shall cause the Dresser-Rand Group, to continue to make contributions in accordance with the "pension equalizer" provisions of the Dresser-Rand Company Retirement Savings Plan and the Dresser-Rand Company Retirement Savings Plan-B, or in the event that one or both of such plans are terminated, any defined contribution plan established for the benefit of Dresser-Rand Group Employees, with respect to each employee who prior to the Closing Date is receiving such contributions ("Grandfathered Employees"), in a manner and amount which is at least equal to the "pension equalizer" contributions such Grandfathered Employees receive under the Dresser-Rand Company Retirement Savings Plan and the Dresser-Rand Company Retirement Savings Plan-B prior to the Closing Date. (ii) Except as set forth in Section 6.8(o), commencing as of the Closing Date, the Sellers shall have no liability whatsoever (under this Agreement or otherwise) and Buyers shall indemnify and hold the Sellers harmless with respect to liability relating to or arising out of or in connection with the D R Defined Contribution Plans. (d) Welfare Benefit Plans. (i) Commencing as of the Closing, Buyers shall be liable for and shall indemnify and hold harmless the Sellers for welfare benefit claims relating to the Dresser-Rand Group Employees and their dependents, regardless of when incurred, to the extent the Dresser-Rand Group has not reimbursed the Sellers prior to the Closing for any such claims. (ii) On or prior to the Closing Date, the Dresser-Rand Group shall assume sponsorship from IRNJ of the Dresser-Rand Welfare VEBA Trust (the "D-R VEBA") and, with respect to the D-R VEBA, the assets, liabilities and obligations accrued through the Closing Date. Except as set forth in Section 6.8(o), commencing as of the Closing Date, the Sellers shall have no liability whatsoever (under this Agreement 46 or otherwise) and Buyers shall indemnify and hold the Sellers harmless with respect to liability relating to or arising out of or in connection with the D R VEBA. (e) Post-Retirement Benefit Plan. With respect to Dresser-Rand Group Employees who retire or retired pursuant to the terms of IRNJ's or the Dresser-Rand Group's retiree welfare programs (the "Retiree Welfare Plans") on or prior to the Closing Date, or are eligible to retire pursuant to the terms of the Retiree Welfare Plans as of the Closing Date, the Sellers shall retain liability for benefits under the Retiree Welfare Plans in accordance with their terms (as such terms exist as of the Closing Date or as otherwise approved by Sellers). On and after the Closing Date the Sellers shall have no liability for retiree welfare benefits with respect to any Dresser-Rand Group Employee who becomes eligible to retire pursuant to the terms of the Retiree Welfare Plans after the Closing Date (the "Post-Closing Retirees"), and the Buyers shall indemnify and hold the Sellers harmless with respect to retiree welfare liability relating to or arising out of or in connection with such Post-Closing Retirees. (f) Prior Service; Deductibles. The Buyers shall recognize each Dresser-Rand Group Employee's service with the Sellers or the Dresser-Rand Group as of the Closing Date as service with Buyers for all purposes, as applicable, in the Buyers' employee welfare benefit plans, employee pension plans, vacation, disability, severance and other employee benefit plans or policies, but only to the extent that such service was recognized by the Sellers or the Dresser-Rand Group under the Dresser-Rand Group Plans, except where such crediting would result in an unintended duplication of benefits. In addition, the Buyers shall, or shall cause the Dresser-Rand Group to, waive any pre-existing condition limitations and eligibility waiting periods under the employee benefit plans applicable to Dresser-Rand Group Employees or their respective dependents to the extent such pre-existing limitations and eligibility waiting periods were satisfied or did not exist or apply under the comparable Dresser-Rand Group Plans prior to the Closing. Buyers shall, or shall cause the Dresser-Rand Group to recognize (or cause to be recognized) the dollar amount of all expenses incurred by Dresser-Rand Group Employees and their respective dependents during the calendar year in which the Closing Date occurs for purposes of satisfying the deductibles and co-payment or out- of-pocket limitations for such calendar year under the relevant employee welfare benefit plans of the Buyers to the extent such expenses were recognized by the comparable Dresser-Rand Group Plan prior to the Closing. (g) Accrued Vacation. The Buyers shall, or shall cause the Dresser-Rand Group to, credit each current Dresser-Rand Group Employee (and, to the extent any such amount is owing to any former Dresser-Rand Group Employee, each such former Dresser-Rand Group Employee) with the accrued and unused vacation days and any personal and sickness days accrued in accordance with the vacation and personnel policies and labor agreements of the Sellers or the Dresser-Rand Group in effect as of the Closing Date. (h) Severance Obligations. The Sellers and the Buyers agree that the transactions contemplated hereby shall not constitute a severance of employment of 47 any Dresser-Rand Group Employee, and that such employees will be deemed for all purposes to have continuous and uninterrupted employment before and immediately after the Closing Date. Except as required by law or an applicable collective bargaining agreement, the Buyers shall provide severance and other separation benefits to each Dresser-Rand Group Employee terminated by the Buyers or the Dresser-Rand Group within two (2) years following the Closing Date (or, in the case of Dresser-Rand Group Employees who are subject to a collective bargaining agreement, the period required therein, if greater) upon terms and conditions that are no less favorable than those applicable to such Dresser-Rand Group Employees under the severance and other separation benefits provided by the Sellers and their Affiliates in effect on the date of this Agreement. The Buyers shall be responsible for any claim made on or after the Closing Date by any Dresser-Rand Group Employee who is an active employee as of the Closing Date for severance or other separation benefits including, without limitation, in connection with the consummation of the transaction contemplated hereby, for any contractual, statutory or other claims arising out of or in connection with any termination of employment on or after the Closing Date. (i) Annual Incentive Compensation. Effective as of the Closing Date through December 31, 2004, the Buyers shall, or shall cause the Dresser-Rand Group to, maintain the annual incentive compensation plans in which any of the Dresser-Rand Group Employees participate immediately prior to the Closing Date without change. In addition, the Buyers shall, or shall cause the Dresser-Rand Group to, pay any bonuses payable according to the terms of such incentive compensation plans to any Dresser-Rand Group Employees in respect of calendar year 2004 no later than March 31, 2005; provided, that if any Dresser-Rand Group Employee is terminated other than for cause by Buyers or the Dresser-Rand Group on or after the Closing Date but prior to payment of such bonus, such Dresser-Rand Group Employee shall receive, at the same time as bonuses are paid to active employees, a prorated portion of such bonus based on the portion of calendar year 2004 that has elapsed prior to the date of termination of employment. (j) Flexible Benefits. To the extent any Dresser-Rand Group Employee contributed to a dependent care or medical expense reimbursement account under a Dresser-Rand Group Plan ("IR's Flexible Account Plan") during the plan year that includes the Closing Date, the Sellers shall, on or as soon as reasonably practicable after the Closing Date, transfer the account balances for such plan year, if any, of each such Dresser-Rand Group Employee to a dependent care or medical expense reimbursement account, as applicable, maintained by the Buyers for the benefit of such Dresser-Rand Group Employees (the "Buyer's Flexible Account Plan"), and the Buyers shall provide benefits under the Buyer's Flexible Account Plan that are no less favorable than those provided under IR's Flexible Account Plan to such Transferred Employees at least through the end of the plan year in effect as of the Closing. The Buyers shall be responsible for all liability for and administration of reimbursement claims that have not been received by the Sellers as of the date the Sellers transfer assets to the Buyers from IR's Flexible Account Plan, regardless of when the claim was incurred. 48 (k) Collective Bargaining Agreement(s). The Buyers shall cause each member of the Dresser-Rand Group to continue in full force and effect the collective bargaining agreement(s) set forth in Section 2.14 of the Disclosure Schedule to which each such member of the Dresser-Rand Group is a party on the Closing Date with respect to Union Employees and shall further cause each such member of the Dresser-Rand Group to continue the employment of all Union Employees covered by said agreements in accordance with the terms of such collective bargaining agreements. The Sellers shall use their commercially reasonable efforts to furnish or cause to be furnished such information and assistance relating to the obligations under the collective bargaining agreements pursuant to the preceding clause as the Buyers shall reasonably request. (l) Non-U.S. Employment Matters. (i) Employment. Without limiting the generality of the foregoing, as of the Closing Date, the Buyers shall, or shall cause the Dresser-Rand Group to, assume or retain and be responsible for the employment (including any employment contracts) of the Dresser-Rand Group Employees who are employed outside the United States (the "Non-U.S. Employees"), and the Buyers shall, or shall cause the Dresser-Rand Group to, take any and all commercially reasonable actions necessary or appropriate (if any) to continue the employment of such Non-U.S. Employees and assume or retain all obligations and liabilities relating to their employment (including, but not limited to, any employment contracts) under applicable laws and practices without the Sellers or any of their Affiliates having any liability to any such employees for severance, redundancy, termination, payment in lieu of notice, indemnity or other payments to any of such employees by reason of, or as a result of, the actions contemplated by this Agreement. (ii) Employee Benefit Plans for Non-U.S. Employees. Without limiting the generality of Section 6.8(a), effective as of the Closing Date, the Buyers shall, or shall cause the Dresser-Rand Group to, maintain, establish and/or qualify or register with applicable regulatory authorities employee benefit plans for, or shall extend existing Non-U.S. Dresser-Rand Group Plans to, the Non-U.S. Employees to the extent required by applicable law and, for not less than two (2) years following the Closing Date, provide benefits to the Non-U.S. Employees on terms and conditions which are no less favorable in the aggregate, to those provided to Non-U.S. Employees by the Sellers, the Dresser-Rand Group, or their respective subsidiaries immediately prior to the Closing Date. (m) No Right to Employment. Nothing herein expressed or implied shall confer upon any of the employees of the Sellers, the Buyers, or any of their Affiliates, any additional rights or remedies, including, without limitation, any additional right to employment, or continued employment for any specified period, of any nature or kind whatsoever under or by reason of this Agreement. 49 (n) Post-Closing Determination of Pension Deficiency Amount. (i) Prior to the Closing Date, Sellers shall be permitted to make such contributions to the Funded Pension Plans as Seller deems appropriate; provided that Sellers shall use reasonable best efforts not to create a Pension Surplus Amount (as defined below) with any such discretionary contributions. As promptly as practical following the Closing Date, Watson Wyatt & Company (the "Designated Actuary") shall calculate the Pension Deficiency (as defined below) (and will calculate Pension Deficiency Amounts, Pension Surplus Amounts, Pension Assets and Pension Liabilities with respect to each Funded Pension Plan (as those terms are defined below)). The "Pension Deficiency" shall equal the aggregate Pension Deficiency Amounts of all Funded Pension Plans minus the aggregate Pension Surplus Amounts of all Funded Pension Plans. "Funded Pension Plans" shall mean all Dresser-Rand Group Plans which are defined benefit pension plans or are otherwise set forth in Section 6.8(n) of the Disclosure Schedule, that are required to be funded by the Sellers or the Dresser-Rand Group and which, commencing as of the Closing Date, shall constitute liabilities or obligations of the Buyers or the Dresser-Rand Group. Section 6.8(n) of the Disclosure Schedule sets forth a complete and accurate list of all Funded Pension Plans. "Pension Deficiency Amount" shall, with respect to any Funded Pension Plan, be an amount (in no case less than zero), if any, equal to (A) the "Pension Liabilities" of such plan minus (B) the "Pension Assets" of such plan. The "Pension Surplus Amount" shall, with respect to any Funded Pension Plan, be an amount (in no case less than zero), if any, equal to (I) the Pension Assets of such plan minus (II) the Pension Liabilities of such plan; provided that with respect to the D-R Defined Benefit Plan, the Pension Surplus Amount shall not take into account Pension Assets in excess of 103% of Pension Liabilities. (ii) The Designated Actuary's calculation of the Pension Deficiency shall be provided in a written report to the Sellers and the Buyers no later than sixty (60) calendar days following the Closing Date. Such report shall include a reasonable level of detail to support the Designated Actuary's calculation, and the Designated Actuary shall use good faith efforts to promptly provide the Sellers and the Buyers with such written supporting materials as either party shall request following delivery of the report. The Sellers and the Buyers shall have a period of not more than twenty (20) calendar days following delivery of such report to notify the other party that it believes the calculation of the Pension Deficiency contains mathematical errors, is based on actuarial or other assumptions inconsistent with the principles and definitions set forth in this Section 6.8, or otherwise was not performed in accordance with the principles and definitions set forth in this Section 6.8. If neither party notifies the other of any such dispute within the applicable time period, then such report and calculation of the Pension Deficiency shall be final 50 and conclusive for purposes hereof. If either party notifies the other of any such dispute during the applicable time period the Designated Actuary shall resolve such dispute within twenty (20) calendar days following such notice, and in any event not later than ninety (90) calendar days following the Closing Date, in its sole discretion, applying the principles and definitions set forth in this Section 6.8. Within three (3) business days of the final resolution by the Designated Actuary of the amount of the Pension Deficiency (including resolution by the Designated Actuary of any dispute in respect thereof), Sellers shall pay to Buyers in cash the amount of such Pension Deficiency. Promptly following receipt of such payment, Buyers agree to promptly fund, subject to applicable Law, the amount of such Pension Deficiency into each Funded Pension Plan for which a Pension Deficiency Amount exists, in the proportion that each such Funded Pension Plan's Pension Deficiency Amount bears to the aggregate Pension Deficiency Amounts for all such Funded Pension Plans with Pension Deficiency Amounts. (iii) The fees and expenses of the Designated Actuary shall be paid equally by the Buyers and the Sellers. (iv) "Pension Assets" shall mean, as of the Closing Date, the aggregate fair market value of the assets of the applicable Funded Pension Plan and "Pension Liabilities" shall mean, as of the Closing Date, the accumulated benefit obligations (as defined under FAS No. 87) under the applicable Funded Pension Plan, which, in each case, shall be determined on the basis of the methodologies and assumptions with respect to the applicable Funded Pension Plan utilized in Audited Financial Statements as set forth in Section 6.8(n)(iv) of the Disclosure Schedule, provided that (x) the exchange rate, to the extent applicable, will be determined as of the Closing Date in accordance with the Currency Conversion Rules, (y) the participant census information shall be actual census information with respect to the applicable Funded Pension Plan as of the Closing Date, and (z) creditable service will be that performed on or before the Closing Date. (o) Non-Dresser-Rand Group Employees. The Buyers shall have no liability whatsoever (under this Agreement or otherwise) and the Sellers shall indemnify and hold the Buyers harmless with respect to liability (in excess of any assets received by Buyers allocable to such liability) relating to or arising out of or in connection with the Dresser-Rand Group Plans that relates to any participant thereunder who is not a Dresser-Rand Group Employee. (p) Sale Incentive Program. IR shall be responsible for and shall pay to Dresser-Rand Group Employees any amounts owed to such Dresser-Rand Group Employees under the Sale Incentive Program in connection with the consummation of the transactions contemplated by this Agreement and IR shall indemnify and hold the Buyers harmless with respect to liability relating to or arising out of or in connection with any 51 such amounts owed to Dresser-Rand Group Employees under the Sale Incentive Program. (q) AIM Bonuses. Subject to Section 6.8(i), on the later of the applicable payment date under the AIM Program and the date that the AIM Program Payment Amount is paid to Buyer, Buyers agree to pay each Dresser-Rand Group Employee who is an active employee as of the applicable payment date under the AIM Program the AIM Program bonus awarded to such Dresser-Rand Group Employee for calendar year 2004 in accordance with the terms of the AIM Program; provided that the aggregate of such payments shall not be less than the AIM Program Payment Amount. 6.9 Labor Matters. (a) The Buyers shall not, at any time during the sixty (60) days following the Closing Date, effectuate a "plant closing" or "mass layoff," as those terms are defined in the WARN Act, affecting in whole or in part any site of employment, facility, operating unit or employee of any Seller, without notifying IR in advance and without complying with the notice requirements and other provisions of the WARN Act. The Buyers agree that from and after the Closing Date the Dresser-Rand Group shall be responsible for any notification required under the WARN Act with respect to the Dresser-Rand Group members. The Sellers agree that between the date hereof and the Closing Date, they will cause the Dresser-Rand Group not to effect or permit a "plant closing" or "mass layoff" as these terms are defined in the WARN Act with respect to any member of the Dresser-Rand Group without (i) notifying the Buyers in advance, (ii) obtaining the Buyers' prior written approval and (iii) complying with the notice requirements and all other provisions of the WARN Act. The Sellers will also notify FRC, prior to the Closing, of all layoffs and terminations at any "single site of employment" or "facility or operating unit within a single site of employment" that occur within ninety (90) days prior to the Closing. (b) The Buyers and the Sellers shall cooperate in connection with any required notification to, or any required consultation with, the employees, employee representatives, work councils, unions, labor boards and relevant government agencies concerning the transactions contemplated by this Agreement with respect to the Non-U.S. Employees of any member of the Dresser-Rand Group. 6.10 Covenant to Satisfy Conditions. Each party hereto agrees to use all commercially reasonable efforts to ensure that the conditions set forth in Article IV and Article V hereof are satisfied and the transactions contemplated hereby are consummated as promptly as practicable insofar as such matters are within the control of such party. 6.11 Contact With Customers and Suppliers. Prior to Closing, the Buyers and their representatives shall contact and communicate with the employees, customers, suppliers and licensors of the Dresser-Rand Group in connection with the transactions contemplated hereby only with the prior written consent of the Sellers, which consent may be conditioned upon a designee of the Sellers being present at any such meeting or conference. 52 6.12 Projections. In connection with the Buyers' investigation of the Dresser-Rand Group and its businesses, the Buyers may have received, or may receive, from the Sellers, the Dresser-Rand Group and/or their respective representatives certain projections and other forecasts for the Dresser-Rand Group and certain business plan and budget information. The Buyers acknowledge that (i) there are uncertainties inherent in attempting to make such projections, forecasts, plans and budgets, (ii) the Buyers are familiar with such uncertainties, (iii) the Buyers are taking full responsibility for making their own evaluation of the adequacy and accuracy of all estimates, projections, forecasts, plans and budgets so furnished to them, and (iv) Sellers make no representations or warranties as to such information and the Buyers will not assert any claim against the Sellers, the Dresser-Rand Group or any of their respective directors, officers, employees, Affiliates or representatives, or hold the Sellers, the Dresser-Rand Group or any such persons liable, with respect thereto. 6.13 No Hire. IR agrees that until the first anniversary of the Closing, it will not, and will cause its subsidiaries not to, without the prior written consent of FRC, cause or seek to cause any employees of the Business to leave the employ of the Business; provided, however, that the foregoing provision will not prevent IR and its Affiliates from soliciting or hiring through a general solicitation or advertisement, or from hiring (i) any secretarial, clerical or other non-managerial employee (other than professionals or sales employees) or (ii) any employee of the Business whose employment has been terminated by any company within the Dresser-Rand Group. 6.14 Use of Names. IR hereby covenants and agrees that, notwithstanding anything in Section 3.8 of the Organization Agreement, dated as of December 31, 1986, by and between Dresser Industries, Inc. and IR (as amended, the "Organization Agreement"), or any other prior agreement between the parties, to the contrary, neither IR nor any of its Affiliates will revoke, rescind, terminate, cancel, decrease or limit the rights of the members of the Dresser-Rand Group to use the term "Rand" as part of the combined name "Dresser-Rand" used as a trade name, corporate name, domain name, trademark or service mark, or take, or assist any third party to take, any action that challenges, or is inconsistent with the Dresser-Rand Group's right to so use the same, except as provided in this Section 6.14. Specifically, if IR reasonably determines that the Dresser-Rand Group has taken any action or, with respect to the Dresser-Rand Group's own use of such name or mark, failed to take any action which is causing material destruction, decrease or diminution of the "Rand" name or the reputation or goodwill thereof or of the Ingersoll-Rand Marks, then IR shall provide written notice of such alleged default in reasonable detail to FRC (it being understood that the foregoing shall not be the case so long as Buyers conduct the Business in the ordinary course of business consistent with past practice). If the Dresser-Rand Group fails to remedy such alleged default within sixty (60) days after receiving such notice from IR, then IR shall have the right to immediately terminate the usage of the name "Rand" as granted in this Section 6.14 (subject to the Buyer's and Dresser-Rand Group's right to phase-out use of such portion of the name as soon as reasonably practicable following such termination, but in any event within six months following such termination). The Dresser-Rand Group may use the term "Rand" as a source-identifier as described herein only as part of the combined term "Dresser-Rand". Following the 53 Closing, (i) Buyers and the Dresser-Rand Group shall not use or license the use of the Dresser-Rand Marks as a source-identifier in conjunction with INGERSOLL or any Mark confusingly similar to INGERSOLL, and shall not use or license the Ingersoll-Rand Marks as a source identifier (subject to the Buyer's and Dresser-Rand Group's right to phase-out any such use of the Ingersoll-Rand Mark that it is making as of the Closing as soon as reasonably practicable following the Closing, but in any event within six months following the Closing Date), and (ii) Sellers shall not use or license the use of the Ingersoll-Rand Marks as a source-identifier in conjunction with DRESSER or any Mark confusingly similar to DRESSER, and shall not use or license (and are not as of the Closing using or licensing) the Dresser-Rand Marks as a source identifier. Any and all provisions concerning the license by Sellers to the Dresser-Rand Group in and to the name "Rand" or Ingersoll-Rand Marks, including without limitation the license contained in Section 3.8 of the Organization Agreement, are hereby terminated and of no further force and effect. As used in this Section 6.14, (i) the "Dresser-Rand Marks" shall mean, collectively, all worldwide right, title, and interest in the names, trademarks, service marks, trade-names, domain names, logos and trade dress ("Marks") consisting of or incorporating the term DRESSER-RAND and any formatives or derivatives thereof, including "D-R" and the "D-R" logotype, and all goodwill relating to the foregoing and (ii) the "Ingersoll-Rand Marks" shall mean, collectively, all worldwide right, title and interest in the Marks consisting of or incorporating the term INGERSOLL-RAND and any formatives or derivatives thereof, including "IR" and the "IR" logotype, and all goodwill relating to the foregoing. Sellers agree that the Dresser-Rand Group may register the Dresser-Rand Marks, and Sellers acknowledge that as between the parties the Dresser-Rand Group is the owner of said marks, worldwide, subject to IR's right of termination with respect to the "Rand" name in "Dresser-Rand" pursuant to this Section 6.14, and except in all cases the name "Rand" alone, and Buyers acknowledge that Sellers own all worldwide right, title and interest in the Ingersoll-Rand Marks. In the event that Sellers at any time terminate the Dresser-Rand Group's right to use "Rand" pursuant to this Section 6.14, the Dresser-Rand Group shall promptly cancel any registrations that it owns worldwide for such mark at the Dresser-Rand Group's expense, or otherwise deal with such mark as reasonably requested by and at the out-of-pocket expense of Sellers. The right to use "Rand" as part of the combined term "Dresser-Rand" granted in this Section 6.14 is personal to the Business and may not, except in connection with the assignment or other transfer of all or substantially all of the business or assets of the Business, be assigned or otherwise transferred, in whole or in part, by the Dresser-Rand Group without IR's prior written authorization, which may be withheld in IR's sole discretion. 6.15 Environmental Rights and Responsibilities After Execution of Agreement. (a) "Identified Environmental Liability" means (i) any matter identified in Section 2.17 of the Disclosure Schedule or (ii) any matter that is placed on the "Environmental Remediation and Compliance Schedule" by the mutual agreement of IR and FRC prior to the Closing (pursuant to the process set forth in Sections 6.15(b) and 6.15(c) below), to which Sellers retain liability to the extent provided in this Section 6.15, and as to which Sellers shall indemnify Buyers Indemnified Persons, subject to the 54 limitations set forth in this Section 6.15 and in Article VIII. The matters that will be placed on the Environmental Remediation and Compliance Schedule will be matters that are determined, pursuant to the process set forth in this Section 6.15, to constitute either (A) violations of Environmental Law (as in effect as of the Closing Date), or (B) Releases of any Hazardous Material into the environment, including Releases relating to the treatment, disposal or arranging for disposal of Hazardous Materials on or prior to the Closing Date by or on behalf of a member of the Dresser-Rand Group at any Leased Real Property or Owned Real Property ("On-site Contamination"), or at any location not owned or leased by a member of the Dresser-Rand Group ("Off-site Contamination"), and which, in either case (A) or (B), (1) require any response action (including investigation, monitoring, cleanup, remediation, or related activities (each, a "Response Action")) under Environmental Law (as in effect as of the Closing Date), (2) are the subject of a Response Action required by a Governmental Authority pursuant to any Environmental Law (as in effect as of the Closing Date), or (3) if known to the Governmental Authority with jurisdiction over the matter, would be matters with respect to which such Governmental Authority would be expected to require Response Action pursuant to any Environmental Law (as in effect as of the Closing Date). Immaterial inaccuracies in the description of any such matter shall not constitute a defense to any indemnification claim therefor by Indemnified Persons against Sellers as provided herein. (b) Prior to the date of this Agreement, at Buyers' sole expense, the Buyers' environmental consultants have completed site visits and interviews of the sort conducted to carry out Phase I environmental site assessments. Based on this and other information available to Buyers and Sellers, the parties have set forth on Section 6.15 of the Disclosure Schedule a list of matters which may potentially constitute an Identified Environmental Liability, a list of all environmental documents that Buyers have requested which have not been provided by Sellers and a list of all Real Property locations at which Phase II investigations may be conducted pursuant to this Section 6.15 and a brief description of the scope and nature of such investigation at each Real Property location on such list. Buyers' consultants may continue their record review after the date of this Agreement but for each applicable site shall complete and make available to Sellers the full and final reports of the Phase I environmental site assessments ("Phase I Environmental Assessment Reports") for such site within the later of thirty (30) days after the date of this Agreement or thirty (30) days after Buyers receive substantially all environmental documents identified on Section 6.15 of the Disclosure Schedule with respect to such site; provided, that, with respect to each such site, Buyers shall notify Sellers of any matters that satisfy the requirements specified in Section 6.15(a) for inclusion on the Environmental Remediation and Compliance Schedule (based on their review of the applicable documents identified on Section 6.15 of the Disclosure Schedule) within the later of ten (10) days after the date of this Agreement and ten (10) days after Buyers receive substantially all such documents, unless using commercially reasonable efforts Buyers are unable to identify such matters within such ten (10) day period, in which case Buyers shall have twenty (20) days. Buyers shall have the right but not the obligation, prior to Closing and pursuant to the terms of the Access Agreement, dated as of the date hereof (the "Access Agreement"), to prepare a work plan for Phase II environmental investigations of the Real Property identified on Section 6.15 of the Disclosure Schedule setting forth, in tabular form, the proposed locations for testing, the 55 media being tested, the testing parameters and the initial testing schedule for Phase II environmental investigations (the "Phase II Work Plan"), and to conduct such investigations, which shall be of a scope and nature as set forth in Section 6.15 of the Disclosure Schedule, all at Buyers' sole expense; provided that such investigations shall not unreasonably disrupt operations at, or cause damage to, any of the Real Property. Within seven (7) days following the date of this Agreement, Buyers shall provide the Phase II Work Plan to Sellers and upon receipt thereof, Sellers shall have the right to review and request changes to the Phase II Work Plan (and Buyers' will use best efforts to cause their environmental consultants to be available and cooperate for such purpose), and Buyers shall not unreasonably withhold consent to any such requested changes. Within six (6) days of receipt thereof, Sellers shall approve the Phase II Work Plan and provide access to the applicable Real Property to Buyers' environmental consultants for purposes of conducting the investigations set forth thereon. Buyer shall use best efforts to complete any such Phase II environmental investigation, and provide to Sellers any report relating to such investigation ("Phase II Environmental Assessment Reports"), within thirty (30) days of the date on which the Phase II Work Plan provided to Sellers has been approved by Sellers and Buyers have obtained access to each relevant site; provided, that, if Buyers shall have used best efforts and are unable to complete and deliver any report within such thirty (30) day period, Buyers may extend such period up to an additional ten (10) days for such report. At Sellers' request, Buyers shall split all samples taken in connection with the environmental site assessments authorized pursuant to this Section 6.15(b). Sellers shall be solely responsible for any additional reasonable expense incurred as a result of any split sampling requested by Sellers. Buyers and Sellers agree that any investigation performed pursuant to this Section 6.15(b) shall be undertaken by ENVIRON International Corporation, or a subcontractor thereof ("Environ"). Sellers and their representatives shall be entitled to accompany and observe Buyers and their representatives (including Environ) in the course of performing the Phase II environmental investigations. Within 5 (five) days after the completion of each site's Phase II investigation, Buyers shall identify to Sellers in writing those matters set forth on Section 6.15 of the Disclosure Schedule, identified in the Phase II investigations, or in documents provided to Buyers after the date of this Agreement and identified on Section 6.15 of the Disclosure Schedule and that Buyers propose for placement on the Environmental Remediation and Compliance Schedule. Based on the Phase I Environmental Assessment Reports and the Phase II Environmental Assessment Reports, prior to the Closing Date, Buyers and Sellers shall use commercially reasonable efforts, in good faith, to agree which matters, if any, will be placed on the Environmental Remediation and Compliance Schedule under the terms specified in Section 6.15(a). All matters and issues identified in the Phase II investigations shall be eligible for placement on the Environmental Remediation and Compliance Schedule. In the event that Sellers are unable to provide Buyers reasonable access to perform Phase II investigation of a Leased Real Property, the Sellers and Buyers agree that any Release of Hazardous Substances into the environment existing as of the Closing Date at those areas of concern to be addressed in the work plan for the Phase II investigation for the relevant Leased Real Property, to the extent that such work plan was previously agreed to by Sellers in accordance with the procedure outlined above, shall be deemed to be included on the Environmental Remediation and Compliance Schedule if such Release either (1) requires 56 any Response Action under Environmental Law (as in effect as of the Closing Date), (2) is the subject of a Response Action required by a Governmental Authority pursuant to any Environmental Law (as in effect as of the Closing Date), or (3) if known to the Governmental Authority with jurisdiction over the matter, would be a matter with respect to which such Governmental Authority would be expected to require Response Action pursuant to any Environmental Law (as in effect as of the Closing Date). With regard to each area of contamination identified in the Phase II investigations which the parties agree should be placed on the Environmental Remediation and Compliance Schedule, the specific locations where contamination was found will be listed and Seller shall be responsible for all Response Actions ordered or agreed to with a Governmental Authority that relate to or result from investigation of the identified area of contamination, and if the Response Action is conducted in the absence of a governmental order, Seller shall be responsible for all Response Actions relating to the plume within which the contamination was identified and the sources of contamination of the plume and with respect to soil contamination, all Response Actions relating to the contamination or the source of the contamination. If Buyers and Sellers are unable to agree on the matters to be placed on the Environmental Remediation and Compliance Schedule, such disagreement will be resolved pursuant to the process described in Section 6.15(h). (c) Subject to the terms set forth in this Section 6.15, the Sellers agree to use commercially reasonable efforts to correct prior to the Closing all matters identified on the Environmental Remediation and Compliance Schedule that are violations of Environmental Law and diligently perform any reasonably required Response Action with respect to all other Identified Environmental Liabilities; provided, that to the extent Sellers are unable, prior to the Closing, to correct all matters identified on the Environmental Remediation and Compliance Schedule that are violations of Environmental Law, Sellers will use commercially reasonable efforts to correct any such violations as soon as practicable following the Closing Date (it being understood that in any case Sellers' obligation to correct violations under this Section 6.15 shall not require Sellers to implement measures to comply with any Environmental Laws other than those in effect as of the Closing Date, or for operations other than as conducted as of the Closing Date). Without affecting the indemnity obligations under this Agreement, Sellers shall have no obligation under this Section 6.15(c) to perform any Response Action with respect to Identified Environmental Liabilities (i) resulting from a Release at a Leased Property to the extent caused by an entity other than a member of the Dresser Rand Group or any of their respective predecessors, agents or invitees or (ii) at any Real Property with respect to any Releases to the extent originating at a location other than the Real Property, unless in each case any Seller or any member of the Dresser-Rand Group has been ordered to implement such Response Action by a Governmental Authority with jurisdiction over the matter. In connection with any Response Action which Sellers perform with respect to any Identified Environmental Liability, Buyers hereby assign to Sellers all right, title and interest of Buyers and the members of the Dresser Rand Group in and to any actual or potential claims or causes of action against third parties relating to the contamination that is the subject matter of such Response Action. To the extent Sellers decide to contest any governmental orders or third-party complaints filed with respect to any Identified Environmental Liability, they shall do so at their own expense, provided that Buyers shall reasonably cooperate with Sellers (including without 57 limitation making available any documents, employees or consultants and providing access to any properties relevant to such governmental orders or third-party complaints) so that Sellers may evaluate and contest such matters if Sellers so decide. To the extent Sellers fail to resolve any such Identified Environmental Liability required to be resolved by Sellers under this Section 6.15(c) such that it is no longer an Identified Environmental Liability, Buyers may resolve such Identified Environmental Liability and Sellers shall reimburse any expense reasonably incurred by any Buyers Indemnified Persons to do so, provided, however, that Buyers first notify Sellers in writing of Buyers' intention to resolve such Identified Environmental Liability and that Sellers do not, within twenty (20) days from receipt of such notice, notify Buyers in writing that they agree to resolve such Identified Environmental Liability (it being understood that the foregoing proviso shall not apply with respect to any action by Buyers where complying with the proviso would result in a substantial risk of harm to health or the environment or a substantial risk of otherwise significantly compromising Buyers' ability to mitigate Losses with respect to the Identified Environmental Liability involved, and Buyers provide written notice of their action to Sellers as soon as practicable and afford Sellers the opportunity to take up the resolution of such matter if Sellers indicate in writing their agreement to do so). Buyers agree that any Response Action which Sellers are obligated to perform with respect to any Identified Environmental Liability shall: (i) be the least costly alternative acceptable to Governmental Authorities; (ii) be based upon non-residential (as opposed to residential) standards, if applicable and acceptable to Governmental Authorities; (iii) not exceed any applicable requirements of Environmental Laws in effect on the date of such Response Action; and (iv) not have resulted from, or relate to, any change in use, reconfiguration, alteration or development of any relevant property after the Closing Date. Buyers shall not unreasonably withhold consent to the imposition of reasonable deed restrictions, engineering controls or environmental land use restrictions on such locations as necessary, at the Sellers' discretion, to implement such Response Action; provided that such deed restrictions, engineering controls or environmental land use restrictions do not restrict the use of such properties to uses that are more restrictive than their use as of the Closing Date or any substantially similar use. Buyers agree that they shall cooperate with Sellers regarding Sellers' obligations under this Section 6.15, including without limitation reasonably cooperating to avoid or minimize expense to Sellers, and Buyers further agree that they and any of their representatives or successors (and after the Closing Date, any member of the Dresser-Rand Group and any of their representatives or successors) (the "Buyer Parties") shall not directly or indirectly solicit or importune any Person to seek or require any Response Action and shall not otherwise directly or indirectly report information concerning any Identified Environmental Liability to any Person, except in accordance with the procedures set forth in Exhibit E hereto. Buyers agree that they shall, in good faith, agree to enter, when reasonably consistent with their obligations under this Section 6.15, an agreement with the government entity having jurisdiction over the Response Action to use the least costly method and least stringent standard in connection with such Response Action; provided that such method and standard are acceptable to such government entity and will not restrict the use of such properties to uses that are more restrictive than their use as of the Closing Date or any substantially similar use. Sellers shall solely control and perform any Response Action with respect to the Identified Environmental Liabilities (including 58 any negotiation with governmental authorities regarding the Response Action) using all commercially reasonable efforts to avoid any material interference with operations at the relevant property. The Buyers and their Affiliates shall provide the Sellers reasonable access to any relevant property and shall otherwise reasonably cooperate with the Sellers regarding the Sellers' performance of any such Response Action. The Sellers agree to provide to Buyers, reasonably in advance of any filing in order to afford Buyers the opportunity to review, copies of all material filings and submissions to Governmental Authorities (or to any other Persons who have made a claim regarding any Identified Environmental Liabilities) relating to the Response Actions taken with respect to the Identified Environmental Liabilities, unless the applicable requirements make such opportunity for Buyers to review in advance impracticable, in which case Sellers shall provide such materials to Buyers promptly after filing or submission. (d) With respect to any Identified Environmental Liability, any Buyers Indemnified Person's sole right to pursue recovery for any such Losses shall be under this Section 6.15 regardless of any other provisions of this Agreement to the contrary. (e) Sellers shall, at their sole expense, obtain, with the reasonable cooperation of Buyers, any required, transaction-triggered approval for the consummation of this transaction or the transfer of any real property pursuant thereto required by any Environmental Law. To the extent any such law or approval shall require any party to this Agreement to agree or enter a consent order or the like to undertake investigation or remediation of any environmental matter relating to such property, Sellers shall agree to be such party undertaking such obligation and shall remain responsible for performing its obligations under such agreement or order only to the extent the foregoing relates to an Identified Environmental Liability. (f) Notwithstanding any other provision of this Agreement, to the extent any Identified Environmental Liability: (i) involves Off-site Contamination, Sellers shall have no obligation with respect to such Off-site Contamination unless and until such Off-site Contamination is the subject of an Environmental Claim against the Dresser-Rand Group, and only if Buyers deliver written notice to Sellers of such Environmental Claim pursuant to Section 8.1(e) of this Agreement prior to the date three (3) years after the Closing Date; provided, however, that the foregoing three (3) year limitation shall not apply to Environmental Claims against any member of the Dresser-Rand Group for response costs at sites that are on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., regardless of whether such sites are identified on Section 6.15 of the Disclosure Schedule; or (ii) gives rise to any exposure or alleged exposure of any person (other than any claim for workers' compensation) 59 to any Hazardous Substance or any other harmful or deleterious substance or condition (other than any "Asbestos Liability" as such term is defined in Section 9.10(b)) that affects or allegedly affects such person's health, Sellers shall have no obligation with respect to such exposure or alleged exposure unless and until it gives rise to an Environmental Claim against any member of the Dresser-Rand Group, and only if Buyers deliver written notice to Sellers of such Environmental Claim pursuant to Section 8.1(e) of this Agreement prior to the date three (3) years after the Closing Date (it being understood that with respect to any claim for workers' compensation and with respect to any Asbestos Liability, Sellers have no obligations under this Section 6.15). (g) Buyers and Sellers agree that any matters relating to the removal of friable asbestos in connection with Identified Environmental Liabilities shall be governed by this Section 6.15 (it being understood that any asbestos matter that is an "Asbestos Liability" as such term is defined in Section 9.10(b) shall be subject to the indemnification provisions set forth in Section 8.1(a) and not governed by the provisions of this Section 6.15, including any restrictions set forth herein). (h) In the event that Buyers and Sellers are unable to resolve, prior to Closing, any disagreements as to what matters shall be included on the Environmental Remediation and Compliance Schedule (and how such matters should be described on such schedule), Buyers and Sellers shall attempt in good faith to agree upon a neutral environmental attorney with significant experience in environmental transactional matters, to resolve such disagreement. In the event that Buyers and Sellers are unable to identify such neutral environmental attorney, Sellers shall select such an attorney from a list of five candidates provided by Buyers, each candidate from a different nationally recognized law firm with experience in transactions involving environmental matters and not currently engaged (and having no material history or immediate prospects of significant engagement) by, either Buyers or Sellers, or counsel for Buyers or Sellers. Such neutral attorney shall issue a written decision indicating simply whether the matter at issue meets the standard for being listed on the Environmental Remediation and Compliance Schedule (and how such matters should be described on such schedule) within the meaning of Section 6.15 (of this Agreement, within thirty (30) days after being selected, and any matter determined by such neutral attorney to meet such standard shall be placed on the Environmental Remediation and Compliance Schedule. Such neutral attorney shall resolve the disagreement based on a review of the Phase I Environmental Assessment Reports and the Phase II Environmental Assessment Reports, and written submissions by the parties setting forth their positions and the reasons in support thereof, after meeting with the parties. In such attorney's reasonable discretion, such attorney may also enlist the assistance of an environmental attorney or environmental consultant (acceptable to and approved by both Buyers and Sellers) located or with significant experience in the jurisdiction in which the environmental condition at issue is located. The decision of such neutral attorney shall be binding upon the parties. Such attorney's costs and fees, and the costs and fees of any environmental attorney or consultant retained by such attorney in accordance with this Section 6.15(h), shall be borne equally 60 by Buyers and Sellers. It is understood that the completion of the resolution of any dispute pursuant to this Section 6.15(h) shall not be required prior to the Closing. 6.16 Intercompany Debt. To the extent reasonably practicable and permissible under applicable Laws, on or prior to the day before the Closing, (a) each member of the Dresser-Rand Group that has positive "Net Intercompany Receivables" shall distribute such Net Intercompany Receivables to its shareholders and (b) the Sellers shall, and shall cause their Affiliates to, eliminate any Net Intercompany Receivables of each member of the Dresser-Rand Group that has negative Net Intercompany Receivables and such elimination shall be treated as a contribution of capital to each such member of the Dresser-Rand Group by its parent with the result that there will be no intercompany receivables or intercompany payables between the members of the Dresser-Rand Group, on the one hand, and the Sellers or their Affiliates (other than the members of the Dresser-Rand Group), on the other hand, at the Closing Date; provided, that, to the extent any Net Intercompany Receivables are not distributed or eliminated pursuant to (a) or (b) above, they will otherwise be eliminated or cancelled prior to the Closing Date. For the avoidance of doubt, any intercompany receivables or payables between members of the Dresser-Rand Group shall remain in place and not be cancelled. As used herein, "Net Intercompany Receivables" means with respect to each member of the Dresser-Rand Group (i) all intercompany receivables due or other intercompany amounts accrued, prepaid, due or payable to such member of the Dresser-Rand Group from the Sellers and their Affiliates (other than the members of the Dresser-Rand Group), less (ii) all intercompany payables of or other intercompany amounts accrued, prepaid, due or payable by such member of the Dresser-Rand Group to the Sellers and their Affiliates (other than the members of the Dresser-Rand Group). 6.17 Substitute Guarantees. On or prior to the Closing Date, Buyers agree to provide the Guarantees in accordance with the requirements of Section 4.6 above, in form and substance satisfactory to the respective banks or other counterparties, and, both prior to and following the Closing Date, Buyers and Sellers shall cooperate to obtain a release in form and substance reasonably satisfactory to Buyer and IR with respect to all Seller Credit Support Instruments. As of a date approximately five (5) business days prior to the Closing Date, IR shall provide FRC its good faith calculation of the total amount of Seller Credit Support Instruments outstanding as of such date, in U.S. dollars determined in accordance with Currency Conversion Rules. 6.18 Plaintiff Actions. After the Closing, the Buyers will, or they will cause the applicable member of the Dresser-Rand Group to, pursue diligently the actions and proceedings set forth in Section 6.18 of the Disclosure Schedule (the "Plaintiff Actions"). The Buyers acknowledge that the Sellers shall retain the benefits of any recoveries, awards, settlements or judgments with respect to the Plaintiff Actions and the Buyers agree to pay or deliver to the Sellers the full amount of cash or other assets received by any Buyer in connection with any such recoveries, awards, settlements or judgments. Except as set forth below, the Sellers agree to reimburse the Buyers for all reasonable out-of-pocket expenses incurred by the Buyers or their Affiliates in connection with pursuing the Plaintiff Actions. The Sellers shall be entitled to assume and direct the prosecution of the Plaintiff Actions, with counsel selected by the Sellers 61 and, after notice from the Sellers to the Buyers of such election to assume the prosecution thereof, the Sellers shall not be liable to the Buyers for any fees or expenses of other counsel or any other expenses subsequently incurred by the Buyers in connection with the prosecution thereof. The Sellers and the Buyers agree to cooperate fully with each other and their respective counsel in connection with the prosecution, negotiation or settlement of the Plaintiff Actions. The Buyers shall have the right to participate at their own expense in the prosecution of the Plaintiff Actions. If the Sellers assume the prosecution of a Plaintiff Action, (i) no settlement or compromise thereof may be effected: (A) by the Sellers without the written consent of FRC (which consent shall not be unreasonably withheld or delayed) unless there is (1) no finding or admission of any violation of law or any violation of the rights of any Person by any Buyer or any member of the Dresser-Rand Group, (2) no net settlement payment or similar liability to be paid by any Buyer or any member of the Dresser-Rand Group, and (3) no adverse effect (other than immaterial effects) on any Buyer or any member of the Dresser-Rand Group or the Business; or (B) by any Buyer or any member of the Dresser-Rand Group without the consent of IR, and (ii) the Buyers may subsequently assume the prosecution of such Plaintiff Action if a court of competent jurisdiction determines that the Sellers are not vigorously prosecuting such action. 6.19 Financing. (a) Buyers shall use their reasonable best efforts to (x) maintain in effect the Financing Commitments and to satisfy the conditions to obtaining the Financing set forth therein (including, without limitation, by funding the equity contemplated by the Equity Financing Commitment), (y) enter into definitive financing agreements with respect to the Debt Financing (the "Debt Financing Agreement") so that the Debt Financing Agreement is in effect as soon as reasonably practicable but in any event no later than the Closing Date and (z) consummate the Financing at or prior to Closing. Subject to the satisfaction or waiver of the conditions to Closing in Article V of this Agreement, Buyers agree to use the bridge facility contemplated by the Financing Commitments to cause the Closing to occur effective as of no later than October 31, 2004. Buyers shall keep IR reasonably informed of the status of the financing process relating thereto. IR shall cause the Sellers and its and their respective officers and employees to provide such cooperation as may be reasonably requested by Buyers in connection with the Debt Financing and any offering of debt securities privately or in a registered offering, including in connection with the preparation of "bank books", offering materials and similar documents and all other necessary cooperation in connection with the arrangement of any financing to be consummated contemporaneous with or at or after the Closing in respect of the transactions contemplated by this Agreement, including without limitation, participation in good faith in meetings, due diligence sessions, road shows, the preparation of offering memoranda, registration statements or other appropriate disclosure documents and the execution and delivery of underwriting, placement or similar agreements, whose effectiveness shall be conditioned on the closing of the transactions contemplated by this Agreement. If necessary in connection with the Debt Financing, in the event that Closing has not occurred due solely to the failure of one or more of the conditions to Closing in Article V to be satisfied or capable of being satisfied, and the Debt Financing shall not have been consummated, by 62 November 9, 2004, IR shall provide to the Buyers on or prior to such date with an unaudited balance sheet of the Dresser-Rand Group and the Business as of September 30, 2004 and the related unaudited statements of income and cash flows for the nine-month period ended September 30, 2004 (the "September Financial Statements"). (b) As reasonably requested by Buyers and necessary to the consummation of the Debt Financing, IR shall use commercially reasonable efforts to (i) to ensure that PWC will conduct a review of the Six-Month Financial Statements and the September Financial Statements, as the case may be, in accordance with SAS 100, and in a manner reasonably satisfactory to IR (the "SAS 100 Review") as soon as practicable following the delivery thereof, (ii) cooperate and assist Buyers in the preparation of data (including selected financial data and management discussion and analysis of financial statements) that the Securities and Exchange Commission would require in a registered offering in connection with the offering of securities of the type contemplated by the Debt Financing, (iii) obtain from PricewaterhouseCoopers LLP "comfort" letters and updates thereof in customary form and covering the matters of the type customarily covered in "comfort" letters in connection with offerings of securities of the type contemplated by the Debt Financing and (iv) provide Buyers with documents reasonably requested by Buyers in order for Buyers to obtain title insurance and a current survey with respect to material Owned Real Property. All reasonable out-of-pocket costs and expenses incurred by IR or Sellers (including, without limitation, the fees and expenses of Sellers' accountants, which shall be paid directly by Buyers) pursuant to this paragraph and in connection with any other Debt Financing matters shall be borne by Buyers, and shall be paid by Buyers to the party incurring such costs and expenses at least one (1) business day prior to the Closing so long as such party has provided reasonable documentation for such expenses at least five (5) days prior to the Closing. (c) If, notwithstanding the use of reasonable best efforts by Buyers to satisfy its obligations under Section 6.19(a) and (b), any of the Financing Commitments or the Debt Financing Agreement expire or are terminated prior to the Closing, in whole or in part, for any reason, Buyers shall (i) promptly notify IR of such expiration or termination and the reasons therefor and (ii) use its reasonable efforts promptly to arrange for alternative financing to replace the financing contemplated by such expired or terminated commitments or agreements, sufficient to consummate the transactions contemplated by this Agreement. The Buyers shall keep IR reasonably apprised of the status of all matters relating to the Financing and shall give IR prompt written notice of (i) any material breach by any party of the Financing Commitments (or any definitive agreements entered into pursuant thereto) or (ii) any condition to the funding under any such Financing Commitment becoming incapable of being satisfied. 6.20 Pending Insurance Claim. (a) The Buyers and Sellers acknowledge that any ultimate recovery of the Buyers or the Dresser-Rand Group from insurance claims made prior to the date of this Agreement by the Sellers or the Dresser-Rand Group in respect of a fire at a Port Harcourt, Nigeria warehouse that destroyed inventory of the Business (the "Pending Insurance Claim") shall be for IR's account and sole benefit. For no further 63 consideration, effective as of the Closing, Buyers hereby assign and transfer to IR any right, title and interest to which Buyers or any member of the Dresser-Rand Group may be or become entitled at or following the Closing in respect of the Pending Insurance Claim. In all events, the Buyers agree to immediately pay over to IR any such insurance recoveries actually received by them or any member of the Dresser-Rand Group in respect of the Pending Insurance Claim, or to cause the applicable recovery to be paid directly to IR, without setoff or reduction; provided, however, that Buyers shall be entitled to withhold from any such payments an amount equal to any Taxes of Buyers and their Affiliates that Buyers reasonably determine (based on a "will" level tax opinion from nationally recognized tax counsel) to result from the receipt of any insurance recoveries with respect to the Pending Insurance Claim. (b) In the event that the assignment contemplated by Section 6.20(a) is for any reason ineffective under applicable Law to transfer all right, title and interest in the Pending Insurance Claim to IR, then: (i) the Buyers (and following the Closing, the Dresser-Rand Group) shall collect and remit all such amounts received by them in respect of the Pending Insurance Claim solely as custodian and collection agent for and on behalf of IR and not as a principal, partner or joint venturer; and (ii) if any such recovery is received by the Buyers, the Buyers may commingle such amounts collected by them with their own funds, pending remittance to IR, to the extent necessary to avoid undue administrative expense, but shall not otherwise exercise any dominion or control over such amounts, hold themselves out to any third party as their owner, or hold the amounts under claim of right. Consistent with the Buyers' status as IR's custodian and collection agent, IR and the Buyers shall report all such amounts collected by the Buyers and remitted to IR for tax and financial reporting purposes as having been received directly by IR (unless otherwise required under Law). (c) The Buyers agree to take any reasonable action in respect of recovery in respect of the Pending Insurance Claim as is reasonably requested by IR, all at the reasonable expense of IR. 6.21 Transfers of Non-U.S. Interests. (a) IR shall cause the relevant Sellers to accept the French Offer Letter and to complete the sale of the French Shares in France pursuant to the French Offer Letter subject to: (i) the completion by the applicable Sellers and the applicable Buyers (with the cooperation of the other party) of all requisite employee consultation procedures (provided that IR shall cause such consultation to occur as promptly as practicable following the date hereof); and (ii) all other conditions to the Closing set forth in Article IV and Article V having been satisfied or waived. It is the intention of the parties that the purchase and sale of the French Shares contemplated by the French Offer 64 Letter shall be consummated on the Closing Date. Each of the parties shall take such actions as may be necessary to ensure that no purchase and sale contemplated under the French Offer Letter occurs prior to the Closing. (b) Sellers and Buyers agree to cooperate with each other with respect to the transfer of other Non-U.S. Acquired Interests on the Closing Date. If mutually agreed by IR and FRC, the parties shall transfer such Non-U.S. Acquired Interests at the Closing in such manner as they may mutually agree pursuant to local transfer agreements in each applicable jurisdiction that are mutually acceptable to each of IR and FRC (such agreements, the "Local Transfer Agreements"). If requested by Sellers, the transfer of Non-U.S. Acquired Interests pursuant to Local Transfer Agreements will take place in the jurisdiction in which each relevant entity is organized or incorporated. Notwithstanding anything else to the contrary contained herein, if requested by Buyers, the transfer of the Non-U.S. Acquired Interests listed on Section 6.21(b) of the Disclosure Schedule will occur on the Closing Date by way of a direct purchase of such equity interests by Buyers and/or their Affiliates; provided, however, that any such direct purchase will take place in the jurisdiction in which the relevant entity is organized or incorporated. 6.22 Real Property Deeds. As soon as reasonably practicable following the date hereof, the Sellers agree to use their reasonable best efforts to provide to Buyers true and correct copies of all existing deeds, mortgages, deeds of trust, and, to the extent reasonably available, most recent available title insurance policies and surveys, in each case relating to each material parcel of Owned Real Property. 6.23 Estimated Customer Prepayments Statement. No later than three (3) business days prior to the anticipated Closing Date, IR shall prepare, or cause to be prepared, a statement (the "Estimated Customer Prepayments Statement") containing IR's good faith estimate (the "Estimated Customer Prepayments Amount") of the customer prepayments of the Dresser-Rand Group, determined in accordance with the methodologies set forth on Section 6.23 of the Disclosure Schedule, as of 11:59 P.M. local time on the Closing Date, which have not been converted to work in progress, finished inventory or supplier prepayments (the "Customer Prepayments Amount"). IR shall provide the Buyers and their accountants reasonable access to all relevant books, records, facilities and employees of the Dresser-Rand Group and to any other information reasonably necessary to review and understand the Estimated Customer Prepayments Statement. The Estimated Customer Prepayments Statement prepared in accordance with this Section 6.23 shall be final and not subject to objection from Buyers for purposes of calculating the Closing Payment at the Closing. 6.24 Currency Conversion. Any monetary conversion from the currency of a foreign country in which the Business is conducted and products are sold into U.S. Dollars shall be calculated in accordance with the methods set forth on Section 6.24 of the Disclosure Schedule (the "Currency Conversion Rules"). 6.25 Insurance. Subject to Section 6.20, from and after the Closing Date, members of the Dresser Rand Group will have the right to assert, prosecute and 65 recover proceeds in respect of claims (and IR and its Affiliates, as applicable, will use commercially reasonable efforts to assist members of the Dresser Rand Group in asserting or prosecuting claims and, if necessary, shall assert and prosecute such claims on behalf of members of the Dresser Rand Group and remit to the applicable member of the Dresser Rand Group any proceeds relating thereto) for any Loss with respect to the Business under insurance coverage of the Business under all insurance policies and insurance contracts of any kind with third-party insurers that as of the date of this Agreement are owned or maintained by IR or its Affiliates and cover, in whole or in part, the assets, employees, operations or businesses of the Dresser Rand Group (collectively, "IR Insurance Policies") arising out of insured incidents occurring from the date of coverage first commenced thereunder until the Closing Date to the extent that the terms and conditions of any such IR Insurance Policies and agreements relating thereto so allow. IR and its Affiliates' obligation to use commercially reasonable efforts to assist members of the Dresser Rand Group in asserting claims under will include using commercially reasonable efforts in assisting members of the Dresser Rand Group to establish its right to coverage. None of IR or its Affiliates will bear any liability for the failure of an insurer to pay any claim under any IR Insurance Policy. Nothing in this Section 6.25 shall constitute a representation or warranty by Sellers that coverage is available to any member of the Dresser-Rand Group under any insurance policy or contract for any specific claim. Neither this Section 6.25 nor any provision hereof shall be read in a manner that violates or conflicts with any provision of any applicable insurance policy or contract. To the extent that this Section 6.25 or any provision hereof violates or conflicts with any provision of any applicable insurance policy or contract or would cause a cancellation or loss of rights under any applicable insurance policy or contract, the parties agree that this Section 6.25 shall be amended or construed with respect only to such applicable insurance policy or contract and to the minimum extent necessary to cure or avoid such conflict, inconsistency, violation, cancellation or loss of rights; provided, however, that this provision shall not constitute a representation or warranty that any such conflict, purported assignment, inconsistency or violation may be avoided or cured. ARTICLE VII TERMINATION 7.1 Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing: (a) by the mutual written consent of the Sellers and the Buyers; (b) by the Buyers if the Closing has not occurred on or before December 31, 2004 (the "Outside Date"), unless the failure of such consummation shall be due to the failure of the Buyers to comply in all material respects with the representations, warranties, agreements and covenants contained herein to be performed by the Buyers on or before Outside Date; 66 (c) by the Sellers if the Closing has not occurred on or before the Outside Date, unless the failure of such consummation shall be due to the failure of the Sellers to comply in all material respects with the representations, warranties, agreements and covenants contained herein to be performed by the Sellers on or before the Outside Date; (d) by either the Sellers or the Buyers within 10 days following the delivery to FRC of the SAS Financial Statements if the EBITDA Deficiency exceeds $6.6 million; or (e) by either the Sellers or the Buyers if any court or Governmental Authority of competent jurisdiction shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, decree or ruling or other action shall have become final and nonappealable. 7.2 Procedure and Effect of Termination. In the event of the termination of this Agreement and the abandonment of the transactions contemplated hereby by the Sellers or the Buyers pursuant to Section 7.1 hereof, written notice thereof shall forthwith be given to the other parties. If this Agreement is terminated and the transactions contemplated by this Agreement are abandoned as provided herein: (a) Each party will redeliver all documents, work papers and other material of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the party furnishing the same; (b) The provisions of the Confidentiality Agreement shall continue in full force and effect; and (c) No party to this Agreement will have any liability under this Agreement to any other and the French Offer Letter or any Local Transfer Agreement entered into prior to the Closing Date shall automatically terminate and be of no further force or effect, except (i) that nothing herein shall relieve any party from any liability for any breach of any of the representations, warranties, covenants and agreements set forth in this Agreement and (ii) as contemplated by paragraph (b) above and by Sections 9.1, 9.2, 9.14 and 9.15. ARTICLE VIII INDEMNIFICATION 8.1 Indemnification. (a) Indemnification by the Sellers. Subject to the limits set forth in this Section 8.1, the Sellers agree, jointly and severally, to indemnify, defend and hold the Buyers and their Affiliates (including, after the Closing Date, the Dresser-Rand Group) and their respective officers, directors, partners, stockholders, employees, agents and representatives (the "Buyers Indemnified Persons") harmless from and in respect of 67 any and all losses, claims, liabilities, damages, fines, penalties, costs (in each case including reasonable out-of-pocket expenses (including, without limitation, reasonable fees and expenses of counsel) (collectively, "Losses"), that they may incur arising out of, relating to, or due to any (i) breach or inaccuracy as of the date of this Agreement or as of the Closing Date of any representation or warranty (in the case of each representation and warranty (other than in Section 2.5, Section 2.6, Section 2.7, the first sentence of Section 2.8, the first sentence of Section 2.9, the second sentence of Section 2.10, the first sentence and clauses (a) and (e) of Section 2.11, Section 2.13(a), Section 2.13(b), the second sentence of Section 2.13(d), clause (iii) of Section 2.14, Section 2.16(a) and the first sentence of Section 2.19(a)) without regard to qualification with respect to materiality or Material Adverse Effect, but in all cases giving effect to any dollar limitations or thresholds) of the Sellers set forth in this Agreement (other than the representations and warranties set forth in Section 2.12), (ii) breach or nonperformance of any covenant, undertaking or other agreement of the Sellers contained in this Agreement, (iii) Asbestos Liabilities and (iv) Products Liabilities Losses. Anything to the contrary contained herein notwithstanding, (x) none of the Buyers Indemnified Persons shall be entitled to recover from the Sellers for any claims for indemnity or damages with respect to Losses arising under Section 8.1(a)(i) (except for Unlimited Representations (as defined in Section 8.1(d))) or Section 8.1(a)(ii) above unless and until the total of all such claims in respect of such Losses exceeds $18,000,000 (the "Basket"); provided that, in calculating whether the Basket has been obtained, only Losses in excess of $50,000 (the "Minimum Claim Amount") shall be considered and after the Basket has been obtained Sellers shall not be liable for any Losses under Section 8.1(a)(i) (except for Unlimited Representations) or Section 8.1(a)(ii) unless the Losses exceed the Minimum Claim Amount; and (y) the Buyers Indemnified Parties shall not be entitled to recover from the Sellers nor shall Sellers be responsible to pay more than an aggregate of 33 1/3% of the Purchase Price (the "Cap") for any claims for indemnity in respect of Losses or other amounts paid pursuant to Section 6.15 (except for Asbestos Liabilities), Section 8.1(a)(i) (except for Unlimited Representations) and Section 8.1(a)(ii); provided, however, that neither the Basket nor the Cap shall apply with respect to any Losses resulting from or relating to Asbestos Liabilities, Products Liabilities, Unlimited Representations; provided, further, that none of the Basket, the Cap or the Minimum Claim Amount shall apply with respect to the indemnities provided in Section 6.5 or with respect to any Losses resulting from or relating to any breaches of Sections 6.8(n), 6.8(o) or 6.8(p) or any amounts payable pursuant to Article I. Notwithstanding any provision of this Article VIII to the contrary, other than as relating to Asbestos Liabilities, Section 6.15 constitutes the sole remedy of the Buyers Indemnified Persons against the Sellers regarding Losses relating to Environmental Laws or Hazardous Materials and the Buyers Indemnified Persons hereby waive all other rights or causes of action against the Sellers under or relating to Environmental Laws or Hazardous Materials. Notwithstanding anything to the contrary, no indemnification shall be available for any Losses to the extent such Losses are included in the calculation of Net Cash Amount or Closing Net Working Capital Amount. (b) Indemnification by the Buyers. Subject to the limits set forth in this Section 8.1, the Buyers jointly and severally agree to indemnify, defend and hold the Sellers and their respective agents and representatives (the "Sellers Indemnified 68 Persons") harmless from and in respect of any and all Losses that they may incur arising (i) out of or due to any inaccuracy of any representation or the breach of any warranty, covenant, undertaking or other agreement of the Buyers contained in this Agreement; (ii) as a result of the conduct of business of any member of the Dresser-Rand Group after the Closing Date; (iii) from a third party claim under the Partnership's Amended and Restated Partnership Agreement, dated as of October 1, 1992 or the partnership law of the State of New York as a result of the status of the Sellers as partners of the Partnership prior to the Closing but only to the extent related to the business now or previously conducted by the Dresser-Rand Group or its predecessors (other than with respect to matters contemplated to be the responsibility of the Sellers or as to which Sellers are obligated to indemnify pursuant to this Agreement); and (iv) under any guarantees, standby letters of credit or other forms of credit support provided by any of the Sellers or any of their Affiliates to third parties in respect of obligations of any members of the Dresser-Rand Group. Anything to the contrary contained herein notwithstanding, (x) none of the Sellers Indemnified Persons shall be entitled to recover from the Buyers for any Losses indemnifiable under Section 8.1(b)(i) and Section 8.1(b)(ii) above unless and until the total amount of all such claims in respect of Losses pursuant to Section 8.1(b)(i) and Section 8.1(b)(ii) exceeds the Basket; provided that in calculating whether the Basket has been obtained, only Losses in excess of the Minimum Claim Amount shall be considered and after the Basket has been obtained Buyers shall not be liable for any Losses under Section 8.1(b)(i) or Section 8.1(b)(ii) unless the Losses exceed the Minimum Claim Amount; and (y) the Sellers Indemnified Parties shall not be entitled to recover more than the Cap from the Buyers pursuant to Section 8.1(b)(i) and Section 8.1(b)(ii); provided, however, that neither the Basket nor the Cap shall apply with respect to any Losses resulting from or relating to Section 8.1(b)(iii) and Section 8.1(b)(iv). Notwithstanding anything to the contrary in this Section 8.1(b), the Buyers hereby waive any and all claims which they have or may have against the Sellers under the Partnership's Amended and Restated Partnership Agreement, dated as of October 1, 1992 or the partnership law of the State of New York as a result of the status of the Sellers as partners of the Partnership prior to the Closing but only to the extent related to the business now or previously conducted by the Dresser-Rand Group or its predecessors (other than with respect to matters contemplated to be the responsibility of the Sellers or as to which Sellers are obligated to indemnify pursuant to this Agreement). (c) Indemnification Calculations. (i) The amount of any Losses for which indemnification is provided under this Article VIII and under Sections 6.5 and 6.15 shall be computed net of any third-party insurance proceeds and recoveries in respect of third party indemnification obligations actually received by the indemnified party in connection with such Losses. The indemnified party agrees to use its reasonable best efforts to obtain recovery in respect of any Losses from any third party indemnity which is available in respect of such Losses. If an indemnified party receives such insurance proceeds or indemnification recoveries in connection with Losses for which it has received indemnification, such party shall refund to the indemnifying party the amount of such insurance proceeds when 69 received, up to the amount of indemnification received. An indemnified party shall use commercially reasonable efforts to pursue third-party insurance claims with respect to any Losses. If the amount with respect to which any claim is made under this Article VIII or under Sections 6.5 or 6.15 (an "Indemnity Claim") gives rise to an actually realized Tax Benefit to the party that made the claim, such party shall refund to the indemnifying party the amount of such Tax Benefit when, as and if actually realized; provided, however, that such obligation of the indemnified party to refund to the indemnifying party the amount of any Tax Benefit shall only apply to the extent that such Tax Benefit is actually realized within three (3) years following the Closing Date. For purposes of this Section 8.1(c), a "Tax Benefit" to a party means an amount by which the Tax liability of such party (or group of Affiliates including such party) is actually reduced (including, without limitation, by deduction, reduction of income by virtue of increased tax basis or otherwise, entitlement to refund, credit or otherwise) as such amount may actually be reduced by, but not below zero, any increase in such party's Tax liability as a result of its receipt of payment for such Indemnity Claim plus any related interest received from the relevant Taxing Authority. Where a party has other losses, deductions, credits or items available to it, the Tax Benefit from any losses, deductions, credits or items relating to the Indemnity Claim shall be deemed to be utilized after all other losses, deductions, credits or items have been completely utilized (i.e., a Tax Benefit is not actually realized until the relevant party actually pays less in Taxes than it otherwise would have paid without the supposed Tax Benefit). In the event that there should be a determination disallowing the Tax Benefit, the indemnifying party shall be liable to the indemnified party for any Taxes or Losses resulting from such disallowance. (ii) The parties agree that any indemnification payments made pursuant to this Agreement shall be treated for Tax purposes as an adjustment to the Purchase Price, unless otherwise required by applicable law. (iii) Each indemnified party shall take all reasonable steps to mitigate any Loss in respect of which a claim could be made under this Article VIII or any other provision of this Agreement. (iv) No party shall be entitled to recover more than the full amount of any Loss under the provisions of this Agreement in respect of any such Loss. (d) Survival of Representations and Warranties. The representations and warranties of the parties contained in this Agreement or in any instrument delivered pursuant hereto will survive the Closing Date and will remain in full force and effect thereafter until the date that is 18 months after the Closing Date, provided that (i) the representations and warranties set forth in Section 2.12 (Tax Matters) 70 and Section 2.17 (Environmental Matters) shall terminate and expire on the Closing Date and (ii) representations and warranties contained in Section 2.1 (Organization of Certain Sellers), the first two sentences of Section 2.2 (Subsidiaries), Section 2.3 (Ownership of Acquired Interests), Section 2.4 (Authorization, Etc.), and Section 2.21 (No Brokers' or Other Fees) (collectively, the "Unlimited Representations") shall survive the Closing without limitations; provided, further, that such representations or warranties shall survive (if at all) beyond such period with respect to any inaccuracy therein or breach thereof, written notice of which shall have been duly given within such applicable period in accordance with Section 8.1(e) hereof. (e) Notice and Opportunity to Defend. If there occurs an event which a party asserts is an indemnifiable event pursuant to Sections 8.1(a), 8.1(b) or 6.15, the party or parties seeking indemnification (the "Indemnified Party") shall notify the other party or parties obligated to provide indemnification (the "Indemnifying Party") promptly. If such event involves (i) any claim or (ii) the commencement of any action or proceeding by a third person, the party seeking indemnification will give such Indemnifying Party prompt written notice of such claim or the commencement of such action or proceeding; provided, however, that the failure to provide prompt notice as provided herein will relieve the Indemnifying Party of its obligations hereunder only to the extent that such failure materially prejudices the Indemnifying Party hereunder. In case any such action shall be brought against any party seeking indemnification and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate therein and to assume the defense thereof, with counsel selected by the Indemnifying Party and, after notice from the Indemnifying Party to such party or parties seeking indemnification of such election so to assume the defense thereof, the Indemnifying Party shall not be liable to the party or parties seeking indemnification hereunder for any legal expenses of other counsel or any other expenses subsequently incurred by such party or parties in connection with the defense thereof; provided, however, that Sellers shall assume the defense of all Asbestos Liabilities. The Indemnifying Party and the Indemnified Party shall cooperate in the defense of such third party claims. The Indemnifying Party and the party seeking indemnification agree to cooperate fully with each other and their respective counsel in connection with the defense, negotiation or settlement of any such action or asserted liability. The party or parties seeking indemnification shall have the right to participate at their own expense in the defense of such action or asserted liability; and if requested by the Indemnified Party in respect of any action or asserted liability that would reasonably be expected to exceed the applicable Cap or have a material adverse effect on the Indemnified Party's business, the Indemnifying Party shall not make any material decision (procedural or otherwise) in respect of material aspects of the defense of such action without the participation and prior written consent (such consent not to be unreasonably withheld or delayed) of the Indemnified Party. If the Indemnifying Party assumes the defense of an action (A) no settlement or compromise thereof may be effected (i) by the Indemnifying Party without the written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed) unless (x) there is no finding or admission of any violation of law or any violation of the rights of any Person by any Indemnified Party and no adverse effect on any other claims that may be made against any Indemnified Party, (y) all relief provided is paid or satisfied in full by the Indemnifying Party and (z) such settlement or 71 compromise would not have a material adverse effect upon the Indemnified Party or (ii) by the Indemnified Party without the consent of the Indemnifying Party; and (B) the Indemnified Party may subsequently assume the defense of such action if a court of competent jurisdiction determines that the Indemnifying Party is not vigorously defending such action. If the Indemnifying Party fails to assume the defense of a third party claim, the Indemnified Party may assume the defense of any such claim with counsel selected by the Indemnified Party. In no event shall an Indemnifying Party be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld or delayed). To the extent that there is any conflict between the procedures set forth in this Section 8.1(e) and those set forth in Section 6.15, the procedures set forth in Section 6.15 shall govern. (f) Payment. On each occasion that any Indemnified Party shall be entitled to indemnification or reimbursement under this Article VIII, Section 6.5 or Section 6.15, the Indemnifying Party shall, at each such time, promptly pay the amount of such indemnification or reimbursement. If any Indemnified Party shall be entitled to indemnification under this Article VIII, Section 6.5 or Section 6.15 the Indemnifying Party shall pay the Indemnified Party's costs and expenses arising as a result of a proceeding directly relating to an indemnifiable Loss (including, without limitation, any reasonable fees paid to witnesses), periodically as incurred. (g) Special Damages. No Indemnified Party will be entitled to indemnification pursuant to this Agreement for punitive damages or for lost profits, diminution in value, consequential, exemplary or special damages. (h) Exclusive Remedy. Except as otherwise provided below, the indemnification provided for in this Section 8.1 and in Section 6.15, subject to the limitations set forth herein or therein, shall be the exclusive post-Closing remedy available to any party in connection with any Losses arising out of the matters set forth in this Agreement or the transactions contemplated hereunder; provided, however, that nothing herein will limit in any way any such party's remedies in respect of fraud by the other party in connection herewith or the transactions contemplated hereby. (i) Tax Indemnity. Notwithstanding anything to the contrary in this Article VIII (other than as specifically set forth in Sections 8.1(c), (d), (f) and (g)), indemnification with respect to Taxes for which indemnification is provided in Section 6.5 shall be governed solely by Section 6.5 and Section 6.6. ARTICLE IX MISCELLANEOUS 9.1 Fees and Expenses; Transfer Taxes. (a) Except as otherwise provided in this Agreement, the Sellers shall bear their own expenses and the expenses of their respective Affiliates and the Buyers shall bear their own expenses in connection with the preparation and negotiation 72 of this Agreement and the consummation of the transactions contemplated by this Agreement. Each of the Sellers and the Buyers shall bear the fees and expenses of any broker or finder retained by such party or parties and its respective Affiliates in connection with the transactions contemplated herein. (b) Notwithstanding anything to the contrary in Section 6.4(b) or Section 6.5, the Sellers on the one hand, and the Buyers on the other hand, each shall bear one half of any Transfer Taxes. 9.2 Governing Law. This Agreement shall be construed under and governed by the laws of the State of New York without giving effect to any choice or conflict of laws provisions or rules that would cause the application of laws of any jurisdiction other than the State of New York. 9.3 Amendment. This Agreement may not be amended, modified or supplemented except upon the execution and delivery of a written agreement executed by the Buyers and the Sellers. 9.4 No Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the Buyers, in the case of assignment by any Seller, and the Sellers, in the case of any assignment by any Buyer; provided that Buyer may transfer or assign, in whole or in part from time to time, its rights or obligations hereunder to any one or more of its Affiliates or pledge its rights as security to any of its financing sources without the prior written consent of the other parties hereto; provided, further, that no such assignment by Buyer shall relieve Buyer of its obligations hereunder. 9.5 Waiver. Any of the terms or conditions of this Agreement which may be lawfully waived may be waived in writing at any time by each party which is entitled to the benefits thereof. Any waiver of any of the provisions of this Agreement by any party hereto shall be binding only if set forth in an instrument in writing signed on behalf of such party. No failure to enforce any provision of this Agreement shall be deemed to or shall constitute a waiver of such provision and no waiver of any of the provisions of this Agreement shall be deemed to or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 9.6 Notices. Any notice, demand, or communication required or permitted to be given by any provision of this Agreement shall be deemed to have been sufficiently given or served for all purposes if (a) personally delivered, (b) mailed by registered or certified first class mail, prepaid with return receipt requested, (c) sent by a nationally recognized overnight courier service, to the recipient at the address below indicated or (d) delivered by facsimile which is confirmed in writing by sending a copy of such facsimile to the recipient thereof pursuant to clause (a) or (c) above: If to any Buyer: c/o First Reserve Corporation One Lafayette Place 73 Greenwich, CT 06830 Attention: Tom Denison (203) 625-8520 (telecopier) (203) 661-6001 (telephone) With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, NY 10036 Attention: Howard Ellin (212) 735-2000 (telecopier) (212) 735-3000 (telephone) If to any Seller: c/o Ingersoll-Rand Company 200 Chestnut Ridge Road Woodcliff Lake, NJ 07677 Attention: Deputy General Counsel - Transactions (201) 573-3448 (telecopier) (201) 573-3274 (telephone) With a copy to: Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017 Attention: Alan G. Schwartz (212) 455-2502 (telecopier) (212) 455-2000 (telephone) or to such other address as any party hereto may, from time to time, designate in a written notice given in like manner. 9.7 Complete Agreement. This Agreement, the Confidentiality Agreement, the Transaction Agreements and the other documents and writings referred to herein or delivered pursuant hereto contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and thereof. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. 9.8 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original. 9.9 Publicity. The Sellers and the Buyers will consult with each other and will mutually agree upon any publication or press release of any nature with respect to 74 this Agreement or the transactions contemplated hereby and shall not issue any such publication or press release prior to such consultation and agreement except as may be required by applicable law or by obligations pursuant to any listing agreement with any securities exchange or any securities exchange regulation, in which case the party proposing to issue such publication or press release shall make all reasonable efforts to consult in good faith with the other party or parties before issuing any such publication or press release and shall provide a copy thereof to the other party or parties prior to such issuance. 9.10 Certain Definitions. For purposes of this Agreement: (a) "Affiliate" shall mean, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. (b) "Asbestos Liability" (and collectively "Asbestos Liabilities") means, to the extent related to the period prior to the Closing, (i) any claim or Proceeding against Dresser-Rand Group or any of its Subsidiaries or any of their respective predecessors or against any Person or entity whose liability for any such claim Sellers, Dresser-Rand Group or any of its Subsidiaries or any of their respective predecessors, has or allegedly has retained or assumed either contractually or by operation of Law, related to or arising from the sale or use of any Product containing asbestos, or (ii) any claim or litigation by any Person based on personal injury caused by the presence of asbestos containing material in any form or condition at any location formerly owned, leased, or operated by the Dresser-Rand Group or any of its Subsidiaries, or any subsidiary, Affiliate, or predecessor thereof, or at any location at which Dresser-Rand Group or any of its Subsidiaries, or any subsidiary, Affiliate, or predecessor thereof has or is alleged to have disposed or arranged for the disposal of any actual or alleged asbestos containing material. (c) "French Offer Letter" shall mean the offer letter dated as of the date hereof addressed by FRC to Dresser-Rand Company, relating to FRC's offer to purchase the French Shares. (d) "French Shares" shall mean all of the issued and outstanding shares of Dresser-Rand S.A., a company organized under the laws of France and a member of the Dresser-Rand Group. (e) "Knowledge of the Sellers" shall mean the actual knowledge (after reasonable inquiry) of the individuals listed in Section 9.10(e) of the Disclosure Schedule. (f) "Person" shall mean any individual, partnership, firm, corporation, association, trust, unincorporated organization, joint venture, limited liability company, governmental or regulatory authority or other entity. (g) "Products Liability" (and collectively "Products Liabilities") means, to the extent related to Products shipped prior to the Closing Date and except to 75 the extent based on acts or omissions (excluding omissions in respect of an alleged failure to warn based solely on events, activities or occurrences prior to the Closing) following the Closing, any claim or Proceeding of a third party against Dresser-Rand Group or any of its Subsidiaries or any of their respective predecessors or against any Person or entity whose liability for any such claim Sellers, Dresser-Rand Group or any of its Subsidiaries or any of their respective predecessors, has or allegedly has retained or assumed either contractually or by operation of Law, to the extent such claim or Proceeding alleges personal injury or property damage (other than damage to the Products) related to or arising from an alleged defect in design, manufacture, materials or workmanship, an alleged failure to exercise reasonable care in repair, service or maintenance, an alleged failure to warn, an alleged failure to provide adequate warnings or an alleged noncompliance with applicable Laws. (h) "subsidiary" shall mean with respect to any Person, any corporation, limited liability company, partnership, association, or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other subsidiaries of that Person or a combination thereof or (ii) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of partnership or other similar ownership interests thereof having the power to govern or elect members of the applicable governing body of such entity is at the time owned or controlled, directly or indirectly, by that Person or one or more subsidiaries of that Person or a combination thereof; and the term "subsidiary" shall include all subsidiaries of such subsidiary. (i) Where any Seller that is not a party to this Agreement agrees to, or not to, take any action, IR shall be deemed to have agreed to cause such Seller to, or not to, take such action. Where any Buyer that is not a party to this Agreement and agrees to, or not to, take any action, FRC shall be deemed to have agreed to cause such Buyer to, or not to, take such action. (j) All references herein to dollars or "$" shall mean U.S. dollars, unless otherwise noted. 9.11 Headings. The headings contained in this Agreement are for reference only and shall not affect in any way the meaning or interpretation of this Agreement. 9.12 Severability. Any provision of this Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provision of this Agreement invalid, illegal or unenforceable in any other jurisdiction. 9.13 Third Parties. Except as specifically set forth or referred to herein, nothing herein expressed or implied is intended or shall be construed to confer upon or 76 give to any Person or corporation, other than the parties hereto, the other Sellers and Buyers set forth on Exhibit A hereto, and their respective permitted successors or assigns, any rights or remedies under or by reason of this Agreement. 9.14 CONSENT TO JURISDICTION. THE PARTIES HERETO HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE AREA ENCOMPASSED BY THE SOUTHERN DISTRICT OF THE STATE OF NEW YORK AND IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. THE PARTIES HERETO EACH ACCEPT FOR ITSELF AND IN CONNECTION WITH ITS RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION AND VENUE OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY NON APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. 9.15 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW, THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE PARTIES HERETO ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE PARTIES HERETO ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE PARTIES HERETO FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 77 9.16 Specific Enforcement. Each party acknowledges and agrees that, prior to Closing, the other party would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement by a Seller or a Buyer could not be adequately compensated in all cases by monetary damages alone. Accordingly, in addition to any other right or remedy to which any party may be entitled at law or in equity, prior to Closing it shall be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking. 9.17 Guarantee of Seller Obligations. Prior to the Closing, each of First Reserve Fund IX, L.P., a Delaware limited partnership, and First Reserve Fund X, L.P., a Delaware limited partnership (collectively, the "Funds"), hereby jointly and severally, irrevocably, absolutely and unconditionally guarantees to the Sellers, as and for its own debt and without any setoff or requirement of presentment, the due, punctual and complete payment and performance of each and all of the Buyers' obligations and liabilities under this Agreement, in each case as and when the same shall become due and payable and/or performable. The Sellers shall be entitled to enforce directly against the Funds any of the foregoing obligations, and the Funds' obligations hereunder are in no way conditioned or contingent upon any attempt to collect from or enforce performance or compliance by the Buyers or upon any other event or condition whatsoever. Each of the Funds agrees to make capital calls (not in excess of $900 million in the aggregate) on its limited partners and take such other actions as are necessary to perform its obligations under this Section 9.17. 78 IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by its duly authorized officer, in each case as of the day and year first above written. FRC ACQUISITIONS LLC By: First Reserve GP IX, L.P., as Manager By: First Reserve GP IX, Inc., its general partner By: /s/ Thomas R. Denison ----------------------------------- Name: Thomas R. Denison Title: Managing Director By: First Reserve GP X, L.P., as Manager By: First Reserve GP X, Inc., its general partner By: /s/ Thomas R. Denison ----------------------------------- Name: Thomas R. Denison Title: Managing Director INGERSOLL-RAND COMPANY LIMITED By: /s/ Herbert L. Henkel ----------------------------------- Name: Herbert L. Henkel Title: Chairman, President and CEO FIRST RESERVE FUND IX, L.P. By: First Reserve GP IX, L.P., its general partner By: First Reserve GP IX, Inc., its general partner (solely in respect of Section 9.17 hereof) /s/ Thomas R. Denison By: --------------------- Name: Thomas R. Denison Title: Managing Director FIRST RESERVE FUND X, L.P. By: First Reserve GP X, L.P., its general partner By: First Reserve GP X, Inc., its general partner (solely in respect of Section 9.17 hereof) /s/ Thomas R. Denison By: --------------------- Name: Thomas R. Denison Title: Managing Director EXHIBIT C FORM OF TRANSITION SERVICES AGREEMENT DEFINED TERMS
Page ---- 2003 Balance Sheet.......................................................... 15 Access Agreement............................................................ 55 Acquired Interests.......................................................... 1 Affiliate................................................................... 75 Agreement................................................................... 1 AIM Calculations Statement.................................................. 12 AIM Program................................................................. 12 AIM Program Payment Amount.................................................. 12 Alternate Certificate....................................................... 4 Asbestos Liabilities........................................................ 75 Asbestos Liability.......................................................... 75 Asset-Level Purchase Price Allocation....................................... 11 Audited Financial Statements................................................ 15 Base Amount................................................................. 8 Basket...................................................................... 68 Benchmark Net Working Capital Statement..................................... 6 Business.................................................................... 1 Business EBITDA............................................................. 3 Buyer Parties............................................................... 58 Buyer's Flexible Account Plan............................................... 48 Buyers...................................................................... 1 Buyers Indemnified Persons.................................................. 67 Buyers' Disclosure Schedule................................................. 31 Cap......................................................................... 68 Cash........................................................................ 9 Citigroup................................................................... 31 Closing..................................................................... 3 Closing Customer Prepayments Amount......................................... 6 Closing Customer Prepayments Statement...................................... 6 Closing Date................................................................ 3 Closing Net Cash Amount..................................................... 6 Closing Net Cash Statement.................................................. 6 Closing Net Working Capital Amount.......................................... 6 Closing Payment............................................................. 4 Closing Statements.......................................................... 6 Closing Working Capital Statement........................................... 6 Code........................................................................ 19 Competition/Investment Law.................................................. 16 Confidentiality Agreement................................................... 38 Consent..................................................................... 33 CPA Firm.................................................................... 7 Currency Conversion Rules................................................... 65 Customer Prepayments Amount................................................. 65 Debt Financing.............................................................. 31 Debt Financing Agreement.................................................... 62 Debt Financing Commitment................................................... 31 Debt Obligations............................................................ 9 Designated Actuary.......................................................... 50 Disclosure Schedule......................................................... 2 D-R Canada.................................................................. 13 D-R Defined Benefit Plan.................................................... 45 D-R Defined Contribution Plans.............................................. 46 DR Holding.................................................................. 13 D-R VEBA.................................................................... 46 Dresser-Rand ERISA Affiliate................................................ 21 Dresser-Rand Group.......................................................... 14 Dresser-Rand Group Employees................................................ 21 Dresser-Rand Group Intellectual Property.................................... 23 Dresser-Rand Group Plans.................................................... 21 Dresser-Rand Marks.......................................................... 54 EBITDA Adjustment Amount.................................................... 3 EBITDA Deficiency........................................................... 3 Encumbrances................................................................ 1 Entity-Level Purchase Price Allocation...................................... 11 Environ..................................................................... 56 Environmental Claim......................................................... 26 Environmental Laws.......................................................... 26 Environmental Remediation and Compliance Schedule........................... 54 Equity Financing............................................................ 31 Equity Financing Commitment................................................. 31 ERISA....................................................................... 21 Estimated Customer Prepayments Amount....................................... 65 Estimated Customer Prepayments Statement.................................... 65 Estimated Net Cash Amount................................................... 2 Estimated Net Cash Statement................................................ 2 Final Customer Prepayments Amount........................................... 8 Final Net Cash Amount....................................................... 8 Final Net Working Capital Amount............................................ 7 Financing................................................................... 31 Financing Commitments....................................................... 31
ii FIRPTA Certificate.......................................................... 4 FRC......................................................................... 1 French Offer Letter......................................................... 75 French Shares............................................................... 75 Funded Pension Plans........................................................ 50 Funds....................................................................... 78 GAAP........................................................................ 6 Governmental Authority...................................................... 16 Governmental Order.......................................................... 33 Grandfathered Employees..................................................... 46 Guarantees.................................................................. 33 Hazardous Materials......................................................... 26 hazardous substances........................................................ 26 hazardous wastes............................................................ 26 HSR Act..................................................................... 16 Identified Environmental Liability.......................................... 54 Indemnified Party........................................................... 71 Indemnifying Party.......................................................... 71 Indemnity Claim............................................................. 70 Ingersoll-Rand Marks........................................................ 54 Initial Purchase Price...................................................... 2 Intellectual Property....................................................... 23 Interim Balance Sheet....................................................... 15 Interim Financial Statements................................................ 15 IR ........................................................................ 1 IR Insurance Policies....................................................... 66 IR Master Trust............................................................. 45 IR's Flexible Account Plan.................................................. 48 IRNJ........................................................................ 13 Knowledge of the Sellers.................................................... 75 Law......................................................................... 16 Leased Real Property........................................................ 28 License Agreement........................................................... 5 Local Transfer Agreements................................................... 65 Losses...................................................................... 68 Marks....................................................................... 54 Material Adverse Effect..................................................... 14 Material Contracts.......................................................... 24 Minimum Claim Amount........................................................ 68 Minority Interests.......................................................... 14 Morgan Stanley.............................................................. 31 Multiemployer Plan.......................................................... 22 Net Cash Amount............................................................. 10 Net Intercompany Receivables................................................ 61 Non-Income Tax Claim........................................................ 43 Non-U.S. Acquired Interests................................................. 1 Non-U.S. Dresser-Rand Group Plans........................................... 21 Non-U.S. Employees.......................................................... 49 Objection................................................................... 6 Off-site Contamination...................................................... 55 On-site Contamination....................................................... 55 Organization Agreement...................................................... 53 Outside Date................................................................ 66 Owned Real Property......................................................... 28 Partnership................................................................. 13 Payroll Tax Amount.......................................................... 12 Pending Insurance Claim..................................................... 63 Pension Assets.............................................................. 51 Pension Deficiency.......................................................... 50 Pension Deficiency Amount................................................... 50 pension equalizer........................................................... 46 Pension Liabilities......................................................... 51 Pension Surplus Amount...................................................... 50 Permits..................................................................... 17 Permitted Encumbrances...................................................... 17 Person...................................................................... 75 Phase I Environmental Assessment Reports.................................... 55 Phase II Environmental Assessment Reports................................... 56 Phase II Work Plan.......................................................... 56 Plaintiff Actions........................................................... 61 Post-Closing Retirees....................................................... 47 Prime Rate.................................................................. 10 Proceedings................................................................. 17 Products.................................................................... 29 Products Liabilities........................................................ 75 Products Liability.......................................................... 75 Purchase Price.............................................................. 2 Purchase Price Allocation................................................... 11 Real Property............................................................... 28 Release..................................................................... 26 Response Action............................................................. 55 Retiree Welfare Plans....................................................... 47 SAS 100 Review.............................................................. 63 SAS Financial Statements.................................................... 35 Securities Act.............................................................. 32 Seller Credit Support Instruments........................................... 33 Sellers..................................................................... 1 Sellers Indemnified Persons................................................. 69

iii September Financial Statements.............................................. 63 Six-Month Financial Statements.............................................. 35 Straddle Period............................................................. 39 Straddle Period Tax Claim................................................... 43 Subsidiaries................................................................ 13 subsidiary.................................................................. 76 Tax......................................................................... 19 Tax Benefit................................................................. 70 Tax Claim................................................................... 43 Tax Return.................................................................. 19 Taxes....................................................................... 19 Taxing Authority............................................................ 19 Transaction Agreements...................................................... 5 Transfer Taxes.............................................................. 40 Transition Services Agreement............................................... 5 Treasury Regulations........................................................ 19 U.S. Dresser-Rand Group Plans............................................... 21 UBS......................................................................... 31 Union Employees............................................................. 45 Unlimited Representations................................................... 71 WARN Act.................................................................... 23

iv EX-10.2 16 y68981exv10w2.txt EX-10.2: CREDIT AGREEMENT EXHIBIT 10.2 EXECUTION COPY ================================================================================ U.S.$695,032,550 CREDIT AGREEMENT Dated as of October 29, 2004 Among D-R INTERHOLDING, LLC, as Holdings, DRESSER RAND GROUP INC., as Domestic Borrower, D-R HOLDINGS (UK) LTD and D-R HOLDINGS (France) S.A.S., as Foreign Borrowers, THE LENDERS PARTY HERETO, CITICORP NORTH AMERICA, INC., as Administrative Agent, MORGAN STANLEY SENIOR FUNDING, INC. and UBS SECURITIES LLC, as Co-Syndication Agents CITIGROUP GLOBAL MARKETS INC. and MORGAN STANLEY SENIOR FUNDING, INC. and UBS SECURITIES LLC, as Joint Lead Arrangers and Joint Book Managers and BEAR STEARNS CORPORATE LENDING INC. and NATEXIS BANQUES POPULAIRES as Co-Documentation Agents ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms............................................................................ 3 SECTION 1.02. Terms Generally.......................................................................... 52 SECTION 1.03. Effectuation of Transfers................................................................ 53 SECTION 1.04. Financial Assistance..................................................................... 53 ARTICLE II THE CREDITS SECTION 2.01. Commitments.............................................................................. 53 SECTION 2.02. Loans and Borrowings..................................................................... 54 SECTION 2.03. Requests for Borrowings.................................................................. 55 SECTION 2.04. Swingline Loans.......................................................................... 55 SECTION 2.05. Letters of Credit........................................................................ 57 SECTION 2.06. Funding of Borrowings.................................................................... 62 SECTION 2.07. Interest Elections....................................................................... 63 SECTION 2.08. Termination and Reduction of Commitments................................................. 64 SECTION 2.09. Repayment of Loans; Evidence of Debt..................................................... 65 SECTION 2.10. Repayment of Term Loans and Revolving Facility Loans..................................... 66 SECTION 2.11. Prepayment of Loans...................................................................... 69 SECTION 2.12. Fees..................................................................................... 70 SECTION 2.13. Interest................................................................................. 71 SECTION 2.14. Alternate Rate of Interest............................................................... 72 SECTION 2.15. Increased Costs.......................................................................... 73 SECTION 2.16. Break Funding Payments................................................................... 74 SECTION 2.17. Taxes.................................................................................... 74 SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.............................. 76 SECTION 2.19. Mitigation Obligations; Replacement of Lenders........................................... 78 SECTION 2.20. Additional Reserve Costs................................................................. 79 SECTION 2.21. Increase in Revolving Facility Commitments and/or Tranche B Term Loan Commitments........ 80 SECTION 2.22. Illegality............................................................................... 81 SECTION 2.23. Additional Borrowers..................................................................... 82 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Organization; Powers..................................................................... 82 SECTION 3.02. Authorization............................................................................ 82 SECTION 3.03. Enforceability........................................................................... 83 SECTION 3.04. Governmental Approvals................................................................... 83
i SECTION 3.05. Financial Statements..................................................................... 83 SECTION 3.06. No Material Adverse Effect............................................................... 84 SECTION 3.07. Title to Properties; Possession Under Leases............................................. 84 SECTION 3.08. Litigation; Compliance with Laws......................................................... 85 SECTION 3.09. Federal Reserve Regulations.............................................................. 86 SECTION 3.10. Investment Company Act; Public Utility Holding Company Act............................... 86 SECTION 3.11. Use of Proceeds.......................................................................... 86 SECTION 3.12. Tax Returns.............................................................................. 86 SECTION 3.13. No Material Misstatements................................................................ 87 SECTION 3.14. Employee Benefit Plans................................................................... 87 SECTION 3.15. Environmental Matters.................................................................... 88 SECTION 3.16. Mortgages................................................................................ 89 SECTION 3.17. Location of Real Property................................................................ 89 SECTION 3.18. Solvency................................................................................. 89 SECTION 3.19. Labor Matters............................................................................ 89 SECTION 3.20. Insurance................................................................................ 90 SECTION 3.21. Representations and Warranties in Acquisition Agreement.................................. 90 ARTICLE IV CONDITIONS OF LENDING SECTION 4.01. All Credit Events........................................................................ 90 SECTION 4.02. First Credit Event....................................................................... 91 SECTION 4.03. Conditions Precedent to the Initial Borrowing of Each Additional Borrower................ 95 ARTICLE V AFFIRMATIVE COVENANTS SECTION 5.01. Existence; Businesses and Properties..................................................... 96 SECTION 5.02. Insurance................................................................................ 96 SECTION 5.03. Taxes.................................................................................... 98 SECTION 5.04. Financial Statements, Reports, etc....................................................... 98 SECTION 5.05. Litigation and Other Notices............................................................. 100 SECTION 5.06. Compliance with Laws..................................................................... 100 SECTION 5.07. Maintaining Records; Access to Properties and Inspections................................ 101 SECTION 5.08. Use of Proceeds.......................................................................... 101 SECTION 5.09. Compliance with Environmental Laws....................................................... 101 SECTION 5.10. Further Assurances....................................................................... 101 SECTION 5.11. Fiscal Year.............................................................................. 104 SECTION 5.12. Interest Rate Protection Agreements...................................................... 104 SECTION 5.13. Proceeds of Certain Dispositions......................................................... 105 SECTION 5.14. Post-Closing Transactions................................................................ 105 SECTION 5.15. Post-Closing Matters..................................................................... 105

ii ARTICLE VI NEGATIVE COVENANTS SECTION 6.01. Indebtedness............................................................................. 105 SECTION 6.02. Liens.................................................................................... 108 SECTION 6.03. Sale and Lease-Back Transactions......................................................... 111 SECTION 6.04. Investments, Loans and Advances.......................................................... 112 SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions................................ 114 SECTION 6.06. Dividends and Distributions.............................................................. 116 SECTION 6.07. Transactions with Affiliates............................................................. 118 SECTION 6.08. Business of Holdings and the Subsidiaries................................................ 120 SECTION 6.09. Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc....................... 120 SECTION 6.10. Capital Expenditures..................................................................... 121 SECTION 6.11. Interest Coverage Ratio.................................................................. 122 SECTION 6.12. Leverage Ratio........................................................................... 123 SECTION 6.13. Swap Agreements.......................................................................... 123 SECTION 6.14. Designated Senior Debt................................................................... 123 ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Events of Default........................................................................ 124 SECTION 7.02. Exclusion of Immaterial Subsidiaries..................................................... 127 SECTION 7.03. Holdings' Right to Cure.................................................................. 127 ARTICLE VIII THE AGENTS SECTION 8.01. Appointment.............................................................................. 128 SECTION 8.02. Nature of Duties......................................................................... 129 SECTION 8.03. Resignation by the Agents................................................................ 129 SECTION 8.04. Each Agent in Its Individual Capacity.................................................... 129 SECTION 8.05. Indemnification.......................................................................... 130 SECTION 8.06. Lack of Reliance on Agents............................................................... 130 SECTION 8.07. Sub-Agent................................................................................ 130 SECTION 8.08. Appointment of Supplemental Collateral Agents............................................ 130 ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices.................................................................................. 131 SECTION 9.02. Survival of Agreement.................................................................... 132 SECTION 9.03. Binding Effect........................................................................... 133 SECTION 9.04. Successors and Assigns................................................................... 133 SECTION 9.05. Expenses; Indemnity...................................................................... 136

iii SECTION 9.06. Right of Set-off......................................................................... 138 SECTION 9.07. Applicable Law........................................................................... 138 SECTION 9.08. Waivers; Amendment....................................................................... 138 SECTION 9.09. Interest Rate Limitation................................................................. 141 SECTION 9.10. Entire Agreement......................................................................... 141 SECTION 9.11. WAIVER OF JURY TRIAL..................................................................... 141 SECTION 9.12. Severability............................................................................. 142 SECTION 9.13. Counterparts............................................................................. 142 SECTION 9.14. Headings................................................................................. 142 SECTION 9.15. Jurisdiction; Consent to Service of Process.............................................. 142 SECTION 9.16. Confidentiality.......................................................................... 143 SECTION 9.17. Citigroup Direct Website Communications.................................................. 144 SECTION 9.18. Release of Liens and Guarantees.......................................................... 145 SECTION 9.19. U.S. Patriot Act......................................................................... 145 SECTION 9.20. Judgment................................................................................. 145 SECTION 9.21. Substitution of Currency................................................................. 145 SECTION 9.22. Termination or Release................................................................... 146 SECTION 9.23. Pledge and Guarantee Restrictions........................................................ 146 SECTION 9.24. Matters Pertaining to the French Borrower and to any Additional Foreign Borrower organized under the laws of France.................................... 147

Exhibits, Annexes and Schedules Exhibit A Form of Assignment and Acceptance Exhibit B Form of Administrative Questionnaire Exhibit C-1 Form of Borrowing Request Exhibit C-2 Form of Swingline Borrowing Request Exhibit D Form of Mortgage Exhibit E-1 Form of Domestic Collateral Agreement Exhibit E-2A Form of UK Debenture Exhibit E-2B Form of UK Share Charge Exhibit E-3A Form of French Debt Pledge Agreement Exhibit E-3B Form of French Equity Pledge Agreement Exhibit E-4 Form of Foreign Guaranty Exhibit F Reserve Costs for Mandatory Costs Rate Exhibit G Form of Solvency Certificate of Dresser-Rand Group Inc. Exhibit H Form of Solvency Certificate of D-R Interholding, LLC Exhibit I Form of Credit Agreement Supplement Exhibit J Form of IR Letter of Credit Exhibit K Form of TEG Letter Exhibit L-1 Form of Revolving Note Exhibit L-2 Form of Term Note Annex A Description of Closing Date Intercompany Transactions iv Schedule 1.01(a) Certain Subsidiaries Schedule 1.01(b) Pro Forma Adjusted EBITDA Schedule 1.01(c) Excluded Acquisition Agreement Payments Schedule 1.01(d) Certain Material Subsidiaries Schedule 2.01 Commitments Schedule 3.01 Organization and Good Standing Schedule 3.04 Governmental Approvals Schedule 3.07(e) Condemnation Proceedings Schedule 3.07(g) Subsidiaries Schedule 3.07(h) Subscriptions Schedule 3.08(a) Litigation Schedule 3.08(b) Violations Schedule 3.12 Taxes Schedule 3.15 Environmental Matters Schedule 3.17(a) Owned Real Property Schedule 3.17(b) Leased Real Property Schedule 3.19 Labor Matters Schedule 3.20 Insurance Schedule 4.02(k) Governmental Approvals Schedule 6.01 Indebtedness Schedule 6.02(a) Liens Schedule 6.04 Investments Schedule 6.07 Transactions with Affiliates v CREDIT AGREEMENT dated as of October 29, 2004 (this "Agreement"), among D-R INTERHOLDING, LLC, a Delaware limited liability company ("Holdings"), DRESSER-RAND GROUP INC., a Delaware corporation ("Acquisition Corp." or the "Domestic Borrower"), D-R HOLDINGS (UK) LTD, a corporation organized under the laws of England and Wales (the "UK Borrower") and D-R HOLDINGS (France) S.A.S., a corporation organized under the laws of France (the "French Borrower" and, together with the UK Borrower, the "Initial Foreign Borrowers"), any Additional Foreign Borrower (as hereinafter defined) that becomes a Borrower (as hereinafter defined) pursuant to the terms thereof, the LENDERS party hereto from time to time, CITICORP NORTH AMERICA, INC., as administrative agent (in such capacity, together with any successor administrative agent appointed pursuant to the provisions of Article VIII, the "Administrative Agent") and as collateral agent (in such capacity, together with any successor collateral agent appointed pursuant to the provisions of Article VIII, the "Collateral Agent") for the Lenders, MORGAN STANLEY SENIOR FUNDING, INC. ("MS") and UBS SECURITIES LLC, each as co-syndication agent (in such capacity, a "Co-Syndication Agent"), CITIGROUP GLOBAL MARKETS INC., MS and UBS SECURITIES LLC, as joint lead arrangers and joint book managers (in such capacity, the "Joint Lead Arrangers") and BEAR STEARNS CORPORATE LENDING INC. and NATEXIS BANQUES POPULAIRES, as co-documentation agents, (in such capacity, the "Co-Documentation Agents"). W I T N E S S E T H : WHEREAS, First Reserve Fund IX L.P., First Reserve Fund X L.P. and certain of their respective Affiliates (as hereinafter defined) (collectively, the "Funds") have formed Dresser-Rand Holdings LLC, a Delaware limited liability company ("FRC") f/k/a FRC Acquisition, LLC, FRC has formed Holdings, and Holdings has formed the Domestic Borrower; WHEREAS, the Domestic Borrower has formed Dresser-Rand Holdings (Canada), a company organized under the laws of Canada ("Canada HoldCo"), Dresser-Rand Central Services GmbH & Co. KG, a limited partnership organized under the laws of Germany ("Germany KG"), D-R Holdings Norway AS, a company organized under the laws of Norway ("Norway HoldCo"), the UK Borrower and the French Borrower, the Domestic Borrower has formed D-R Holdings (Netherlands) B.V., a company organized under the laws of the Netherlands ("Dutch Holdco") and capitalized it with a contribution of the equity interests of Norway Holdco; and Germany KG has formed Dresser-Rand Holdings (Germany) GmbH, a company organized under the laws of Germany ("Germany HoldCo"); WHEREAS, pursuant to that Equity Purchase Agreement, dated August 25, 2004 (as amended by the Closing Agreement, the "Acquisition Agreement") among FRC, the Domestic Borrower (as assignee of certain obligations of FRC) and Ingersoll-Rand Company Limited, a company organized under the laws of Bermuda (the "Seller"), (i) the Domestic Borrower will acquire, directly or indirectly, all of the issued and outstanding equity interests of each of Dresser-Rand LLC, a Delaware limited liability company ("DR"), Dresser-Rand Company, a New York general partnership ("Dresser-Rand Company"), Dresser-Rand Holding LLC, a Delaware limited liability company ("Dresser-Rand Holding") and Dresser-Rand Power LLC, a Delaware limited liability company ("Dresser-Rand Power"), (ii) Canada HoldCo will acquire all of the issued and outstanding equity interests of Dresser-Rand Canada, Inc., a company organized under the laws of Canada ("Dresser-Rand Canada"), (iv) the French Borrower will acquire all of the issued and outstanding equity interests of Dresser-Rand S.A., a company organized under the laws of France ("Dresser-Rand France"), (v) Germany HoldCo will acquire all of the issued and outstanding equity interests of Dresser-Rand GmbH, a company organized under the laws of Germany ("Dresser-Rand Germany"), (vi) Norway HoldCo will acquire all of the issued and outstanding equity interests of Dresser-Rand A/S Norway, a company organized under the laws of Norway ("Dresser-Rand Norway"), and (vii) the UK Borrower will acquire all of the issued and outstanding equity interests of Dresser-Rand Company Limited, a company organized under the laws of England and Wales ("Dresser-Rand UKI") and Dresser-Rand (UK) Limited, a company organized under the laws of England and Wales ("Dresser-Rand UKII" and, together with DR, Dresser-Rand Company, Dresser-Rand Holding, Dresser-Rand Power, Dresser-Rand Canada, Dresser-Rand France, Dresser-Rand Germany, Dresser-Rand Norway and Dresser-Rand UKI and their respective interests in each of their direct and indirect subsidiaries, the "Acquired Business"); WHEREAS, in connection with the consummation of the Acquisition, the Funds and their Affiliates will contribute cash common equity to FRC in an aggregate amount of not less than U.S.$430.0 million (the "Equity Financing") on the terms and conditions set forth in the Equity Commitment Letters (as hereinafter defined); WHEREAS, the aggregate amount of the Equity Financing will be contributed by FRC to the common equity of Holdings and Holdings will contribute such amount to the common equity of Acquisition Corp. to be used by Acquisition Corp. to fund the Acquisition; WHEREAS, in connection with the consummation of the Acquisition, the Domestic Borrower will simultaneously herewith issue a total of up to U.S.$420.0 million in aggregate principal amount of its Senior Subordinated Notes (as defined herein) in a public offering or in a Rule 144A or other private placement; WHEREAS, as of the Closing Date, Acquisition Corp. will own, directly or indirectly, 100% of the outstanding Equity Interests of the Initial Foreign Borrowers and their respective direct and indirect subsidiaries, including, without limitation, DR, Dresser-Rand Company, Dresser-Rand Canada, Dresser-Rand France, Dresser-Rand Holding and Dresser-Rand Power; WHEREAS, the Borrowers have requested the Lenders to extend credit in the form of (a) Term Loans on the Closing Date, in an aggregate principal amount not in excess of U.S.$395.0 million, and (b) Revolving Facility Loans and Letters of Credit at any time and from time to time prior to the Revolving Facility Maturity Date, in an aggregate principal amount at any time outstanding not in excess of U.S.$300.0 million; and WHEREAS, to facilitate the Acquisition and related transactions, substantially simultaneously with the Closing, the transactions (and flow of funds) described in Annex A shall occur, including, among other things, the use of the proceeds from the Equity Financing, the Senior Subordinated Notes, the Term Loans and the Revolving Loans to be extended on the Closing Date to fund the Acquisition and pay related fees and expenses. 2 NOW, THEREFORE, the Lenders are willing to extend such credit to the Borrowers on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans. "ABR Loan" shall mean any ABR Term Loan, ABR Revolving Loan or Swingline Loan. "ABR Revolving Facility Borrowing" shall mean a Borrowing comprised of ABR Revolving Loans. "ABR Revolving Loan" shall mean any Revolving Facility Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "ABR Term Loan" shall mean any Tranche B Dollar Term Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "Acquired Business" shall have the meaning assigned to such term in the second recital hereto. "Acquisition" shall mean the transactions described in the second and third recital hereto. "Acquisition Agreement" shall have the meaning assigned to such term in the third recital hereto. "Acquisition Agreement Payments" shall mean cash amounts received by Holdings, any Borrower or any of their Affiliates in respect of any claim under the Acquisition Agreement or as a direct or indirect result of any breach of any term or provision of the Acquisition Agreement or otherwise in respect of any claim by Holdings, any Borrower or any of their Affiliates arising out of the Acquisition, in an aggregate amount in excess of U.S.$5.0 million; provided, however, that Acquisition Agreement Payments shall not include any amounts described on Schedule 1.01(c). "Acquisition Documents" shall mean the collective reference to the Acquisition Agreement, and all exhibits and schedules thereto. 3 "Additional Foreign Borrower" shall mean any direct or indirect wholly-owned Foreign Subsidiary of the Domestic Borrower that shall become a party to this Agreement pursuant to Section 2.23. "Additional Foreign Subsidiary Loan Party" shall mean with respect to each Additional Foreign Borrower, each Wholly Owned Subsidiary of such Additional Foreign Borrower that (a) is (i) a Foreign Subsidiary, (ii) a Material Subsidiary and (iii) organized under the same jurisdiction as such Additional Foreign Borrower and (b) is not (i) a Special Purpose Receivables Subsidiary, (ii) listed on Schedule 1.01(a), or (iii) a Subsidiary whose guarantee of the Obligations of such Additional Foreign Borrower is prohibited under Section 9.23. "Adjusted LIBO Rate" shall mean, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves applicable to such Eurocurrency Borrowing, if any. "Administrative Agent" shall have the meaning assigned to such term in the introductory paragraph of this Agreement. "Administrative Agent Fees" shall have the meaning assigned to such term in Section 2.12(c). "Administrative Questionnaire" shall mean an Administrative Questionnaire in the form of Exhibit B. "Affiliate" shall mean, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Agent Parties" shall have the meaning assigned to such term in Section 9.17(c). "Agents" shall mean the Administrative Agent and the Collateral Agent. "Agreed Security Principles" shall mean any grant of a Lien or provision of a guarantee by any Person that could: (a) result in any breach of corporate benefit, financial assistance, capital preservation, fraudulent preference, thin capitalization rules, retention of title claims and similar laws or regulations (or analogous restrictions) of the jurisdiction of organization of such Person; (b) result in any risk to the officers of such Person of contravention of their fiduciary duties and/or of civil or criminal liability; (c) result in costs (tax, administrative or otherwise) that are materially disproportionate to the benefit obtained by the beneficiaries of such Lien and/or guarantee; 4 (d) result in a breach of a material agreement binding on such Person that may not be amended or otherwise modified using commercially reasonable efforts to avoid such breach ; or (e) result in a Lien being granted over assets, the acquisition of which was financed from a subsidy or payments, the terms of which prohibit any assets acquired with such subsidy or payment being used as collateral. "Agreement" shall have the meaning assigned to such term in the introductory paragraph of this Agreement. "Alternate Base Rate" shall mean, for any day, a rate per annum equal to the greater of (a) Citibank, N.A.'s Base Rate, (b) the three-month certificate of deposit plus 1/2 of 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate, including the failure of the Federal Reserve Bank of New York to publish rates or the inability of the Administrative Agent to obtain quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (c) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Base Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Base Rate or the Federal Funds Effective Rate, respectively. "Applicable Margin" shall mean (i) for any day with respect to any Eurocurrency Loan that is a Revolving Facility Loan denominated in Dollars or a Foreign Currency and any ABR Loan that is a Revolving Facility Loan, the applicable margin per annum set forth below under the caption "Revolving Facility Loan Eurocurrency Spread," and "Revolving Facility Loan ABR Spread,"as applicable, based upon the Leverage Ratio as of the last date of the most recent fiscal quarter of the Domestic Borrower, (ii) for any day with respect to any Eurocurrency Loan that is a Tranche B Euro Term Loan, 2.50% and (iii) for any day with respect to any Eurocurrency Loan that is a Tranche B Dollar Term Loan and any ABR Loan that is a Tranche B Dollar Term Loan, 2.00% and 1.00%, respectively. 5
Revolving Revolving Facility Facility Loan Loan Eurocurrency Leverage Ratio: ABR Spread Spread - --------------- ------------- ------------------ Category 1 Equal to or greater than 5.0 to 1.00 1.50% 2.50% Category 2 Less than 5.0 to 1.00 but equal to or greater than 4.0 to 1.00 1.25% 2.25% Category 3 Less than 4.0 to 1.00 1.00% 2.00%
For purposes of the foregoing, (1) the Leverage Ratio shall be determined as of the end of each fiscal quarter of the Domestic Borrower's fiscal year based upon the consolidated financial information of the Domestic Borrower and its Subsidiaries delivered pursuant to Section 5.04(a) or (b) and (2) each change in the Applicable Margin resulting from a change in the Leverage Ratio shall be effective on the first Business Day after the date of delivery to the Administrative Agent of such consolidated financial information indicating such change and ending on the date immediately preceding the effective date of the next such change; provided that until the Trigger Date, the Leverage Ratio shall be deemed to be in Category 1; provided further that the Leverage Ratio shall be deemed to be in Category 1 at the option of the Administrative Agent or the Required Lenders, at any time during which the Domestic Borrower fails to deliver the consolidated financial information when required to be delivered pursuant to Section 5.04(a) or (b), during the period from the expiration of the time for delivery thereof until such consolidated financial information is delivered. "Approved Fund" shall have the meaning assigned to such term in Section 9.04(b). "Asset Acquisition" shall mean any Permitted Business Acquisition, the aggregate consideration for which exceeds U.S.$5.0 million. "Asset Disposition" shall mean any sale, transfer or other disposition by Holdings or any Subsidiary to any Person other than Holdings or any Subsidiary to the extent otherwise permitted hereunder of any asset or group of related assets (other than inventory or other assets sold, transferred or otherwise disposed of in the ordinary course of business) in one or a series of 6 related transactions, the Net Proceeds from which exceed (a) $10.0 million during the first six months after the Closing Date and (b) thereafter, $5.0 million. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent and the Borrowers (if required by such assignment and acceptance), in the form of Exhibit A or such other form as shall be approved by the Administrative Agent. "Availability Period" shall mean the period from the Closing Date to but excluding the earlier of the Revolving Facility Maturity Date and in the case of each of the Revolving Facility Loans, Revolving Facility Borrowings, Swingline Loans, Swingline Borrowings, and Letters of Credit, the date of termination of the Revolving Facility Commitments. "Available Investment Basket Amount" shall mean, on any date of determination, an amount equal to (a) the Cumulative Retained Excess Cash Flow Amount on such date plus the aggregate amount of proceeds received after the Closing Date and prior to such date that would have constituted Net Proceeds pursuant to clause (a) of the definition thereof except for the operation of clause (x) or (y) of the second proviso thereof, minus (b) any amounts thereof used to make Investments pursuant to Section 6.04(a), clause (ii) of Section 6.04(i) and/or clause (i)(y) of Section 6.04(j) and/or clause (iii) of Section 6.04(j) after the Closing Date and on or prior to such date, minus (c) the aggregate amount of Capital Expenditures made after the Closing Date and on or prior to such date pursuant to Section 6.10(c). "Available Unused Commitment" shall mean, with respect to a Revolving Facility Lender, at any time of determination, an amount equal to the amount by which (a) the Revolving Facility Commitment of such Revolving Facility Lender at such time exceeds (b) the Revolving Facility Credit Exposure of such Revolving Facility Lender at such time (calculated in respect of any portion of such Revolving Facility Lender's Revolving Facility Credit Exposure that is denominated in a Foreign Currency on the Equivalent thereof in Dollars determined at such time). "Base Rate" shall mean the sum (adjusted to the nearest 0.25% or, if there is no nearest 0.25% to the next higher 0.25%) of (i) 0.5% per annum, (ii) the rate per annum obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank, N.A. on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank, N.A. from three New York certificate of deposit dealers of recognized standing selected by Citibank, N.A., by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) for Citibank, N.A. in respect of liabilities consisting of or including (among other liabilities) three-month U.S. dollar nonpersonal time deposits in the 7 United States and (iii) the average during such three-week period of the maximum annual assessment rates estimated by Citibank, N.A. for determining the then current annual assessment payable by Citibank, N.A. to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. Dollar deposits in the United States. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States of America. "Borrowers" shall mean, collectively, the Domestic Borrower and the Foreign Borrowers. "Borrowing" shall mean a group of Loans of a single Type under a single Facility and made on a single date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect. "Borrowing Minimum" shall mean (a) in the case of an ABR Revolving Facility Borrowing, U.S.$5.0 million (or the Equivalent determined on the date of delivery of the applicable Borrowing Request or notice of repayment in the applicable Foreign Currency of U.S. $5.0 million), (b) in the case of a Eurocurrency Revolving Facility Borrowing, U.S.$5.0 million (or the Equivalent determined on the date of delivery of the applicable Borrowing Request or notice of repayment in the applicable Foreign Currency of U.S. $5.0 million), and (c) in the case of a Swingline Borrowing, U.S.$500,000 (or the Equivalent determined on the date of delivery of the applicable Swingline Borrowing Request in the applicable Foreign Currency of U.S. $500,000). "Borrowing Multiple" shall mean (a) in the case of a Revolving Facility Borrowing, U.S.$1.0 million as applicable (or the Equivalent determined on the date of delivery of the applicable Borrowing Request or notice of repayment in the applicable Foreign Currency of U.S. $1.0 million) and (b) in the case of a Swingline Borrowing, U.S.$500,000 (or the Equivalent determined on the date of delivery of the applicable Swingline Borrowing Request or notice of repayment in the applicable Foreign Currency of U.S. $500,000). "Borrowing Request" shall mean a request by a Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C-1. "Business" shall mean the business of, among other things, the design, manufacture, sale, maintenance and repair of gas and steam compression equipment (including centrifugal and reciprocating compressors and steam and gas turbines), all as conducted by the Acquired Business on the Closing Date; provided that "Business" shall not include the Seller's and its Subsidiaries' high-capacity hoists and winch business. "Business Day" shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that when used in connection with a Eurocurrency Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in deposits in the applicable currency in the London interbank market and in case of a Loan denominated in Euros, the term Business Day shall also exclude any day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is not open. 8 "Calculation Period" means, as of any date of determination, the period of four consecutive fiscal quarters ending on such date or, if such date is not the last day of a fiscal quarter, ending on the last day of the fiscal quarter of the Domestic Borrower most recently ended prior to such date. "Capital Expenditures" shall mean, for any Person in respect of any period, the aggregate of all expenditures incurred by such Person during such period that, in accordance with GAAP, are or should be included in "additions to property, plant or equipment" or similar items reflected in the statement of cash flows of such Person; provided, however, that Capital Expenditures for the Domestic Borrower and its Subsidiaries shall not include: (a) expenditures to the extent they are made with proceeds of the issuance of Equity Interests of the Domestic Borrower after the Closing Date to FRC, Holdings, any Fund or Fund Affiliate or with funds that would have constituted Net Proceeds under clause (a) of the definition of the term "Net Proceeds" (but that will not constitute Net Proceeds as a result of the first proviso to such clause (a)), (b) expenditures of proceeds of insurance settlements, condemnation awards and other settlements in respect of lost, destroyed, damaged or condemned assets, equipment or other property to the extent such expenditures are made to replace or repair such lost, destroyed, damaged or condemned assets, equipment or other property or otherwise to acquire, maintain, develop, construct, improve, upgrade or repair assets or properties useful in the business of the Domestic Borrower and the Subsidiaries within 12 months of receipt of such proceeds, (c) interest capitalized in accordance with GAAP during such period, (d) expenditures that are accounted for as capital expenditures of such Person and that actually are paid for by a third party (excluding the Domestic Borrower or any Subsidiary) and for which neither the Domestic Borrower nor any Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such third party or any other Person (whether before, during or after such period), (e) the book value of any asset owned by such Person prior to or during such period to the extent that such book value is included as a capital expenditure during such period as a result of such Person reusing or beginning to reuse such asset during such period without a corresponding expenditure actually having been made in such period, provided that (i) any expenditure necessary in order to permit such asset to be reused shall be included as a Capital Expenditure during the period that such expenditure actually is made and (ii) such book value shall have been included in Capital Expenditures when such asset was originally acquired, (f) the purchase price of equipment purchased during such period to the extent the consideration therefor consists of any combination of (i) used or surplus equipment traded in at the time of such purchase and (ii) the proceeds of a concurrent sale of used or surplus equipment, in each case, in the ordinary course of business, 9 (g) Investments in respect of a Permitted Business Acquisition, or (h) the purchase price of equipment that is purchased substantially contemporaneously with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time. "Capital Lease Obligations" of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for purposes hereof, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "Cash Interest Expense" shall mean, with respect to the Domestic Borrower and its Subsidiaries on a consolidated basis for any period, Interest Expense for such period, less the sum of (a) pay-in-kind Interest Expense or other noncash Interest Expense (including as a result of the effects of purchase accounting), (b) to the extent included in Interest Expense, the amortization of any financing fees paid by, or on behalf of, the Domestic Borrower or any Subsidiary, including such fees paid in connection with the Transactions, (c) the amortization of debt discounts, if any, or fees in respect of Swap Agreements and (d) cash interest income of the Domestic Borrower and its Subsidiaries for such period; provided that (i) Cash Interest Expense shall exclude any one-time financing fees paid in connection with the Transactions or any amendment of this Agreement or upon entering into a Permitted Receivables Financing and (ii) historical Cash Interest Expense shall be deemed to be (w) for the fiscal quarter ended March 31, 2004, U.S.$13.5 million, (x) for the fiscal quarter ended June 30, 2004, U.S.$13.5 million, (y) for the fiscal quarter ended September 30, 2004, U.S.$13.5 million and (z) for the period beginning October 1, 2004 through to and excluding the Closing Date, U.S.$13.5 million multiplied by a fraction the numerator of which equals the number of days elapsed during such period and the denominator of which equals 90. A "Change in Control" shall be deemed to occur if: (a) at any time, (i) Holdings shall fail to own, directly or indirectly, beneficially and of record 85% of the Domestic Borrower, (ii) a majority of the seats (other than vacant seats) on the board of directors of Holdings shall at any time be occupied by Persons who were neither (A) nominated by the board of directors of Holdings or a Permitted Holder, (B) appointed by directors so nominated nor (C) appointed by a Permitted Holder or (iii) a "Change in Control" shall occur under the Senior Subordinated Note Indenture or under any Permitted Senior Debt Securities or Permitted Subordinated Debt Securities; (b) at any time prior to an initial public offering of Equity Interests of Holdings, any combination of Permitted Holders shall fail to own beneficially (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date), directly or indirectly, in the aggregate Equity Interests representing at least 51% of (i) the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of 10 Holdings or (ii) the common economic interest represented by the issued and outstanding Equity Interests of Holdings; or (c) at any time from and after an initial public offering of Equity Interests of (x) Holdings, (y) any Person who, directly or indirectly, owns 100% of the issued and outstanding Equity Interests of Holdings (a "Parent Company") or (z) any Subsidiary of Holdings who, directly or indirectly, owns 85% of the issued and outstanding Equity Interests of the Domestic Borrower (an "Intermediate Holding Company"), any Person or group (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date), other than any combination of the Permitted Holders, shall own beneficially (as defined above), directly or indirectly, in the aggregate Equity Interests representing 35% or more of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings, such Parent Company or such Intermediate Holding Company, as applicable, and the Permitted Holders own beneficially (as defined above), directly or indirectly, a smaller percentage of such ordinary voting power at such time than the Equity Interests owned by such other Person or group. "Change in Law" shall mean (a) the adoption of any law, rule or regulation after the Closing Date, (b) any change in law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the Closing Date or (c) compliance by any Lender or Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender's or Issuing Bank's holding company, if any) with any written request, guideline or directive (whether or not having the force of law but if not having the force of law, then being one with which the relevant party would customarily comply) of any Governmental Authority made or issued after the Closing Date. "Charges" shall have the meaning assigned to such term in Section 9.09. "Closing Agreement" shall mean the Closing Agreement, dated as of October 29, 2004, by and among FRC, the Domestic Borrower, on behalf of itself and the other buyers set forth on Exhibit A to the Acquisition Agreement, and the Seller, on behalf of itself and the other sellers set forth on Exhibit A to the Acquisition Agreement. "Closing Date" shall mean October 29, 2004, and "Closing" shall mean the making of the initial Loans on the Closing Date hereunder. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Collateral" shall mean all the "Collateral" as defined in any Security Document and shall also include the Mortgaged Properties. "Collateral Agent" shall have the meaning given such term in the introductory paragraph of this Agreement. "Collateral Agreements" shall mean the Domestic Collateral Agreement, the UK Collateral Agreement, the French Collateral Agreement and the Foreign Collateral Agreement. 11 "Collateral and Guarantee Requirement" shall mean the requirement that: (a) on the Closing Date, the Collateral Agent shall have received (i) from Holdings, the Domestic Borrower and each Domestic Subsidiary Loan Party a counterpart of the Domestic Collateral Agreement duly executed and delivered on behalf of such Person, (ii) from the Domestic Borrower a counterpart of the UK Share Charge duly executed and delivered on behalf of such Person together with share certificates and related stamped, executed in blank stock transfer forms, (iii) from the UK Borrower a counterpart of the UK Debenture duly executed and delivered on behalf of such Person together with (or to be received by the Collateral Agent promptly after the Closing Date) share certificates and related stamped, executed in blank stock transfer forms, (iv) from the Domestic Borrower a counterpart of the French Equity Pledge Agreement and the French Debt Pledge Agreement, each duly executed and delivered on behalf of such Person, (v) from the French Borrower, a counterpart of the French Equity Pledge Agreement and the Foreign Guarantee, in each case, duly executed and delivered on behalf of such Person and (vi) from the UK Borrower, a counterpart of the Foreign Guarantee duly executed and delivered on behalf of such Person. (b) (i) within thirty (30) days after the Closing Date, the Collateral Agent shall have received from each UK Subsidiary Loan Party a counterpart of the UK Debenture and the Foreign Guarantee, each duly executed and delivered on behalf of such Person; provided that any UK Subsidiary Loan Party shall only guarantee the UK Obligations, and (ii) on or prior to any date on which Revolving Facility Loans are made to the French Borrower, from each French Subsidiary Loan Party a counterpart of the Foreign Guarantee and the Foreign Collateral Agreement, each duly executed and delivered on behalf of such Person; provided that any French Subsidiary Loan Party shall only guarantee the French Subsidiary Obligations. (c) on the Closing Date, the Collateral Agent shall have received or shall otherwise have received a pledge over all the issued and outstanding Equity Interests of (i) the Borrowers, (ii) each Subsidiary Loan Party directly owned on the Closing Date by any Loan Party and (iii) any other Material Subsidiary directly owned on the Closing Date by any Loan Party, except, in each case, to the extent that a pledge of such Equity Interests is not permitted under Section 9.23; and the Collateral Agent shall have received all certificates or other instruments (if any) representing such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank; provided that Equity Interests of the Material Subsidiaries listed on Schedule 1.01(d) shall be pledged within 60 days after the Closing Date; (d) in the case of any Person that becomes a Subsidiary Loan Party after the Closing Date, the Collateral Agent shall have received (A) in the case of a Domestic Subsidiary Loan Party, a supplement to the Domestic Collateral Agreement, in the form specified therein, duly executed and delivered on behalf of such Domestic Subsidiary Loan Party, (B) in the case of a UK Subsidiary Loan Party, a supplement to the UK Debenture and the Foreign Guarantee, in the form specified therein, duly executed and delivered on behalf of such UK Subsidiary Loan Party; provided that any UK Subsidiary Loan Party shall only guarantee the UK Obligations, (C) in the case of a French 12 Subsidiary Loan Party, a Foreign Collateral Agreement, in the form specified therein, duly executed and delivered on behalf of such French Subsidiary Loan Party and a Foreign Guarantee; provided that any French Subsidiary Loan Party shall only guarantee the French Subsidiary Obligations and (D) in the case of any other Foreign Subsidiary Loan Party, a Foreign Guarantee and a Foreign Collateral Agreement, duly executed and delivered on behalf of such Foreign Subsidiary Loan Party; provided, in each case, that any Foreign Subsidiary Loan Party shall only guarantee or support Obligations or pledge assets to the extent permitted under Section 9.23; provided further, in each case, that if any Subsidiary Loan Party owns Equity Interests of a Material Subsidiary which is a Foreign Subsidiary, such Equity Interests may be pledged in lieu of the foregoing pursuant to a foreign pledge agreement, duly executed and delivered on behalf of such Subsidiary Loan Party; (e) after the Closing Date and within the time period set forth in Section 5.10(c), all the outstanding Equity Interests directly owned by a Loan Party of any Person that becomes (i) a Subsidiary Loan Party or (ii) a Material Subsidiary after the Closing Date, shall have been pledged pursuant to the applicable Collateral Agreement, as applicable to the extent permitted under Section 9.23, and the Collateral Agent shall have received all certificates or other instruments (if any) representing such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank or shall have otherwise received a pledge over such Equity Interests; (f) all Indebtedness of Holdings, any Borrower and each other Subsidiary having an aggregate principal amount in excess of U.S.$10.0 million (other than intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of Holdings and the Subsidiaries) that is owing to any Loan Party shall be evidenced by a promissory note or an instrument and shall have been pledged pursuant to the applicable Collateral Agreement, and the Collateral Agent shall have received all such promissory notes or instruments, together with note powers or other instruments of transfer with respect thereto endorsed in blank; (g) all documents and instruments, including UCC financing statements, required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create the Liens intended to be created by the Security Documents (in each case, including any supplements thereto) and perfect such Liens to the extent required by, and with the priority required by, the Security Documents, shall have been filed, registered or recorded or delivered to the Collateral Agent for filing, registration or the recording concurrently with, or promptly following, the execution and delivery of each such Security Document; (h) each Loan Party shall have obtained all consents and approvals required to be obtained by it in connection with the execution and delivery of all Security Documents (or supplements thereto) to which it is a party and the granting by it of the Liens thereunder and the performance of its obligations thereunder; and 13 (i) the Collateral Agent shall receive from the applicable Loan Parties the following documents and instruments relating to Material Real Property located in the United States that constitutes Collateral on the dates specified below: (i) with respect to each Material Real Property located in the United States, within 90 days following the Closing Date, in the case of such Material Real Property, and on the date specified in Section 5.10, in the case of such after-acquired Material Real Property, a Mortgage duly authorized and executed, in form for recording in the recording office of each jurisdiction where such Material Real Property or such after-acquired Material Real Property to be encumbered thereby is situated, in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, together with such other instruments as shall be necessary or appropriate (in the reasonable judgment of the Collateral Agent) to create a Lien under applicable law, all of which shall be in form and substance reasonably satisfactory to Collateral Agent, which Mortgage and other instruments shall be effective to create and/or maintain a first priority Lien on such Material Real Property or such after-acquired Material Real Property, as the case may be, subject to no Liens other than Prior Liens and Permitted Encumbrances applicable to such Material Real Property or such after-acquired Material Real Property, as the case may be; (ii) within 90 days following the Closing Date, with respect to each Material Real Property located in the United States, policies or certificates of insurance of the type required by Section 5.02; (iii) within 90 days following the Closing Date, with respect to each Material Real Property located in the United States, UCC, judgment and tax Lien searches (in each case to the extent the same exists in the relevant jurisdiction) in form and substance satisfactory to Administrative Agent; (iv) within 90 days following the Closing Date, evidence acceptable to Administrative Agent of payment by Borrower of all title insurance premiums, search and examination charges, mortgage, filing and recording taxes, fees and related charges required for the recording of the Mortgages and issuance of the title insurance policies referred to in clause (vi) below; (v) within 90 days following the Closing Date, with respect to (a) each Material Real Property located in the United States, a fully paid policy of title insurance (or marked up commitment having the same effect of a title insurance policy) or a binding commitment from the Title Company to issue such title insurance each in the form approved by the Administrative Agent insuring the Lien of the Mortgage encumbering such Material Real Property as a valid first priority Lien (subject to this paragraph (v)) on the Material Real Property and fixtures described therein. Each policy of title insurance (or marked up commitment having the same effect of a title insurance policy) shall be in an amount reasonably satisfactory to the Administrative Agent and shall (a) be issued by the Title Company, (b) include such coinsurance and reinsurance 14 arrangements (with provisions for direct access) as shall be reasonably acceptable to Administrative Agent, (c) have been supplemented by such endorsements or affirmative insurance (or, where such endorsements are not available, opinions of special counsel or other professionals reasonably acceptable to Administrative Agent) as shall be reasonably requested by Administrative Agent and shall be available in the applicable jurisdiction at commercially reasonable rates (including, without limitation, endorsements on matters relating to usury, first loss, last dollar, zoning (or PZR report), revolving credit, doing business, variable rate, address, separate tax lot, subdivision, tie in or cluster, deletion of the creditors' rights exclusion, contiguity, road access and so-called comprehensive coverage over covenants and restrictions), (d) include such affidavits and instruments of indemnifications by Borrower and the applicable Subsidiary as shall be reasonably required to induce the Title Company to issue the policy or policies (or commitment) and endorsements contemplated in this paragraph and (e) contain no exceptions to title other than exceptions for Prior Liens, Permitted Encumbrances and other exceptions reasonably acceptable to Administrative Agent. With respect to the legal descriptions attached to the Mortgages encumbering the Material Real Properties insured by the policies of title insurance described by this clause (v), in the event the Administrative Agent determines that any Mortgage does not include all of the real property which is owned by Borrower or a Material Subsidiary at that particular site, then upon written notice of the Administrative Agent, Borrower or its Material Subsidiary shall execute and deliver (at the sole cost and expense of Borrower) all necessary documentation, including without limitation an amendment to the applicable Mortgage, to cause the unencumbered portion of said real property to be included in such Mortgage; (vi) within 90 days following the Closing Date, American Land Title Association/American Congress of Surveying and Mapping form surveys for each Material Real Property for which all necessary fees (where applicable) have been paid, and dated a date reasonably acceptable to the Administrative Agent, certified to the Collateral Agent and the issuer of the title insurance policies in a manner satisfactory to the Administrative Agent by a land surveyor duly registered and licensed in the states in which the property described in such surveys is located and acceptable to the Administrative Agent, showing all buildings and other improvements, any off-site improvements, the location of any easements, parking spaces, rights of way, building set-back lines and other dimensional regulations and the absence of encroachments, either by such improvements or on to such property, and other defects, other than encroachments and other defects acceptable to the Administrative Agent; and (vii) within 90 days following the Closing Date, with respect to each Material Real Property located in the United States, all such other items as shall be reasonably necessary in the opinion of counsel to the Lenders to create a valid and perfected first priority mortgage Lien on such Material Real Property subject only to Permitted Encumbrances and Prior Liens. Without limiting the generality of the foregoing, the Administrative Agent shall have received, on behalf of itself, 15 the Collateral Agent, the Lenders and each Issuing Bank within 90 days following the Closing Date, opinions of local counsel for the Loan Parties in states in which the Real Properties are located, with respect to the enforceability and validity of the Mortgages and any related fixture filings in form and substance reasonably satisfactory to the Administrative Agent. (j) the Collateral Agent shall receive from the applicable Loan Parties documents and instruments relating to Material Real Property located outside the United States that constitutes Collateral that are customarily provided under the applicable law of the jurisdiction in which such Material Real Property is located to create a valid and perfected Lien on such Material Real Property under the applicable law of the jurisdiction in which such Material Real Property is located; provided that such Material Real Property shall only be pledged to the extent permitted under Section 9.23, and provided further that the Administrative Agent may, in its good faith discretion, consent to a waiver of the pledge of such Material Real Property. With respect to Material Real Property located outside the United States that constitutes Collateral, such documents and instruments shall be provided within 90 days after the Closing Date and with respect to each after-acquired Material Real Property located outside the United States that constitutes Collateral, such documents and instruments shall be provided within 90 days after the acquisition of such Material Real Property. (k) With respect to each of the items identified in this definition of "Collateral and Guarantee Requirement" that are required to be delivered on a date after the Closing Date, the Administrative Agent, in each case, may (in its sole discretion) extend such date on two separate occasions by up to 30 days on each such occasion. "Commitment Fee" shall have the meaning assigned to such term in Section 2.12(a). "Commitments" shall mean (a) with respect to any Lender, such Lender's Revolving Facility Commitment, and Tranche B Dollar Term Loan Commitment and Tranche B Euro Term Loan Commitment and (b) with respect to any Swingline Lender, its Swingline Commitment, as applicable. "Communications" shall have the meaning assigned to such term in Section 9.17. "Companies Act" shall mean the Companies Act 1985 of England and Wales (as amended). "Consolidated Debt" at any date shall mean (without duplication) all Indebtedness consisting of Capital Lease Obligations, Indebtedness for borrowed money (other than letters of credit to the extent undrawn) and Indebtedness in respect of the deferred purchase price of property or services of the Domestic Borrower and its Subsidiaries determined on a consolidated basis on such date plus (ii) any Receivables Net Investment. "Consolidated Net Debt" at any date shall mean Consolidated Debt of the Domestic Borrower and its Subsidiaries determined on a consolidated basis on such date minus cash and Permitted Investments of Holdings and its Subsidiaries on such date. 16 "Consolidated Net Income" shall mean, with respect to any Person for any period, the aggregate of the Net Income of such Person and its subsidiaries for such period, on a consolidated basis; provided, however, that (i) any net after-tax extraordinary, unusual or nonrecurring gains or losses (less all fees and expenses related thereto) or income or expenses or charges (including, without limitation, (A) income and expenses from the New York state grant, SFAS 106 expense, pension expense, excess corporate and tax department allocations from Ingersoll-Rand, casualty losses, severance expenses, relocation expenses, other restructuring expenses, special provisions to increase the OSMI reserve, and losses on contracts in Nigeria, in each case, incurred prior to January 1, 2006 and to the extent identified in the projections set forth in the Information Memorandum and (B) any severance, relocation and other restructuring expenses and fees, expenses or charges related to any offering of Equity Interests of such Person, any Investment, acquisition or Indebtedness permitted to be incurred hereunder (in each case, whether or not successful), including all fees, expenses, charges and change in control payments related to the Transactions), in each case, shall be excluded; provided, that with respect to each nonrecurring item, the Domestic Borrower shall have delivered to the Administrative Agent an officers' certificate specifying and quantifying such item and stating that such item is a nonrecurring item, (ii) any net after-tax income or loss from discontinued operations and any net after-tax gain or loss on disposal of discontinued operations shall be excluded, (iii) any net after-tax gain or loss (less all fees and expenses or charges relating thereto) attributable to business dispositions or asset dispositions other than in the ordinary course of business (as determined in good faith by the Board of Directors of the Domestic Borrower) shall be excluded, (iv) any net after-tax income or loss (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of indebtedness (including obligations under Swap Agreements) shall be excluded, (v) (A) the Net Income for such period of any Person that is not a subsidiary of such Person, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions or other payments paid in cash (or to the extent converted into cash) to the referent Person or a subsidiary thereof in respect of such period and (B) the Net Income for such period shall include any dividend, distribution or other payment in respect of equity paid in cash by such Person in excess of the amounts included in clause (A), (vi) the Net Income for such period of any subsidiary (that is not a Loan Party) of such Person shall be excluded to the extent that the declaration or payment of dividends or similar distributions by such subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation 17 applicable to that subsidiary or its stockholders or members, unless such restriction with respect to the payment of dividends or in similar distributions has been legally waived (provided that the net loss of any such subsidiary shall be included to the extent funds are disbursed by such Person or any other subsidiary of such Person in respect of such loss and that Consolidated Net Income of such Person shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) by such subsidiary to the Domestic Borrower or another Subsidiary in respect of such period to the extent not already included therein), (vii) Consolidated Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period, (viii) any noncash charges from the application of the purchase method of accounting in connection with the Transactions or any future acquisition, to the extent such charges are deducted in computing such Consolidated Net Income shall be excluded, (ix) accruals and reserves that are established within twelve months after the Closing Date and that are so required to be established in accordance with GAAP shall be excluded, (x) any non-cash impairment charges resulting from the application of Statements of Financial Accounting Standards No. 142 and No. 144 and the amortization of intangibles pursuant to Statement of Financial Accounting Standards No. 141 shall be excluded, and (xi) any long-term incentive plan accruals and any non-cash compensation expense realized from grants of stock appreciation or similar rights, stock options or other rights to officers, directors and employees of such Person or any of its subsidiaries shall be excluded. "Consolidated Total Assets" shall mean, as of any date, the total assets of the Domestic Borrower and the consolidated Subsidiaries, determined in accordance with GAAP, in each case as set forth on the consolidated balance sheet of the Domestic Borrower as of such date. "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and "Controlling" and "Controlled" shall have meanings correlative thereto. "Co-Syndication Agent" shall have the meaning assigned to such term in the introductory paragraph of this Agreement. "Credit Agreement Supplement" has the meaning specified in Section 2.23. "Credit Event" shall have the meaning assigned to such term in Article IV. 18 "Cumulative Retained Excess Cash Flow Amount" shall mean, at any date, an amount, not less than zero, determined on a cumulative basis equal to the amount of Excess Cash Flow for all Excess Cash Flow Periods ending after the Closing Date that is not (and, in the case of any Excess Cash Flow Period where the respective required date of prepayment has not yet occurred pursuant to Section 2.11(d), will not on such date of required prepayment be) required to be applied in accordance with Section 2.11(d). "Cure Amount" shall have the meaning assigned to such term in Section 7.03(a). "Cure Right" shall have the meaning assigned to such term in Section 7.03(a). "Current Assets" shall mean, with respect to the Domestic Borrower and its Subsidiaries on a consolidated basis at any date of determination, the sum of (a) all assets (other than cash and Permitted Investments or other cash equivalents) that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Domestic Borrower and its Subsidiaries as current assets at such date of determination, other than amounts related to current or deferred Taxes based on income or profits, and (b) in the event that a Permitted Receivables Financing is accounted for off-balance sheet, (x) gross accounts receivable comprising part of the Receivables Assets subject to such Permitted Receivables Financing less (y) collections against the amounts sold pursuant to clause (x). "Current Liabilities" shall mean, with respect to the Domestic Borrower and its Subsidiaries on a consolidated basis at any date of determination, all liabilities that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Domestic Borrower and its Subsidiaries as current liabilities at such date of determination, other than (a) the current portion of any debt or Capital Lease Obligations, (b) accruals of Interest Expense (excluding Interest Expense that is due and unpaid), (c) accruals for current or deferred Taxes based on income or profits, (d) accruals, if any, of transaction costs resulting from the Transactions, (e) accruals of any costs or expenses related to (i) severance or termination of employees prior to the Closing Date or (ii) bonuses, pension and other post-retirement benefit obligations, and (f) accruals for add-backs to EBITDA included in clauses (a)(iv) through (a)(ix) of the definition of such term. "Debt Service" shall mean, with respect to the Domestic Borrower and its Subsidiaries on a consolidated basis for any period, Cash Interest Expense for such period plus scheduled principal amortization of Consolidated Debt for such period. "Default" shall mean any event or condition that upon notice, lapse of time or both would constitute an Event of Default. "Defaulting Lender" shall mean any Lender with respect to which a Lender Default is in effect. "Dollars" or "$" shall mean lawful money of the United States of America. "Domestic Borrower" shall have the meaning assigned to such term in the introductory paragraph to this Agreement. 19 "Domestic Collateral Agreement" shall mean the Guarantee and Collateral Agreement, as amended, supplemented or otherwise modified from time to time, substantially in the form of Exhibit E-1, among Holdings, the Domestic Borrower, each Domestic Subsidiary Loan Party and the Collateral Agent. "Domestic Loan Parties" shall mean Holdings, the Domestic Borrower and each Domestic Subsidiary Loan Party. "Domestic Subsidiary" shall mean each Subsidiary that is not a Foreign Subsidiary. "Domestic Subsidiary Loan Party" shall mean each direct Wholly Owned Subsidiary of Holdings that (a) is (i) a Domestic Subsidiary and (ii) a Material Subsidiary, and (b) is not (i) a Special Purpose Receivables Subsidiary, (ii) listed on Schedule 1.01(a), or (iii) a Subsidiary whose guarantee of the Obligations is prohibited under Section 9.23. "EBITDA" shall mean, with respect to the Domestic Borrower and its Subsidiaries on a consolidated basis for any period, the Consolidated Net Income of the Domestic Borrower and its Subsidiaries for such period plus (a) the sum of (in each case without duplication and to the extent the respective amounts described in subclauses (i) through (viii) of this clause (a) reduced such Consolidated Net Income for the respective period for which EBITDA is being determined): (i) provision for Taxes based on income, profits or capital of the Domestic Borrower and its Subsidiaries for such period to the extent that such provision for taxes was deducted in calculating Consolidated Net Income), (ii) Interest Expense of the Domestic Borrower and its Subsidiaries for such period (net of interest income of the Domestic Borrower and its Subsidiaries for such period), (iii) depreciation, amortization (including amortization of intangibles, deferred financing fees and any amortization expense included in pension, OPEB or other employee benefit expenses) and other non-cash expenses (including, without limitation write-downs and impairment of property, plant, equipment and intangibles and other long-lived assets and the impact of purchase accounting on the Domestic Borrower and its Subsidiaries for such period, (iv) the amount of any restructuring charges (which, for the avoidance of doubt, shall include retention, severance, systems establishment cost or excess pension, other post-employment benefits, curtailment or other excess charges); provided that with respect to each such restructuring charge, the Domestic Borrower shall have delivered to the Administrative Agent an officers' certificate specifying and quantifying such expense or charge and stating that such expense or charge is a restructuring charge, (v) equity earnings losses in Affiliates unless funds have been disbursed to such Affiliates by the Domestic Borrower or any Subsidiary of the Domestic Borrower, 20 (vi) other non-operating expenses, (vii) the minority interest expense consisting of subsidiary income attributable to minority equity interests of third parties in any non-Wholly Owned Subsidiary in such period or any prior period, except to the extent of dividends declared or paid on Equity Interests held by third parties, and (viii) accretion of asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations, and any similar accounting in prior periods; minus (b) the sum of (in each case without duplication and to the extent the respective amounts described in subclause (i) of this clause (b) increased such Consolidated Net Income for the respective period for which EBITDA is being determined): (i) noncash items increasing Consolidated Net Income of the Domestic Borrower and its Subsidiaries for such period (but excluding any such items which represent the reversal in such period of any accrual of, or cash reserve for, anticipated cash charges in any prior period where such accrual or reserve is no longer required). For purposes of determining EBITDA under this Agreement, EBITDA will be deemed to be U.S.$25,456,000 for the three months ended March 31, 2004, U.S.$59,451,000 for the six months ended June 30, 2004, U.S.$98,388,000 for the nine months ended September 30, 2004. "EMU" shall mean the Economic and Monetary Union as contemplated by the Treaty on European Union. "Environment" shall mean ambient and indoor air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata or sediment, natural resources such as flora and fauna, the workplace or as otherwise defined in any Environmental Law. "Environmental Claim" shall mean any and all actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, notices of liability or potential liability, investigations, proceedings, consent orders or consent agreements relating in any way to any Environmental Law or any Hazardous Material. "Environmental Law" shall mean, collectively, all federal, state, local or foreign laws, including common law, ordinances, regulations, rules, codes, orders, judgments or other requirements or rules of law that relate to (a) the prevention, abatement or elimination of pollution, or the protection of the Environment, natural resources or human health, or natural resource damages, and (b) the use, generation, handling, treatment, storage, disposal, Release, transportation or regulation of or exposure to Hazardous Materials, including the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., the Endangered Species Act, 16 U.S.C. Sections 1531 et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq., the Clean Air Act, 42 U.S.C. Sections 7401 et seq., the Clean Water Act, 33 U.S.C. Sections 1251 et seq., the Toxic Substances 21 Control Act, 15 U.S.C. Sections 2601 et seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. Sections 11001 et seq., each as amended, and their foreign, state or local counterparts or equivalents. "Equity Commitment Letters" shall mean the letter agreement among First Reserve Fund IX, L.P., First Reserve Fund X, L.P. and FRC, dated as of August 25, 2004, which collectively provide for the contribution of the Equity Financing to FRC by the Funds. "Equity Financing" shall have the meaning assigned to such term in the third recital hereto. "Equity Interests" of any Person shall mean any and all shares, interests, rights to purchase, warrants, options, participation or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, any limited or general partnership interest and any limited liability company membership interest. "Equivalent" in Dollars of any Foreign Currency on any date shall mean the equivalent in Dollars of such Foreign Currency determined by using the quoted spot rate at which the Sub-Agent's principal office in London offers to exchange Dollars for such Foreign Currency in London prior to 4:00 p.m. (London time) (unless otherwise indicated by the terms of this Agreement) on such date as is required pursuant to the terms of this Agreement, and the "Equivalent" in any Foreign Currency of Dollars shall mean the equivalent in such Foreign Currency of Dollars determined by using the quoted spot rate at which the Sub-Agent's principal office in London offers to exchange such Foreign Currency for Dollars in London prior to 4:00 p.m. (London time) (unless otherwise indicated by the terms of this Agreement) on such date as is required pursuant to the terms of this Agreement. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that, together with Holdings, any Borrower or any other Subsidiary, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" shall mean (a) any Reportable Event; (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan, the failure to make by its due date a required installment under Section 412(m) of the Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (d) the incurrence by Holdings, the Domestic Borrower, any other Subsidiary or any ERISA Affiliate of any liability under Title IV of ERISA; (e) the receipt by Holdings, any Borrower, any other Subsidiary or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or to appoint a trustee to administer any Plan under Section 4042 of ERISA, or the occurrence of any event or 22 condition which could be reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (f) the incurrence by Holdings, any Borrower, any other Subsidiary or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; (g) the receipt by Holdings, any Borrower, any other Subsidiary or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from Holdings, any Borrower, a Subsidiary or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; or (h) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to result in liability to Holdings, any Borrower or any other Subsidiary. "EURIBO Rate" means, in relation to any Loan in Euro: (a) the applicable Screen Rate; or (b) (if no Screen Rate is available for the Interest Period of that Loan) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Administrative Agent at the request quoted by Citibank International, N.A. to leading banks in the European interbank market, as of 11:00 am London time on the Quotation Day for the offering of deposits in Euro for a period comparable to the Interest Period of the relevant Loan. "Eurocurrency Borrowing" shall mean a Borrowing comprised of Eurocurrency Loans. "Eurocurrency Loan" shall mean any Eurocurrency Term Loan or Eurocurrency Revolving Loan. "Eurocurrency Revolving Facility Borrowing" shall mean a Borrowing comprised of Eurocurrency Revolving Loans. "Eurocurrency Revolving Loan" shall mean any Revolving Facility Loan denominated in Dollars or a Foreign Currency bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. "Eurocurrency Term Loan" shall mean any Term Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. "Euros" shall mean the single currency unit of the member states of the European Community that adopt or have adopted that currency unit as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union. "Event of Default" shall have the meaning assigned to such term in Section 7.01. 23 "Excess Cash Flow" shall mean, with respect to the Domestic Borrower and its Subsidiaries on a consolidated basis for any Excess Cash Flow Period, EBITDA of the Domestic Borrower and its Subsidiaries on a consolidated basis for such Excess Cash Flow Period, minus, without duplication, (a) Debt Service for such Excess Cash Flow Period, (b) (i) any voluntary prepayments of Term Loans during such Excess Cash Flow Period, (ii) any permanent voluntary reductions during such Excess Cash Flow Period of Revolving Facility Commitments to the extent that an equal amount of Revolving Facility Loans was simultaneously repaid and (iii) any voluntary prepayment permitted hereunder of term Indebtedness during such Excess Cash Flow Period to the extent not financed, or intended to be financed, using the proceeds of the incurrence of Indebtedness or the issuance of Equity Interests, so long as the amount of such prepayment is not already reflected in Debt Service, (c) (i) Capital Expenditures by the Domestic Borrower and its Subsidiaries on a consolidated basis during such Excess Cash Flow Period (excluding Capital Expenditures made in such Excess Cash Flow Period where a certificate in the form contemplated by the following clause (d) was previously delivered) that are paid in cash, and (ii) the aggregate consideration paid in cash during such Excess Cash Flow Period in respect of Permitted Business Acquisitions and other Investments permitted hereunder (less any amounts received in respect thereof as a return of capital), (d) Capital Expenditures that the Domestic Borrower or any Subsidiary shall, during such Excess Cash Flow Period, become obligated to make but that are not made during such Excess Cash Flow Period, provided that the Domestic Borrower shall deliver a certificate to the Administrative Agent not later than 90 days after the end of such Excess Cash Flow Period, signed by a Responsible Officer of the Domestic Borrower and certifying that such Capital Expenditures and the delivery of the related equipment will be made in the following Excess Cash Flow Period, (e) Taxes paid in cash by the Domestic Borrower and its Subsidiaries on a consolidated basis during such Excess Cash Flow Period or that will be paid within six months after the close of such Excess Cash Flow Period (provided that any amount so deducted that will be paid after the close of such Excess Cash Flow Period shall not be deducted again in a subsequent Excess Cash Flow Period) and for which reserves have been established, including income tax expense and withholding tax expense incurred in connection with cross-border transactions involving the Foreign Subsidiaries, (f) an amount equal to any increase in Working Capital of the Domestic Borrower and its Subsidiaries for such Excess Cash Flow Period, (g) cash expenditures made in respect of Swap Agreements during such Excess Cash Flow Period, to the extent not reflected in the computation of EBITDA or Interest Expense, 24 (h) permitted dividends or distributions or repurchases of its Equity Interests paid in cash by the Domestic Borrower during such Excess Cash Flow Period and permitted dividends paid by any Borrower or by any Subsidiary to any Person other than Holdings, any Borrower or any of the Subsidiaries during such Excess Cash Flow Period, in each case in accordance with Section 6.06, (i) amounts paid in cash during such Excess Cash Flow Period on account of (x) items that were accounted for as noncash reductions of Net Income in determining Consolidated Net Income or as noncash reductions of Consolidated Net Income in determining EBITDA of the Domestic Borrower and its Subsidiaries in a prior Excess Cash Flow Period and (y) reserves or accruals established in purchase accounting, (j) to the extent not deducted in the computation of Net Proceeds in respect of any asset disposition or condemnation giving rise thereto, the amount of any mandatory prepayment of Indebtedness (other than Indebtedness created hereunder or under any other Loan Document), together with any interest, premium or penalties required to be paid (and actually paid) in connection therewith, (k) the amount related to items that were added to or not deducted from Net Income in calculating Consolidated Net Income or were added to or not deducted from Consolidated Net Income in calculating EBITDA to the extent such items represented a cash payment (which had not reduced Excess Cash Flow upon the accrual thereof in a prior Excess Cash Flow Period), or an accrual for a cash payment, by the Domestic Borrower and its Subsidiaries or did not represent cash received by the Domestic Borrower and its Subsidiaries, in each case on a consolidated basis during such Excess Cash Flow Period, plus, without duplication, (l) an amount equal to any decrease in Working Capital for such Excess Cash Flow Period, (m) all proceeds received during such Excess Cash Flow Period of Capital Lease Obligations, purchase money Indebtedness, Sale and Lease-Back Transactions pursuant to Section 6.03 and any other Indebtedness, in each case to the extent used to finance any Capital Expenditure (other than Indebtedness under this Agreement to the extent there is no corresponding deduction to Excess Cash Flow above in respect of the use of such Borrowings), (n) all amounts referred to in clause (c) above to the extent funded with the proceeds of the issuance of Equity Interests of, or capital contributions to, the Domestic Borrower after the Closing Date (to the extent not previously used to prepay Indebtedness (other than Revolving Facility Loans or Swingline Loans), made in any investment or capital expenditure or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any prior Excess Cash Flow Period) or any amount that would have constituted Net Proceeds under clause (a) of the definition of the term "Net Proceeds" if not so spent, 25 in each case to the extent there is a corresponding deduction from Excess Cash Flow above, (o) to the extent any permitted Capital Expenditures and the corresponding delivery of equipment referred to in clause (d) above do not occur in the Excess Cash Flow Period of the Domestic Borrower specified in the certificate of the Domestic Borrower provided pursuant to clause (d) above, the amount of such Capital Expenditures that were not so made in the Excess Cash Flow Period of the Domestic Borrower specified in such certificates, (p) cash payments received in respect of Swap Agreements during such Excess Cash Flow Period to the extent (i) not included in the computation of EBITDA or (ii) such payments do not reduce Cash Interest Expense, (q) any extraordinary or nonrecurring gain realized in cash during such Excess Cash Flow Period (except to the extent such gain consists of Net Proceeds subject to Section 2.11(c)), (r) to the extent deducted in the computation of EBITDA, cash interest income, and (s) the amount related to items that were deducted from or not added to Net Income in connection with calculating Consolidated Net Income or were deducted from or not added to Consolidated Net Income in calculating EBITDA to the extent either (x) such items represented cash received by the Domestic Borrower or any Subsidiary thereof or (y) does not represent cash paid by the Domestic Borrower or any Subsidiary thereof, in each case on a consolidated basis during such Excess Cash Flow Period. "Excess Cash Flow Period" shall mean (i) the period taken as one accounting period beginning on January 1, 2005 and ending on December 31, 2005, and (ii) each fiscal year of the Domestic Borrower ended thereafter. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Excluded Indebtedness" shall mean all Indebtedness permitted to be incurred under Section 6.01 (other than Sections 6.01(o) and (r)). "Excluded Taxes" shall mean, with respect to any Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder, (a) income or franchise taxes imposed on (or measured by) its net income or net profits by the United States of America or by the jurisdiction under the laws of which such recipient is organized or in which its principal office (or other fixed place of business) is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits tax or any similar tax that is imposed by any jurisdiction described in clause (a) above and (c) other than in the case of an assignee pursuant to a request by such Loan Party under Section 2.19(b), any withholding tax imposed by the United States or by the jurisdiction under the laws of which such Loan Party is organized or in which its principal office (or other fixed place of business) is located that is in effect and would apply to amounts payable hereunder to such 26 Lender or other recipient at the time such Lender or other recipient becomes a party to any Loan Document (or designates a new lending office), except to the extent that such Lender or other recipient (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from a Loan Party with respect to such withholding tax pursuant to Section 2.17(a) or Section 2.17(c), and (d) any withholding taxes attributable to such Lender's or such other recipient's failure (other than as a result of a Change in Law) to comply with Section 2.17(e); provided, however, that the term "Excluded Taxes" shall not include any taxes that are imposed or otherwise due as a result of any action undertaken by one or more of such Agent, Lender or Issuing Bank to collect funds due hereunder or under any other Loan Document or enforce or exercise its rights or pursue any remedy provided hereunder or under any other Loan Document. "Facility" shall mean the respective facility and commitments utilized in making Loans and credit extensions hereunder, it being understood that as of the date of this Agreement there are three Facilities, i.e., the Tranche B Dollar Facility, Tranche B Euro Facility and the Revolving Facility. "Federal Funds Effective Rate" shall mean, for any day, the weighted average (rounded upward, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average (rounded upward, if necessary, to the next 1/100 of 1%) of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fee Letter" shall mean that certain Fee Letter dated August 25, 2004 by and among FRC, the Administrative Agent, the Joint Lead Arrangers and UBS Loan Finance LLC. "Fees" shall mean the Commitment Fees, the L/C Participation Fees, the Issuing Bank Fees and the Administrative Agent Fees. "Financial Officer" of any Person shall mean the Chief Financial Officer, principal accounting officer, Treasurer, Assistant Treasurer or Controller of such Person. "Financial Performance Covenants" shall mean the covenants of Holdings set forth in Sections 6.11 and 6.12. "Flow Through Entity" shall mean an entity that is treated as a partnership not taxable as a corporation, a grantor trust or a disregarded entity for United States federal income tax purposes or subject to treatment on a comparable basis for purposes of state, local or foreign tax law. "Foreign Borrower" shall mean, collectively, the Initial Foreign Borrowers and each Additional Foreign Borrower. "Foreign Collateral Agreement" shall mean with respect to any Person, such collateral agreements and other agreements necessary under applicable foreign law to grant to 27 the Collateral Agent a security interest in such assets of such Person of the type identified in the Domestic Collateral Agreement; provided that no security interest shall be granted on all or any portion of such assets if the Domestic Borrower demonstrates to the Collateral Agent and the Collateral Agent determines (in its reasonable discretion) that the cost of granting such security interest exceeds the value of the security offered thereby. "Foreign Currency" shall mean Euros and Sterling. "Foreign Guarantee" shall mean, collectively, one or more guarantee agreements, as amended, supplemented or otherwise modified from time to time, each substantially in the form of Exhibit E-4 with such other modifications or in such other form as may be necessary to comply with applicable foreign laws and regulations and otherwise reasonably satisfactory to the Collateral Agent, among the applicable Foreign Subsidiary Loan Party and the Collateral Agent. "Foreign Lender" shall mean any Lender that is organized under the laws of a jurisdiction other than the United States of America. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "Foreign Loan Parties" shall mean each Foreign Borrower and each Foreign Subsidiary Loan Party. "Foreign Subsidiary" shall mean any Subsidiary that is incorporated or organized under the laws of any jurisdiction other than the United States of America, any State thereof or the District of Columbia and any Subsidiary of a Foreign Subsidiary. "Foreign Subsidiary Loan Party" shall mean, collectively, the UK Subsidiary Loan Parties, the French Subsidiary Loan Parties and the Additional Foreign Subsidiary Loan Parties. "French Borrower" shall have the meaning assigned to such term in the introductory paragraph of this Agreement. "French Debt Pledge Agreement" shall mean, collectively, one or more pledge agreements between the applicable French Loan Party and the Collateral Agent, as amended, supplemented or otherwise modified from time to time, substantially in the form of Exhibit E-3A or in such other form reasonably satisfactory to the Collateral Agent and with such modifications related to the applicable French Loan Party. "French Equity Pledge Agreement" shall mean, collectively, one or more equity pledge agreements between the applicable French Loan Party and the Collateral Agent, as amended, supplemented or otherwise modified from time to time, substantially in the form of Exhibit E-3B or in such other form reasonably satisfactory to the Collateral Agent and with such modifications related to the applicable French Loan Party. "French Loan Party" shall mean the French Borrower and each French Subsidiary Loan Party. 28 "French Obligations" shall mean all amounts owing to any of the Agents or any Lender by any French Loan Party pursuant to the terms of this Agreement or any other Loan Document. "French Subsidiary Obligations" shall mean at any time, with respect to any French Subsidiary Loan Party, the aggregate unpaid principal amount at such time of the loan made by the French Borrower to such French Subsidiary Loan Party from the proceeds of the Revolving Facility Loans made to the French Borrower. "French Subsidiary Loan Party" shall mean each direct Wholly Owned Subsidiary of the French Borrower that (a) is (i) organized under the same jurisdiction as the French Borrower, (ii) a Foreign Subsidiary and (iii) a Material Subsidiary, and (b) is not (i) a Special Purpose Receivables Subsidiary, (ii) listed on Schedule 1.01(a), or (iii) a Subsidiary whose guarantee of the French Obligations is prohibited under Section 9.23; provided that Dresser-Rand France shall not be a French Subsidiary Loan Party unless it has satisfied the requirement set forth in clause (b)(ii) of the definition of Collateral and Guarantee Requirement. "Fund Affiliate" shall mean (i) each Affiliate of the Funds that is neither a portfolio company nor a company controlled by a portfolio company and (ii) each general partner of the Funds or any Fund Affiliate who is a partner or employee of First Reserve Corporation. "Funds" shall have the meaning assigned to such term in the first recital hereto. "GAAP" shall mean generally accepted accounting principles in effect from time to time in the United States, applied on a consistent basis, subject to the provisions of Section 1.02. "Governmental Authority" shall mean any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory or legislative body, including, without limitation, any agency of the European Union or similar monetary or multinational authority. "Guarantee" of or by any Person (the "guarantor") shall mean (a) any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay or otherwise) or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment thereof, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness, (iv) entered into for the purpose of assuring in any other manner the holders of such Indebtedness of the payment thereof or to protect such holders against loss in respect thereof (in whole or in part) or (v) as an account party in respect of any 29 letter of credit or letter of guaranty issued to support such Indebtedness, or (b) any Lien on any assets of the guarantor securing any Indebtedness (or any existing right, contingent or otherwise, of the holder of Indebtedness to be secured by such a Lien) of any other Person, whether or not such Indebtedness is assumed by the guarantor; provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement. "Hazardous Materials" shall mean all pollutants, contaminants, wastes, chemicals, materials, substances and constituents, including, without limitation, explosive or radioactive substances or petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls or radon gas, of any nature, in each case subject to regulation or which can give rise to liability under any Environmental Law. "Holdings" shall have the meaning assigned to such term in the introductory paragraph of this Agreement. "Holdings LLC Agreement" shall mean the operating agreement entered into by Holdings on the Closing Date. "Improvements" shall have the meaning assigned to such term in the Mortgages. "Increased Amount Date" shall have the meaning assigned to such term in Section 2.21. "Indebtedness" of any Person shall mean, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (d) all obligations of such Person issued or assumed as the deferred purchase price of property or services (other than trade liabilities and intercompany liabilities incurred in the ordinary course of business and maturing within 365 days after the incurrence thereof), (e) all Guarantees by such Person of Indebtedness of others, (f) all Capital Lease Obligations of such Person, (g) all payments that such Person would have to make in the event of an early termination, on the date Indebtedness of such Person is being determined in respect of outstanding Swap Agreements (such payments in respect of any Swap Agreement with a counterparty being calculated net of amounts owing to such Person by such counterparty in respect of other Swap Agreements), (h) the principal component of all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit (other than any letters of credit, bank guarantees or similar instrument in respect of which a back-to-back letter of credit has been issued under or permitted by this Credit Agreement) and (i) the principal component of all obligations of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any partnership in which such Person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness expressly limits the liability of such Person in respect thereof. To the extent not otherwise included, Indebtedness shall include the amount of any Permitted Receivables Financing. 30 "Indemnified Taxes" shall mean all Taxes other than Excluded Taxes. "Indemnitee" shall have the meaning assigned to such term in Section 9.05(b). "Information Memorandum" shall mean (a) the Confidential Information Memorandum dated October, 2004, as modified or supplemented prior to the Closing Date, and (b) the Offering Memorandum. "Initial Foreign Borrowers" shall have the meaning assigned to it in the recitals hereof. "Installment Date" shall mean a Tranche B Dollar Installment Date and a Tranche B Euro Installment Date. "Interest Coverage Ratio" shall have the meaning assigned to such term in Section 6.11. "Interest Election Request" shall mean a request by a Borrower to convert or continue a Tranche B Dollar Term Borrowing, a Tranche B Euro Term Borrowing or a Revolving Facility Borrowing in accordance with Section 2.07. "Interest Expense" shall mean, with respect to any Person for any period, the sum of (a) gross interest expense of such Person for such period on a consolidated basis, including (i) the amortization of debt discounts, (ii) the amortization of all fees (including fees with respect to Swap Agreements) payable in connection with the incurrence of Indebtedness to the extent included in interest expense, (iii) the portion of any payments or accruals with respect to Capital Lease Obligations allocable to interest expense and (iv) commissions, discounts, yield and other fees and charges incurred in connection with any Permitted Receivables Financing which are payable to any Person other than Holdings, the Borrowers or a Subsidiary Loan Party, and (b) capitalized interest of such Person. For purposes of the foregoing, gross interest expense shall be determined after giving effect to any net payments made or received and costs incurred by the Domestic Borrower and its Subsidiaries with respect to Swap Agreements. "Interest Payment Date" shall mean (a) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months' duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months' duration been applicable to such Borrowing and, in addition, the date of any refinancing or conversion of such Borrowing with or to a Borrowing of a different Type, (b) with respect to any ABR Loan, the last day of each calendar quarter and (c) with respect to any Swingline Loan, the day that such Swingline Loan is required to be repaid pursuant to Section 2.09(a). "Interest Period" shall mean, as to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as applicable, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter (or 9 or 12 months, if at the time of the 31 relevant Borrowing, all Lenders make interest periods of such length available), as the applicable Borrower may elect, or the date any Eurocurrency Borrowing is converted to an ABR Borrowing in accordance with Section 2.07 or repaid or prepaid in accordance with Section 2.09, 2.10 or 2.11; provided, unless the Administrative Agent shall otherwise agree, that prior to the earlier of the 31st day after the Closing Date and the date on which the Administrative Agent has notified the Borrowers that the primary syndication of the Facilities has been completed, the Borrowers shall only be permitted to request Interest Periods of seven days (it being understood that notwithstanding anything else in this Agreement to the contrary, if on the last day of any such seven day Interest Period the primary syndication of the Facilities shall not have been completed, a new seven day Interest Period will begin on such day with respect to each such Borrowing and no notice by any Borrower shall be required with respect thereto); provided further, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "IR Letter of Credit" shall mean a letter of credit issued by Citibank, N. A. in favor of Ingersoll-Rand Company Limited on the Closing Date in the form attached as Exhibit J hereto. "Issuing Bank" shall mean Citibank, N.A. and each other Issuing Bank designated pursuant to Section 2.05(k), in each case in its capacity as an issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i). An Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term "Issuing Bank" shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. "Issuing Bank Fees" shall have the meaning assigned to such term in Section 2.12(b). "Joint Lead Arrangers" shall have the meaning assigned to such term in the introductory paragraph of this Agreement. "L/C Disbursement" shall mean a payment or disbursement made by an Issuing Bank pursuant to a Letter of Credit, including, for the avoidance of doubt, a payment or disbursement made by an Issuing Bank pursuant to a Letter of Credit upon or following the reinstatement of such Letter of Credit. "L/C Participation Fee" shall have the meaning assigned such term in Section 2.12(b). "Lender" shall mean each financial institution listed on Schedule 2.01, as well as any Person that becomes a "Lender" hereunder pursuant to Section 9.04. "Lender Default" shall mean (i) the refusal (which has not been retracted) of a Lender to make available its portion of any Borrowing, to acquire participations in a Swingline Loan pursuant to Section 2.04 or to fund its portion of any unreimbursed payment under Section 32 2.05(e), or (ii) a Lender having notified in writing any Borrower and/or the Administrative Agent that it does not intend to comply with its obligations under Section 2.04, 2.05 or 2.06. "Letter of Credit" shall mean any letter of credit issued pursuant to Section 2.05. "Leverage Ratio" shall mean, on any date, the ratio of (a) Consolidated Net Debt as of such date to (b) EBITDA for the period of four consecutive fiscal quarters of the Domestic Borrower most recently ended as of such date, all determined on a consolidated basis in accordance with GAAP; provided that to the extent any Asset Disposition or any Asset Acquisition (or any similar transaction or transactions that require a waiver or a consent of the Required Lenders pursuant to Section 6.04 or Section 6.05) or incurrence or repayment of Indebtedness (excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes) has occurred during the relevant Test Period, EBITDA shall be determined for the respective Test Period on a Pro Forma Basis for such occurrences. "LIBO Rate" means (i) in relation to any Eurocurrency Borrowing denominated in Dollars or any Foreign Currency (other than Euro): (a) the applicable Screen Rate; or (b) (if no Screen Rate is available for the currency or Interest Period of that Eurocurrency Borrowing) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Administrative Agent at its request quoted by Citicorp North America, Inc. to leading banks in the London interbank market, as of 11:00 am London time on the Quotation Day for the offering of deposits in the currency of that Eurocurrency Borrowing and for a period comparable to the Interest Period for that Eurocurrency Borrowing and (ii) with respect to any Eurocurrency Borrowing denominated in Euros, the EURIBO Rate. "License Agreement" shall mean the License Agreement, dated October 29, 2004 by and between Dresser-Rand Company, Dresser-Rand A.S., Ingersoll-Rand Energy Systems Corporation, and the Energy Systems Division of Ingersoll-Rand Company. "Lien" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, hypothecation, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities (other than securities representing an interest in a joint venture that is not a Subsidiary), any purchase option, call or similar right of a third party with respect to such securities. "Loan Documents" shall mean this Agreement, the Letters of Credit, the Security Documents, each Credit Agreement Supplement entered into by an Additional Foreign Borrower and any promissory note issued under Section 2.09(e). "Loan Parties" shall mean each Domestic Loan Party and each Foreign Loan Party. 33 "Loans" shall mean the Term Loans, the Revolving Facility Loans and the Swingline Loans (and shall include any Replacement Term Loans and any Loans under the New Revolving Facility Commitments or New Term B Commitments). "Local Time" shall mean (i) in the case of Loans and Letters of Credit denominated in Dollars, New York City time and (ii) in the case of Loans and Letters of Credit denominated in Euros or any other Foreign Currency, London time. "Majority Lenders" of any Facility shall mean, at any time, Lenders under such Facility having Loans and unused Commitments representing more than 50% of the sum of all Loans outstanding under such Facility and unused Commitments under such Facility at such time, in each case calculated on the Equivalent in Dollars at such time. The Loans and Commitment of any Defaulting Lender shall be disregarded in determining Majority Lenders at any time. "Management Group" shall mean the group consisting of the directors, executive officers and other management personnel of the Domestic Borrower and Holdings, as the case may be, on the Closing Date together with (1) any new directors whose election by such boards of directors or whose nomination for election by the shareholders of the Domestic Borrower or Holdings, as the case may be, was approved by a vote of a majority of the directors of the Domestic Borrower or Holdings, as the case may be, then still in office who were either directors on the Closing Date or whose election or nomination was previously so approved and (2) executive officers and other management personnel of the Domestic Borrower or Holdings, as the case may be, hired at a time when the directors on the Closing Date together with the directors so approved constituted a majority of the directors of the Domestic Borrower or Holdings, as the case may be. "Management Notes" shall mean the subordinated notes issued by Holdings, any Subsidiary or any Parent Company to existing or former employees, officers, consultants or directors of Holdings, any Subsidiary or any Parent Company in consideration for such Person's Equity Interests in Holdings, any Subsidiary or any Parent Company, in each case subordinated to the Obligations on terms and conditions reasonably satisfactory to the Administrative Agent. "Margin Stock" shall have the meaning assigned to such term in Regulation U. "Material Adverse Effect" shall mean the existence of events, conditions and/or contingencies that have had or are reasonably likely to have (a) a materially adverse effect on the business, operations, properties, assets or financial condition of Holdings and the Subsidiaries, taken as a whole, or (b) a material impairment of the validity or enforceability of, or a material impairment of the material rights, remedies or benefits available to the Lenders, any Issuing Bank, the Administrative Agent or the Collateral Agent under, any Loan Document; provided that, solely for purposes of determining whether or not there has been a Material Adverse Effect on the Closing Date, "Material Adverse Effect" shall mean any event, occurrence or development of a state of circumstances or facts that, individually, or together with any other event, occurrence or development of a state of circumstances or facts, has a material adverse effect on the business, operations, assets, liabilities (except to the extent assumed or retained by the Sellers), results of operations or condition (financial or otherwise) of the Business, taken as a 34 whole; provided further that a "Material Adverse Effect" does not include any effect caused by a change, occurrence or development in (i) events affecting the United States, European or global economy or capital or financial markets generally, (ii) conditions in the industries in which the Acquired Business conducts business, except to the extent such changes, occurrences or developments impact the Business in a materially disproportionate fashion, (iii) laws, regulations or GAAP, or in the authoritative interpretations thereof or in regulatory guidance related thereto, (iv) earthquakes or similar catastrophes, or acts of war, sabotage, terrorism, hostilities, military action or any escalation or worsening thereof (other than actual damage or casualty loss to any member of the Acquired Business or its properties or assets) or (v) the Acquisition Agreement, the announcement thereof and the consummation of the transactions contemplated by the Acquisition Agreement. "Material Indebtedness" shall mean Indebtedness (other than Loans and Letters of Credit) of any one or more of Holdings or any Subsidiary in an aggregate principal amount exceeding U.S.$20.0 million. "Material Real Property" shall mean any Real Property owned by a Loan Party on the Closing Date having a fair market value exceeding $5,000,000 and any after-acquired Real Property owned by a Loan Party having a gross purchase price exceeding $5,000,000 at the time of acquisition. "Material Subsidiary" shall mean each Subsidiary of Holdings now existing or hereafter acquired or formed by Holdings which, on a consolidated basis for such Subsidiary and its Subsidiaries, (a) for the applicable Calculation Period accounted for more than 1.5% of the consolidated revenues of the Domestic Borrower and its Subsidiaries or (b) as of the last day of such Calculation Period, was the owner of more than 1.5% of the Consolidated Total Assets of the Domestic Borrower and its Subsidiaries; provided that at no time shall the total assets of all Subsidiaries that are not Material Subsidiaries exceed, for the applicable Calculation Period, 5.0% of the Consolidated Total Assets of the Domestic Borrower and its Subsidiaries. "Maximum Rate" shall have the meaning assigned to such term in Section 9.09. "Moody's" shall mean Moody's Investors Service, Inc. "Mortgaged Properties" shall mean all Material Real Property which shall be subject to a Mortgage that is delivered pursuant to the terms of this Agreement. "Mortgages" shall mean the mortgages, deeds of trust, assignments of leases and rents and other security documents delivered on the Closing Date pursuant to Section 4.02(e) or after the Closing Date pursuant to Section 5.10, as amended, supplemented or otherwise modified from time to time, with respect to Mortgaged Properties, each substantially in the form of Exhibit D, with such changes thereto as shall be acceptable to the Collateral Agent, including all such changes as may be required to account for local law matters. "Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA with respect to which Holdings, any Borrower, any other Subsidiary or any ERISA Affiliate (a) is making or has an obligation to make contributions, (b) has within any of 35 the preceding six plan years made or had an obligation to make contributions or (c) otherwise could incur liability. "Net Income" shall mean, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends. "Net Proceeds" shall mean: (a) 100% of the cash proceeds actually received by Holdings, or any Wholly-Owned Subsidiary (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise and including casualty insurance settlements and condemnation awards, but only as and when received) from any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition (including any sale and leaseback of assets) to any Person of any asset or assets of Holdings or any Subsidiary (other than those pursuant to Section 6.05(a), (b), (c), (e), (f), (g), (i) or (j)), net of (i) attorneys' fees, accountants' fees, investment banking fees, sales commissions, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, required debt payments and required payments of other obligations relating to the applicable asset (other than pursuant hereto or pursuant to the Senior Subordinated Notes or any Permitted Senior Debt Securities or Permitted Subordinated Debt Securities) and any cash reserve for adjustment in respect of the sale price of such asset established in accordance with GAAP, including without limitation, pension and post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction, other customary expenses and brokerage, consultant and other customary fees actually incurred in connection therewith and (ii) Taxes paid or payable as a result thereof, provided that, except in the case of the sale, transfer or other disposition of an asset or group of related assets resulting in Net Proceeds in excess of U.S.$50.0 million, if no Event of Default exists and Holdings shall deliver a certificate of a Responsible Officer of Holdings to the Administrative Agent promptly following receipt of any such proceeds setting forth Holdings' intention to use any portion of such proceeds, to acquire, maintain, develop, construct, improve, upgrade or repair assets useful in the business of Holdings and the Subsidiaries, or make investments pursuant to Section 6.04(j), in each case within 12 months of such receipt, such portion of such proceeds shall not constitute Net Proceeds except to the extent (1) not so used within such 12-month period and (2) not contracted to be used within such 12-month period and not used within 18 months of such receipt, and provided further that (x) no proceeds realized in a single transaction or series of related transactions shall constitute Net Proceeds unless such proceeds shall exceed U.S.$5.0 million and (y) no proceeds shall constitute Net Proceeds in any fiscal year until the aggregate amount of all such proceeds in such fiscal year shall exceed U.S.$10.0 million, and (b) 100% of the cash proceeds from the incurrence, issuance or sale by Holdings or any Subsidiary of any Indebtedness (other than Excluded Indebtedness), net 36 of all taxes and fees (including investment banking fees), commissions, costs and other expenses, in each case incurred in connection with such issuance or sale. For purposes of calculating the amount of Net Proceeds, fees, commissions and other costs and expenses payable to Holdings or any Borrower or any Affiliate of any of them shall be disregarded, except for financial advisory fees customary in type and amount paid to Affiliates of the Funds. "New Commitments" shall have the meaning assigned to such term in Section 2.21. "New Lender" shall have the meaning assigned to such term in Section 2.21. "New Revolving Facility Commitments" shall have the meaning assigned to such term in Section 2.21. "New Revolving Facility Lender" shall have the meaning assigned to such term in Section 2.21. "New Tranche B Term Commitments" shall have the meaning assigned to such term in Section 2.21. "New Tranche B Term Lender" shall have the meaning assigned to such term in Section 2.21. "New Tranche B Term Loan" shall have the meaning assigned to such term in Section 2.21. "Non-Consenting Lender" shall have the meaning assigned to such term in Section 2.19(c). "Obligations" shall mean all amounts owing to any of the Agents or any Lender pursuant to the terms of this Agreement or any other Loan Document. "Offering Memorandum" shall mean the Offering Memorandum, dated October 14, 2004, in respect of the Senior Subordinated Notes. "Other Taxes" shall mean any and all present or future stamp or documentary taxes or any other excise or property, intangible or mortgage recording taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, the Loan Documents, and any and all interest and penalties related thereto. "Parent Company" shall have the meaning assigned to such term in clause (c) of the definition of "Change in Control" in Section 1.01. "Participant" shall have the meaning assigned to such term in Section 9.04(c). 37 "Participating Member State" means, any member state of the European community that adopts or has adopted the Euro as its lawful currency in accordance with legislation of the European community relating to Economic and Monetary Union. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "Perfection Certificate" shall mean a certificate in the form of Annex I to the Domestic Collateral Agreement or any other form approved by the Collateral Agent. "Permitted Business Acquisition" shall mean any acquisition of all or substantially all the assets of, or all the Equity Interests (other than directors' qualifying shares) in, a Person or division or line of business of a Person (or any subsequent investment made in a Person, division or line of business previously acquired in a Permitted Business Acquisition) if (a) such acquisition was not preceded by, or effected pursuant to, an unsolicited or hostile offer and (b) immediately after giving effect thereto: (i) no Event of Default shall have occurred and be continuing or would result therefrom; (ii) all transactions related thereto shall be consummated in accordance with applicable laws; and (iii) (A) the Domestic Borrower and its Subsidiaries shall be in compliance, on a Pro Forma Basis after giving effect to such acquisition or formation, with the covenants contained in Sections 6.11 and 6.12 recomputed as at the last day of the most recently ended fiscal quarter of the Domestic Borrower and its Subsidiaries, and the Domestic Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer of the Domestic Borrower to such effect, together with all relevant financial information for such Subsidiary or assets, and (B) any acquired or newly formed Subsidiary shall not be liable for any Indebtedness (except for Indebtedness permitted by Section 6.01). "Permitted Business Acquisition Step-Up Period" shall mean (a) any period commencing on the first day on which the Leverage Ratio on a Pro Forma Basis is less than 4.25 to 1.00 (but greater than or equal to 3.25 to 1.00) and ending on the first day thereafter on which the Leverage Ratio on a Pro Forma Basis is either (i) greater than or equal to 4.25 to 1.00 or (ii) less than 3.25 to 1.00 or (b) any period commencing on the first day on which the Leverage Ratio on a Pro Forma Basis is less than 3.25 to 1.00 and ending on the first day thereafter on which the Leverage Ratio on a Pro Forma Basis is greater than or equal to 3.25 to 1.00. "Permitted Cure Security" shall mean (i) a common equity security of Holdings or (ii) any other equity security of Holdings having no mandatory redemption, repurchase or similar requirements prior to 91 days after the Tranche B Dollar Maturity Date, and upon which all dividends or distributions (if any) shall be payable solely in additional shares of such equity security. "Permitted Encumbrances" shall mean (i) with respect to each Real Property, those Liens and other encumbrances permitted by paragraphs (b), (d), (h), (m) and (o) of Section 6.02 and (ii) with respect to each Real Property acquired after the Closing Date, those Liens and other encumbrances permitted by paragraphs (b), (d), (e), (h), (k), (m) and (o) of Section 6.02, provided, however, that in the case of those Liens and other encumbrances permitted by clause (o) of Section 6.02 and as described in clauses (i) and (ii) of this definition, in the event any Loan Party shall constitute the lessor under any such lease or sublease, no Lien created or permitted to 38 be incurred thereby shall be permitted hereunder except to the extent such Lien would otherwise constitute a Permitted Encumbrance. "Permitted Holder" shall mean each of (i) the Funds and the Fund Affiliates and (ii) with respect to not more than 15% of the total voting power of the Equity Interests of Holdings or the Domestic Borrower, the Management Group. "Permitted Investments" shall mean: (a) direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof, in each case with maturities not exceeding two years; (b) time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, or any state thereof having capital, surplus and undivided profits in excess of U.S.$500.0 million and whose long-term debt, or whose parent holding company's long-term debt, is rated A (or such similar equivalent rating or higher) by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act); (c) repurchase obligations with a term of not more than 180 days for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above; (d) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of any Borrower) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moody's, or A-1 (or higher) according to S&P; (e) securities with maturities of two years or less from the date of acquisition issued or fully guaranteed by any State, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by S&P or A-2 by Moody's; (f) shares of mutual funds whose investment guidelines restrict 95% of such funds' investments to those satisfying the provisions of clauses (a) through (e) above; (g) money market funds that (i) comply with the criteria set forth in Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody's and (iii) have portfolio assets of at least U.S.$500.0 million; and (h) time deposit accounts, certificates of deposit and money market deposits in an aggregate face amount not in excess of 1/2 of 1% of the total assets of Holdings and the Subsidiaries, on a consolidated basis, as of the end of Holdings' most recently completed fiscal year. 39 "Permitted Receivables Documents" shall mean all documents and agreements evidencing, relating to or otherwise governing a Permitted Receivables Financing. "Permitted Receivables Financing" shall mean one or more transactions pursuant to which (i) Receivables Assets or interests therein are sold to or financed by one or more Special Purpose Receivables Subsidiaries, and (ii) such Special Purpose Receivables Subsidiaries finance their acquisition of such Receivables Assets or interests therein, or the financing thereof, by selling or borrowing against such Receivables Assets; provided that (A) recourse to Holdings or any Subsidiary (other than the Special Purpose Receivables Subsidiaries) and any obligations or agreements of Holdings or any Subsidiary (other than the Special Purpose Receivables Subsidiaries) in connection with such transactions shall be limited to the extent customary for similar transactions in the applicable jurisdictions (including, to the extent applicable, in a manner consistent with the delivery of a "true sale"/"absolute transfer" opinion with respect to any transfer by Holdings or any Subsidiary (other than a Special Purpose Receivables Subsidiary), (B) the aggregate Receivables Net Investment since the Closing Date shall not exceed U.S.$75.0 million at any time, (C) the Board of Directors of the Domestic Borrower shall have determined in good faith that each such Permitted Receivables Financing (including financing terms, covenants, termination events and other provisions) is in the aggregate economically fair and reasonable to the Domestic Borrower and the applicable Special Purpose Receivables Subsidiary, (D) all sales of Receivables Assets or interests therein to any Special Purpose Receivables Subsidiary are made at fair market value (as determined in good faith by the Domestic Borrower), and (E) the financing terms, covenants, termination events and other provisions thereof will be market terms (as determined in good faith by the Domestic Borrower) and may include representations, warranties, covenants, indemnities and guarantees of performance which the Domestic Borrower has determined in good faith to be customary in a receivables financing including, without limitation, those relating to the servicing of the assets of a Special Purpose Receivables Subsidiary, it being understood and agreed that any obligation of a seller of receivables to repurchase receivables arising as a result of a breach of a representation, warranty or covenant or otherwise, including as a result of a receivable or portion thereof becoming subject to any asserted defense, dispute, off-set or counterclaim of any kind as a result of any action taken by, any failure to take action by or by other event relating to the seller, shall be deemed customary. "Permitted Refinancing Indebtedness" shall mean any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to "Refinance"), the Indebtedness being Refinanced (or previous refinancings thereof constituting Permitted Refinancing Indebtedness); provided that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest and premium thereon), (b) the average life to maturity of such Permitted Refinancing Indebtedness is greater than or equal to that of the Indebtedness being Refinanced, (c) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing Indebtedness shall be subordinated in right of payment to such Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being Refinanced, (d) no Permitted Refinancing Indebtedness shall have different obligors, or greater guarantees or security, than the Indebtedness being Refinanced and (e) if the Indebtedness being Refinanced is 40 secured by any collateral (whether equally and ratably with, or junior to, the Secured Parties or otherwise), such Permitted Refinancing Indebtedness may be secured by such collateral (including in respect of working capital facilities of Foreign Subsidiaries otherwise permitted under this Agreement only, any collateral pursuant to after-acquired property clauses to the extent any such collateral secured the Indebtedness being Refinanced) on terms no less favorable to the Secured Parties than those contained in the documentation governing the Indebtedness being Refinanced. "Permitted Senior Debt Securities" shall mean unsecured senior notes issued by the Domestic Borrower, (i) the terms of which do not provide for any scheduled repayment, mandatory redemption or sinking fund obligation prior to the Tranche B Dollar Maturity Date, (ii) the covenants (other than the lien covenant and the subsidiary debt covenant), events of default, subsidiary guarantees and other terms of which (other than interest rate and redemption premiums), taken as a whole, are not more restrictive to the Domestic Borrower and its Subsidiaries than those in the Senior Subordinated Notes, (iii) the lien covenant and the subsidiary debt covenant are on market terms for similar issuers at the time of issuance and (iv) of which no subsidiary of the Domestic Subsidiary (other than a Domestic Subsidiary Loan Party) is an obligor under such notes that is not an obligor under the Senior Subordinated Notes. "Permitted Subordinated Debt Securities" shall mean unsecured subordinated notes issued by the Domestic Borrower, (i) the terms of which do not provide for any scheduled repayment, mandatory redemption or sinking fund obligation prior to the date on which the final maturity of the Senior Subordinated Notes occurs (as in effect on the Closing Date), (ii) the covenants, events of default, Subsidiary guarantees and other terms of which (other than interest rate and redemption premiums), taken as a whole, are not more restrictive to the Domestic Borrower and its Subsidiaries than those in the Senior Subordinated Notes and (iii) of which no Subsidiary of the Domestic Subsidiary (other than a Domestic Subsidiary Loan Party) is an obligor under such notes that is not an obligor under the Senior Subordinated Notes. "Person" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company or government, individual or family trusts, or any agency or political subdivision thereof. "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA which is maintained or contributed to by Holdings, any Borrower, any other Subsidiary or any ERISA Affiliate or with respect to which Holdings, any Borrower or any other Subsidiary could incur liability (including under Section 4069 of ERISA). "Platform" shall have the meaning assigned to such term in Section 9.17(b). "Pledged Collateral" shall have the meaning assigned to such term in the applicable Collateral Agreement. "primary obligor" shall have the meaning given such term in the definition of the term "Guarantee." 41 "Prior Liens" shall mean Liens which, pursuant to the provisions of any Security Document, are or may be superior to the Lien of such Security Document. "Pro Forma Adjusted EBITDA" shall mean, with respect to the Domestic Borrower and its Subsidiaries on a consolidated basis for any period, the EBITDA for such period adjusted (a) as required or permitted by Regulation S-X of the Securities Act, (b) to reflect FRC's good faith estimate of the additional costs that would have been incurred by the Domestic Borrower (i) as a stand-alone entity and/or (ii) to implement the Domestic Borrower's business plan previously described to the Joint Lead Arrangers (in each case such adjustments shall be in form and substance reasonably satisfactory to the Joint Lead Arrangers) and (c) as shall be reasonably acceptable to the Joint Lead Arrangers. "Pro Forma Basis" shall mean, as to any Person, for any events as described in clauses (i) and (ii) below that occur subsequent to the commencement of a period for which the financial effect of such events is being calculated, and giving effect to the events for which such calculation is being made, such calculation as will give pro forma effect to such events as if such events occurred on the first day of the four consecutive fiscal quarter period ended on or before the occurrence of such event (the "Reference Period"): (i) in making any determination of EBITDA, pro forma effect shall be given to any Asset Disposition and to any Asset Acquisition (or any similar transaction or transactions that require a waiver or consent of the Required Lenders pursuant to Section 6.04 or 6.05), in each case that occurred during the Reference Period (or, in the case of determinations made pursuant to the definition of the term "Asset Acquisition," occurring during the Reference Period or thereafter and through and including the date upon which the respective Asset Acquisition is consummated); and (ii) in making any determination on a Pro Forma Basis, (x) all Indebtedness (including Indebtedness incurred or assumed and for which the financial effect is being calculated, whether incurred under this Agreement or otherwise, but excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes and amounts outstanding under any Permitted Receivables Financing, in each case, not to finance any acquisition) incurred or permanently repaid during the Reference Period (or, in the case of determinations made pursuant to the definition of the term "Asset Acquisition," occurring during the Reference Period or thereafter and through and including the date upon which the respective Asset Acquisition is consummated) shall be deemed to have been incurred or repaid at the beginning of such period and (y) Interest Expense of such Person attributable to interest on any Indebtedness, for which pro forma effect is being given as provided in preceding clause (x), bearing floating interest rates shall be computed on a pro forma basis as if the rates that would have been in effect during the period for which pro forma effect is being given had been actually in effect during such periods. Pro forma calculations made pursuant to the definition of the term "Pro Forma Basis" shall be determined in good faith by a Responsible Officer of the Domestic Borrower and, for any fiscal period ending on or prior to the first anniversary of an Asset Acquisition or Asset Disposition (or any similar transaction or transactions that require a waiver or consent of the Required Lenders 42 pursuant to Section 6.04 or 6.05), may include adjustments to reflect operating expense reductions and other operating improvements or synergies reasonably expected to result from such Asset Acquisition, Asset Disposition or other similar transaction, to the extent that the Domestic Borrower delivers to the Administrative Agent (i) a certificate of a Financial Officer of the Domestic Borrower setting forth such operating expense reductions and other operating improvements or synergies and (ii) information and calculations supporting in reasonable detail such estimated operating expense reductions and other operating improvements or synergies. "Projections" shall mean the projections of the Domestic Borrower and its Subsidiaries included in the Information Memorandum and any other projections and any forward-looking statements (including statements with respect to booked business) of such entities furnished to the Lenders or the Administrative Agent by or on behalf of Holdings, the Borrowers or any of their Subsidiaries prior to the Closing Date. "Qualifying Lender" means a Lender that is beneficially entitled to amounts payable to such Lender in respect of an advance under a Loan Document and is: (a) a Lender: (i) which is a bank (as defined for the purpose of section 349 of the United Kingdom Income and Corporation Taxes Act 1988) making an advance under a Loan Document; or (ii) in respect of an advance made under a Loan Document by a person that was a bank (as defined for the purpose of section 349 of the United Kingdom Income and Corporation Taxes Act 1988) at the time that that advance was made, and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance; or (b) a Lender which is treated as a resident of a jurisdiction having a double taxation agreement (a "Treaty") with the United Kingdom which makes provision for full exemption from tax imposed by the United Kingdom on interest and which does not carry on a business in the United Kingdom through a permanent establishment with which that Lender's participation in the Loan is effectively connected (a "Treaty Lender"). "Quotation Day" means, in relation to any period for which an interest rate is to be determined: (a) (if the currency is Sterling) the first day of that period; (b) (if the currency is Euro) two TARGET Days before the first day of that period; or (c) (for any other currency) two Business Days before the first day of that period, unless market practice differs in the Relevant Interbank Market for a currency, in which case the Quotation Day for that currency will be determined by the Administrative 43 Agent in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of these days). "Real Property" shall mean, collectively, all right, title and interest of any Borrower or any other Subsidiary in and to any and all parcels of real property owned or operated by any Borrower or any other Subsidiary together with all Improvements and appurtenant fixtures, equipment, personal property, easements and other property and rights incidental to the ownership, lease or operation thereof. "Receivables Assets" shall mean accounts receivable (including any bills of exchange) and related assets and property from time to time originated, acquired or otherwise owned by the Domestic Borrower or any Subsidiary. "Receivables Net Investment" shall mean the aggregate cash amount paid by the lenders or purchasers under any Permitted Receivables Financing in connection with their purchase of, or the making of loans secured by, Receivables Assets or interests therein, as the same may be reduced from time to time by collections with respect to such Receivables Assets or otherwise in accordance with the terms of the Permitted Receivables Documents; provided, however, that if all or any part of such Receivables Net Investment shall have been reduced by application of any distribution and thereafter such distribution is rescinded or must otherwise be returned for any reason, such Receivables Net Investment shall be increased by the amount of such distribution, all as though such distribution had not been made. "Reference Period" shall have the meaning assigned to such term in the definition of the term "Pro Forma Basis." "Refinance" shall have the meaning assigned to such term in the definition of the term "Permitted Refinancing Indebtedness," and "Refinanced" shall have a meaning correlative thereto. "Refinanced Term Loans" shall have the meaning assigned to such term in Section 9.08(e). "Register" shall have the meaning assigned to such term in Section 9.04(b). "Regulation U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Related Parties" shall mean, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. 44 "Release" shall mean any placing, spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or depositing in, into or onto the Environment. "Relevant Interbank Market" means, in relation to the LIBO Rate, the principal London offices of Citibank International plc and, in relation to the EURIBO Rate, the principal office in New York City of Citibank, N.A. or such other banks as may be appointed by the Administrative Agent with the consent of the Borrowers. "Remaining Present Value" shall mean, as of any date with respect to any lease, the present value as of such date of the scheduled future lease payments with respect to such lease, determined with a discount rate equal to a market rate of interest for such lease reasonably determined at the time such lease was entered into. "Replacement Term Loans" shall have the meaning assigned to such term in Section 9.08(e). "Reportable Event" shall mean any reportable event as defined in Section 4043(c) of ERISA or the regulations issued thereunder, other than those events as to which the 30-day notice period referred to in Section 4043(c) of ERISA has been waived, with respect to a Plan. "Required Lenders" shall mean, at any time, Lenders having (a) Loans (other than Swingline Loans) outstanding (calculated in respect of Loans denominated in a Foreign Currency on the Equivalent thereof in Dollars at such time), (b) Revolving L/C Exposures, (c) Swingline Exposures, and (d) Available Unused Commitments, that taken together, represent more than 50% of the sum of (w) all Loans (other than Swingline Loans) outstanding (calculated in respect of Loans denominated in a Foreign Currency on the Equivalent thereof in Dollars at such time), (x) Revolving L/C Exposures, (y) Swingline Exposures, and (z) the total Available Unused Commitments at such time. The Loans, Revolving L/C Exposures, Swingline Exposures and Available Unused Commitment of any Defaulting Lender shall be disregarded in determining Required Lenders at any time. "Required Percentage" shall mean, with respect to an Excess Cash Flow Period, (i) 75%, if the Leverage Ratio at the end of such Excess Cash Flow Period is greater than 5.00 to 1.00, (ii) 50%, if the Leverage Ratio at the end of such Excess Cash Flow Period is greater than 4.00 to 1.00 but less than or equal to 5.00 to 1.00, (iii) 25%, if the Leverage Ratio at the end of such Excess Cash Flow Period is greater than 3.00 to 1.00 and equal to or less than 4.00 to 1.00, and (iv) 0%, if the Leverage Ratio at the end of such Excess Cash Flow Period is equal to or less than 3.00 to 1.00. "Responsible Officer" of any Person shall mean any executive officer or Financial Officer of such Person and any other officer or similar official thereof responsible for the administration of the obligations of such Person in respect of this Agreement. "Revolving Facility" shall mean the Revolving Facility Commitments and the extensions of credit made hereunder by the Revolving Facility Lenders. 45 "Revolving Facility Borrowing" shall mean a Borrowing comprised of Revolving Facility Loans. "Revolving Facility Commitment" shall mean, with respect to each Revolving Facility Lender, the commitment of such Revolving Facility Lender to make Revolving Facility Loans pursuant to Section 2.01, expressed as a Dollar amount representing the maximum aggregate permitted amount of such Revolving Facility Lender's Revolving Facility Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender under Section 9.04. The initial Dollar amount of each Revolving Facility Lender's Revolving Facility Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Revolving Facility Lender shall have assumed its Revolving Facility Commitment, as applicable. The aggregate Dollar amount of the Revolving Facility Commitments on the date hereof is U.S.$300.0 million. "Revolving Facility Credit Exposure" shall mean, at any time, the sum of (a) the aggregate principal amount of the Revolving Facility Loans outstanding at such time (calculated in respect of Loans denominated in a Foreign Currency on the Equivalent thereof in Dollars at such time), (b) the Swingline Exposure at such time and (c) the Revolving L/C Exposure at such time (calculated in respect of Revolving L/C Exposure denominated in a Foreign Currency on the Equivalent thereof in Dollars at such time). The Revolving Facility Credit Exposure of any Revolving Facility Lender at any time shall be the sum of (a) the aggregate principal amount of such Revolving Facility Lender's Revolving Facility Loans outstanding at such time (calculated in respect of Loans denominated in a Foreign Currency on the Equivalent thereof in Dollars at such time) and (b) such Revolving Facility Lender's Revolving Facility Percentage of the Swingline Exposure and Revolving L/C Exposure at such time (calculated in respect of Revolving L/C Exposure denominated in a Foreign Currency on the Equivalent thereof in Dollars at such time). "Revolving Facility Lender" shall mean a Lender with a Revolving Facility Commitment or with outstanding Revolving Facility Loans (including any New Revolving Facility Lenders). "Revolving Facility Loan" shall mean a Loan made by a Revolving Facility Lender pursuant to Section 2.01(b) or a New Revolving Facility Lender pursuant to Section 2.21. Each Revolving Facility Revolving Loan shall be a Eurocurrency Loan or an ABR Revolving Loan. "Revolving Facility Maturity Date" shall mean October 29, 2009. "Revolving Facility Percentage" shall mean, with respect to any Revolving Facility Lender, the percentage of the total Revolving Facility Commitments represented by such Lender's Revolving Facility Commitment. If the Revolving Facility Commitments have terminated or expired, the Revolving Facility Percentages shall be determined based upon the Revolving Facility Commitments most recently in effect, giving effect to any assignments pursuant to Section 9.04. 46 "Revolving L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn amount of all Letters of Credit outstanding at such time (calculated in respect of Letters of Credit denominated in a Foreign Currency on the Equivalent thereof in Dollars at such time) and (b) the aggregate principal amount of all L/C Disbursements that have not yet been reimbursed at such time (calculated in respect of L/C Disbursements denominated in a Foreign Currency on the Equivalent thereof in Dollars at such time). The Revolving L/C Exposure of any Revolving Facility Lender at any time shall mean its Revolving Facility Percentage of the aggregate Revolving L/C Exposure at such time. "S&P" shall mean Standard & Poor's Ratings Group, Inc. "Sale and Lease-Back Transaction" shall have the meaning assigned to such term in Section 6.03. "Screen Rate" means: (a) in relation to the LIBO Rate, the British Bankers' Association Interest Settlement Rate for the relevant currency and period; and (b) in relation to the EURIBO Rate, the percentage rate per annum determined by the Banking Federation of the European Union for the relevant period, displayed on the appropriate page of the Telerate screen. If the agreed page is replaced or service ceases to be available, the Administrative Agent may specify another page or service displaying the appropriate rate after consultation with the Foreign Borrowers and the Lenders. "SEC" shall mean the Securities and Exchange Commission or any successor thereto. "Secured Parties" shall mean the "Secured Parties" as defined in the Collateral Agreements. "Securities Act" shall mean the Securities Act of 1933, as amended. "Security Documents" shall mean the Mortgages, the Collateral Agreements and each of the security agreements and other instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 5.10. "Seller" shall have the meaning assigned to such term in the first recital hereto. "Senior Subordinated Note Documents" shall mean the Senior Subordinated Notes and the Senior Subordinated Note Indenture. "Senior Subordinated Note Indenture" shall mean the Indenture dated as of October 29, 2004 under which the Senior Subordinated Notes were issued, among the Domestic Borrower and Citibank, N.A., as trustee, as in effect on the Closing Date and as amended, restated, supplemented or otherwise modified from time to time in accordance with the requirements thereof and of this Agreement. 47 "Senior Subordinated Notes" shall mean the Domestic Borrower's 7-3/8% Senior Subordinated Notes due 2014 issued pursuant to the Senior Subordinated Note Indenture and any notes issued by the Domestic Borrower in exchange for, and as contemplated by, the Senior Subordinated Notes and the related registration rights agreement with substantially identical terms as the Senior Subordinated Notes. "Special Purpose Receivables Subsidiary" shall mean a direct or indirect Subsidiary of Holdings established in connection with a Permitted Receivables Financing for the acquisition of Receivables Assets or interests therein, and which is organized in a manner intended to reduce the likelihood that it would be substantively consolidated with Holdings or any of the Subsidiaries (other than Special Purpose Receivables Subsidiaries) in the event Holdings or any such Subsidiary becomes subject to a proceeding under the U.S. Bankruptcy Code (or other insolvency law). "Statutory Reserves" shall mean, with respect to any currency, any reserve, liquid asset or similar requirements established by any Governmental Authority of the United States of America or of the jurisdiction of such currency or any jurisdiction in which Loans in such currency are made to which banks in such jurisdiction are subject for any category of deposits or liabilities customarily used to fund loans in such currency or by reference to which interest rates applicable to Loans in such currency are determined. "Sterling" shall mean the lawful currency of the United Kingdom of Great Britain and Northern Ireland. "Sub-Agent" shall mean Citibank International plc. "Subordinated Intercompany Debt" shall have the meaning assigned to such term in Section 6.01(e). "subsidiary" shall mean, with respect to any Person (herein referred to as the "parent"), any corporation, partnership, association or other business entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, directly or indirectly, owned, Controlled or held by such Person. "Subsidiary" shall mean a subsidiary; provided that unless the context otherwise requires, "Subsidiary" shall mean a subsidiary of Holdings. "Subsidiary Loan Party" shall mean a Domestic Subsidiary Loan Party or a Foreign Subsidiary Loan Party. "Supply Agreement" shall mean the Supply Agreement, dated October 29, 2004 by and between Dresser-Rand Company and Ingersoll-Rand Company Limited. "Swap Agreement" shall mean any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value 48 or any similar transaction or any combination of these transactions, provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of Holdings or any of its Subsidiaries shall be a Swap Agreement. "Swingline Borrowing" shall mean a Borrowing comprised of Swingline Loans. "Swingline Borrowing Request" shall mean a request by any Borrower substantially in the form of Exhibit C-2. "Swingline Commitment" shall mean, with respect to each Swingline Lender, the commitment of such Swingline Lender to make Swingline Loans pursuant to Section 2.04. The aggregate amount of the Swingline Commitments on the Closing Date is U.S.$30.0 million. "Swingline Exposure" shall mean at any time the aggregate principal amount of all outstanding Swingline Borrowings at such time. The Swingline Exposure of any Revolving Facility Lender at any time shall mean its Revolving Facility Percentage of the aggregate Swingline Exposure at such time. "Swingline Lender" shall mean Citicorp North America, Inc., in its capacity as a lender of Swingline Loans, and/or any other Revolving Facility Lender designated as such by the Domestic Borrower after the Closing Date that is reasonably satisfactory to the Domestic Borrower and the Administrative Agent and executes a counterpart to this Agreement as a Swingline Lender. "Swingline Loans" shall mean the swingline loans made to any Borrower pursuant to Section 2.04. "Taxes" shall mean any and all present or future taxes, levies, imposts, duties (including stamp duties), deductions, charges (including ad valorem charges) or withholdings imposed by any Governmental Authority and any and all interest and penalties related thereto. "Term Loan" shall mean any Tranche B Dollar Term Loan and any Tranche B Euro Term Loan. "Test Period" shall mean, on any date of determination, the period of four consecutive fiscal quarters of the Domestic Borrower then most recently ended (taken as one accounting period). "Title Company" shall mean Title Associates Inc., as agent for Stewart Title Insurance Company, or such other nationally recognized title company as shall be selected by the Administrative Agent. "Tranche B Dollar Facility" shall mean the Tranche B Dollar Term Loan Commitments and the Tranche B Dollar Term Loans made hereunder. "Tranche B Dollar Installment Date" shall have the meaning assigned to such term in Section 2.10(a)(i). 49 "Tranche B Dollar Maturity Date" shall mean October 29, 2011. "Tranche B Dollar Term Borrowing" shall mean a Borrowing comprised of Tranche B Dollar Term Loans. "Tranche B Dollar Term Lender" shall mean a Lender with a Tranche B Dollar Term Loan Commitment or with outstanding Tranche B Dollar Term Loans (including any New Tranche B Dollar Term Lender). "Tranche B Dollar Term Loan Commitment" shall mean with respect to each Lender, the amount set forth on Schedule 2.01. The aggregate amount of the Tranche B Dollar Term Loan Commitments on the Closing Date is U.S.$295.0 million. "Tranche B Dollar Term Loans" shall mean the term loans denominated in Dollars made by the Lenders to the Domestic Borrower pursuant to Section 2.01(a) or 2.21 (including New Tranche B Term Loans denominated in Dollars). "Tranche B Euro Facility" shall mean the Tranche B Euro Term Loan Commitments and the Tranche B Euro Term Loans made hereunder. "Tranche B Euro Installment Date" shall have the meaning assigned to such term in Section 2.10(a)(ii). "Tranche B Euro Maturity Date" shall mean October 29, 2011. "Tranche B Euro Term Borrowing" shall mean a Borrowing comprised of Tranche B Euro Term Loans. "Tranche B Euro Term Lender" shall mean a Lender with a Tranche B Euro Term Loan Commitment or with outstanding Tranche B Euro Term Loans (including any New Tranche B Euro Term Lender). "Tranche B Euro Term Loan Commitment" shall mean with respect to each Lender, the amount set forth on Schedule 2.01. The Equivalent in Dollars of the aggregate amount of the Tranche B Euro Term Loan Commitments on the Closing Date is U.S.$100,032,550. "Tranche B Euro Term Loans" shall mean the term loans denominated in Euros made by the Lenders to the Foreign Borrowers pursuant to Section 2.01(a) or 2.21 (including New Tranche B Term Loans denominated in Euro). "Tranche B Term Borrowings" shall mean Tranche B Dollar Term Borrowings and Tranche B Euro Term Borrowings. "Tranche B Term Loans" shall mean Tranche B Dollar Term Loans and Tranche B Euro Term Loans. 50 "Transaction Documents" shall mean the Acquisition Documents, the Senior Subordinated Note Documents, the Equity Financing Documents and the Loan Documents. "Transactions" shall mean, collectively, the transactions to occur on or prior to the Closing Date pursuant to the Transaction Documents, including (a) the consummation of the Acquisition; (b) the restructuring described in Annex A, (c) the execution and delivery of the Loan Documents and the initial borrowings hereunder; (d) the Equity Financing; (e) the issuance of the Senior Subordinated Notes; and (f) the payment of all fees and expenses owing in connection with the foregoing. "Transition Services Agreement" shall mean the Transition Services Agreement, dated October 29, 2004 by and between Ingersoll-Rand Company Limited and Dresser-Rand Holdings, LLC. "Trigger Date" shall mean the date of delivery of financial statements for the first fiscal quarter ending at least six months after the Closing Date. "Type," when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term "Rate" shall include the Adjusted LIBO Rate and the Alternate Base Rate. "UCC" shall mean (i) the Uniform Commercial Code as in effect in the applicable state of jurisdiction and (ii) certificate of title or other similar statutes relating to "rolling stock" or barges as in effect in the applicable jurisdiction. "UK Borrower" shall have the meaning assigned to such term in the introductory paragraph of this Agreement. "UK Debenture" shall mean, collectively, one or more debentures, as amended, supplemented or otherwise modified from time to time, substantially in the form of Exhibit E-2A, among the UK Loan Parties and the Collateral Agent. "UK Obligations" shall mean all amounts owing to any of the Agents or any Lender by any UK Loan Party pursuant to the terms of this Agreement or any other Loan Document. "UK Loan Party" shall mean the UK Borrower and each UK Subsidiary Loan Party. "UK Share Charge" shall mean the charge entered into by the Domestic Borrower over its shares in the UK Borrower, substantially in the form of Exhibit E-2B. "UK Subsidiary Loan Party" shall mean each direct Wholly Owned Subsidiary of the UK Borrower that (a) is (i) organized under the same jurisdiction as the UK Borrower, (ii) a Foreign Subsidiary and (iii) a Material Subsidiary, and (b) is not (i) a Special Purpose Receivables Subsidiary, (ii) listed on Schedule 1.01(a), or (iii) a Subsidiary whose guarantee of the UK Obligations is prohibited under Section 9.23; provided that neither Dresser-Rand UK1 51 nor Dresser-Rand UK2 shall be a UK Subsidiary Loan Party unless it has satisfied the requirement set forth in clause (b)(i) of the definition of Collateral and Guarantee Requirement. "U.S. Bankruptcy Code" shall mean Title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors. "U.S. Patriot Act" shall have the meaning assigned to such term in Section 3.08(a). "Wholly Owned Subsidiary" of any Person shall mean a subsidiary of such Person, all of the Equity Interests of which (other than directors' qualifying shares or nominee or other similar shares required pursuant to applicable law) are owned by such Person or another Wholly Owned Subsidiary of such Person. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. "Working Capital" shall mean, with respect to the Domestic Borrower and its Subsidiaries on a consolidated basis at any date of determination, Current Assets at such date of determination minus Current Liabilities at such date of determination; provided that, for purposes of calculating Excess Cash Flow, increases or decreases in Working Capital shall be calculated without regard to any changes in Current Assets or Current Liabilities as a result of (a) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between current and noncurrent or (b) the effects of purchase accounting. SECTION 1.02. Terms Generally. The definitions set forth or referred to in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Domestic Borrower notifies the Administrative Agent that the Domestic Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Closing Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Domestic Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. 52 SECTION 1.03. Effectuation of Transfers. Each of the representations and warranties of Holdings and the Borrowers contained in this Agreement (and all corresponding definitions) are made after giving effect to the Transactions (other than those referred in clause (b) of the definition thereof which are indicated to be concluded after the Closing Date), unless the context otherwise requires. SECTION 1.04. Financial Assistance. None of the proceeds of any Loan under this Agreement may be used in any way that infringes Section 151 of the Companies Act unless the use of such proceeds is lawfully permitted by virtue of the procedure set out in Sections 155 to 158 of the Companies Act. ARTICLE II THE CREDITS SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees (a) (i) to make Tranche B Dollar Term Loans to the Domestic Borrower and the UK Borrower on the Closing Date in Dollars in a principal amount that will not result in the aggregate amount of such Lender's Tranche B Dollar Term Loans exceeding such Lender's Tranche B Dollar Term Loan Commitment and (ii) to make Tranche B Euro Term Loans to the French Borrower on the Closing Date in Euros in an aggregate principal amount that will not result in the aggregate amount of such Lender's Tranche B Euro Term Loans exceeding such Lender's Tranche B Euro Term Loan Commitment; (b) to make Revolving Facility Loans denominated in Dollars or in a Foreign Currency to any Borrower, in each case from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lender's Revolving Facility Credit Exposure exceeding such Lender's Revolving Facility Commitment, (ii) the Revolving Facility Credit Exposure exceeding the total Revolving Facility Commitments, (iii) the Revolving Credit Exposure denominated in Euros exceeding the Equivalent in Dollars determined on the date of delivery of the applicable Borrowing Request of U.S.$200 million, (iv) the Revolving Credit Exposure denominated in Sterling exceeding the Equivalent in Dollars determined on the date of delivery of the applicable Borrowing Request of U.S.$75 million, (v) the aggregate Revolving Facility Loans exceeding the sum of U.S.$15 million (plus working capital adjustments resulting in an increased purchase price for the Acquisition identified to the Lenders at least three days prior to the Closing Date) on the Closing Date, and (vi) the Revolving L/C Exposure exceeding U.S.$180 million on the Closing Date. Within the foregoing limits and subject to the terms and conditions set forth herein, each Borrower may borrow, prepay and reborrow Revolving Facility Loans. Amounts repaid or prepaid in respect of Tranche B Dollar Term Loans or Tranche B Euro Term Loans may not be reborrowed. 53 SECTION 2.02. Loans and Borrowings(a) Each Loan shall be made as part of a Borrowing consisting of Loans under the same Facility and of the same Type and in the same currency made by the Lenders ratably in accordance with their respective Commitments under the applicable Facility (or, in the case of Swingline Loans, in accordance with their respective Swingline Commitments); provided, however, that Revolving Facility Loans shall be made by the Revolving Facility Lenders ratably in accordance with their respective Revolving Facility Percentages on the date such Loans are made hereunder. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.14, each Borrowing denominated in Dollars shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Domestic Borrower may request in accordance herewith. Unless and until exchanged into the Equivalent in Dollars thereof and converted into ABR Loans in accordance with Section 2.07(e), 2.14 or 2.22, each Borrowing denominated in a Foreign Currency shall be comprised entirely of Eurocurrency Loans. Each Lender at its option may make any ABR Loan or Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of any Borrower to repay such Loan in accordance with the terms of this Agreement and such Lender shall not be entitled to any amounts payable under Section 2.15, 2.17 or 2.20 solely in respect of increased costs resulting from such exercise and existing at the time of such exercise. (c) At the commencement of each Interest Period for any Eurocurrency Revolving Facility Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum; provided that a Eurocurrency Revolving Facility Borrowing may be in an aggregate amount that is equal to the entire unused balance of the Revolving Facility Commitments or that is required to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e). At the time that each ABR Revolving Facility Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum; provided that an ABR Revolving Facility Borrowing may be in an aggregate amount that is equal to the entire unused balance of the Revolving Facility Commitments or that is required to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e). Each Swingline Borrowing shall be in an amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. Borrowings of more than one Type and under more than one Facility may be outstanding at the same time; provided that there shall not at any time be more than a total of (i) three (3) Eurocurrency Borrowings outstanding under each of the Tranche B Dollar Facility and the Tranche B Euro Facility and (ii) twenty (20) Eurocurrency Borrowings outstanding under the Revolving Facility. (d) Notwithstanding any other provision of this Agreement, no Borrower shall be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Facility Maturity Date, the Tranche B Dollar Maturity Date or the Tranche B Euro Maturity Date, as applicable. 54 SECTION 2.03. Requests for Borrowings. To request a Revolving Facility Borrowing and/or a Tranche B Dollar Term Borrowing and/or a Tranche B Euro Term Borrowing, the applicable Borrower shall notify the Administrative Agent (and, in the case of a Revolving Facility Borrowing consisting of Loans denominated in a Foreign Currency or a Tranche B Euro Term Borrowing, simultaneously to the Sub-Agent) of such request by telephone (a) in the case of a Eurocurrency Borrowing, not later than 11:00 a.m., Local Time, three (3) Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon, Local Time, one (1) Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Facility Borrowing to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e) may be given not later than 10:00 a.m., Local Time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower making such Borrowing Request. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) whether the requested Borrowing is to be a Revolving Facility Borrowing; (ii) the aggregate amount of the requested Borrowing (expressed in Dollars); (iii) the date of such Borrowing, which shall be a Business Day; (iv) in the case of a Borrowing denominated in Dollars, whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; (v) in the case of a Eurocurrency Borrowing, the currency and the initial Interest Period to be applicable thereto; and (vi) the location and number of the Borrower's account to which funds are to be disbursed. If no election as to the Type of Revolving Facility Borrowing is specified, then the requested Revolving Facility Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Borrowing, then the Borrower requesting such Eurocurrency Borrowing shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Swingline Loans. (a) Subject to the terms and conditions set forth herein, each Swingline Lender agrees to make Swingline Loans to any of the Borrowers from time to time during the Availability Period, in an aggregate principal amount at any time outstanding that will not result in (x) the aggregate principal amount of outstanding Swingline Loans exceeding the Swingline Commitment or (y) the Revolving Facility Credit Exposure exceeding the total Revolving Facility Commitments; provided that no Swingline Lender shall be required to make a Swingline Loan to refinance an outstanding Swingline Borrowing. Interest on Swingline Loans denominated in Foreign Currency will be calculated based on the overnight 55 EURIBO Rate. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow Swingline Loans. (b) To request a Swingline Borrowing, the applicable Borrower shall notify the Administrative Agent and the Swingline Lenders of such request by telephone (confirmed by a Swingline Borrowing Request by telecopy) (x) in the case of a Swingline Borrowing denominated in Euros or Sterling, not later than 11:00 a.m., Local Time, one (1) Business Day before the date of the proposed Swingline Borrowing or (y) in the case of a Swingline Borrowing denominated in Dollars, not later than 11:00 a.m., Local Time on the day of the proposed Swingline Borrowing. Each such notice and Swingline Borrowing Request shall be irrevocable and shall specify (i) the requested date (which shall be a Business Day), (ii) the amount of the requested Swingline Borrowing (expressed in Dollars), (iii) in the case of a Swingline Borrowing denominated in Euros or Sterling, the currency requested, (iv) the term of such Swingline Loan (which, in the case of a Swingline Borrowing denominated in Euros or Sterling, shall not be more than 7 Business Days) and (v) the location and number of the Borrower's account to which funds are to be disbursed. Each Swingline Lender shall make each Swingline Loan to be made by it hereunder in accordance with Section 2.02(a) on the proposed date thereof by wire transfer of immediately available funds by 3:00 p.m., Local Time, to the account of the applicable Borrower (or, in the case of a Swingline Borrowing made to finance the reimbursement of an L/C Disbursement as provided in Section 2.05(e), by remittance to the applicable Issuing Bank). (c) A Swingline Lender may by written notice given to the Administrative Agent (and to the other Swingline Lenders) not later than 10:00 a.m., Local Time on any Business Day, require the Revolving Facility Lenders to acquire participations on such Business Day in all or a portion of the outstanding Swingline Loans made by it. Such notice shall specify the aggregate amount of such Swingline Loans in which the Revolving Facility Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each such Lender, specifying in such notice such Lender's Revolving Facility Percentage of such Swingline Loan or Loans. Each Revolving Facility Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent for the account of the applicable Swingline Lender, such Revolving Facility Lender's Revolving Facility Percentage of such Swingline Loan or Loans. Each Revolving Facility Lender acknowledges and agrees that its respective obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Revolving Facility Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Revolving Facility Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the applicable Swingline Lender the amounts so received by it from the Revolving Facility Lenders. The Administrative Agent shall notify the applicable Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph (c), and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the applicable Swingline Lender. Any amounts received by a Swingline Lender from the applicable Borrower (or other party on behalf of such Borrower) in respect of a Swingline Loan after receipt by such 56 Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Facility Lenders that shall have made their payments pursuant to this paragraph and to such Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to such Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the applicable Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrowers of any default in the payment thereof. SECTION 2.05. Letters of Credit. (a) General. On the Closing Date, Citibank, N.A., in its capacity as an Issuing Bank shall issue the IR Letter of Credit. Subject to the terms and conditions set forth herein, each Borrower may request the issuance of Letters of Credit for its own account in a form reasonably acceptable to the applicable Issuing Bank, at any time and from time to time during the Availability Period and prior to the date that is five (5) Business Days prior to the Revolving Facility Maturity Date. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by any Borrower to, or entered into by such Borrower with, an Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal (other than an automatic renewal in accordance with paragraph (c) of this Section) or extension of an outstanding Letter of Credit), a Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Issuing Bank) to the applicable Issuing Bank and the Administrative Agent (two (2) Business Days in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit and the currency (either in Dollars or a Foreign Currency) in which it is denominated, the name and address of the beneficiary thereof and such other information as shall be necessary to issue, amend, renew or extend such Letter of Credit. If requested by the applicable Issuing Bank, a Borrower also shall submit a letter of credit application on such Issuing Bank's standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the applicable Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, (i) the Revolving L/C Exposure shall not exceed U.S.$300.0 million, (ii) the Revolving Facility Credit Exposure shall not exceed the total Revolving Facility Commitments and (iii) the Equivalent in Dollars of the Revolving L/C Exposure denominated in a Foreign Currency determined on the date of such issuance, amendment, renewal or extension shall not exceed (A) in the case such Foreign Currency is Euros, U.S.$200 million, and (B) in the case such Foreign Currency is Sterling, U.S.$75 million. 57 (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (A) the date one (1) year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (B) the date that is five (5) Business Days prior to the Revolving Facility Maturity Date; provided that any Letter of Credit with a one-year tenor may provide for the automatic renewal thereof for additional one-year periods (which, in no event, shall extend beyond the date referred to in clause (B) of this paragraph (c)). (d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Revolving Facility Lenders, such Issuing Bank hereby grants to each Revolving Facility Lender, and each Revolving Facility Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such Revolving Facility Lender's Revolving Facility Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Facility Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent in Dollars or the Foreign Currency in which such Letter of Credit is denominated, as the case may be, for the account of the applicable Issuing Bank, such Revolving Facility Lender's Revolving Facility Percentage of each L/C Disbursement made by such Issuing Bank not reimbursed by the applicable Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the applicable Borrower for any reason. Each Revolving Facility Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement. If the applicable Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower for which such Letter of Credit was issued shall reimburse such L/C Disbursement by paying to the Administrative Agent an amount equal to such L/C Disbursement in Dollars or the Foreign Currency in which such Letter of Credit is denominated, as the case may be, not later than 5:00 p.m., Local time, on the Business Day immediately following the date such Borrower receives notice under paragraph (g) of this Section of such L/C Disbursement, provided that such Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that such payment be financed with an ABR Revolving Facility Borrowing or a Swingline Borrowing or an Eurocurrency Revolving Loan denominated in the applicable Foreign Currency, as applicable, in an equivalent amount and, to the extent so financed, such Borrower's obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Facility Borrowing or Swingline Borrowing or Eurocurrency Revolving Loan. If any Borrower fails to reimburse any L/C Disbursement when due, then the Administrative Agent shall promptly notify the applicable Issuing Bank and each other 58 Revolving Facility Lender of the applicable L/C Disbursement, the payment then due from such Borrower and, in the case of a Revolving Facility Lender, such Lender's Revolving Facility Percentage thereof. Promptly following receipt of such notice, each Revolving Facility Lender shall pay to the Administrative Agent in Dollars or such Foreign Currency, as the case may be, its Revolving Facility Percentage of the payment then due from such Borrower, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Facility Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Bank in Dollars or such Foreign Currency, as the case may be, the amounts so received by it from the Revolving Facility Lenders. Promptly following receipt by the Administrative Agent of any payment from such Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Revolving Facility Lenders have made payments pursuant to this paragraph to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any payment made by a Revolving Facility Lender pursuant to this paragraph to reimburse an Issuing Bank for any L/C Disbursement (other than the funding of an ABR Revolving Loan or a Swingline Borrowing or an Eurocurrency Revolving Loan as contemplated above) shall not constitute a Loan and shall not relieve any Borrower of its obligation to reimburse such L/C Disbursement. (f) Obligations Absolute. The obligation of each Borrower to reimburse L/C Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the applicable Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, any Borrower's obligations hereunder; provided that, in each case, payment by the Issuing Bank shall not have constituted gross negligence or willful misconduct. Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of such Issuing Bank; provided that the foregoing shall not be construed to excuse the applicable Issuing Bank from liability to any Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by each Borrower to the extent permitted by applicable law) suffered by such 59 Borrower that are determined by a court having jurisdiction to have been caused by (i) such Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof or (ii) such Issuing Bank's refusal to issue a Letter of Credit in accordance with the terms of this Agreement. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the applicable Issuing Bank, such Issuing Bank shall be deemed to have exercised care in each such determination and each refusal to issue a Letter of Credit. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the applicable Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (g) Disbursement Procedures. The applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Issuing Bank shall promptly notify the Administrative Agent and the applicable Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Bank has made or will make a L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve any Borrower of its obligation to reimburse such Issuing Bank and the Revolving Facility Lenders with respect to any such L/C Disbursement. (h) Interim Interest. If an Issuing Bank shall make any L/C Disbursement, then, unless the applicable Borrower shall reimburse such L/C Disbursement in full on the date such L/C Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such L/C Disbursement is made to but excluding the date that such Borrower reimburses such L/C Disbursement, at the rate per annum then applicable to ABR Revolving Loans or Eurocurrency Revolving Loans denominated in the applicable Foreign Currency, as applicable; provided that, if such L/C Disbursement is not reimbursed by such Borrower when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply; provided further that any L/C Disbursement that is reimbursed after the date such L/C Disbursement is required to be reimbursed under paragraph (e) of this Section, (A) be payable in Dollars or the Foreign Currency in which such Letter of Credit is denominated, as the case may be, (B) bear interest at the rate per annum then applicable to ABR Revolving Loans or Eurocurrency Revolving Loans denominated in the applicable Foreign Currency, as applicable, and (C) Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Facility Lender pursuant to paragraph (e) of this Section to reimburse such Issuing Bank shall be for the account of such Revolving Facility Lender to the extent of such payment. (i) Replacement of an Issuing Bank. An Issuing Bank may be replaced at any time by written agreement among the Borrowers, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the 60 Lenders of any such replacement of an Issuing Bank. At the time any such replacement shall become effective, each Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12. From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of such Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement but shall not be required to issue additional Letters of Credit. (j) Cash Collateralization. If any Event of Default shall occur and be continuing, (i) in the case of an Event of Default described in Section 7.01(h) or (i), on the Business Day or (ii) in the case of any other Event of Default, on the third Business Day, in each case, following the date on which any Borrower receives notice from the Administrative Agent (or, if the maturity of the Loans has been accelerated, Revolving Facility Lenders with Revolving L/C Exposure representing greater than 50% of the total Revolving L/C Exposure) demanding the deposit of cash collateral pursuant to this paragraph, such Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in Dollars in cash equal to the Revolving L/C Exposure as of such date plus any accrued and unpaid interest thereon; provided that, upon the occurrence of any Event of Default with respect to any Borrower described in clause (h) or (i) of Section 7.01, the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable in Dollars or such Foreign Currency, without demand or other notice of any kind. Each Borrower also shall deposit cash collateral pursuant to this paragraph as and to the extent required by Section 2.11(b). Each such deposit pursuant to this paragraph or pursuant to Section 2.11(b) shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the applicable Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of (i) for so long as an Event of Default shall be continuing, the Administrative Agent and (ii) at any other time, the applicable Borrower, in each case, in Permitted Investments and at the risk and expense of such Borrower, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse each Issuing Bank for L/C Disbursements for which such Issuing Bank has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the applicable Borrower for the Revolving L/C Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Facility Lenders with Revolving L/C Exposure representing greater than 50% of the total Revolving L/C Exposure), be applied to satisfy other obligations of such Borrower under this Agreement. If any Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of 61 an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to such Borrower within three (3) Business Days after all Events of Default have been cured or waived. If any Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.11(b), such amount (to the extent not applied as aforesaid) shall be returned to such Borrower as and to the extent that, after giving effect to such return, such Borrower would remain in compliance with Section 2.11(b) and no Event of Default shall have occurred and be continuing. (k) Additional Issuing Banks. From time to time, the Borrowers may by notice to the Administrative Agent designate up to three Lenders (in addition to Citibank, N.A.) that agree (in their sole discretion) to act in such capacity and are reasonably satisfactory to the Administrative Agent as Issuing Banks. Each such additional Issuing Bank shall execute a counterpart of this Agreement upon the approval of the Administrative Agent (which approval shall not be unreasonably withheld) and shall thereafter be an Issuing Bank hereunder for all purposes. (l) Reporting. Unless otherwise requested by the Administrative Agent, each Issuing Bank shall (i) provide to the Administrative Agent copies of any notice received from any Borrower pursuant to Section 2.05(b) no later than the next Business Day after receipt thereof and (ii) report in writing to the Administrative Agent (A) on or prior to each Business Day on which such Issuing Bank expects to issue, amend, renew or extend any Letter of Credit, the date of such issuance, amendment, renewal or extension, and the aggregate face amount of the Letters of Credit to be issued, amended, renewed or extended by it and outstanding after giving effect to such issuance, amendment, renewal or extension occurred (and whether the amount thereof changed), and the Issuing Bank shall be permitted to issue, amend, renew or extend such Letter of Credit if the Administrative Agent shall not have advised the Issuing Bank that such issuance, amendment renewal or extension would not be in conformity with the requirements of this Agreement, (B) on each Business Day on which such Issuing Bank makes any L/C Disbursement, the date of such L/C Disbursement and the amount of such L/C Disbursement and (C) on any other Business Day, such other information as the Administrative Agent shall reasonably request, including but not limited to prompt verification of such information as may be requested by the Administrative Agent. If requested by any Lender, the Administrative Agent shall provide copies to such Lender of the reports referred to in clause (ii) of the preceding sentence and a summary of such reports on a monthly basis. SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds, (i) in the case of a Loan denominated in Dollars, in Dollars, by 12:00 noon, Local Time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders, and (ii) in the case of a Loan denominated in a Foreign Currency, in the applicable Foreign Currency, by 12:00 noon, Local Time, to the account of the Sub-Agent most recently designated by the Administrative Agent for such purpose by notice to the Lenders, as the case may be; provided that Swingline Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans available to the applicable Borrower by promptly crediting the amounts so received, in like funds, to an account of such 62 Borrower maintained with the Administrative Agent in New York City or as otherwise agreed between such Borrower and the Administrative Agent, and designated by such Borrower in the Borrowing Request; provided that ABR Revolving Loans, Swingline Borrowings and Eurocurrency Revolving Loans made to finance the reimbursement of a L/C Disbursement and reimbursements as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the applicable Issuing Bank. (b) Unless the Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the applicable Borrower severally agree to pay to the Administrative Agent forthwith on demand (without duplication) such corresponding amount with interest thereon, for each day from and including the date such amount is made available to such Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, (A) for Loans denominated in Dollars, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (B) for Loans denominated in a Foreign Currency, the greatest of the Federal Funds Rate, the cost of funds incurred by the Administrative Agent or Sub-Agent in respect of such amount and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of such Borrower, (A) for Loans denominated in Dollars, the interest rate applicable to ABR Loans and (B) for Loans denominated in a Foreign Currency, the greater of the interest rate applicable to ABR Loans and the cost of funds incurred by the Administrative Agent or Sub-Agent in respect of such amount. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.07. Interest Elections. (a) Each Borrowing denominated in Dollars initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, each Borrower may elect, in the case of a Borrowing denominated in Dollars, to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section. Each Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued. (b) To make an election pursuant to this Section, a Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if such Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by 63 hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the applicable Borrower. (b) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) in the case of a Borrowing denominated in Dollars, whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; and (iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election. If any such Interest Election Request made by any Borrower requests a Eurocurrency Borrowing but does not specify an Interest Period, then such Borrower shall be deemed to have selected an Interest Period of one month's duration. (c) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender to which such Interest Election Request relates of the details thereof and of such Lender's portion of each resulting Borrowing. (d) If any Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period, (i) if such Borrowing is denominated in Dollars, such Borrower shall be deemed to have converted such Borrowing to an ABR Borrowing, and (ii) if such Borrowing is denominated in a Foreign Currency, such Borrower shall be deemed to have selected a one-month Interest Period for such Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the written request (including a request through electronic means) of the Required Lenders, so notifies such Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Borrowing may be converted to or continued as a Eurocurrency Borrowing, (ii) unless repaid, each Eurocurrency Borrowing denominated in Dollars shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto and (iii) unless repaid, each Eurocurrency Borrowing denominated in a Foreign Currency shall bear interest calculated on the one-week EURIBO Rate. SECTION 2.08. Termination and Reduction of Commitments. (a) Unless previously terminated, the Revolving Facility Commitments shall terminate on the Revolving Facility Maturity Date. The parties hereto acknowledge that the Tranche B Term Loan Commitments will terminate at 5 p.m. New York City time on the Closing Date. 64 (b) Each Borrower may at any time terminate, or from time to time reduce, the Commitments under any Facility; provided that (i) each reduction of the Commitments under any Facility shall be in an amount that is an integral multiple of U.S.$1.0 million and not less than U.S.$5.0 million (or, if less, the remaining amount of the Revolving Facility Commitments) and (ii) no Borrower shall terminate or reduce the Revolving Facility Commitments if, after giving effect to any concurrent prepayment of the Revolving Facility Loans in accordance with Section 2.11, the Revolving Facility Credit Exposure would exceed the total Revolving Facility Commitments. (c) Each Borrower shall notify the Administrative Agent of any election to terminate or reduce the Revolving Facility Commitments under paragraph (b) of this Section at least three (3) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the applicable Lenders of the contents thereof. Each notice delivered by any Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Facility Commitments delivered by such Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by such Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments under any Facility shall be made ratably among the Lenders in accordance with their respective Commitments under such Facility. SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) Each Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Revolving Facility Lender the then unpaid principal amount of each Revolving Facility Loan to such Borrower on the Revolving Facility Maturity Date, (ii) to the Administrative Agent for the account of each Tranche B Dollar Term Lender the then unpaid principal amount of each Tranche B Dollar Term Loan of such Lender to such Borrower on such dates and in such amounts as provided in Section 2.10, (iii) to the Administrative Agent for the account of each Tranche B Euro Term Lender the then unpaid principal amount of each Tranche B Euro Term Loan of such Lender to such Borrower on such dates and in such amounts as provided in Section 2.10 and (iv) to the Swingline Lender the then unpaid principal amount of each Swingline Loan made to such Borrower on the earlier of the Revolving Facility Maturity Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least seven Business Days after such Swingline Loan is made; provided that on each date that a Revolving Facility Borrowing (other than a Borrowing that is required to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e)) is made by the Domestic Borrower, the Domestic Borrower shall repay all Swingline Loans then outstanding. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Facility and Type thereof and the Interest 65 Period (if any) applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) any amount received by such Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of any Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it to any Borrower be evidenced by a promissory note substantially in the form of Exhibit L-1 or Exhibit L-2, as applicable. In such event, each such Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.10. Repayment of Term Loans and Revolving Facility Loans. (a) (i) Subject to adjustment pursuant to paragraph (c) of this Section, the Domestic Borrower and the UK Borrower shall repay Tranche B Dollar Term Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date in respect of such Borrower (each such date being referred to as a "Tranche B Dollar Installment Date"):
Domestic Borrower UK Borrower Date Amount Amount - ------------------------------ ----------------- --------------- December 31, 2004 U.S.$ 700,000 U.S.$ 37,500 March 31, 2005 U.S.$ 700,000 U.S.$ 37,500 June 30, 2005 U.S.$ 700,000 U.S.$ 37,500 September 30, 2005 U.S.$ 700,000 U.S.$ 37,500 December 31, 2005 U.S.$ 700,000 U.S.$ 37,500 March 31, 2006 U.S.$ 700,000 U.S.$ 37,500 June 30, 2006 U.S.$ 700,000 U.S.$ 37,500 September 30, 2006 U.S.$ 700,000 U.S.$ 37,500 December 31, 2006 U.S.$ 700,000 U.S.$ 37,500 March 31, 2007 U.S.$ 700,000 U.S.$ 37,500 June 30, 2007 U.S.$ 700,000 U.S.$ 37,500 September 30, 2007 U.S.$ 700,000 U.S.$ 37,500 December 31, 2007 U.S.$ 700,000 U.S.$ 37,500 March 31, 2008 U.S.$ 700,000 U.S.$ 37,500 June 30, 2008 U.S.$ 700,000 U.S.$ 37,500 September 30, 2008 U.S.$ 700,000 U.S.$ 37,500 December 31, 2008 U.S.$ 700,000 U.S.$ 37,500 March 31, 2009 U.S.$ 700,000 U.S.$ 37,500
66
Domestic Borrower UK Borrower Date Amount Amount - ------------------------------ ----------------- --------------- June 30, 2009 U.S.$ 700,000 U.S.$ 37,500 September 30, 2009 U.S.$ 700,000 U.S.$ 37,500 December 31, 2009 U.S.$ 700,000 U.S.$ 37,500 March 31, 2010 U.S.$ 700,000 U.S.$ 37,500 June 30, 2010 U.S.$ 700,000 U.S.$ 37,500 September 30, 2010 U.S.$ 700,000 U.S.$ 37,500 December 31, 2010 U.S.$ 700,000 U.S.$ 37,500 March 31, 2011 U.S.$ 700,000 U.S.$ 37,500 June 30, 2011 U.S.$ 700,000 U.S.$ 37,500 Tranche B Dollar Maturity Date U.S.$261,100,000 U.S.$13,987,500
In the event that any New Tranche B Term Loans denominated in Dollars are made on an Increased Amount Date, the amount due on each Tranche B Dollar Installment Date (other than the Tranche B Dollar Maturity Date) occurring after the Increased Amount Date shall increase by an amount equal to 1/4 of 1% per annum of the principal amount of such New Tranche B Term Loans, with the remaining principal amount of such New Tranche B Term Loans being repaid on the Tranche B Dollar Maturity Date. (ii) Subject to adjustment pursuant to paragraph (c) of this Section, the French Borrower shall repay Tranche B Euro Term Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date (each such date being referred to as a "Tranche B Euro Installment Date"):
Date French Borrower Amount - ---------------------------- ---------------------- December 31, 2004 (euro) 196,250 March 31, 2005 (euro) 196,250 June 30, 2005 (euro) 196,250 September 30, 2005 (euro) 196,250 December 31, 2005 (euro) 196,250 March 31, 2006 (euro) 196,250 June 30, 2006 (euro) 196,250 September 30, 2006 (euro) 196,250 December 31, 2006 (euro) 196,250 March 31, 2007 (euro) 196,250 June 30, 2007 (euro) 196,250 September 30, 2007 (euro) 196,250 December 31, 2007 (euro) 196,250 March 31, 2008 (euro) 196,250 June 30, 2008 (euro) 196,250 September 30, 2008 (euro) 196,250 December 31, 2008 (euro) 196,250 March 31, 2009 (euro) 196,250 June 30, 2009 (euro) 196,250 September 30, 2009 (euro) 196,250
67
Date French Borrower Amount - ---------------------------- ---------------------- December 31, 2009 (euro) 196,250 March 31, 2010 (euro) 196,250 June 30, 2010 (euro) 196,250 September 30, 2010 (euro) 196,250 December 31, 2010 (euro) 196,250 March 31, 2011 (euro) 196,250 June 30, 2011 (euro) 196,250 Tranche B Euro Maturity Date (euro)73,201,250
In the event that any New Tranche B Term Loans denominated in Euros are made on an Increased Amount Date, the amount due on each Tranche B Euro Installment Date (other than the Tranche B Euro Maturity Date) occurring after the Increased Amount Date shall increase by an amount equal to 1/4 of 1% per annum of the principal amount of such New Tranche B Term Loans, with the remaining principal amount of such New Tranche B Term Loans being repaid on the Tranche B Euro Maturity Date. (b) To the extent not previously paid, all Tranche B Dollar Term Loans shall be due and payable on the Tranche B Dollar Maturity Date and to the extent not previously paid, all Tranche B Euro Term Loans shall be due and payable on the Tranche B Euro Maturity Date. (c) Prepayment of the Tranche B Term Borrowings from: (i) all Net Proceeds or Acquisition Agreement Payments pursuant to Section 2.11(c) or 2.11(e), respectively, shall be applied ratably (determined by the Equivalent in Dollars three (3) Business Days prior to the date of payment) to the Tranche B Dollar Facility and the Tranche B Euro Facility and, in respect of each such Facility, shall be applied to reduce on a pro rata basis (based on the amount of such amortization payments) the remaining scheduled amortization payments in respect of such Term Borrowings; and (ii) Excess Cash Flow pursuant to Section 2.11(d) and any optional prepayments pursuant to Section 2.11(a) shall be applied to the Tranche B Dollar Facility and the Tranche B Euro Facility as directed by the Domestic Borrower or the Foreign Borrowers, as applicable. (d) Any Lender holding Term Loans may elect, on not less than two Business Days' prior written notice to the Administrative Agent with respect to any mandatory prepayment made pursuant to Section 2.11(c), Section 2.11(d) or Section 2.11(e), not to have such prepayment applied to such Lender's Term Loans, in which case, the full amount not so applied shall be retained by the Domestic Borrower or the Foreign Borrowers, as applicable. (e) Prior to any repayment of any Borrowing under any Facility hereunder, a Borrower shall select the Borrowing or Borrowings under the applicable Facility to be repaid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 2:00 p.m., Local Time, (i) in the case of an ABR Borrowing, one Business Day before 68 the scheduled date of such repayment and (ii) in the case of a Eurocurrency Borrowing, three Business Days before the scheduled date of such repayment. Each repayment of a Borrowing (x) in the case of the Revolving Facility, shall be applied to the Revolving Facility Loans included in the repaid Borrowing such that each Revolving Facility Lender receives its ratable share of such repayment (based upon the respective Revolving Facility Credit Exposures of the Revolving Facility Lenders at the time of such repayment) and (y) in all other cases, shall be applied ratably to the Loans included in the repaid Borrowing. Notwithstanding anything to the contrary in the immediately preceding sentence, prior to any repayment of a Swingline Borrowing hereunder, the Domestic Borrower shall select the Borrowing or Borrowings to be repaid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 1:00 p.m., Local Time, on the scheduled date of such repayment. Repayments of Borrowings shall be accompanied by accrued interest on the amount repaid. SECTION 2.11. Prepayment of Loans. (a) Each Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, without premium or penalty (but subject to Section 2.16), in an aggregate principal amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum or, if less, the amount outstanding, subject to prior notice in accordance with Section 2.10(e). (b) If on any date, the Administrative Agent notifies the Domestic Borrower that, on the last day of any month, the sum of (A) the sum of aggregate principal amount of all Revolving Facility Loans denominated in Dollars plus the aggregate principal amount of all Letters of Credit denominated in Dollars then outstanding plus (B) the Equivalent in Dollars (determined on the third Business Day prior to such interest payment date) of the sum of the aggregate principal amount of all Revolving Facility Loans denominated in Foreign Currencies plus the aggregate principal amount of all Letters of Credit denominated in Foreign Currencies then outstanding exceeds 105% of the aggregate Revolving Facility Commitments of the Lenders on such date, the Domestic Borrower and each other Borrower shall, as soon as practicable and in any event within two Business Days following such date, prepay the outstanding principal amount of any Revolving Facility Loans owing by such Borrower in an aggregate amount (or deposit cash collateral in an account with the Administrative Agent pursuant to Section 2.05(j)) sufficient to reduce such sum to an amount not to exceed 100% of the aggregate Revolving Facility Commitments of the Lenders on such date together with any interest accrued to the date of such prepayment on the aggregate principal amount of Revolving Facility Loans prepaid. The Administrative Agent shall give prompt notice of any prepayment required under this Section 2.11(b) to the Domestic Borrower and the Lenders. (c) Each Borrower shall apply all Net Proceeds upon receipt thereof to prepay Tranche B Term Borrowings in accordance with paragraphs (c) and (d) of Section 2.10. (d) Not later than 90 days after the end of each Excess Cash Flow Period, the Domestic Borrower shall calculate Excess Cash Flow for such Excess Cash Flow Period and the Domestic Borrower or any Foreign Borrower, as applicable, shall apply an aggregate amount equal to the Required Percentage of such Excess Cash Flow to prepay Tranche B Term Borrowings in accordance with paragraphs (c) and (d) of Section 2.10. Not later than the date on which the Domestic Borrower is required to deliver financial statements with respect to the end of each Excess Cash Flow Period under Section 5.04(a), the Domestic Borrower will deliver to 69 the Administrative Agent a certificate signed by a Financial Officer of the Domestic Borrower setting forth the amount, if any, of Excess Cash Flow for such fiscal year and the calculation thereof in reasonable detail. (e) Following the receipt of any Acquisition Agreement Payments, each Borrower shall prepay, or cause to be prepaid, Term Borrowings in accordance with paragraphs (c) and (d) of Section 2.10. SECTION 2.12. Fees. (a) The Domestic Borrower agrees to pay to each Lender (other than any Defaulting Lender), through the Administrative Agent, 10 Business Days after the last day of March, June, September and December in each year, and three Business Days after the date on which the Revolving Facility Commitments of all the Lenders shall be terminated as provided herein, a commitment fee (a "Commitment Fee") on the daily amount of the Available Unused Commitment of such Lender during the preceding quarter (or other period commencing with the Closing Date and ending with the date on which the last of the Commitments of such Lender shall be terminated) at the rate per annum set forth under the caption "Commitment Fee" below based upon the Leverage Ratio as of the most recent determination date; provided that until the Trigger Date, the Leverage Ratio shall be deemed to be Category 1.
Leverage Ratio Commitment Fee -------------- -------------- ~~Category 1 Equal to or greater than 4.00 to 1.00 0.50% Category 2 Less than 4.00 to 1.00 0.375%~~
All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. For the purpose of calculating any Lender's Commitment Fee, the outstanding Swingline Loans during the period for which such Lender's Commitment Fee is calculated shall be deemed to be zero. The Commitment Fee due to each Lender shall begin to accrue on the Closing Date and shall cease to accrue on the date on which the last of the Commitments of such Lender shall be terminated as provided herein. (b) The Domestic Borrower from time to time agrees to pay to each Revolving Facility Lender (other than any Defaulting Lender), through the Administrative Agent, 10 Business Days after the last day of March, June, September and December of each year and three Business Days after the date on which the Revolving Facility Commitments of all the Lenders shall be terminated as provided herein, a fee (an "L/C Participation Fee") on such Lender's Revolving Facility Percentage of the daily aggregate Revolving L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C Disbursements), during the preceding quarter (or shorter period commencing with the Closing Date and ending with the Revolving Facility Maturity Date or the date on which the Revolving Facility Commitments shall be terminated) at the rate per annum equal to the Applicable Margin for Eurocurrency Revolving Facility Borrowings effective for each day in such period. Each Borrower from time to time agrees to pay to each Issuing Bank, for its own account, (x) 10 Business Days after the 70 last day of March, June, September and December of each year and three Business Days after the date on which the Revolving Facility Commitments of all the Lenders shall be terminated as provided herein, a fronting fee in respect of each Letter of Credit issued by such Issuing Bank at the request of such Borrower for the period from and including the date of issuance of such Letter of Credit to and including the termination of such Letter of Credit (computed at a rate equal to 1/4 of 1% per annum of the daily average stated amount of such Letter of Credit), plus (y) in connection with the issuance, amendment or transfer of any such Letter of Credit or any L/C Disbursement thereunder, such Issuing Bank's customary documentary and processing charges (collectively, "Issuing Bank Fees"). All L/C Participation Fees and Issuing Bank Fees that are payable on a per annum basis shall be computed on the basis of the actual number of days elapsed in a year of 360 days. (c) The Domestic Borrower agrees to pay to the Administrative Agent, for the account of the Administrative Agent, the fees set forth in the Fee Letter, dated as of August 25, 2004, as amended, restated, supplemented or otherwise modified from time to time, at the times specified therein (the "Administrative Agent Fees"). (d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that Issuing Bank Fees shall be paid directly to the applicable Issuing Banks. Once paid, none of the Fees shall be refundable under any circumstances. SECTION 2.13. Interest. (a) Each Borrower shall pay interest on the unpaid principal amount of each ABR Loan made to such Borrower at the Alternate Base Rate plus the Applicable Margin. (b) Each Borrower shall pay interest on the unpaid principal amount of each Eurocurrency Loan made to such Borrower at the Adjusted LIBO Rate for the Interest Period in effect for such Eurocurrency Loan plus the Applicable Margin. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any Fees or other amount payable by any Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such Borrower shall pay interest on such overdue amount, after as well as before judgment, at a rate per annum equal to (x) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (y) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section; provided that this paragraph (c) shall not apply to any Event of Default that has been waived by the Lenders pursuant to Section 9.08. (d) Accrued interest on each Loan shall be payable by the applicable Borrower in arrears (i) on each Interest Payment Date for such Loan, (ii) in the case of Revolving Facility Loans, upon termination of the Revolving Facility Commitments, (iii) in the case of the Tranche B Dollar Term Loans, on the Tranche B Dollar Maturity Date and (iv) in the case of the Tranche B Euro Term Loans, on the Tranche B Euro Maturity Date; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan 71 prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that (i) all interest on Loans denominated in Sterling shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and (ii) interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate, LIBO Rate or EURIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing denominated in any currency: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the LIBO Rate or the EURIBO Rate, as applicable, for such Interest Period; or (b) the Administrative Agent is advised by the Required Lenders or the Majority Lenders under the Revolving Facility that the Adjusted LIBO Rate, the LIBO Rate or the EURIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrowers and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrowers and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurocurrency Borrowing shall be ineffective and such Borrowing, if denominated in Dollars, shall be converted to, and if denominated in Euros, shall be exchanged into the Equivalent thereof in Dollars and converted to, an ABR Borrowing, in each case on the last day of the Interest Period applicable thereto, and (ii) if any Borrowing Request requests a Eurocurrency Borrowing, such Borrowing shall be made as an ABR Borrowing or shall be made as a Borrowing bearing interest at such rate as the Majority Lenders under the Revolving Facility shall agree adequately reflects the costs to the Revolving Facility Lenders of making the Loans comprising such Borrowing. SECTION 2.15. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, 72 any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate or those for which payment has been requested pursuant to Section 2.20) or Issuing Bank; or (ii) impose on any Lender or Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurocurrency Loans made by such Lender or any Letter of Credit or participation therein (except those for which payment has been requested pursuant to Section 2.20); and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Loan (or of maintaining its obligation to make any such Loan) to any Borrower or to increase the cost to such Lender or Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or otherwise), then such Borrower will pay to such Lender or Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or Issuing Bank, as applicable, for such additional costs incurred or reduction suffered. (b) If any Lender or Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or Issuing Bank's capital or on the capital of such Lender's or Issuing Bank's holding company, if any, as a consequence of this Agreement or any of the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender's or such Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or such Issuing Bank's policies and the policies of such Lender's or such Issuing Bank's holding company with respect to capital adequacy), then from time to time each Borrower to which such Loans were made or are to be made shall pay to such Lender or such Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender's or such Issuing Bank's holding company for any such reduction suffered. (c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) of this Section shall be delivered to the applicable Borrower and shall be conclusive absent manifest error. Each Borrower shall pay such Lender or Issuing Bank, as applicable, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Promptly after any Lender or any Issuing Bank has determined that it will make a request for increased compensation pursuant to this Section 2.15, such Lender or Issuing Bank shall notify the Borrowers thereof. Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or Issuing Bank's right to demand such compensation; provided that no Borrower shall be required to compensate a Lender or an Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or Issuing Bank, as applicable, notifies such Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's or Issuing Bank's intention to claim compensation 73 therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurocurrency Loan on the date specified in any notice delivered pursuant hereto or (d) the assignment of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto as a result of a request by any Borrower pursuant to Section 2.19, then, in any such event, such Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to be the amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue a Eurocurrency Loan, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in Dollars if such Loan is denominated in Dollars or the applicable Foreign Currency if such Loan is denominated in such Foreign Currency, as the case may be, of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to such Borrower and shall be conclusive absent manifest error. Such Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.17. Taxes. (a) Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if a Loan Party shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) any Agent, Lender or Issuing Bank, as applicable, receives an amount equal to the sum it would have received had no such deductions for Indemnified Taxes and Other Taxes been made, (ii) such Loan Party shall make such deductions and (iii) such Loan Party shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, each Loan Party shall pay any Other Taxes payable on account of any obligation of such Loan Party to the relevant Governmental Authority in accordance with applicable law. (c) Each Loan Party shall indemnify each Agent, each Lender and each Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (other than Indemnified Taxes or Other Taxes resulting from 74 gross negligence or willful misconduct of such Agent, Lender or Issuing Bank and without duplication of any amounts indemnified under Section 2.17(a)) paid by such Agent, Lender or Issuing Bank, as applicable, on or with respect to any payment by or on account of any obligation of such Loan Party under any Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability and setting forth in reasonable detail the calculation for such payment or liability delivered to such Loan Party by a Lender or an Issuing Bank, or by the Administrative Agent on its own behalf, on behalf of another Agent or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error of the Lender, the Issuing Bank or the Administrative Agent. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Loan Party to a Governmental Authority, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Lender, Agent or Issuing Bank that is entitled to an exemption from or reduction of withholding Tax otherwise indemnified against by a Loan Party pursuant to this Section 2.17 with respect to payments under any Loan Document shall deliver to the relevant Borrower or the relevant Governmental Authority (with a copy to the Administrative Agent), to the extent such Lender, Agent or Issuing Bank is legally entitled to do so, at the time or times prescribed by applicable law such properly completed and executed documentation prescribed by applicable law as may reasonably be requested by such Borrower to permit such payments to be made without such withholding tax or at a reduced rate; provided that no Lender shall have any obligation under this paragraph (e) with respect to any withholding Tax imposed by any jurisdiction other than the United States or the jurisdiction under the laws of which any Borrower is organized or in which it is treated as a tax resident if in the reasonable judgment of such Lender such compliance would subject such Lender to any material cost or expense not reimbursed or indemnified by the Loan Parties or would otherwise prejudice such Lender's interest in any material respect. (f) If an Agent, Lender or Issuing Bank determines, in good faith and in its sole discretion, that it has received a refund of any taxes in respect of or calculated with reference to Indemnified Taxes or Other Taxes as to which it has been indemnified by a Loan Party or with respect to which a Loan Party has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to such Loan Party (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section 2.17 with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Agent, Lender or Issuing Bank (including any Taxes imposed with respect to such refund) as is determined by the Agent, Lender or Issuing Bank in good faith and in its sole discretion, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that such Loan Party, upon the request of such Agent, Lender or Issuing Bank, agrees to repay as soon as reasonably practicable the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed 75 by the relevant Governmental Authority) to such Agent, Lender or Issuing Bank in the event such Agent, Lender or Issuing Bank is required to repay such refund to such Governmental Authority. This Section shall not be construed to require any Agent, Lender or Issuing Bank to make available its tax returns (or any other information relating to its Taxes which it deems confidential) to the Loan Parties or any other Person. (g) A Loan Party is not required to pay an increased amount to a Lender or Agent under clause (a) of this Section 2.17 in respect of any Indemnified Tax that is required by the United Kingdom to be deducted from any payment by that Loan Party of interest on a Loan to a Borrower incorporated in the United Kingdom, if on the date on which the payment falls due (i) the payment could have been made to the relevant Lender or Agent without deduction of the relevant Indemnified Tax if the relevant Lender was a Qualifying Lender, but on that date that Lender is not or has ceased to be a Qualifying Lender other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty, or any published practice or concession of any relevant Governmental Authority; or (ii) the relevant Lender is a Treaty Lender (as defined in the definition of Qualifying Lender) and the Loan Party making the payment is able to demonstrate that the payment could have been made to the relevant Lender or Agent without deduction of the relevant Indemnified Tax had the relevant Lender complied with its obligations under clause (e) of this Section 2.17. SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Unless otherwise specified, each Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of L/C Disbursements, or of amounts payable under Section 2.15, 2.16, 2.17 or 2.20, or otherwise) prior to 2:00 p.m., Local Time, on the date when due, in immediately available funds, without condition or deduction for any defense, recoupment, set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent to the applicable account designated to the Borrowers by the Administrative Agent, except payments to be made directly to the applicable Issuing Bank or the applicable Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17, 2.20 and 9.05 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. Except for Loans denominated in any Foreign Currency (the principal of and interest on which hereunder shall be paid in such Foreign Currency) and except for reimbursement obligations with respect to any Letter of Credit denominated in any Foreign Currency (which shall be paid in such Foreign Currency), all payments hereunder of (i) principal or interest in respect of any Loan, (ii) reimbursement obligations with respect to any Letter of Credit or (iii) any other amount due hereunder or under any other Loan Document shall be made in Dollars. Any payment required to be made by the Administrative Agent hereunder shall be deemed to have been made by the time required if such Administrative Agent shall, at or before such time, have taken the necessary steps to make such payment in accordance with the regulations or operating 76 procedures of the clearing or settlement system used by such Administrative Agent to make such payment. (b) If at any time insufficient funds are received by and available to the Administrative Agent from any Borrower to pay fully all amounts of principal, unreimbursed L/C Disbursements, interest and fees then due from such Borrower hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due from such Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed L/C Disbursements then due from such Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed L/C Disbursements then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim, through the application of any proceeds of Collateral or otherwise, obtain payment in respect of any principal of or interest on any of its Term Loans, Revolving Facility Loans or participations in L/C Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Term Loans, Revolving Facility Loans and participations in L/C Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Term Loans, Revolving Facility Loans and participations in L/C Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Term Loans, Revolving Facility Loans and participations in L/C Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph (c) shall not be construed to apply to any payment made by any Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in L/C Disbursements to any assignee or participant, other than to such Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph (c) shall apply). Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the applicable Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the applicable Issuing Bank hereunder that such Borrower will not make such payment, the Administrative Agent may assume that such Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Bank, as applicable, the amount due. In such event, if such Borrower has not in fact made such payment, then each of the Lenders or the applicable Issuing Bank, as applicable, severally agrees to repay to the Administrative Agent 77 forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b) or 2.18(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. (f) To the extent that the Administrative Agent receives funds for application to the amounts owing by any Borrower under or in respect of this Agreement in currencies other than the currency or currencies required to enable the Administrative Agent to distribute funds to the Lenders in accordance with the terms of this Section 2.18, the Administrative Agent shall be entitled to convert or exchange such funds into Dollars or into a Foreign Currency or from Dollars to a Foreign Currency or from a Foreign Currency to Dollars, as the case may be, to the extent necessary to enable the Agent to distribute such funds in accordance with the terms of this Section 2.18; provided that each Borrower and each of the Lenders hereby agree that the Administrative Agent shall not be liable or responsible for any loss, cost or expense suffered by such Borrower or such Lender as a result of any conversion or exchange of currencies affected pursuant to this Section 2.18(f) or as a result of the failure of the Administrative Agent to effect any such conversion or exchange; and provided further that each applicable Borrower agrees to indemnify the Administrative Agent and each Lender, and hold the Administrative Agent and each Lender harmless, for any and all losses, costs and expenses incurred by the Administrative Agent or any Lender for any conversion or exchange of currencies (or the failure to convert or exchange any currencies) in accordance with this Section 2.18(f). SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.15 or 2.20, or if any Loan Party is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15, 2.17 or 2.20, as applicable, in the future and (ii) would not subject such Lender to any material unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in any material respect. The relevant Loan Party hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.15 or 2.20, or if any Loan Party is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or is a Defaulting Lender, then such Loan Party may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in 78 accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) such Loan Party shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in L/C Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or such Loan Party (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or 2.20 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments. Nothing in this Section 2.19 shall be deemed to prejudice any rights that any Loan Party may have against any Lender that is a Defaulting Lender. (c) If any Lender (such Lender, a "Non-Consenting Lender") has failed to consent to a proposed amendment, waiver, discharge or termination which pursuant to the terms of Section 9.08 requires the consent of all of the Lenders affected and with respect to which the Required Lenders shall have granted their consent, then provided no Event of Default then exists, such Borrower shall have the right (unless such Non-Consenting Lender grants such consent) to replace such Non-Consenting Lender by requiring such Non-Consenting Lender to assign its Loans, and its Commitments hereunder to one or more assignees reasonably acceptable to the Administrative Agent, provided that: (a) all Obligations of Borrowers owing to such Non-Consenting Lender being replaced shall be paid in full to such Non-Consenting Lender concurrently with such assignment, and (b) the replacement Lender shall purchase the foregoing by paying to such Non-Consenting Lender a price equal to the principal amount thereof plus accrued and unpaid interest thereon. In connection with any such assignment each Borrower, Administrative Agent, such Non-Consenting Lender and the replacement Lender shall otherwise comply with Section 9.04. SECTION 2.20. Additional Reserve Costs. (a) For so long as any Lender is required to make special deposits with the Bank of England or comply with reserve assets, liquidity, cash margin or other requirements of the Bank of England, to maintain reserve asset ratios or to pay fees, in each case in respect of such Lender's Eurocurrency Loans, each Borrower shall pay, contemporaneously with each payment of interest on each of such Loans made to such Borrower, additional interest on such Loan at a rate per annum equal to the Mandatory Costs Rate calculated in accordance with the formula and in the manner set forth in Exhibit F hereto. (b) Any additional interest owed pursuant to paragraph (a) above shall be determined by the applicable Lender, which determination shall be conclusive absent manifest error, and notified to the applicable Borrower (with a copy to the Administrative Agent) at least five Business Days before each date on which interest is payable for the applicable Loan, and such additional interest so notified to such Borrower by such Lender shall be payable to the Administrative Agent for the account of such Lender on each date on which interest is payable for such Loan. 79 SECTION 2.21. Increase in Revolving Facility Commitments and/or Tranche B Term Loan Commitments. (a) New Commitments. At any time following the completion of the syndication of the Facilities (as reasonably determined by the Administrative Agent), either Borrower may by written notice to the Administrative Agent elect to request an increase to the existing Revolving Facility Commitments (any such increase, the "New Revolving Facility Commitments") and/or the Tranche B Dollar Term Loan Commitments and/or the Tranche B Euro Term Loan Commitments (any such increase, the "New Tranche B Term Commitments" and together with the New Revolving Facility Commitments, if any, the "New Commitments"), by an amount not in excess of U.S.$200.0 million (or the Equivalent thereof in Euros on the date of such request) in the aggregate or a lesser amount in integral multiples of U.S.$10.0 million (or the Equivalent thereof in Euros on the date of such request). Such notice shall (A) specify the date (an "Increased Amount Date") on which such Borrower proposes that the New Commitments and, in the case of New Tranche B Term Commitments, the date for borrowing, as applicable, be made available, which shall be a date not less than 5 Business Days after the date on which such notice is delivered to the Administrative Agent, and (B) offer each Revolving Facility Lender (in the case of New Revolving Facility Commitments) and/or Tranche B Dollar Term Lender (in the case of New Tranche B Term Commitments denominated in Dollars) and/or Tranche B Euro Term Lender (in the case of New Tranche B Term Commitments denominated in Euros) the right to increase its Revolving Facility Commitment and/or Tranche B Dollar Term Loan Commitment and/or Tranche B Euro Term Loan Commitment, as applicable, on a pro rata basis. The applicable Borrower shall notify the Administrative Agent in writing of the identity of each Revolving Facility Lender, Tranche B Dollar Term Lender, Tranche B Euro Term Loan Commitment or other financial institution reasonably acceptable to the Administrative Agent (each, a "New Revolving Facility Lender," a "New Tranche B Term Lender" or generally, a "New Lender") to whom the New Commitments have been (in accordance with the prior sentence) allocated and the amounts of such allocations; provided that any Lender approached to provide all or a portion of the New Commitments may elect or decline, in its sole discretion, to provide a New Commitment. Such New Commitments shall become effective as of such Increased Amount Date, and in the case of New Tranche B Term Commitments, such new Term Loans in respect hereof ("New Tranche B Term Loans") shall be made on such Increased Amount Date; provided that (1) no Default or Event of Default shall exist on such Increased Amount Date before or after giving effect to such New Commitments and Loans; (2) such increase in the Revolving Facility Commitments and/or the Tranche B Dollar Term Loan Commitments and/or Tranche B euro Term Commitments shall be evidenced by one or more joinder agreements executed and delivered to Administrative Agent by each New Lender, as applicable, and each shall be recorded in the register, each of which shall be reasonably satisfactory to the Administrative Agent and subject to the requirements set forth in Section 2.17(e); and (3) the Borrowers shall make any payments required pursuant to Section 2.16 in connection with the provisions of the New Commitments. (b) On any Increased Amount Date on which New Revolving Facility Commitments are effected, subject to the satisfaction of the foregoing terms and conditions, (i) each of the existing Revolving Facility Lenders shall assign to each of the New Revolving Facility Lenders, and each of the New Revolving Facility Lenders shall purchase from each of the existing Revolving Facility Lenders, at the principal amount thereof, such interests in the outstanding Revolving Facility Loans and participations in Letters of Credit and Swingline Loans outstanding on such Increased Amount Date that will result in, after giving effect to all 80 such assignments and purchases, such Revolving Facility Loans and participations in Letters of Credit and Swingline Loans being held by existing Revolving Facility Lenders and New Revolving Facility Lenders ratably in accordance with their Revolving Facility Commitments after giving effect to the addition of such New Revolving Facility Commitments to the Revolving Facility Commitments, (ii) each New Revolving Facility Commitment shall be deemed for all purposes a Revolving Facility Commitment and each Loan made thereunder shall be deemed, for all purposes, a Revolving Facility Loan and have the same terms as any existing Revolving Facility Loan and (iii) each New Revolving Facility Lender shall become a Lender with respect to the Revolving Facility Commitments and all matters relating thereto. (c) On any Increased Amount Date on which New Tranche B Term Loan Commitments denominated in Dollars are effected and borrowed, subject to the satisfaction of the foregoing terms and conditions, (i) each New Tranche B Term Loan Commitment shall be deemed for all purposes a Tranche B Dollar Term Loan Commitment and each Loan made thereunder shall be deemed, for all purposes, a Tranche B Dollar Term Loan, (ii) each New Tranche B Term Lender shall become a Lender with respect to the Tranche B Dollar Term Loan Commitments and all matters relating thereto and (iii) the New Tranche B Term Loans shall have the same terms as the existing Tranche B Dollar Term Loans and be made by each New Tranche B Term Lender on the Increased Amount Date. On any Increased Amount Date on which New Tranche B Term Loan Commitments denominated in Euros are effected and borrowed, subject to the satisfaction of the foregoing terms and conditions, (i) each New Tranche B Term Loan Commitment shall be deemed for all purposes a Tranche B Euro Term Loan and each Loan made thereunder shall be deemed, for all purposes, a Tranche B Euro Term Loan, (ii) each New Tranche B Term Lender shall become a Lender with respect to the Tranche B Euro Term Loan Commitments and all matters relating thereto and (iii) the New Tranche B Term Loans shall have the same terms as the existing Tranche B Euro Term Loans and be made by each New Tranche B Term Lender on the Increased Amount Date. All New Tranche B Term Loans made on any Increased Amount Date will be made in accordance with the procedures set forth in Section 2.03. (d) The Administrative Agent shall notify the Lenders promptly upon receipt of a Borrower's notice of an Increased Amount Date and, in respect thereof, the New Commitments and the New Lenders. SECTION 2.22. Illegality. If any Lender reasonably determines that any change in law has made it unlawful, or that any Governmental Authority has asserted after the Closing Date that it is unlawful, for any Lender or its applicable lending office to make or maintain any Eurocurrency Loans in Dollars or Euros or any other Foreign Currency, then, on notice thereof by such Lender to any Borrower through the Administrative Agent, any obligations of such Lender to make or continue Eurocurrency Loans in Dollars or Euros or such other Foreign Currency, or to convert ABR Borrowings to Eurocurrency Borrowings denominated in Dollars, as the case may be, shall be suspended until such Lender notifies the Administrative Agent and such Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, such Borrower shall upon demand from such Lender (with a copy to the Administrative Agent), if such Eurocurrency Borrowings are denominated in Dollars, convert all such Eurocurrency Borrowings of such Lender made to such Borrower to ABR Borrowings, and if such Eurocurrency Borrowings are denominated in a Foreign Currency, exchange all such 81 Eurocurrency Borrowings into the Equivalent thereof in Dollars and convert such Borrowings to ABR Borrowings, in each case either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Borrowings to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans. Upon any such prepayment or conversion, such Borrower shall also pay accrued interest on the amount so prepaid or converted. SECTION 2.23. Additional Borrowers. Upon the execution and delivery by any Additional Foreign Borrower acceptable to the Administrative Agent in its reasonable judgment of a supplement to this Agreement, in substantially the form of Exhibit I hereto (a "Credit Agreement Supplement") with such changes and modifications thereto as may be required by the laws of any applicable foreign jurisdiction, (i) such Person shall be referred to as a "Foreign Borrower" and shall be and become a Foreign Borrower, and each reference in this Agreement to a "Foreign Borrower" shall also mean and be a reference to such Foreign Borrower and each reference in any other Loan Document to a "Foreign Borrower" or a "Loan Party" shall also mean and be a reference to such Foreign Borrower, and (ii) such Person shall assume all of the Obligations of a Foreign Borrower which is organized in the same jurisdiction as such Additional Foreign Borrower. The Administrative Agent shall promptly notify each Lender of each such additional Foreign Borrower. ARTICLE III REPRESENTATIONS AND WARRANTIES Each of Holdings and the Borrowers represents and warrants to each of the Lenders with respect to itself and each of its respective Subsidiaries that: SECTION 3.01. Organization; Powers. Except as set forth on Schedule 3.01, each of Holdings, the Borrowers and each of the other Subsidiaries (a) is duly organized, validly existing and (if applicable) in good standing under the laws of the jurisdiction of its organization except for such failures to be in good standing which could not reasonably be expected to have a Material Adverse Effect, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted, (c) is qualified to do business in each jurisdiction where such qualification is required, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect, and (d) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of each Borrower, to borrow and otherwise obtain credit hereunder. SECTION 3.02. Authorization. The execution, delivery and performance by Holdings, each Borrower, and each of the other Subsidiaries of each of the Loan Documents to which it is a party, and the borrowings hereunder and the Transactions (a) have been duly authorized by all corporate, stockholder, limited liability company or partnership action required to be obtained by Holdings, each Borrower and such Subsidiaries and (b) will not (i) violate (A) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of Holdings, any Borrower or any such Subsidiary, (B) 82 any applicable order of any court or any rule, regulation or order of any Governmental Authority or (C) any provision of any indenture, lease, agreement or other instrument to which Holdings, any Borrower or any such Subsidiary is a party or by which any of them or any of their respective property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, give rise to a right of or result in any cancellation or acceleration of any right or obligation (including any payment) or to a loss of a material benefit under any such indenture, lease, agreement or other instrument, where any such conflict, violation, breach or default referred to in clause (i) or (ii) of this Section 3.02, could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by Holdings, any Borrower or any such Subsidiary, other than the Liens created by the Loan Documents. SECTION 3.03. Enforceability. This Agreement has been duly executed and delivered by Holdings and each Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party that is party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against each such Loan Party in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors' rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied covenants of good faith and fair dealing. SECTION 3.04. Governmental Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions except for (a) the filing of UCC financing statements, (b) filings with the United States Patent and Trademark Office and the United States Copyright Office or, with respect to Intellectual Property which is the subject of registration or application outside the United States, such applicable patent, trademark or copyright office or other intellectual property authority, (c) recordation of the Mortgages, (d) such consents, authorizations, filings or other actions that have either (i) been made or obtained and are in full force and effect or (ii) are listed on Schedule 3.04, and (e) such actions, consents and approvals the failure to be obtained or made which could not reasonably be expected to have a Material Adverse Effect. SECTION 3.05. Financial Statements. (a) There has heretofore been furnished to the Lenders: (i) The audited consolidated balance sheets as of December 31, 2003 and the related audited combined statements of income and cash flows for the years ended December 31, 2003 of the Acquired Business, were prepared in accordance with GAAP consistently applied not only during such periods but also as compared to the periods covered by the financial statements of Acquired Business referred to in paragraph (ii) of this Section 3.05 (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of the Acquired Business as of the dates thereof and its consolidated results of operations and cash flows for the period then ended; and 83 (ii) The unaudited interim consolidated balance sheet as of June 30, 2004, and the related unaudited interim combined statements of income and cash flows for the six months ended June 30, 2004 of the Acquired Business, were prepared in accordance with GAAP consistently applied not only during such periods but also as compared to the periods covered by the financial statements of the Acquired Business referred to in paragraph (i) of this Section 3.05 (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of the Acquired Business as of the dates thereof and its consolidated results of operations and cash flows for the periods then ended (subject to normal year-end adjustments). (b) There has heretofore been furnished to the Lenders the pro forma consolidated balance sheet of Holdings as of June 30, 2004, prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) has been prepared in good faith based on the same assumptions used to prepare the pro forma financial statements included in the Offering Memorandum (which assumptions are believed by Holdings and the Borrowers to have been reasonable at the time made and to be reasonable as of the Closing Date (it being understood that such assumptions are based on good faith estimates with respect to certain items and that the actual amounts of such items on the Closing Date is subject to variation)) and calculated in the manner set forth in Schedule 1.01(b), (ii) subject to the assumptions and qualifications described in the Offering Memorandum, accurately reflects all adjustments necessary to give effect to the Transactions and (iii) subject to the assumptions and qualifications described in the Offering Memorandum presents fairly, in all material respects, the pro forma financial position of Holdings and its Subsidiaries as of June 30, 2004, as if the Transactions had occurred on such date. SECTION 3.06. No Material Adverse Effect. Since December 31, 2003, there has been no event or occurrence which has resulted in or would reasonably be expected to result in, individually or in the aggregate, any Material Adverse Effect. SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of Holdings, the Borrowers and the other Subsidiaries has good and valid record fee simple title to, all Mortgaged Properties, subject solely to Permitted Encumbrances and except where the failure to have such title could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Borrowers and the other Subsidiaries have maintained, in all material respects and in accordance with normal industry practice, all of the machinery, equipment, vehicles, facilities and other tangible personal property now owned or leased by the Borrowers and the other Subsidiaries that is necessary to conduct their business as it is now conducted. All such Mortgaged Properties are free and clear of Liens, other than Liens expressly permitted by Section 6.02 or arising by operation of law. (b) Each of Holdings, the Borrowers and the other Subsidiaries has complied with all obligations under all leases to which it is a party, except where the failure to comply would not have a Material Adverse Effect, and all such leases are in full force and effect, except leases in respect of which the failure to be in full force and effect could not reasonably be expected to have a Material Adverse Effect. Each of Holdings, the Borrowers and the other Subsidiaries enjoys peaceful and undisturbed possession under all such leases, other than leases 84 in respect of which the failure to enjoy peaceful and undisturbed possession could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (c) As of the Closing Date, Holdings, the Borrowers and the other Subsidiaries have good title to or valid leasehold interests in all real property set forth on Schedule 3.17, and all such real property is reasonably necessary for the conduct of the business and operations of Borrower and the other Subsidiaries as currently conducted. (d) Each of Holdings, the Borrowers and the other Subsidiaries owns or possesses, or could obtain ownership or possession of, on terms not materially adverse to it, all patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect thereto necessary for the present conduct of its business, without any known conflict with the rights of others, and free from any burdensome restrictions, except where such conflicts and restrictions could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (e) As of the Closing Date, none of Holdings, the Borrowers and their Subsidiaries has received any notice of any pending or contemplated condemnation proceeding affecting any of the Mortgaged Properties or any sale or disposition thereof in lieu of condemnation that remains unresolved as of the Closing Date, except as set forth on Schedule 3.07(e). (f) None of Holdings, the Borrowers and their Subsidiaries is obligated on the Closing Date under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Mortgaged Property or any interest therein, except as permitted under Section 6.02 or 6.05. (g) Schedule 3.07(g) sets forth as of the Closing Date the name and jurisdiction of incorporation, formation or organization of each Subsidiary of Holdings and, as to each such Subsidiary, the percentage of each class of Equity Interests owned by Holdings or by any such Subsidiary, indicating the ownership thereof. (h) As of the Closing Date, there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors' qualifying shares) of any nature relating to any Equity Interests of Holdings, or any of the Subsidiaries, except rights of employees to purchase Equity Interests of the Domestic Borrower in connection with the Transactions or as set forth on Schedule 3.07(h). SECTION 3.08. Litigation; Compliance with Laws. (a) Except as set forth on Schedule 3.08(a), there are no actions, suits, investigations or proceedings at law or in equity or by or on behalf of any Governmental Authority or in arbitration now pending against, or, to the knowledge of Holdings or the Borrowers, threatened in writing against or affecting, Holdings or any Borrower or any of the other Subsidiaries or any business, property or rights of any such Person (i) as of the Closing Date, that involve any Loan Document or the Transactions or (ii) which individually could reasonably be expected to have a Material Adverse Effect or which could reasonably be expected, individually or in the aggregate, to materially adversely affect the 85 Transactions. Neither the Borrowers nor, to the knowledge of any of the Loan Parties, any of its Affiliates is in violation of any laws relating to terrorism or money laundering, including Executive Order No. 13224 on Terrorist Financing, effective September 23, 2001, and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (signed into law on October 26, 2001) (the "U.S. Patriot Act"). (b) Except as set forth in Schedule 3.08(b), none of Holdings, the Borrowers, the other Subsidiaries and their respective properties or assets is in violation of (nor will the continued operation of their material properties and assets as currently conducted violate) any currently applicable law, rule or regulation (including any zoning, building, Environmental Law, ordinance, code or approval or any building permit) or any restriction of record or agreement affecting any Mortgaged Property, or is in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. SECTION 3.09. Federal Reserve Regulations. (a) None of Holdings, the Borrowers and the other Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. (b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose, or (ii) for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation U or Regulation X. SECTION 3.10. Investment Company Act; Public Utility Holding Company Act. None of Holdings, the Borrowers or any other Subsidiary is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended. SECTION 3.11. Use of Proceeds. The Borrowers will use the proceeds of the Revolving Facility Loans and Swingline Loans, and may request the issuance of Letters of Credit, solely for general corporate purposes (including, without limitation, the consummation of the Acquisition and the Transactions). The Borrowers may use proceeds of Term Loans solely to consummate the Acquisition and the Transactions. SECTION 3.12. Tax Returns. Except as set forth on Schedule 3.12: (a) Each of Holdings, the Borrowers and their Subsidiaries (i) has timely filed or caused to be timely filed all federal, state, local and non-U.S. Tax returns required to have been filed by it that are material to such companies taken as a whole and each such Tax return is true and correct in all material respects and (ii) has timely paid or caused to be timely paid all material Taxes shown thereon to be due and payable by it and all other material Taxes or assessments, except Taxes or assessments that are being contested in good faith by appropriate 86 proceedings in accordance with Section 5.03 and for which Holdings, the Borrowers or any of their Subsidiaries (as the case may be) has set aside on its books adequate reserves; (b) Each of Holdings, the Borrowers and their Subsidiaries has paid in full or made adequate provision (in accordance with GAAP) for the payment of all Taxes due with respect to all periods or portions thereof ending on or before the Closing Date, which Taxes, if not paid or adequately provided for, could individually or in the aggregate reasonably be expected to have a Material Adverse Effect; and (c) Other than as could not be, individually or in the aggregate, reasonably expected to have a Material Adverse Effect: as of the Closing Date, with respect to each of Holdings, the Borrowers and their Subsidiaries, (i) there are no claims being asserted in writing with respect to any Taxes, (ii) no presently effective waivers or extensions of statutes of limitation with respect to Taxes have been given or requested and (iii) no Tax returns are being examined by, and no written notification of intention to examine has been received from, the Internal Revenue Service or any other Taxing authority. SECTION 3.13. No Material Misstatements. (a) All written information (other than the Projections, estimates and information of a general economic nature) (the "Information") concerning Holdings, the Borrowers, their Subsidiaries, the Transactions and any other transactions contemplated hereby included in the Information Memorandum or otherwise prepared by or on behalf of the foregoing or their representatives and made available to any Lenders or the Administrative Agent in connection with the Transactions or the other transactions contemplated hereby, when taken as a whole, were true and correct in all material respects, as of the date such Information was furnished to the Lenders and as of the Closing Date and did not contain any untrue statement of a material fact as of any such date or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements were made. (b) The Projections and estimates and information of a general economic nature prepared by or on behalf of the Borrowers or any of their representatives and that have been made available to any Lenders or the Administrative Agent in connection with the Transactions or the other transactions contemplated hereby (i) have been prepared in good faith based upon assumptions believed by the Borrowers to be reasonable as of the date thereof, as of the date such Projections and estimates were furnished to the Initial Lenders and as of the Closing Date, and (ii) as of the Closing Date, have not been modified in any material respect by any Borrower. SECTION 3.14. Employee Benefit Plans. (a) Each of Holdings, the Borrowers, the other Subsidiaries and the ERISA Affiliates is in compliance with the applicable provisions of ERISA and the provisions of the Code relating to Plans (and the regulations and published interpretations thereunder), except for such noncompliance that could not reasonably be expected to have a Material Adverse Effect. As of the Closing Date, the excess of the present value of all benefit liabilities under each Plan of Holdings, the Borrowers, and each other Subsidiary and the ERISA Affiliates (based on those assumptions used to fund such Plan), as of the last annual valuation date applicable thereto for which a valuation is available, over the value of the assets of such Plan could not reasonably be expected to have a Material Adverse Effect, and the excess of 87 the present value of all benefit liabilities of all underfunded Plans (based on those assumptions used to fund each such Plan) as of the last annual valuation dates applicable thereto for which valuations are available, over the value of the assets of all such under funded Plans could not reasonably be expected to have a Material Adverse Effect. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other ERISA Events which have occurred or for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. (b) All foreign pension schemes operated by Holdings and each of its Subsidiaries is operated in accordance with the requirements of applicable foreign law, except where noncompliance could not reasonably be expected to have a Material Adverse Effect. SECTION 3.15. Environmental Matters. Except as to matters that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (i) no written notice, request for information, order, complaint, Environmental Claim or penalty has been received by Holdings, any Borrower or any of the other Subsidiaries, and there are no judicial, administrative or other actions, suits or proceedings pending or threatened against Holdings, Borrower or any of the other Subsidiaries which allege a violation of or liability under any Environmental Laws, in each case relating to any Borrower or any of its Subsidiaries, (ii) each of the Borrowers and the other Subsidiaries has all environmental, health and safety permits necessary for its operations as currently conducted to comply with all applicable Environmental Laws and is, and has been, in compliance with the terms of such permits and with all other applicable Environmental Laws except for non-compliances which have been resolved and the costs of such resolution have been paid, (iii) Holdings, the Borrowers and the other Subsidiaries have made available to the Administrative Agent prior to the date hereof the most recent environmental assessment with respect to the operations of each of Holdings, the Borrowers and the other Subsidiaries, (iv) to the knowledge of Holdings and the Subsidiaries, no Hazardous Material is located at any property currently owned, operated or leased by any Borrower or any of the other Subsidiaries that would reasonably be expected to give rise to any liability or Environmental Claim of any Borrower or any of its Subsidiaries under any Environmental Laws, and no Hazardous Material has been generated, owned or controlled by any Borrower or any of the other Subsidiaries and transported to or Released at any location in a manner that would reasonably be expected to give rise to any liability or Environmental Claim of any Borrower or any of its Subsidiaries under any Environmental Laws, (v) to the knowledge of Holdings and the Subsidiaries, there are no acquisition agreements pursuant to which any Borrower or any of its Subsidiaries has expressly assumed or undertaken responsibility for any liability or obligation of any other Person arising under or relating to Environmental Laws, which in any such case has not been made available to the Administrative Agent prior to the date hereof, (vi) to the knowledge of Holdings and the Subsidiaries, there are no landfills or disposal areas located at, on, in or under the assets of Holdings or any Subsidiary, and (vii) to the knowledge of Holdings and the Subsidiaries, except as listed on Schedule 3.15(vii), there are not currently and there have not been any underground storage tanks "owned" or "operated" (as defined by applicable Environmental Law) by any Holdings, Borrower or any other Subsidiary or present or located on the Holdings', any Borrower's or any other Subsidiary's Real Property. For purpose of Section 7.01(a), each of the representations and warranties contained in parts (iv), (v), (vi) and (vii) of this Section 3.15 that are qualified by the knowledge of Holdings and the Subsidiaries shall be deemed not to be so qualified. 88 SECTION 3.16. Mortgages. The Mortgages executed and delivered after the Closing Date pursuant to clause (i) of the Collateral and Guarantee Requirement and Section 5.10 shall be effective to create in favor of the Collateral Agent (for the benefit of the Secured Parties) a legal, valid and enforceable security interest on all of the Loan Parties' right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof, and when such Mortgages are filed or recorded in the proper real estate filing or recording offices, the Collateral Agent (for the benefit of the Secured Parties) shall have a fully perfected first priority Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Property and, to the extent applicable, subject to Section 9-315 of the UCC, the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to Permitted Encumbrances. SECTION 3.17. Location of Real Property . (a) Schedule 3.17(a) lists completely and correctly as of the Closing Date each Real Property owned by Holdings, the Borrowers and the Subsidiary Loan Parties, the address or location thereof and the state in which such property is located. (b) Schedule 3.17(b) lists completely and correctly as of the Closing Date each Real Property leased by Holdings, the Borrowers and the Subsidiary Loan Parties, the address or location thereof. SECTION 3.18. Solvency. (a) Immediately after giving effect to the Transactions (i) the fair value of the assets of each Borrower (individually) and Holdings and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of such Borrower (individually) and Holdings and its Subsidiaries on a consolidated basis, respectively; (ii) the present fair saleable value of the property of each Borrower (individually) and Holdings and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of such Borrower (individually) and Holdings and its Subsidiaries on a consolidated basis, respectively, on their debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) each Borrower (individually) and Holdings and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) each Borrower (individually) and Holdings and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date. (b) None of Holdings or the Borrowers intends to, and does not believe that it or any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it or any such subsidiary and the timing and amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such subsidiary. SECTION 3.19. Labor Matters. There are no strikes pending or threatened against Holdings, any Borrower or any of their Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The hours worked and 89 payments made to employees of Holdings, the Borrowers and their Subsidiaries have not been in violation in any material respect of the Fair Labor Standards Act or any other applicable law dealing with such matters. All material payments due from Holdings, any Borrower or any of their Subsidiaries or for which any claim may be made against Holdings, any Borrower or any of their Subsidiaries, on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of Holdings, such Borrower or such Subsidiary to the extent required by GAAP. Except as set forth on Schedule 3.19, consummation of the Transactions will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which Holdings, any Borrower or any of their Subsidiaries (or any predecessor) is a party or by which Holdings, any Borrower or any of their Subsidiaries (or any predecessor) is bound, other than collective bargaining agreements that, individually or in the aggregate, are not material to Holdings, the Borrowers and their Subsidiaries, taken as a whole. SECTION 3.20. Insurance. Schedule 3.20 sets forth a true, complete and correct description of all material insurance maintained by or on behalf of Holdings, the Borrowers or their Subsidiaries as of the Closing Date. As of such date, such insurance is in full force and effect. Each Borrower believes that the insurance maintained by or on behalf of Holdings, such Borrower and their Subsidiaries is adequate. SECTION 3.21. Representations and Warranties in Acquisition Agreement. All representations and warranties of each of the Loan Parties set forth in the Acquisition Agreement were true and correct in all material respects as of the time such representations and warranties were made and, to the extent required to be made on the Closing Date under the Acquisition Agreement, shall be true and correct in all material respects as of the Closing Date as if such representations and warranties were made on and as of such date, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. ARTICLE IV CONDITIONS OF LENDING The obligations of (a) the Lenders (including the Swingline Lenders) to make Loans and (b) any Issuing Bank to issue Letters of Credit or increase the stated amounts of Letters of Credit hereunder (each, a "Credit Event") are subject to the satisfaction of the following conditions: SECTION 4.01. All Credit Events. On the date of each Borrowing (other than a Borrowing on the Closing Date (except with respect to clause (a) below)) and on the date of each issuance, amendment, extension or renewal of a Letter of Credit: (a) The Administrative Agent shall have received, in the case of a Borrowing, a Borrowing Request as required by Section 2.03 (or a Borrowing Request shall have been deemed given in accordance with the last paragraph of Section 2.03) or, in the case of the issuance of a 90 Letter of Credit, the applicable Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance of such Letter of Credit as required by Section 2.05(b). (b) The representations and warranties set forth in Article III hereof shall be true and correct in all material respects on and as of the date of such Borrowing or issuance, amendment, extension or renewal of a Letter of Credit (other than an amendment, extension or renewal of a Letter of Credit without any increase in the stated amount of such Letter of Credit), as applicable, with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects as of such earlier date). (c) At the time of and immediately after such Borrowing or issuance, amendment, extension or renewal of a Letter of Credit (other than an amendment, extension or renewal of a Letter of Credit without any increase in the stated amount of such Letter of Credit), as applicable, no Event of Default or Default shall have occurred and be continuing. Each Borrowing and each issuance, amendment, extension or renewal of a Letter of Credit (other than an amendment, extension or renewal of a Letter of Credit without any increase in the stated amount of such Letter of Credit) made by any Borrower shall be deemed to constitute a representation and warranty by such Borrower on the date of such Borrowing, issuance, amendment, extension or renewal as applicable, as to the matters specified in paragraphs (b) and (c) of this Section 4.01. SECTION 4.02. First Credit Event. On the Closing Date: (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received, on behalf of itself, the Collateral Agent, the Lenders and each Issuing Bank on the Closing Date, favorable written opinions of (i) Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for the Loan Parties, in form and substance reasonably satisfactory to the Administrative Agent and (ii) special counsel to the Administrative Agent in the United Kingdom and France, in each case (A) dated the Closing Date, (B) addressed to each Issuing Bank on the Closing Date, the Administrative Agent, the Collateral Agent and the Lenders and (C) in form and substance reasonably satisfactory to the Administrative Agent and covering such other matters relating to the Loan Documents as the Administrative Agent shall reasonably request, and each Loan Party hereby instructs its counsel to deliver such opinions. (c) All legal matters incident to this Agreement, the borrowings and extensions of credit hereunder and the other Loan Documents shall be reasonably satisfactory to the Administrative Agent, to the Lenders and to each Issuing Bank on the Closing Date. 91 (d) The Administrative Agent shall have received in the case of each Loan Party each of the items referred to in clauses (i), (ii), (iii) and (iv) below: (i) a copy of the certificate or articles of incorporation, partnership agreement or limited liability agreement, including all amendments thereto, or other relevant constitutional documents under applicable law of each Loan Party, (A) in the case of a corporation, certified as of a recent date by the Secretary of State (or other similar official) or, with respect to any Foreign Subsidiary other than a Subsidiary organized under the laws of England, an officer or director or, with respect to any Subsidiary organized under the law of England, a director of the jurisdiction of its organization, and a certificate as to the good standing (to the extent such concept or a similar concept exists under the laws of such jurisdiction) of each such Loan Party as of a recent date from such Secretary of State (or other similar official) or (B) in the case of a partnership of or limited liability company, certified by the Secretary or Assistant Secretary of each such Loan Party; (ii) a certificate of the Secretary or Assistant Secretary or similar officer of each Loan Party other than the Initial Foreign Borrowers, and in the case of the UK Borrower a certificate of a director of the UK Borrower, and in the case of the French Borrower, a certificate of the President of the French Borrower, in each case dated the Closing Date and certifying: (A) that attached thereto is a true and complete copy of the by-laws (or partnership agreement, memorandum and articles of association, limited liability company agreement or other equivalent governing documents) of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors (or equivalent governing body) of such Loan Party (or its managing general partner or managing member) authorizing the execution, delivery and performance of the Loan Documents to which such Person is a party and, in the case of a Borrower, the borrowings hereunder, and in the case of the UK Borrower that neither the borrowings nor the grant of a guarantee or security hereunder will breach any borrowing, guarantee, security or other limit binding on the UK Borrower, and that such resolutions have not been modified, rescinded or amended and are in full force and effect on the Closing Date, (C) that the certificate or articles of incorporation, partnership agreement or limited liability agreement of such Loan Party has not been amended since the date of the last amendment thereto disclosed pursuant to clause (i) above, 92 (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party, and (E) as to the absence of any pending proceeding for the dissolution or liquidation of such Loan Party or, to the knowledge of such Person, threatening the existence of such Loan Party; (iii) a certificate of another officer or, with respect to the French Borrower, a third party reasonably acceptable to the Administrative Agent as to the incumbency and specimen signature of the Secretary or Assistant Secretary or similar officer executing the certificate pursuant to clause (ii) above; and (iv) such other documents as the Administrative Agent may reasonably request (including without limitation, tax identification numbers and addresses). (e) The Collateral and Guarantee Requirement with respect to items to be completed as of the Closing Date shall have been satisfied and the Administrative Agent shall have received completed Perfection Certificates dated the Closing Date and signed by a Responsible Officer of the Domestic Borrower, together with all attachments contemplated thereby, including the results of a search of the UCC (or equivalent) filings made with respect to the Domestic Loan Parties in the jurisdictions contemplated by the Perfection Certificates and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Administrative Agent that the Liens indicated by such financing statements (or similar documents) are permitted by Section 6.02 or have been released. (f) The Transactions shall have been consummated or shall be consummated simultaneously with or immediately following the closing under this Agreement in accordance with the Acquisition Agreement and all other related documentation (without material amendment, modification or waiver thereof which is adverse to the Lenders (as reasonably determined by the Administrative Agent) without the prior consent of the Administrative Agent), including each of the following: (i) The Equity Financing shall have been consummated or shall be consummated simultaneously with or immediately following the closing under this Agreement. The terms and conditions of the Equity Financing shall be as set forth in the Equity Commitment Letters or otherwise reasonably satisfactory in all respects to the Administrative Agent; (ii) The Domestic Borrower shall have received or shall receive simultaneously net cash proceeds from the issuance of U.S.$420.0 million of Senior Subordinated Notes pursuant to the Senior Subordinated Note Indenture; and (iii) The terms and conditions of the Senior Subordinated Notes (including terms and conditions relating to the interest rate, fees, amortization, maturity, subordination, covenants, defaults and remedies) shall be as set forth in 93 the Offering Memorandum or otherwise reasonably satisfactory to the Administrative Agent. (g) The Lenders shall have received: (i) the financial statements referred to in Section 3.05; and (ii) any additional financial statements received by Acquisition Corp. on or prior to the Closing pursuant to the Acquisition Agreement. (h) After giving effect to the Transactions and the other transactions contemplated hereby, Holdings and their Subsidiaries shall have outstanding no Indebtedness other than (i) the Loans and other extensions of credit under this Agreement, (ii) the Senior Subordinated Notes and (iii) other Indebtedness permitted pursuant to Section 6.01. (i) The Lenders shall have received (i) a solvency certificate substantially in the form of Exhibit G and signed by the chief financial officer or another Responsible Officer of the Domestic Borrower confirming the solvency of each Borrower and its Subsidiaries on a consolidated basis after giving effect to the Transactions and (ii) a solvency certificate substantially in the form of Exhibit H and signed by the chief financial officer or another Responsible Officer of Holdings confirming the solvency of Holdings and its Subsidiaries on a consolidated basis after giving effect to the Transactions. (j) There has not been any Material Adverse Effect, after giving effect to the Transactions, taken as a whole, since December 31, 2003. (k) Except as set forth in Schedule 4.02(k), no provision of any applicable law or regulation, and no judgment, injunction, order or decree shall prohibit the consummation of the Transactions, and all material actions by or in respect of or material filings with any Governmental Authority required to permit the consummation of the Transactions shall have been taken, made or obtained, except for any such actions or filings the failure to take, make or obtain would not be material to each Borrower and its Subsidiaries, taken as a whole. (l) The Agents shall have received all fees payable thereto or to any Lender on or prior to the Closing Date and, to the extent invoiced, all other amounts due and payable pursuant to the Loan Documents on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses (including reasonable fees, charges and disbursements of Shearman & Sterling LLP and local counsel) required to be reimbursed or paid by the Loan Parties hereunder or under any Loan Document. (m) The representations and warranties set forth in Sections 3.02, 3.03 and 3.04 hereof shall be true and correct in all material respects on and as of the Closing Date. (n) The ratio of Consolidated Debt to Pro Forma Adjusted EBITDA for the trailing four quarters ended immediately prior to the Closing Date shall not be greater than 6.25 to 1.00. 94 (o) The Administrative Agent shall have received copies of the Phase I and Phase II assessments reports being generated by Environ Corporation on behalf of the Borrowers. (p) The Administrative Agent shall have received a certificate signed by a Responsible Officer of each of Holdings and the Domestic Borrower as to the matters set forth in clauses (f), (h), (j), (k), (m) and (n) of this Section 4.02. (q) The Administrative Agent shall have received copies of each of the License Agreement, the Supply Agreement and the Transition Services Agreement, in each case, in form and substance in form and substance reasonably satisfactory to the Administrative Agent. (r) The French Borrower shall have received a TEG letter substantially in the form of Exhibit K from the Administrative Agent. SECTION 4.03. Conditions Precedent to the Initial Borrowing of Each Additional Borrower. The obligation of any Lender to make an initial advance of any Loan to, or any Issuing Bank to make an initial issuance of any Letter of Credit for the account of, each Additional Foreign Borrower following its designation as a Borrower hereunder pursuant to Section 2.23, is subject to the following: (a) The Administrative Agent (or its counsel) shall have received a counterpart of the Credit Agreement Supplement signed on behalf of such Borrower, in substantially the form of Exhibit I hereto. (b) The Administrative Agent shall have received, on behalf of itself, the Collateral Agent, the Lenders and each Issuing Bank, favorable legal opinions, dated as of the date of such initial advance or issuance, relating to such Borrower and as otherwise described in Section 4.02(b). (c) The Administrative Agent shall have received each of the items referred to in clauses (i), (ii), (iii) and (iv) of Section 4.02(d) with respect to such Borrower, each certified and dated as of the date of such initial advance or issuance. ARTICLE V AFFIRMATIVE COVENANTS Each of Holding and the Borrowers covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, each of Holdings and the Borrowers will, and will cause each of their Subsidiaries to: 95 SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.05, and except for the liquidation or dissolution of Subsidiaries if the assets of such Subsidiaries to the extent they exceed estimated liabilities are acquired by Holdings or a Wholly Owned Subsidiary of Holdings in such liquidation or dissolution; provided that Subsidiaries that are Loan Parties may not be liquidated into Subsidiaries that are not Loan Parties. (b) Do or cause to be done all things necessary to (i) obtain, preserve, renew, extend and keep in full force and effect the permits, franchises, authorizations, patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect thereto necessary to the normal conduct of its business, (ii) comply in all material respects with all material applicable laws, rules, regulations (including any zoning, building, ordinance, code or approval or any building permits or any restrictions of record or agreements affecting the Mortgaged Properties) and judgments, writs, injunctions, decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted and (iii) at all times maintain and preserve all property necessary to the normal conduct of its business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith, if any, may be properly conducted at all times (in each case except as expressly permitted by this Agreement); in each case in this paragraph (b) except where the failure would not reasonably be expected to have a Material Adverse Effect. SECTION 5.02. Insurance. (a) Keep its insurable properties insured at all times by financially sound and reputable insurers in such amounts as shall be customary for similar businesses and maintain such other reasonable insurance (including, to the extent consistent with past practices, self-insurance), of such types, to such extent and against such risks, as is customary with companies in the same or similar businesses and maintain such other insurance as may be required by law or any other Loan Document. (b) Cause all such property and casualty insurance policies with respect to the Mortgaged Properties located in the United States to be endorsed or otherwise amended to include a "standard" or "New York" lender's loss payable endorsement, in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent, which endorsement shall provide that, from and after the Closing Date, if the insurance carrier shall have received written notice from the Administrative Agent or the Collateral Agent of the occurrence of an Event of Default, the insurance carrier shall pay all proceeds otherwise payable to any Borrower or the Loan Parties under such policies directly to the Collateral Agent; cause all such policies to provide that neither any Borrower, the Administrative Agent, the Collateral Agent nor any other party shall be a coinsurer thereunder and to contain a "Replacement Cost Endorsement," without any deduction for depreciation, and such other provisions as the Administrative Agent or the Collateral Agent may reasonably (in light of a Default or a material development in respect of the insured Mortgaged Property) require from time to time to protect their interests; deliver original or certified copies of all such policies or a certificate of an insurance broker to the Collateral Agent; cause each such policy to provide that it shall not be canceled or not renewed upon less than 30 days' prior written notice thereof by the insurer to the Administrative Agent 96 and the Collateral Agent; deliver to the Administrative Agent and the Collateral Agent, prior to the cancellation or nonrenewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent and the Collateral Agent), or insurance certificate with respect thereto, together with evidence satisfactory to the Administrative Agent and the Collateral Agent of payment of the premium therefor. (c) If at any time the area in which the Premises (as defined in the Mortgages) are located is designated a "flood hazard area" in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such reasonable total amount as the Administrative Agent or the Collateral Agent may from time to time reasonably require, and otherwise to ensure compliance with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time. (d) With respect to each Mortgaged Property located in the United States, carry and maintain comprehensive general liability insurance including the "broad form CGL endorsement" (or equivalent coverage) and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any and all claims, in each case in amounts and against such risks as are customarily maintained by companies engaged in the same or similar industry operating in the same or similar locations naming the Collateral Agent as an additional insured, on forms reasonably satisfactory to the Collateral Agent. (e) Notify the Administrative Agent and the Collateral Agent promptly whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.02 is taken out by Holdings, any Borrower or any of their Subsidiaries; and promptly deliver to the Administrative Agent and the Collateral Agent a duplicate original copy of such policy or policies, or an insurance certificate with respect thereto. (f) In connection with the covenants set forth in this Section 5.02, it is understood and agreed that: (i) none of the Agents, the Lenders, the Issuing Bank and their respective agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 5.02, it being understood that (A) each Borrower and the other Loan Parties shall look solely to their insurance companies or any parties other than the aforesaid parties for the recovery of such loss or damage and (B) such insurance companies shall have no rights of subrogation against the Agents, the Lenders, any Issuing Bank or their agents or employees. If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then each of Holdings, and the Borrowers hereby agree, to the extent permitted by law, to waive, and to cause each of their Subsidiaries to waive, its right of recovery, if any, against the Agents, the Lenders, any Issuing Bank and their agents and employees; and 97 (ii) the designation of any form, type or amount of insurance coverage by the Administrative Agent, the Collateral Agent under this Section 5.02 shall in no event be deemed a representation, warranty or advice by the Administrative Agent, the Collateral Agent or the Lenders that such insurance is adequate for the purposes of the business of Holdings, the Borrowers and their Subsidiaries or the protection of their properties. SECTION 5.03. Taxes. Pay and discharge promptly when due all material Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise that, if unpaid, might give rise to a Lien upon such properties or any part thereof; provided, however, that such payment and discharge shall not be required with respect to any such Tax, assessment, charge, levy or claim so long as (a) the validity or amount thereof shall be contested in good faith by appropriate proceedings, and Holdings, the affected Borrower or the affected Subsidiary, as applicable, shall have set aside on its books reserves in accordance with GAAP with respect thereto or (b) the aggregate amount of such Taxes, assessments, charges, levies or claims does not exceed U.S.$5 million. SECTION 5.04. Financial Statements, Reports, etc. Furnish to the Administrative Agent (which will promptly furnish such information to the Lenders): (a) within 120 days after the end of the fiscal year ended December 31, 2004, and within 90 days (or such shorter period as the SEC shall specify for the filing of Annual Reports on Form 10-K) after the end of each subsequent fiscal year, a consolidated balance sheet and related statements of operations, cash flows and owners' equity showing the financial position of Domestic Borrower and its Subsidiaries as of the close of such fiscal year and the consolidated results of their operations during such year and setting forth in comparative form the corresponding figures for the prior fiscal year, all audited by independent public accountants of recognized national standing reasonably acceptable to the Administrative Agent and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present, in all material respects, the financial position and results of operations of Domestic Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP (it being understood that the delivery by Domestic Borrower of Annual Reports on Form 10-K of Domestic Borrower and its consolidated Subsidiaries shall satisfy the requirements of this Section 5.04(a) to the extent such Annual Reports include the information specified herein). (b) within 45 days (or such shorter period as the SEC shall specify for the filing of Quarterly Reports on Form 10-Q) after the end of each of the first three fiscal quarters of each fiscal year, a consolidated balance sheet and related statements of operations and cash flows showing the financial position of Domestic Borrower and its Subsidiaries as of the close of such fiscal quarter and the consolidated results of their operations during such fiscal quarter and the then-elapsed portion of the fiscal year and setting forth in comparative form the corresponding figures for the corresponding periods of the prior fiscal year, all certified by a Financial Officer of Domestic Borrower, on behalf of Domestic Borrower, as fairly presenting, in all material respects, the financial position and results of operations of Domestic Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP (subject to normal year-end 98 audit adjustments and the absence of footnotes) (it being understood that the delivery by Domestic Borrower of Quarterly Reports on Form 10-Q of Domestic Borrower and its consolidated Subsidiaries shall satisfy the requirements of this Section 5.04(b) to the extent such Quarterly Reports include the information specified herein); (c) (x) concurrently with any delivery of financial statements under (a) or (b) above, a certificate of a Financial Officer of Domestic Borrower (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) commencing with the fiscal period ending December 31, 2004 setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in Sections 6.10, 6.11 and 6.12 and (y) concurrently with any delivery of financial statements under (a) above, a certificate of the accounting firm opining on or certifying such statements stating whether they obtained knowledge during the course of their examination of such statements of any Default or Event of Default (which certificate may be limited to accounting matters and disclaims responsibility for legal interpretations); (d) promptly after the same become publicly available, copies of all periodic and other publicly available reports, proxy statements and, to the extent requested by the Administrative Agent, other materials filed by Holdings, any Borrower or any of the Subsidiaries with the SEC, or after an initial public offering, distributed to its stockholders generally, as applicable; (e) if, as a result of any change in accounting principles and policies from those as in effect on the Closing Date, the consolidated financial statements of Domestic Borrower and its Subsidiaries delivered pursuant to paragraphs (a) or (b) above will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such clauses had no such change in accounting principles and policies been made, then, together with the first delivery of financial statements pursuant to paragraph (a) and (b) above following such change, a schedule prepared by a Financial Officer on behalf of Domestic Borrower reconciling such changes to what the financial statements would have been without such changes; (f) within 90 days after the beginning of each fiscal year, an operating and capital expenditure budget, in form satisfactory to the Administrative Agent prepared by Holdings for each of the four fiscal quarters of such fiscal year prepared in reasonable detail, of Holdings and the Subsidiaries, accompanied by the statement of a Financial Officer of Holdings to the effect that, to the best of his knowledge, the budget is a reasonable estimate for the period covered thereby; (g) annually, upon the reasonable request of the Administrative Agent, updated Perfection Certificates (or, to the extent such request relates to specified information contained in the Perfection Certificates, such information) reflecting all changes since the date of the information most recently received pursuant to this paragraph (g) or Section 5.10(d); 99 (h) promptly, a copy of all reports submitted to the Board of Directors (or any committee thereof) of any of Holdings, any Borrower or any Subsidiary in connection with any material interim or special audit made by independent accountants of the books of Holdings, any Borrower or any Subsidiary; (i) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of Holdings, any Borrower or any of the Subsidiaries, or compliance with the terms of any Loan Document, or such consolidating financial statements, as in each case the Administrative Agent may reasonably request (for itself or on behalf of any Lender); and (j) promptly upon request by the Administrative Agent, copies of: (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed with the Internal Revenue Service with respect to a Plan; (ii) the most recent actuarial valuation report for any Plan; (iii) all notices received from a Multiemployer Plan sponsor or a Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such other documents or governmental reports or filings relating to any Plan or Multiemployer Plan as the Administrative Agent shall reasonably request. SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative Agent written notice of the following promptly after any Responsible Officer of Holdings or any Borrower obtains actual knowledge thereof: (a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto; (b) the filing or commencement of, or any written threat or written notice of intention of any Person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority or in arbitration, against Holdings, any Borrower or any of the Subsidiaries as to which an adverse determination is reasonably probable and which, if adversely determined, could reasonably be expected to have a Material Adverse Effect; (c) any other development specific to Holdings, any Borrower or any of the Subsidiaries that is not a matter of general public knowledge and that has had, or could reasonably be expected to have, a Material Adverse Effect; and (d) the occurrence of any ERISA Event, that together with all other ERISA Events that have occurred, could reasonably be expected to have a Material Adverse Effect. SECTION 5.06. Compliance with Laws. Comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property (owned or leased), except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; provided that this Section 5.06 shall not apply to Environmental Laws, which are the subject of Section 5.09, or to laws related to Taxes, which are the subject of Section 5.03. 100 SECTION 5.07. Maintaining Records; Access to Properties and Inspections. Maintain all financial records in accordance with GAAP and permit any Persons designated by the Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender to visit and inspect the financial records and the properties of Holdings, any Borrower or any of the Subsidiaries at reasonable times, upon reasonable prior notice to Holdings or such Borrower, and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any Persons designated by the Agents or, upon the occurrence and during the continuance of an Event of Default, any Lender upon reasonable prior notice to Holdings or such Borrower to discuss the affairs, finances and condition of Holdings, such Borrower or any of the Subsidiaries with the officers thereof and independent accountants therefor (subject to reasonable requirements of confidentiality, including requirements imposed by law or by contract). SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and the issuance of Letters of Credit solely for the purposes described in Section 3.11. SECTION 5.09. Compliance with Environmental Laws. Comply, and make commercially reasonable efforts to cause all lessees and other Persons occupying its properties to comply, with all Environmental Laws applicable to its operations and properties; and obtain and renew all material authorizations and permits required pursuant to Environmental Law for its operations and properties, in each case in accordance with Environmental Laws, except, in each case with respect to this Section 5.09, to the extent the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. SECTION 5.10. Further Assurances. (a) Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, Mortgages and other documents and recordings of Liens in stock registries), that may be required under any applicable law, or that the Administrative Agent may reasonably request, to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the applicable Loan Parties and provide to the Administrative Agent, from time to time upon reasonable request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents. (b) In the case of the Domestic Borrower, grant and cause each of the Domestic Subsidiary Loan Parties to grant to the Collateral Agent security interests and Mortgages in such Material Real Property located in the United States of the Domestic Borrower or such Domestic Subsidiary Loan Party as are acquired after the Closing Date and satisfy the requirements of clause (i) of the definition of Collateral and Guarantee Requirement (other than clause (iii)) with respect to such Material Real Properties within ninety (90) days after the date such Material Real Property is acquired. In the case of any Foreign Borrower, grant and cause each of its respective Foreign Subsidiary Loan Parties to grant to the Collateral Agent security interests and Mortgages in such Material Real Property of the Foreign Borrower or such Foreign Subsidiary Loan Party as are acquired after the Closing Date to the extent and in the manner set forth in clause (j) of the definition of Collateral and Guarantee Requirement with respect to such Material Real Properties within ninety (90) days after the date such Material Real Property is acquired. With respect to each of the items identified in this clause (b) that are required to be 101 delivered within ninety (90) days after the date the applicable Material Real Property is acquired, the Administrative Agent, in each case, may (in its sole discretion) extend such date on two separate occasions by up to 30 days on each such occasion. (c) If any additional direct or indirect Subsidiary of Holdings becomes a Material Subsidiary or a Subsidiary Loan Party after the Closing Date within five Business Days after the date such Subsidiary becomes a Material Subsidiary or a Subsidiary Loan Party, notify the Administrative Agent and the Lenders thereof and, within sixty (60) Business Days after the date such Subsidiary becomes a Material Subsidiary or a Subsidiary Loan Party, cause the Collateral and Guarantee Requirement to be satisfied with respect to such Subsidiary and with respect to any Equity Interest in or Indebtedness of such Subsidiary owned by or on behalf of any Loan Party. (d) In the case of any Loan Party, (i) furnish to the Collateral Agent prompt written notice of any change (A) in such Loan Party's corporate or organization name, (B) in such Loan Party's identity or organizational structure or (C) in such Loan Party's organizational identification number; provided that no Loan Party shall effect or permit any such change unless all filings have been made, or will have been made within any statutory period, under the UCC or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral for the benefit of the Secured Parties and (ii) promptly notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed. (e) In the case of each UK Subsidiary Loan Party, the UK Borrower shall procure that each UK Subsidiary Loan Party shall use all reasonable endeavours to: (i) complete the financial assistance whitewash procedures under Sections 155-159 of the English Companies Act 1985; (ii) execute and deliver a guarantee in substantially the same form as the guarantee granted by the UK Borrower pursuant to which such UK Subsidiary Loan Party will become a guarantor of the UK Obligations; (iii) grant a debenture in substantially the same form as the UK Debenture which is granted by the UK Borrower on the Closing Date; and (iv) deliver the following documents in each case certified by a director of such UK Subsidiary Loan Party: (A) in relation to the matters described in clause (i) above, copies of the statutory declarations, auditor's report and net assets letter (addressed, where possible, to the Administrative Agent, on behalf of itself and each of the Lenders) and copies of the registers of directors and shareholders of such UK Subsidiary Loan Party; and 102 (B) in relation to the matters described in clauses (ii) and (iii) above: (1) a copy of the certificate of incorporation, including all amendments thereto, of such UK Subsidiary Loan Party; (2) a true and complete copy of the memorandum and articles of association of such UK Subsidiary Loan Party as in effect on the date that the matters described in clauses (ii) and (iii) above are completed and at all times since a date prior to the date of the resolutions described in the following clause (3) below; (3) a true and complete copy of resolutions duly adopted by the Board of Directors of such UK Subsidiary Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such UK Subsidiary Loan Party is a party and, in the case that such UK Subsidiary Loan Party is an Additional Foreign Borrower, the borrowings hereunder, and that neither the borrowings nor the grant of a guarantee or security hereunder will breach any borrowing, guarantee, security or other limit binding on such UK Subsidiary Loan Party, and that such resolutions have not been modified, rescinded or amended and are in full force and effect on the date that the matters described in clauses (ii) and (iii) above are completed; (4) confirmation that the certificate of incorporation of such UK Subsidiary Loan Party has not been amended since the date of the last amendment thereto disclosed pursuant to clause (1) above; (5) confirmation as to the incumbency and specimen signature of the Director each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such UK Subsidiary Loan Party; (6) confirmation as to the absence of any pending proceeding for the dissolution or liquidation of such UK Subsidiary Loan Party or, to the knowledge of such director, threatening the existence of such UK Subsidiary Loan Party; 103 (7) a certificate of another officer as to the incumbency and specimen signature of the director executing the certificate pursuant to clause (iv) above; and (8) such other documents as the Administrative Agent may reasonably request (including without limitation, tax identification numbers and addresses), in each case as soon as possible and in any event by the date falling 30 days after the Closing Date. The Domestic Borrower shall instruct its auditors and shall procure that the UK Subsidiary Loan Parties instruct their auditors to carry out all necessary reviews to meet this timetable and will keep the Administrative Agent informed as to the progress with the satisfaction of the requirements set forth in Section 5.10(e)(i). (f) The Collateral and Guarantee Requirement and the other provisions of this Section 5.10 need not be satisfied if such action would violate Section 9.23 hereof. In addition, the Collateral and Guarantee Requirement and the other provisions of this Section 5.10 need not be satisfied with respect to (i) any Equity Interests acquired after the Closing Date in accordance with this Agreement if, and to the extent that, and for so long as (A) doing so would violate applicable law or a contractual obligation binding on such Equity Interests and (B) such law or obligation existed at the time of the acquisition thereof and was not created or made binding on such Equity Interests in contemplation of or in connection with the acquisition of such Subsidiary (provided that the foregoing clause (B) shall not apply in the case of a joint venture, including a joint venture that is a Subsidiary), (ii) any assets acquired after the Closing Date, to the extent that, and for so long as, taking such actions would violate a contractual obligation binding on such assets that existed at the time of the acquisition thereof and was not created or made binding on such assets in contemplation or in connection with the acquisition of such assets (except in the case of assets acquired with Indebtedness permitted pursuant to Section 6.01(i) that is secured by a Lien permitted pursuant to Section 6.02(i)) or (iii) any Equity Interests in or any asset of a Foreign Subsidiary if the Domestic Borrower demonstrates to the Collateral Agent and the Collateral Agent determines (in its reasonable discretion) that the cost of the satisfaction of the Collateral and Guarantee Requirement of this Section 5.10 with respect thereto exceeds the value of the security offered thereby; provided that, upon the reasonable request of the Collateral Agent, Holdings shall, and shall cause any applicable Subsidiary to, use commercially reasonable efforts to have waived or eliminated any contractual obligation of the types described in clauses (i) and (ii) above, other than those set forth in a joint venture agreement to which Holdings or any Subsidiary is a party. SECTION 5.11. Fiscal Year. In the case of Holdings and the Subsidiaries, cause their fiscal year to end on December 31. SECTION 5.12. Interest Rate Protection Agreements. As promptly as practicable and in any event within 90 days after the Closing Date, enter into, and for a period of not less than three years after the Closing Date maintain in effect, one or more Swap Agreements with one or more of the Lenders (or Affiliates thereof), the effect of which is that at least 50% of Consolidated Debt (other than any Indebtedness under Revolving Facility Borrowings) will bear interest at a fixed or capped rate or the interest cost in respect of which will be fixed or capped, 104 in each case on terms and conditions reasonably acceptable, taking into account current market conditions, to the Administrative Agent. SECTION 5.13. Proceeds of Certain Dispositions. If, as a result of the receipt of any cash proceeds by any Borrower or any Subsidiary in connection with any sale, transfer, lease or other disposition of any asset, including any Equity Interest, the Domestic Borrower would be required by the terms of the Senior Subordinated Note Indenture to make an offer to purchase any Senior Subordinated Notes, as applicable, then, in the case of a Borrower or a Subsidiary, prior to the first day on which the Domestic Borrower would be required to commence such an offer to purchase, (i) prepay Loans in accordance with Section 2.11 or (ii) acquire assets, Equity Interests or other securities in a manner that is permitted by Section 6.04 or Section 6.05, in each case in a manner that will eliminate any such requirement to make such an offer to purchase. SECTION 5.14. Post-Closing Transactions. Notwithstanding anything to the contrary set forth in this Agreement or any other Loan Document, Holdings and its Subsidiaries shall be permitted to take any and all actions (including, without limitation, taking any such actions that may otherwise be prohibited pursuant to the terms of this Agreement or omitting to take any actions that may otherwise be required pursuant to the terms of this Agreement) to consummate the transactions described on Annex A hereto; provided that Holdings and the Borrowers shall use their commercially reasonable efforts to cause the transactions described on Annex A to be completed as soon as reasonably practicable after the Closing. SECTION 5.15. Post-Closing Matters. Execute and deliver the documents and complete the tasks set forth in the definition of "Collateral and Guarantee Requirement," in each case within the time periods specified therein (including any extension of such time periods permitted by the Administrative Agent pursuant to paragraph (k) of the definition of "Collateral and Guarantee Requirement"). NEGATIVE COVENANTS Each of Holdings and the Borrowers covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, neither Holdings nor any Borrower will, or will cause or permit any of the Subsidiaries to: SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any Indebtedness, except: (a) Indebtedness existing on the Closing Date and (other than in the case of any existing letters of credit to be replaced with Letters of Credit issued hereunder) set forth on Schedule 6.01 and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness (other than intercompany Indebtedness Refinanced with Indebtedness owed to a Person not affiliated with Holdings or any Subsidiary); 105 (b) Indebtedness created hereunder and under the other Loan Documents; (c) Indebtedness of Holdings and the Subsidiaries pursuant to Swap Agreements permitted by Section 6.13; (d) Indebtedness owed to (including obligations in respect of letters of credit or bank guarantees or similar instruments for the benefit of) any Person providing workers' compensation, health, disability or other employee benefits or property, casualty or liability insurance to Holdings or any Subsidiary, pursuant to reimbursement or indemnification obligations to such Person, provided that upon the incurrence of Indebtedness with respect to reimbursement obligations regarding workers' compensation claims, such obligations are reimbursed not later than 30 days following such incurrence; (e) Indebtedness of any Borrower or any Subsidiary to the extent permitted by Section 6.04, provided that Indebtedness of any Loan Party to any Subsidiary that is not a Loan Party (the "Subordinated Intercompany Debt") shall be subordinated to the Obligations on terms reasonably satisfactory to the Administrative Agent; (f) Indebtedness in respect of performance bonds, warranty bonds, bid bonds, appeal bonds, surety bonds and completion or performance guarantees and similar obligations, in each case provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business and Indebtedness arising out of advances on exports, advances on imports, advances on trade receivables, customer prepayments and similar transactions in the ordinary course of business and consistent with past practice; (g) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business or other cash management services in the ordinary course of business, provided that (x) such Indebtedness (other than credit or purchase cards) is extinguished within three Business Days of its incurrence and (y) such Indebtedness in respect of credit or purchase cards is extinguished within 60 days from its incurrence; (h) (i) Indebtedness of a Subsidiary acquired after the Closing Date or a Person merged into or consolidated with a Borrower or any Subsidiary after the Closing Date and Indebtedness assumed in connection with the acquisition of assets, which Indebtedness in each case, exists at the time of such acquisition, merger or consolidation and is not created in contemplation of such event and where such acquisition, merger or consolidation is permitted by this Agreement and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness, provided that the aggregate principal amount of such Indebtedness at the time of, and after giving effect to, such acquisition, merger or consolidation, such assumption or such incurrence, as applicable (together with Indebtedness outstanding pursuant to this paragraph (h), paragraph (i) of this Section 6.01 and the Remaining Present Value of outstanding leases permitted under Section 6.03), would not exceed 3.75% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such acquisition, merger or consolidation, such assumption or such incurrence, as applicable, for which financial statements have been delivered pursuant to Section 5.04; 106 (i) Capital Lease Obligations, mortgage financings and purchase money Indebtedness incurred by Holdings or any Subsidiary prior to or within 270 days after the acquisition, lease or improvement of the respective asset permitted under this Agreement in order to finance such acquisition or improvement, and any Permitted Refinancing Indebtedness in respect thereof, in an aggregate principal amount that at the time of, and after giving effect to, the incurrence thereof (together with Indebtedness outstanding pursuant to paragraph (h) of this Section 6.01, this paragraph (i) and the Remaining Present Value of leases permitted under Section 6.03) would not exceed 3.75% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such incurrence for which financial statements have been delivered pursuant to Section 5.04; (j) Capital Lease Obligations incurred by Holdings or any Subsidiary in respect of any Sale and Lease-Back Transaction that is permitted under Section 6.03; (k) other Indebtedness, in an aggregate principal amount at any time outstanding pursuant to this paragraph (k) not in excess of U.S.$40.0 million; (l) Indebtedness of the Domestic Borrower pursuant to the Senior Subordinated Notes in an aggregate principal amount that is not in excess of the sum of U.S.$420.0 million and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness in the form of Permitted Subordinated Debt Securities; (m) Guarantees (i) by the Loan Parties of the Indebtedness of the Domestic Borrower described in paragraph (l), (ii) by any Loan Party of any Indebtedness of any Borrower or any Loan Party expressly permitted to be incurred under this Agreement, (iii) by any Borrower or any Subsidiary of Indebtedness otherwise expressly permitted hereunder of any Borrower or any Subsidiary that is not a Loan Party to the extent permitted by Section 6.04, (iv) by any Subsidiary that is not a Loan Party of Indebtedness of another Subsidiary that is not a Loan Party; provided that all Foreign Subsidiaries may guarantee obligations of other Foreign Subsidiaries under ordinary course cash management obligations, and (v) by any Borrower of Indebtedness of Foreign Subsidiaries incurred for working capital purposes in the ordinary course of business on ordinary business terms so long as such Indebtedness is permitted to be incurred under 6.01(a), (k) or (s); provided that Guarantees by any Loan Party under this Section 6.01(m) of any other Indebtedness of a Person that is subordinated to other Indebtedness of such Person shall be expressly subordinated to the Obligations on terms consistent with those used, or to be used, for Subordinated Intercompany Debt; (n) Indebtedness arising from agreements of Holdings or any Subsidiary providing for indemnification, adjustment of purchase price, earn outs or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; (o) Indebtedness in connection with Permitted Receivables Financings; provided that the proceeds thereof are applied in accordance with Section 2.11(c); 107 (p) letters of credit or bank guarantees (other than Letters of Credit issued pursuant to Section 2.05) having an aggregate face amount not in excess of U.S.$40.0 million; (q) Indebtedness supported by a Letter of Credit, in a principal amount not in excess of the stated amount of such Letter of Credit; (r) Indebtedness consisting of Permitted Subordinated Debt Securities or Permitted Senior Debt Securities to the extent, in each case, the Net Proceeds in respect thereof are actually utilized to repay Term Borrowings; (s) Indebtedness of Foreign Subsidiaries (including letters of credit or bank guarantees (other than Letters of Credit issued pursuant to Section 2.05)) for working capital purposes incurred in the ordinary course of business on ordinary business terms in an aggregate amount not to exceed U.S.$40.0 million outstanding at any time; (t) Indebtedness of Holdings or any of its Subsidiaries in respect of the Management Notes in an aggregate amount not to exceed $20 million outstanding at any time; and (u) all premium (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in paragraphs (a) through (s) above. (v) intercompany Indebtedness of any Borrower or any other Subsidiary to the extent described on Annex A. Notwithstanding anything to the contrary herein, Holdings shall not be permitted to incur any Indebtedness other than Indebtedness under Sections 6.01(b), (c) and (m). SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on any property or assets (including stock or other securities of any Person, including any Subsidiary) at the time owned by it or on any income or revenues or rights in respect of any thereof, except: (a) Liens on property or assets of Holdings and the Subsidiaries existing on the Closing Date and set forth on Schedule 6.02(a); provided that such Liens shall secure only those obligations that they secure on the Closing Date (and extensions, renewals and refinancings of such obligations permitted by Section 6.01(a)) and shall not subsequently apply to any other property or assets of Holdings or any Subsidiary; (b) any Lien created under the Loan Documents or permitted in respect of any Mortgaged Property by the terms of the applicable Mortgage; (c) any Lien on any property or asset of Holdings or any Subsidiary securing Indebtedness or Permitted Refinancing Indebtedness permitted by Section 6.01(h), provided that (i) such Lien does not apply to any other property or assets of Holdings or any of the Subsidiaries not securing such Indebtedness at the date of the acquisition of such property or asset (other than after-acquired property subjected to a Lien securing Indebtedness and other obligations incurred prior to such date and which Indebtedness and other obligations are permitted hereunder that 108 require a pledge of after-acquired property, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition), (ii) such Lien is not created in contemplation of or in connection with such acquisition and (iii) in the case of a Lien securing Permitted Refinancing Indebtedness, such Lien is permitted in accordance with clause (e) of the definition of the term "Permitted Refinancing Indebtedness"; (d) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent or that are being contested in compliance with Section 5.03; (e) Liens imposed by law (including, without limitation, Liens in favor of customers for equipment under order or in respect of advances paid in connection therewith) such as landlord's, carriers', warehousemen's, mechanics', materialmen's, repairmen's, construction or other like Liens arising in the ordinary course of business and securing obligations that are not overdue by more than 60 days or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, Holdings or any Subsidiary shall have set aside on its books reserves in accordance with GAAP; (f) (i) pledges and deposits made in the ordinary course of business in compliance with the Federal Employers Liability Act or any other workers' compensation, unemployment insurance and other social security laws or regulations and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations and (ii) pledges and deposits securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to Holdings or any Subsidiary; (g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance and return of money bonds, warranty bonds, bids, leases, government contracts, trade contracts, completion or performance guarantees and other obligations of a like nature incurred in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business; (h) zoning restrictions, easements, trackage rights, leases (other than Capital Lease Obligations), licenses, special assessments, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business that do not render title unmarketable and that, in the aggregate, do not interfere in any material respect with the ordinary conduct of the business of Holdings or any Subsidiary or would result in a Material Adverse Effect; (i) purchase money security interests in equipment or other property or improvements thereto hereafter acquired (or, in the case of improvements, constructed) by Holdings or any Subsidiary (including the interests of vendors and lessors under conditional sale and title retention agreements); provided that (i) such security interests secure Indebtedness permitted by Section 6.01(i) (including any Permitted Refinancing Indebtedness in respect thereof), (ii) such security interests are incurred, and the Indebtedness secured thereby is created, 109 within 270 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed 100% of the cost of such equipment or other property or improvements at the time of such acquisition (or construction), including transaction costs incurred by Holdings or any Subsidiary in connection with such acquisition (or construction) and (iv) such security interests do not apply to any other property or assets of Holdings or any Subsidiary (other than to accessions to such equipment or other property or improvements); provided further that individual financings of equipment provided by a single lender may be cross-collateralized to other financings of equipment provided solely by such lender; (j) Liens arising out of capitalized lease transactions permitted under Section 6.03, so long as such Liens attach only to the property sold and being leased in such transaction and any accessions thereto or proceeds thereof and related property; (k) Liens securing judgments that do not constitute an Event of Default under Section 7.01(j); (l) other Liens with respect to property or assets of Holdings or any Subsidiary not constituting Collateral for the Obligations with an aggregate fair market value (valued at the time of creation thereof) of not more than U.S.$40.0 million at any time; (m) Liens disclosed by the title insurance policies and any replacement, extension or renewal of any such Lien; provided that such replacement, extension or renewal Lien shall not cover any property other than the property that was subject to such Lien prior to such replacement, extension or renewal; provided further that the Indebtedness and other obligations secured by such replacement, extension or renewal Lien are permitted by this Agreement; (n) Liens in respect of Permitted Receivables Financings; (o) any interest or title of, or Liens created by, a lessor under any leases or subleases entered into by Holdings or any Subsidiary, as tenant, in the ordinary course of business; (p) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of Holdings or any Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of Holdings and the Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of Holdings or any Subsidiary in the ordinary course of business; (q) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights; (r) Liens securing obligations in respect of trade-related letters of credit permitted under Section 6.01(f) or (p) and covering the goods (or the documents of title in respect of such goods) financed by such letters of credit and the proceeds and products thereof; (s) licenses of intellectual property granted in the ordinary course of business; 110 (t) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (u) Liens on the assets of a Foreign Subsidiary that do not constitute Collateral and which secure Indebtedness of such Foreign Subsidiary that is not otherwise secured by a Lien on the Collateral under the Loan Documents and that is permitted to be incurred under Section 6.01(a) or (k); (v) Liens upon specific items of inventory or other goods and proceeds of Holdings or any of the Subsidiaries securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (w) Liens solely on any cash earnest money deposits made by Holdings or any of the Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder; (x) Liens arising from precautionary Uniform Commercial Code financing statement filings regarding operating leases entered into by Holdings or any of the Subsidiaries in the ordinary course of business; (y) Liens securing insurance premium financing arrangements in an aggregate principal amount not to exceed 1% of Consolidated Total Assets, provided that such Lien is limited to the applicable insurance contracts; and (z) Liens on the assets of a Foreign Subsidiary which secure Indebtedness of such Foreign Subsidiary that is permitted to be incurred under Section 6.01(p) or (s); provided, however, that if such Liens are on assets that constitute Collateral, such Liens may be pari passu with, but not prior to, the Liens granted in favor of the Collateral Agent under the Collateral Agreements unless such Liens secure letters of credit or bank guarantees and such assets constitute the rights of such Foreign Subsidiary under the contracts and agreements in respect of which such Indebtedness was incurred. Notwithstanding the foregoing, no Liens shall be permitted to exist, directly or indirectly, on (1) Pledged Collateral, other than Liens in favor of the Collateral Agent and Liens permitted by Section 6.02(d), (e), (q) or (z), or (2) Mortgaged Property, in each case, other than Liens in favor of the Collateral Agent, Prior Liens and Permitted Encumbrances. SECTION 6.03. Sale and Lease-Back Transactions. Enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a "Sale and Lease-Back Transaction"), provided that a Sale and Lease-Back Transaction shall be permitted so long as at the time the lease in connection therewith is entered into, and after giving effect to the entering into of such Lease, the Remaining Present Value of such lease (together with Indebtedness outstanding pursuant to paragraphs (h) and (i) of Section 6.01 and the Remaining Present Value of outstanding leases previously entered into under this Section 6.03) would not exceed 3.75% of 111 Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date such lease is entered into for which financial statements have been delivered pursuant to Section 5.04. SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire (including pursuant to any merger with a Person that is not a Wholly Owned Subsidiary immediately prior to such merger) any Equity Interests, evidences of Indebtedness or other securities of, make or permit to exist any loans or advances (other than intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of Holdings and the Subsidiaries) to or Guarantees of the obligations of, or make or permit to exist any investment or any other interest in (each, an "Investment"), in any other Person, except: (a) Investments (including, but not limited to, Investments in Equity Interests, intercompany loans, and Guarantees of Indebtedness otherwise expressly permitted hereunder) after the Closing Date by (i) Loan Parties in Subsidiaries that are not Loan Parties in an aggregate amount (valued at the time of the making thereof and without giving effect to any write-downs or write-offs thereof) not to exceed an amount equal to (x) U.S.$40.0 million (plus any return of capital actually received by the respective investors in respect of investments previously made by them pursuant to this paragraph a(i)), plus (y) the portion, if any, of the Available Investment Basket Amount on the date of such election that Holdings elects to apply to this Section 6.04(a), (ii) Domestic Loan Parties in Foreign Loan Parties in an aggregate amount (valued at the time of the making thereof and without giving effect to any write-downs or write-offs thereof) not to exceed (x) U.S.$100.0 million (plus any return of capital actually received by the respective investors in respect of investments previously made by them pursuant to this paragraph a(ii)), plus (y) the portion, if any, of the Available Investment Basket Amount on the date of such election that Holdings elects to apply to this Section 6.04(a), (iii) Domestic Loan Parties in other Domestic Loan Parties, (iv) Foreign Loan Parties in other Foreign Loan Parties and (iv) Subsidiaries that are not Loan Parties in Loan Parties. (b) Permitted Investments and investments that were Permitted Investments when made; (c) Investments arising out of the receipt by Holdings or any Subsidiary of noncash consideration for the sale of assets permitted under Section 6.05; (d) (i) loans and advances to employees of Holdings or any Subsidiary in the ordinary course of business not to exceed U.S.$2.5 million in the aggregate at any time outstanding (calculated without regard to write-downs or write-offs thereof) and (ii) advances of payroll payments and expenses to employees in the ordinary course of business; (e) accounts receivable arising and trade credit granted in the ordinary course of business and any securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and any prepayments and other credits to suppliers made in the ordinary course of business; 112 (f) Swap Agreements permitted pursuant to Section 6.13 and Capital Expenditures permitted pursuant to Section 6.10; (g) Investments existing on the Closing Date and set forth on Part I of Schedule 6.04 and Investments set forth on Part II of Schedule 6.04; (h) Investments resulting from pledges and deposits referred to in Sections 6.02(f) and (g); (i) other Investments by Holdings or any Subsidiary in an aggregate amount (valued at the time of the making thereof, and without giving effect to any write-downs or write-offs thereof) not to exceed (i) U.S.$25.0 million (plus any returns of capital actually received by the respective investor in respect of investments theretofore made by it pursuant to this paragraph (i)), plus (ii) the portion, if any, of the Available Investment Basket Amount on the date such election is made that the Borrowers elect to apply to this paragraph (i); (j) Investments constituting Permitted Business Acquisitions in an aggregate amount, which shall be deemed to include the principal amount of Indebtedness that is assumed pursuant to Section 6.01 in connection with such Permitted Business Acquisitions, not to exceed (i) U.S.$65.0 million (net of any return representing return of capital in respect of any such investment and valued at the time of the making thereof); provided that (x) such amount shall be increased to (a) U.S.$130.0 million, during any period that is a Permitted Business Acquisition Step Up Period pursuant to clause (a) of the definition thereof, or (b) U.S.$200.0 million, during any period that is a Permitted Business Acquisition Step Up Period pursuant to clause (b) of the definition thereof, in each case plus (y) the portion, if any, of the Available Investment Basket Amount on the date such election is made that the Borrowers elect to apply to this paragraph (j), (ii) if any Person acquired in a Permitted Business Acquisition is not merged into any Borrower or a Loan Party or does not become upon consummation of such Permitted Business Acquisition a Loan Party, the aggregate amount expended in respect thereof and for all such similar Permitted Business Acquisitions shall not exceed an amount equal to 50% of the amount of Permitted Business Acquisitions otherwise permitted under this Section 6.04(j) and (iii) if the amount of Investments constituting Permitted Business Acquisitions in accordance with this Section 6.04(j) and outstanding at the time a Permitted Business Acquisition Step-Up Period ends exceeds the amount of Investments constituting Permitted Business Acquisitions that would be permitted under this Section 6.04(j) immediately after the end of such Permitted Business Acquisition Step-Up Period, then the amount of such excess (less the amount by which investments constituting Permitted Business Acquisitions are reduced from such time until the commencement of the next Permitted Business Acquisition Step-Up Period, if any) shall be deemed to be permitted under this Section 6.04(j); provided further that such excess, if any, shall be deemed an election by the Borrowers to utilize the Available Investment Basket Amount in any amount equal to such excess; (k) additional Investments may be made from time to time to the extent made with proceeds of Equity Interests (excluding proceeds received as a result of the exercise of Cure Rights pursuant to Section 7.03) of Holdings, which proceeds or Investments in turn are contributed (as common equity) to any Loan Party; 113 (l) Investments (including, but not limited to, Investments in Equity Interests, intercompany loans, and Guarantees of Indebtedness otherwise expressly permitted hereunder) after the Closing Date by Subsidiaries that are not Loan Parties in any Loan Party or other Subsidiary. (m) Investments arising as a result of Permitted Receivables Financings; (n) the Transactions; (o) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with or judgments against, customers and suppliers, in each case in the ordinary course of business; (p) Investments of a Subsidiary acquired after the Closing Date or of a corporation merged into any Borrower or merged into or consolidated with a Subsidiary in accordance with Section 6.05 after the Closing Date to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation; (q) Guarantees by Holdings or any Subsidiary of operating leases (other than Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into by any Subsidiary in the ordinary course of business; (r) Investments described on Annex A; (s) any Investment related to Multiphase Power and Processing Technologies, LLC and Dresser-Rand and Enserv Services Sdn. Bnd. in accordance with the constitutive documents related thereto and in an aggregate amount not to exceed U.S.$10 million. SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions. Merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets (whether now owned or hereafter acquired), or issue, sell, transfer or otherwise dispose of any Equity Interests of any Borrower or any Subsidiary or preferred equity interests of Holdings, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other Person, except that this Section shall not prohibit: (a) (i) the sale of inventory, supplies, materials and equipment and the purchase and sale of contract rights or licenses or leases of intellectual property, in each case in the ordinary course of business by Holdings or any Subsidiary, (ii) the sale of any other asset in the ordinary course of business by Holdings or any Subsidiary, (iii) the sale of surplus, obsolete or worn out equipment or other property in the ordinary course of business by Holdings or any Subsidiary or (iv) the sale of Permitted Investments in the ordinary course of business; (b) if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing, (i) the merger of any Subsidiary into any Borrower in a transaction in which such Borrower is the surviving corporation, (ii) the merger or 114 consolidation of any Subsidiary into or with any Loan Party in a transaction in which the surviving or resulting entity is a Loan Party and, in the case of each of clauses (i) and (ii), no Person other than such Borrower or a Loan Party receives any consideration, (iii) the merger or consolidation of any Subsidiary that is not a Loan Party into or with any other Subsidiary that is not a Loan Party or (iv) the liquidation or dissolution (other than the Borrowers) or change in form of entity of Holdings or any Subsidiary if Holdings determines in good faith that such liquidation or dissolution is in the best interests of Holdings and is not materially disadvantageous to the Lenders; (c) sales, transfers, leases or other dispositions to Holdings or a Subsidiary (upon voluntary liquidation or otherwise); provided that any sales, transfers, leases or other dispositions by a Loan Party to a Subsidiary that is not a Loan Party shall be made in compliance with Section 6.07; provided further that the aggregate gross proceeds of any sales, transfers, leases or other dispositions by a Loan Party to a Subsidiary that is not a Loan Party in reliance upon this paragraph (c) and the aggregate gross proceeds of any or all assets sold, transferred or leased in reliance upon paragraph (h) below shall not exceed, in any fiscal year of the Domestic Borrower, 3.75% of Consolidated Total Assets as of the end of the immediately preceding fiscal year; (d) Sale and Lease-Back Transactions permitted by Section 6.03; (e) Investments permitted by Section 6.04, Liens permitted by Section 6.02 and Dividends permitted by Section 6.06; (f) the purchase and sale or other transfer (including by capital contribution) of Receivables Assets pursuant to Permitted Receivables Financings; (g) the sale of defaulted receivables in the ordinary course of business and not as part of an accounts receivables financing transaction; (h) sales, transfers, leases or other dispositions of assets not otherwise permitted by this Section 6.05; provided that the aggregate gross proceeds (including noncash proceeds) of any or all assets sold, transferred, leased or otherwise disposed of in reliance upon this paragraph (h) and in reliance upon the second proviso to paragraph (c) above shall not exceed, in any fiscal year of the Domestic Borrower, 3.75% of Consolidated Total Assets as of the end of the immediately preceding fiscal year; provided further that the Net Proceeds thereof are applied in accordance with Section 2.11(c); (i) any merger or consolidation in connection with a Permitted Business Acquisition, provided that following any such merger or consolidation (i) involving any Borrower, such Borrower is the surviving corporation, (ii) involving a domestic Subsidiary, the surviving or resulting entity shall be a domestic Loan Party that is a Wholly Owned Subsidiary and (iii) involving a Foreign Subsidiary, the surviving or resulting entity shall be a Foreign Subsidiary Loan Party that is a Wholly Owned Subsidiary; (j) licensing and cross-licensing arrangements involving any technology or other intellectual property of any Borrower or any Subsidiary in the ordinary course of business; 115 (k) sales, leases or other dispositions of inventory of Holdings and its Subsidiaries determined by the management of Holdings or any Borrower to be no longer useful or necessary in the operation of the business of Holdings or any of the Subsidiaries; provided that the Net Proceeds thereof are applied in accordance with Section 2.11(c); and (l) any sale, transfer or other disposition of assets related to Multiphase Power and Processing Technologies, LLC and Dresser-Rand and Enserv Services Sdn. Bnd. in accordance with the constitutive documents related thereto and in an aggregate amount not to exceed U.S.$10 million. Notwithstanding anything to the contrary contained in Section 6.05 above, (i) Holdings shall at all times own, directly or indirectly, 85% of the Equity Interests of each Borrower free and clear of any Liens other than Liens created by the Security Documents, (ii) no sale, transfer or other disposition of assets shall be permitted by this Section 6.05 (other than sales, transfers, leases or other dispositions to Loan Parties pursuant to paragraph (c) hereof and purchases, sales or transfers pursuant to paragraph (f) hereof) unless such disposition is for fair market value, (iii) no sale, transfer or other disposition of assets shall be permitted by paragraph (a), (d), (f) or (k) of this Section 6.05 unless such disposition is for at least 75% cash consideration and (vii) no sale, transfer or other disposition of assets in excess of U.S.$10.0 million shall be permitted by paragraph (h) of this Section 6.05 unless such disposition is for at least 75% cash consideration; provided that for purposes of clauses (ii) and (iii), the amount of any secured Indebtedness or other Indebtedness of a Subsidiary that is not a Loan Party (as shown on Holdings' or such Subsidiary's most recent balance sheet or in the notes thereto) of Holdings or any Subsidiary of Holdings that is assumed by the transferee of any such assets shall be deemed cash. SECTION 6.06. Dividends and Distributions. Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any of its Equity Interests (other than dividends and distributions on Equity Interests payable solely by the issuance of additional shares of Equity Interests of the Person paying such dividends or distributions) or directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any Subsidiary to purchase or acquire) any shares of any class of its Equity Interests or set aside any amount for any such purpose; provided, however, that: (a) any Subsidiary of Holdings may declare and pay dividends to, repurchase its Equity Interests from or make other distributions to, Holdings or to any Wholly Owned Subsidiary of Holdings (or, in the case of non-Wholly Owned Subsidiaries, to Holdings or any subsidiary that is a direct or indirect parent of such subsidiary and to each other owner of Equity Interests of such subsidiary on a pro rata basis (or more favorable basis from the perspective of Holdings, or such subsidiary) based on their relative ownership interests); (b) Holdings and each Subsidiary may declare and pay dividends or make other distributions to any Parent Company in respect of overhead of such Parent Company or its direct or indirect owners, including, without limitation, legal, accounting and professional fees and other fees and expenses in connection with the maintenance of its existence and its 116 ownership of Holdings, in each case, to the extent attributable to the ownership of such Parent Company in Holdings or such Subsidiary; (c) Holdings and each Subsidiary may repurchase, redeem or otherwise acquire or retire (or make dividends or distributions to any Parent Company to finance any such repurchase, redemption or other acquisition or retirement) for value any Equity Interests of Holdings, any Parent Company or any Subsidiary held by any current or former officer, director, consultant or employee of Holdings, any Parent Company or any Subsidiary pursuant to any equity subscription agreement, stock option agreement, shareholders' or members' agreement or similar agreement, plan or arrangement or any Plan and Subsidiaries may declare and pay dividends to Holdings or any other Subsidiary the proceeds of which are used for such purposes, provided that the aggregate amount of such purchases or redemptions under this paragraph (c) shall not exceed in any fiscal year U.S.$4.0 million (plus the amount of net proceeds (x) received by Holdings during such calendar year from sales of Equity Interests of Holdings to directors, consultants, officers or employees of Holdings or any Subsidiary in connection with permitted employee compensation and incentive arrangements and (y) of any key-man life insurance policies recorded during such calendar year) which, if not used in any year, may be carried forward to any subsequent calendar year (d) noncash repurchases of Equity Interests deemed to occur upon exercise of stock options if such Equity Interests represent a portion of the exercise price of such options; (e) so long as no Default or Event of Default shall have occurred and is continuing, Holdings may declare and pay dividends or make other distributions of up to 5% per calendar year of the net cash proceeds received by Holdings from any public offering of the Equity Interests of Holdings; (f) Holdings and each Subsidiary may declare and pay dividends or make other distributions to any Parent Company to fund any payments contemplated by the Transition Services Agreement, the Supply Agreement, the License Agreement and Sections 1.2(c), 1.4(d), 1.8, 6.4, 6.5, 6.7, 6.8(n)(ii), 6.8(q), 6.18, 6.20, 8.1 and 9.1(b) of the Acquisition Agreement; (g) The Domestic Borrower may make distributions to its members of management that hold Equity Interests of the Domestic Borrower in respect of such Equity Interests in an aggregate amount not to exceed in any fiscal year, together with such amounts permitted under Section 6.06(h) for such fiscal year, U.S.$3 million; (h) Holding and the Domestic Borrower may make distributions to any Parent Company solely in connection with distributions to members of management of FRC that hold profit interests in FRC in an aggregate amount not to exceed in any fiscal year, together with such amounts permitted under Section 6.06(g) for such fiscal year, U.S.$3 million; (i) Holdings and each Subsidiary may declare and pay dividends or make other distributions described on Annex A; and (j) Payments on Management Notes so long as such payments are in accordance with the subordination provisions related thereto. 117 SECTION 6.07. Transactions with Affiliates. (a) Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates, unless such transaction is (i) otherwise permitted (or required) under this Agreement (including in connection with any Permitted Receivables Financing) or (ii) upon terms no less favorable to Holdings or such Subsidiary, as applicable, than would be obtained in a comparable arm's-length transaction with a Person that is not an Affiliate; provided that this clause (ii) shall not apply to the indemnification of directors of Holdings and the Subsidiaries in accordance with customary practice. (b) The foregoing paragraph (a) shall not prohibit, to the extent otherwise permitted under this Agreement, (i) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options, stock ownership plans and the granting and performance of registration rights approved by the Board of Directors of Holdings, (ii) transactions among the Borrowers and the Loan Parties and transactions among the non-Loan Parties otherwise permitted by this Agreement, (iii) any indemnification agreement or any similar arrangement entered into with directors, officers, consultants and employees of Holdings and the Subsidiaries or any Parent Company in the ordinary course of business and the payment of fees and indemnities to directors, officers, consultants and employees of Holdings and the Subsidiaries or any Parent Company in the ordinary course of business, (iv) transactions pursuant to permitted agreements in existence on the Closing Date and set forth on Schedule 6.07 or any amendment thereto to the extent such amendment is not adverse to the Lenders in any material respect, (v) any employment agreement or employee benefit plan entered into by Holdings or any of the Subsidiaries in the ordinary course of business or consistent with past practice and payments pursuant thereto, (vi) transactions otherwise permitted under Section 6.04 and Section 6.06, (vii) any purchase by the Funds or any Fund Affiliate of Equity Interests of Holdings or any contribution by Holdings to, or purchase by Holdings of, the equity capital of any Borrower; provided that any Equity Interests of any Borrower purchased by Holdings shall be pledged to the Collateral Agent on behalf of the Lenders pursuant to the applicable Collateral Agreement, (viii) payments by Holdings or any of the Subsidiaries to the Funds or any Fund Affiliate made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including in connection with acquisitions or divestitures, which payments are approved by the majority of the board of directors of Holdings, in good faith, 118 (ix) the existence of, or the performance by Holdings, any Borrower or any of the Subsidiaries of its obligations under the terms of, the Acquisition Agreement, or any agreement contemplated thereunder to which it is a party as of the Closing Date, or the Holdings LLC Agreement; provided, however, that the existence of, or the performance by Holdings, any Borrower or any subsidiary of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Closing Date shall only be permitted by this clause (x) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Lenders in any material respect, (x) transactions with any Affiliate for the purchase or sale of goods, products, parts and services entered into in the ordinary course of business in a manner consistent with past practice, (xi) any transaction in respect of which Holdings delivers to the Administrative Agent (for delivery to the Lenders) a letter addressed to the Board of Directors of Holdings from an accounting, appraisal or investment banking firm, in each case of nationally recognized standing that is (A) in the good faith determination of Holdings qualified to render such letter and (B) reasonably satisfactory to the Administrative Agent, which letter states that such transaction is on terms that are no less favorable to Holdings or such Subsidiary, as applicable, than would be obtained in a comparable arm's-length transaction with a Person that is not an Affiliate, (xii) the payment of all fees, expenses, bonuses and awards related to the Transactions contemplated by the Acquisition Documents, including fees to the Funds or any Fund Affiliate, (xiii) transactions described in Annex A, (xiv) transactions pursuant to any Permitted Receivables Financing, (xv) the issuance of Management Notes, and payments pursuant thereto, so long as such payments are in accordance with the subordination provisions related thereto, (xvi) so long as not otherwise prohibited under this Agreement, guarantees of performance by Holdings or any Subsidiary of any other Subsidiary or Holdings that are not a Loan Party in the ordinary course of business, except for guarantees of Indebtedness in respect of borrowed money; and (xvii) if such transaction is with a Person in its capacity as a holder (A) of Indebtedness of Holdings or any Subsidiary where such Person is treated no more favorably than the other holders of Indebtedness of Holdings or any Subsidiary or (B) at any time after an initial public offering of Equity Interests of Holdings, of Equity Interests of Holdings or any Subsidiary where such Person is treated no more favorably than the other holders of Equity Interests of Holdings or any Subsidiary. 119 SECTION 6.08. Business of Holdings and the Subsidiaries. (a) Notwithstanding any other provisions hereof, engage at any time in any business or business activity other than any business or business activity conducted by it on the Closing Date and any business or business activities incidental or related thereto, or any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto, including the consummation of the Transactions. (b) In the case of Holdings, conduct, transact or otherwise engage in any business or operations other than those incidental to its ownership of the Equity Interests of the Domestic Borrower, the performance of the Transaction Documents and any transactions that Holdings is permitted to enter into or consummate under this Article VI. SECTION 6.09. Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc. (a) Amend or modify in any manner materially adverse to the Lenders, or grant any waiver or release under or terminate in any manner (if such granting or termination shall be materially adverse to the Lenders), the articles or certificate of incorporation or by-laws or partnership agreement or limited liability company operating agreement of Holdings, any Borrower or any of the Subsidiaries or the Acquisition Agreement. (b) (i) Make, or agree or offer to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on the Senior Subordinated Notes or any Permitted Subordinated Debt Securities, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of the Senior Subordinated Notes or any Permitted Subordinated Debt Securities (except for Refinancings permitted by Section 6.01(l)), except for (A) payments of regularly scheduled interest and (B) with respect to Permitted Subordinated Debt Securities, payments made solely with the proceeds of contributions made in respect of Equity Interests; or (ii) Amend or modify, or permit the amendment or modification of, any provision of any Senior Subordinated Note or any Permitted Senior Debt Securities or Permitted Subordinated Debt Securities, any Permitted Receivables Document or any agreement (including any Senior Subordinated Notes Document or any document relating to any Permitted Senior Debt Securities or Permitted Subordinated Debt Securities) relating thereto, other than amendments or modifications that are not in any manner materially adverse to Lenders and that do not affect the subordination provisions thereof (if any) in a manner adverse to the Lenders. (c) Permit any Subsidiary to enter into any agreement or instrument that by its terms restricts (i) the payment of dividends or distributions or the making of cash advances by such Subsidiary to Holdings or any Subsidiary that is a direct or indirect parent of such Subsidiary or (ii) the granting of Liens by such Subsidiary pursuant to the Security Documents, in each case other than those arising under any Loan Document, except, in each case, restrictions existing by reason of: 120 (A) restrictions imposed by applicable law; (B) restrictions contained in any Permitted Receivables Document with respect to any Special Purpose Receivables Subsidiary; (C) contractual encumbrances or restrictions in effect on the Closing Date under (x) any Senior Subordinated Note Document or (y) any agreements related to any permitted renewal, extension or refinancing of any Indebtedness existing on the Closing Date that does not expand the scope of any such encumbrance or restriction; (D) restrictions imposed by any Permitted Senior Debt Securities that are substantially similar to restrictions set forth in the Credit Agreement; (E) any restriction on a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Equity Interests or assets of a Subsidiary pending the closing of such sale or disposition; (F) customary provisions in joint venture agreements and other similar agreements applicable to joint ventures entered into in the ordinary course of business; (G) any restrictions imposed by any agreement relating to secured Indebtedness permitted by this Agreement to the extent that such restrictions apply only to the property or assets securing such Indebtedness; (H) customary provisions contained in leases or licenses of intellectual property and other similar agreements entered into in the ordinary course of business; (I) customary provisions restricting subletting or assignment of any lease governing a leasehold interest; (J) customary provisions restricting assignment of any agreement entered into in the ordinary course of business; (K) customary restrictions and conditions contained in any agreement relating to the sale of any asset permitted under Section 6.05 pending the consummation of such sale; or (L) any agreement in effect at the time such subsidiary becomes a Subsidiary, so long as such agreement was not entered into in contemplation of such Person becoming a Subsidiary. SECTION 6.10. Capital Expenditures. Permit the Domestic Borrower or its Subsidiaries to make any Capital Expenditure, except that: (a) The Domestic Borrower and its Subsidiaries may make Capital Expenditures so long as during (i) the fiscal quarter ended December 31, 2004, Holdings of the aggregate amount thereof does not exceed U.S.$5.0 million and during any fiscal year thereafter the aggregate amount thereof does not exceed the amount set forth opposite such fiscal year below: 121
Year Amount - ---- ------ 2005 U.S.$20.0 million 2006 U.S.$20.0 million 2007 U.S.$25.0 million 2008 U.S.$25.0 million
(b) Notwithstanding anything to the contrary contained in paragraph (a) above, to the extent that the aggregate amount of Capital Expenditures made by the Domestic Borrower and its Subsidiaries in any fiscal year of the Domestic Borrower pursuant to Section 6.10(a) is less than the amount set forth for such fiscal year, the amount of such difference may be carried forward and used to make Capital Expenditures in the two succeeding fiscal years; provided that in any fiscal year, the amount permitted to be applied to make Capital Expenditures pursuant to this paragraph (b) shall in no event exceed an amount equal to 50% of the amount set forth in Section 6.10(a) for such fiscal year. (c) In addition to the Capital Expenditures permitted pursuant to the preceding paragraphs (a) and (b), the Domestic Borrower and its Subsidiaries may make additional Capital Expenditures at any time in an amount not to exceed the portion, if any, of the Available Investment Basket Amount on the date of such Capital Expenditure that the Borrowers elect to apply to this Section 6.10(c). SECTION 6.11. Interest Coverage Ratio. Permit the ratio (the "Interest Coverage Ratio") on the last day of the fiscal quarter set forth below, for the four quarter period ended as of such day of (a) EBITDA to (b) Cash Interest Expense to be less than the ratio set forth below for such period; provided that to the extent any Asset Disposition or any Asset Acquisition (or any similar transaction or transactions for which a waiver or a consent of the Required Lenders pursuant to Section 6.05 has been obtained) or incurrence or repayment of Indebtedness (excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes) has occurred during the relevant Test Period, the Interest Coverage Ratio shall be determined for the respective Test Period on a pro forma Basis for such occurrences.
Period Ended Ratio ------------ ----- December 31, 2004 1.750 to 1.000 March 31, 2005 1.750 to 1.000 June 30, 2005 1.875 to 1.000 September 30, 2005 1.875 to 1.000 December 31, 2005 2.000 to 1.000 March 31, 2006 2.000 to 1.000 June 30, 2006 2.125 to 1.000 September 30, 2006 2.125 to 1.000 December 31, 2006 2.125 to 1.000 March 31, 2007 2.125 to 1.000 June 30, 2007 2.250 to 1.000 September 30, 2007 2.250 to 1.000 December 31, 2007 2.250 to 1.000 March 31, 2008 2.250 to 1.000
122
Period Ended Ratio ------------ ----- ~~June 30, 2008 2.500 to 1.000 September 30, 2008 2.500 to 1.000 December 31, 2008 and thereafter 2.500 to 1.000~~
SECTION 6.12. Leverage Ratio. Permit the Leverage Ratio on the last day of any fiscal quarter set forth below, to be in excess of the ratio set forth below for such period.
Period Ended Ratio ------------ ----- December 31, 2004 6.85 to 1.000 March 31, 2005 6.75 to 1.000 June 30, 2005 6.50 to 1.000 September 30, 2005 6.50 to 1.000 December 31, 2005 6.25 to 1.000 March 31, 2006 6.00 to 1.000 June 30, 2006 5.75 to 1.000 September 30, 2006 5.50 to 1.000 December 31, 2006 5.25 to 1.000 March 31, 2007 5.00 to 1.000 June 30, 2007 4.75 to 1.000 September 30, 2007 4.50 to 1.000 December 31, 2007 4.50 to 1.000 March 31, 2008 4.25 to 1.000 June 30, 2008 4.00 to 1.000 September 30, 2008 4.00 to 1.000 December 31, 2008 and thereafter 4.00 to 1.000
SECTION 6.13. Swap Agreements. Enter into any Swap Agreement, other than (a) Swap Agreements required by Section 5.12 or any Permitted Receivables Financing, (b) Swap Agreements entered into in the ordinary course of business to hedge or mitigate risks to which Holdings or any Subsidiary is exposed in the conduct of its business or the management of its liabilities, and (c) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of Holdings or any Subsidiary. SECTION 6.14. Designated Senior Debt. Designate any Indebtedness of any Borrower or any of the Subsidiaries other than (i) the Obligations hereunder and (ii) Permitted Senior Debt Securities as "Designated Senior Indebtedness" under, and as defined in, the Senior Subordinated Notes Indenture. 123 ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Events of Default. In case of the happening of any of the following events ("Events of Default"): (a) any representation or warranty made or deemed made by Holdings, any Borrower or any other Loan Party in any Loan Document, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished by Holdings, any Borrower or any other Loan Party; (b) default shall be made in the payment of any principal of any Loan or the reimbursement with respect to any L/C Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (c) default shall be made in the payment of any interest on any Loan or on any L/C Disbursement or in the payment of any Fee or any other amount (other than an amount referred to in (b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five (5) Business Days; (d) default shall be made in the due observance or performance by Holdings, any Borrower or any of the Subsidiaries of any covenant, condition or agreement contained in Section 5.01(a) (with respect to Holdings or any Borrower), 5.05(a), 5.08, 5.10(c) or in Article VI; (e) default shall be made in the due observance or performance by Holdings, any Borrower or any of the Subsidiaries of any covenant, condition or agreement contained in any Loan Document (other than those specified in paragraphs (b), (c) and (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or any Lender to any Borrower; (f) (i) any event or condition occurs that (A) results in any Material Indebtedness becoming due prior to its scheduled maturity or (B) enables or permits (with all applicable grace periods having expired) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity or (ii) Holdings, any Borrower or any of the Subsidiaries shall fail to pay the principal of any Material Indebtedness at the stated final maturity thereof; provided that this clause (f) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; (g) there shall have occurred a Change in Control; 124 (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in (or, with respect to any UK Loan Party, the presentation of an application shall be made with) a court of competent jurisdiction seeking (i) relief in respect of Holdings, any Borrower or any of the Subsidiaries (other than a Borrower or Subsidiary incorporated in France), or of a substantial part of the property or assets of Holdings, any Borrower or any Subsidiary (other than a Borrower or Subsidiary incorporated in France), under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official (or, with respect to any UK Loan Party, an administration order) for Holdings, any Borrower or any of the Subsidiaries (other than a Borrower or Subsidiary incorporated in France) or for a substantial part of the property or assets of Holdings, any Borrower or any of the Subsidiaries (other than a Borrower or Subsidiary incorporated in France) or (iii) the winding-up or liquidation of Holdings, any Borrower or any Subsidiary (other than a Borrower or Subsidiary incorporated in France) (except, in the case of any Subsidiary (other than the Borrowers), in a transaction permitted by Section 6.05); and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (i) Holdings, any Borrower or any Subsidiary (other than a Borrower or Subsidiary incorporated in France) shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in paragraph (h) above, (iii) apply for, request or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, any Borrower or any of the Subsidiaries (other than a Borrower or Subsidiary incorporated in France) or for a substantial part of the property or assets of Holdings, any Borrower or any Subsidiary (other than a Borrower or Subsidiary incorporated in France), (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due; (j) the failure by Holdings, any Borrower or any Subsidiary to pay one or more final judgments aggregating in excess of U.S.$20.0 million (net of any amounts which are covered by insurance or bonded), which judgments are not discharged or effectively waived or stayed for a period of 30 consecutive days, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of Holdings, any Borrower or any Subsidiary to enforce any such judgment; (k) one or more ERISA Events shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; (l) any Borrower or any Subsidiary incorporated in France (a) stops or suspends or announces an intention to stop or suspend payment of its debts or shall admit its inability to pay its debts as they fall due or shall for the purpose of any applicable law be or be deemed to be unable to pay its debts or shall otherwise be or be deemed to be insolvent for the 125 purpose of any insolvency law or to be in a state of cessation de paiements, (b) applies for the appointment of a mandataire ad hoc, (c) applies for or is subject to the appointment of a conciliateur for a reglement amiable pursuant to Articles L. 611-3 et seq. of the French Code de Commerce, (d) is the subject of a judgment for redressement judiciaire, cession totale de l'entreprise or liquidation judiciaire pursuant to Articles L. 620-1 et seq. of the French Code de Commerce or (e) is the subject, in any jurisdiction other than France, of any procedure or step analogous to those set out as items (b), (c) and (d) above; (m) (i) any Loan Document shall for any reason be asserted in writing by Holdings, any Borrower or any Subsidiary not to be a legal, valid and binding obligation of any party thereto, (ii) any security interest purported to be created by any Security Document and to extend to Collateral that is not immaterial to Holdings, any Borrower and their Subsidiaries on a consolidated basis shall cease to be, or shall be asserted in writing by any Borrower or any other Loan Party not to be, a valid and perfected security interest (having the priority required by this Agreement or the relevant Security Document) in the securities, assets or properties covered thereby, except to the extent that (x) any such loss of perfection or priority results from the failure of the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Agreements or to file UCC continuation statements, (y) such loss is covered by a lender's title insurance policy and the Administrative Agent shall be reasonably satisfied with the credit of such insurer or (z) any such loss of validity, perfection or priority is the result of any failure by the Collateral Agent or the Administrative Agent to take any action necessary to secure the validity, perfection or priority of the liens, or (iii) the Guarantees pursuant to the Security Documents by Holdings or the Subsidiary Loan Parties of any of the Obligations shall cease to be in full force and effect (other than in accordance with the terms thereof), or shall be asserted in writing by Holdings or any Borrower or any Subsidiary Loan Party not to be in effect or not to be legal, valid and binding obligations; then, and in every such event (other than an event with respect to any Borrower described in paragraph (h), (i) or (l) above), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Borrowers, take any or all of the following actions, at the same or different times: (i) terminate forthwith the Commitments, (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers, anything contained herein or in any other Loan Document to the contrary notwithstanding and (iii) demand cash collateral pursuant to Section 2.05(j); and in any event with respect to the Borrowers described in paragraph (h) or (i) above, the Commitments shall automatically terminate, the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall automatically become due and payable and the Administrative Agent shall be deemed to have made a demand for cash collateral to the full extent permitted under Section 2.05(j), without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers, anything contained herein or in any other Loan Document to the contrary notwithstanding. 126 SECTION 7.02. Exclusion of Immaterial Subsidiaries. Solely for the purposes of determining whether an Event of Default has occurred under clause (h) or (i) of Section 7.01, any reference in any such clause to any Subsidiary shall be deemed not to include any Subsidiary affected by any event or circumstance referred to in any such clause that did not, as of the last day of the fiscal quarter of the Domestic Borrower most recently ended, have assets with a value in excess of 2.5% of the Consolidated Total Assets or 2.5% of total revenues of the Domestic Borrower and its Subsidiaries as of such date; provided that if it is necessary to exclude more than one Subsidiary from clause (h) or (i) of Section 7.01 pursuant to this Section 7.02 in order to avoid an Event of Default thereunder, all excluded Subsidiaries shall be considered to be a single consolidated Subsidiary for purposes of determining whether the condition specified above is satisfied. SECTION 7.03. Holdings' Right to Cure. (a) Financial Performance Covenants. Notwithstanding anything to the contrary contained in Section 7.01, in the event that Holdings fails to comply with the requirements of any Financial Performance Covenant, until the expiration of the 10th day subsequent to the date the certificate calculating such Financial Performance Covenant is required to be delivered pursuant to Section 5.04(c), Holdings shall have the right to issue Permitted Cure Securities for cash or otherwise receive cash contributions to the capital of Holdings, and, in each case, to contribute any such cash to the capital of the Domestic Borrower (collectively, the "Cure Right"), and upon the receipt by the Domestic Borrower of such cash (the "Cure Amount") pursuant to the exercise by Holdings of such Cure Right such Financial Performance Covenant shall be recalculated giving effect to the following pro forma adjustments: (i) EBITDA shall be increased, solely for the purpose of measuring the Financial Performance Covenants and not for any other purpose under this Agreement, by an amount equal to the Cure Amount; and (ii) If, after giving effect to the foregoing recalculations, Holdings shall then be in compliance with the requirements of all Financial Performance Covenants, Holdings shall be deemed to have satisfied the requirements of the Financial Performance Covenants as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of the Financial Performance Covenants that had occurred shall be deemed cured for this purposes of the Agreement. (b) Limitation on Exercise of Cure Right. Notwithstanding anything herein to the contrary, (a) in each four-fiscal-quarter period there shall be at least one fiscal quarter in which the Cure Right is not exercised, (b) in each eight-fiscal-quarter period, there shall be a period of at least four consecutive fiscal quarters during which the Cure Right is not exercised and (c) the Cure Amount shall be no greater than the amount required for purposes of complying with the Financial Performance Covenants. 127 ARTICLE VIII THE AGENTS SECTION 8.01. Appointment. (a) In order to expedite the transactions contemplated by this Agreement, (i) Citicorp North America, Inc. is hereby appointed to act as Administrative Agent and Collateral Agent and (ii) Morgan Stanley Senior Funding, Inc. and UBS Securities LLC are each hereby appointed to act as a Co-Syndication Agent. Each of the Lenders and each assignee of any such Lender hereby irrevocably authorizes the Administrative Agent to take such actions on behalf of such Lender or assignee and to exercise such powers as are specifically delegated to the Administrative Agent by the terms and provisions hereof and of the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders and each Issuing Bank, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders and such Issuing Bank all payments of principal of and interest on the Loans, all payments in respect of L/C Disbursements and all other amounts due to the Lenders and such Issuing Bank hereunder, and promptly to distribute to each Lender or such Issuing Bank its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders of any Event of Default specified in this Agreement of which the Administrative Agent has actual knowledge acquired in connection with the performance of its duties as Administrative Agent hereunder; and (c) to distribute to each Lender copies of all notices, financial statements and other materials delivered by any Borrower pursuant to this Agreement as received by the Administrative Agent. Without limiting the generality of the foregoing, the Collateral Agent is hereby expressly authorized to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Security Documents, and all rights and remedies in respect of such Collateral shall be controlled by the Collateral Agent. (b) Neither the Agents nor any of their respective directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his own gross negligence or willful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by the Borrowers or any other Loan Party of any of the terms, conditions, covenants or agreements contained in any Loan Document. The Agents shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or any other Loan Documents or other instruments or agreements. The Agents shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper Person. Neither the Agents nor any of their respective directors, officers, employees or agents shall have any responsibility to any Borrower or any other Loan Party or any other party hereto or to any Loan Document on account of the failure, delay in performance or breach by, or as a result of information provided by, any Lender or Issuing Bank of any of its obligations hereunder or to any Lender or Issuing Bank on account of 128 the failure of or delay in performance or breach by any other Lender or Issuing Bank or any Borrower or any other Loan Party of any of their respective obligations hereunder or under any other Loan Document or in connection herewith or therewith. Each Agent may execute any and all duties hereunder by or through agents, employees or any sub-agent appointed by it and shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. SECTION 8.02. Nature of Duties. The Lenders hereby acknowledge that no Agent shall be under any duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders. The Lenders further acknowledge and agree that so long as an Agent shall make any determination to be made by it hereunder or under any other Loan Document in good faith, such Agent shall have no liability in respect of such determination to any Person. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into the Loan Documents or otherwise exist against the Administrative Agent. Each Lender recognizes and agrees that the Joint Lead Arrangers shall have no duties or responsibilities under this Agreement or any other Loan Document, or any fiduciary relationship with any Lender, and shall have no functions, responsibilities, duties, obligations or liabilities for acting as such hereunder. SECTION 8.03. Resignation by the Agents. Subject to the appointment and acceptance of a successor Agent as provided below, any Agent may resign at any time by notifying the Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right to appoint a successor with the consent of the Borrowers (not to be unreasonably withheld or delayed). If no successor shall have been so appointed by the Required Lenders and approved by the Borrowers and shall have accepted such appointment within 45 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders with the consent of the Borrowers (not to be unreasonably withheld or delayed), appoint a successor Agent which shall be a bank with an office in New York, New York and an office in London, England (or a bank having an Affiliate with such an office) having a combined capital and surplus that is not less than U.S.$500.0 million or an Affiliate of any such bank. Upon the acceptance of any appointment as Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations hereunder. After the Agent's resignation hereunder, the provisions of this Article and Section 9.05 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. SECTION 8.04. Each Agent in Its Individual Capacity. With respect to the Loans made by it hereunder, each Agent in its individual capacity and not as Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not an Agent, and the Agents and their Affiliates may accept deposits from, lend money to and generally engage in any kind of business with any Borrower or any of the Subsidiaries or other Affiliates thereof as if it were not an Agent. 129 SECTION 8.05. Indemnification. Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of its pro rata share (based on its Commitments hereunder (or if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of its applicable outstanding Loans or participations in L/C Disbursements, as applicable)) of any reasonable expenses incurred for the benefit of the Lenders by the Agents, including reasonable counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, which shall not have been reimbursed by the Borrowers and (b) to indemnify and hold harmless each Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, Taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as Agent or any of them in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by it or any of them under this Agreement or any other Loan Document, to the extent the same shall not have been reimbursed by the Borrowers, provided that no Lender shall be liable to an Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of such Agent or any of its directors, officers, employees or agents. SECTION 8.06. Lack of Reliance on Agents. Each Lender acknowledges that it has, independently and without reliance upon the Agents and any Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents, any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other Loan Document, any related agreement or any document furnished hereunder or thereunder. SECTION 8.07. Sub-Agent. The Sub-Agent has been designated under this Agreement to carry out duties of the Administrative Agent. The Sub-Agent shall be subject to each of the obligations in this Agreement to be performed by the Sub-Agent, and each of the Borrowers and the Lenders agrees that the Sub-Agent shall be entitled to exercise each of the rights and shall be entitled to each of the benefits of the Administrative Agent under this Agreement as related to the performance of its obligations hereunder. SECTION 8.08. Appointment of Supplemental Collateral Agents. (a) It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case the Administrative Agent deems that by reason of any present or future law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Administrative Agent appoint an additional individual or institution as a separate trustee, co-trustee, collateral agent, collateral sub-agent or collateral co-agent (any such additional 130 individual or institution being referred to herein individually as a "Supplemental Collateral Agent" and collectively as "Supplemental Collateral Agents"). (b) In the event that the Administrative Agent appoints a Supplemental Collateral Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to the Administrative Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Collateral Agent to the extent, and only to the extent, necessary to enable such Supplemental Collateral Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Collateral Agent shall run to and be enforceable by either the Administrative Agent or such Supplemental Collateral Agent, and (ii) the provisions of this Article and of Section 9.05 that refer to the Administrative Agent shall inure to the benefit of such Supplemental Collateral Agent and all references therein to the Administrative Agent shall be deemed to be references to the Administrative Agent and/or such Supplemental Collateral Agent, as the context may require. (c) Should any instrument in writing from any Loan Party be required by any Supplemental Collateral Agent so appointed by the Administrative Agent for more fully and certainly vesting in and confirming to it such rights, powers, privileges and duties, such Loan Party shall execute, acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent. In case any Supplemental Collateral Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Collateral Agent, to the extent permitted by law, shall vest in and be exercised by the Administrative Agent until the appointment of a new Supplemental Collateral Agent. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. (a) Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (i) if to the Domestic Borrower, to it at Dresser-Rand Group Inc., Paul Clark Drive, Olean, NY 14760-0560, Attention to Steve Riordan (telecopy (716) 375-3178) (e-mail: steve_riordan@dresser-rand.com) with a copy to First Reserve Corporation, One Lafayette Place, Greenwich, Connecticut 06830; (ii) if to the UK Borrower, to it at 31, Boulevard Winston Churchill 76080 LE HAVRE Cedex 7013 France, Attention: M. Jean-Claude Matton (telecopy +33 (0)2 35 25 53 66 (e-mail: Jean-Claude_Matton@Dresser-Rand.com) with a copy to First Reserve Corporation, One Lafayette Place, Greenwich, Connecticut 06830; 131 (iii) if to the French Borrower, to it at D-R Holdings (France) S.A.S. c/o DRESSER-RAND S.A., 31, Boulevard Winston Churchill 76080 LE HAVRE Cedex 7013, Attention: Jean-Francois CHEVRIER (telecopy +33 235 25 5369 (e-mail: jean-francois_chevrier@dresser-rand.com) with a copy to First Reserve Corporation, One Lafayette Place, Greenwich, Connecticut 06830; (iv) if to the Administrative Agent or the Collateral Agent, to Citicorp North America, Inc., 2 Penns Way, Suite 200, New Castle, Delaware 19720, attention: Keith Carter (telecopy: (212) 994-0961) (e-mail:keith.j.carter@citigroup.com), with a copy to Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York 10022, attention: Maura O' Sullivan, Esq. (telecopy: (646) 848-7897); and (v) if to an Issuing Bank, to it at the address or telecopy number set forth separately in writing. (b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. Each of the Administrative Agent, the Collateral Agent and the Borrowers may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided further that approval of such procedures may be limited to particular notices or communications. (c) All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service, sent by telecopy or (to the extent permitted by paragraph (b) above) electronic means or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. (d) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. SECTION 9.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrowers and the Loan Parties herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and each Issuing Bank and shall survive the making by the Lenders of the Loans, the execution and delivery of the Loan Documents and the issuance of the Letters of Credit, regardless of any investigation made by such Persons or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or L/C Disbursement or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not been terminated. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement obligations contained herein 132 (including pursuant to Sections 2.15, 2.17 and 9.05) shall survive the payment in full of the principal and interest hereunder, the expiration of the Letters of Credit and the termination of the Commitments or this Agreement. SECTION 9.03. Binding Effect. This Agreement shall become effective when it shall have been executed by Holdings, the Borrowers and the Agents and when the Administrative Agent shall have received copies hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of Holdings, the Borrowers, each Issuing Bank, the Agents and each Lender and their respective permitted successors and assigns. SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), except that (i) other than pursuant to a merger permitted by Section 6.05(b) or 6.05(i), no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by any Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents, each Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of: (A) the Borrowers; provided that no consent of any Borrower shall be required for an assignment in respect of the primary syndication of the Facilities (as reasonably determined by the Administrative Agent), so long as the Domestic Borrower is consulted with respect to such assignments; provided, further, that no consent of any Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee (provided that any liability of the Borrowers to an assignee that is an Approved Fund or Affiliate of the assigning Lender under Section 2.15, 2.17 or 2.20 shall be limited to the amount, if any, that would have been payable hereunder by the Borrowers in the absence of such assignment); and (B) the Administrative Agent and, in the case of Revolving Facility Commitment, the Swingline Lenders; provided that no consent of the Administrative Agent or the Swingline Lenders, as applicable, shall be required for an assignment of (i) a Revolving Facility Commitment to an assignee that is a Revolving Facility Lender immediately prior to giving effect to such assignment, or (ii) a Term Loan to a Lender, an 133 Affiliate of a Lender or Approved Fund immediately prior to giving effect to such assignment. (ii) Assignments shall be subject to the following additional conditions: (A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, an assignment of the entire remaining amount of the assigning Lender's Commitment or contemporaneous assignments to related Approved Funds that equal at least U.S.$1.0 million in the aggregate, the amount of the commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than U.S.$1.0 million, unless each of the Borrowers and the Administrative Agent otherwise consent; provided that no such consent of the Borrowers shall be required if an Event of Default under paragraph (b), (c), (h) or (i) of Section 7.01 has occurred and is continuing; (B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement; (C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of U.S.$3,500; provided that no such recordation fee shall be due in connection with an assignment to an existing Lender or Affiliate of a Lender or an Approved Fund of such Lender or an assignment by the Administrative Agent and provided further that only one such fee shall be payable in connection with contemporaneous assignments to related Approved Funds; and (D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. For purposes of this Section 9.04(b), the term "Approved Fund" shall have the following meaning: "Approved Fund" shall mean any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course and that is administered or managed by a Lender, an Affiliate of a Lender or an entity or an Affiliate of an entity that administers or manages a Lender. (iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender hereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.05). Any assignment or transfer 134 by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section. (iv) The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and L/C Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and each Borrower, the Agents, each Issuing Bank and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by any Borrower, any Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (v) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (c) (i) Any Lender may, without the consent of the Borrowers, the Administrative Agent, any Issuing Bank or any Swingline Lender, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender's obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrowers, the Agents, each Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument (oral or written) pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents; provided that (x) such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in Section 9.04(a)(i) or clauses (i), (ii), (iii), (iv), (v) or (vi) of the first proviso to Section 9.08(b) that affects such Participant and (y) no other agreement (oral or written) with respect to such Participant may exist between such Lender and such Participant. Subject to paragraph (c)(ii) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.06 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. 135 (ii) A Participant shall not be entitled to receive any greater payment under Section 2.15, 2.16 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrowers' prior written consent (which shall not be unreasonably withheld). A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 to the extent such Participant fails to comply with Section 2.17(e) as though it were a Lender. (d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (e) For the purposes of Article 1278 of the French Civil Code, it is expressly agreed that upon any assignment of the rights and obligations of a Lender, the security created or evidenced by any collateral agreement or instrument governed by French law and/or with a French law party shall be preserved for the benefit of the new Lender and each other Secured Party. (f) A copy of the instrument evidencing the assignment of the rights of a Lender in respect of any Loan to the French Borrower or any Additional Foreign Borrower organized under the laws of France shall be notified through a French bailiff (huissier) to such Borrower in accordance with Article 1690 of the French Civil Code. The new Lender will be responsible for the fees of the French bailiff (huissier) for so notifying the French Loan Party. SECTION 9.05. Expenses; Indemnity. (a) The Domestic Borrower agrees to pay all reasonable and documented out-of-pocket expenses (including Other Taxes) incurred by the Agents in connection with the preparation of this Agreement and the other Loan Documents, or by the Agents in connection with the syndication of the Commitments or the administration of this Agreement (including expenses incurred in connection with due diligence and initial and ongoing Collateral examination to the extent incurred with the reasonable prior approval of the Domestic Borrower and the reasonable fees, disbursements and the charges for no more than one counsel in each jurisdiction where Collateral is located) or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the Transactions hereby contemplated shall be consummated) or incurred by the Agents or any Lender in connection with the enforcement or protection of their rights in connection with this Agreement and the other Loan Documents, in connection with the Loans made or the Letters of Credit issued hereunder, including the reasonable fees, charges and disbursements of Shearman & Sterling LLP, counsel for the Agents and the Joint Lead Arrangers, and, in connection with any such enforcement or protection, the reasonable fees, charges and disbursements of any other counsel) (including the reasonable and documented allocated costs of internal counsel for the Agents, the Joint Lead Arrangers, any Issuing Bank or any Lender (but no more than one such counsel for any Lender)). 136 (b) The Domestic Borrower agrees to indemnify the Agents, the Joint Lead Arrangers, each Issuing Bank, each Lender and each of their respective directors, trustees, officers, employees, investment advisors and agents (each such Person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable and documented counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto and thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated hereby, (ii) the use of the proceeds of the Loans or the use of any Letter of Credit or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses result primarily from the gross negligence or willful misconduct of such Indemnitee (treating, for this purpose only, any Agent, any Joint Lead Arranger, any Issuing Bank, any Lender and any of their respective Related Parties as a single Indemnitee). Subject to and without limiting the generality of the foregoing sentence, the Domestic Borrower agrees to indemnify each Indemnitee against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable and documented counsel or consultant fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (A) any Environmental Claim related in any way to Holdings, any Borrower or any of their Subsidiaries, or (B) any actual or alleged presence, Release or threatened Release of Hazardous Materials at, under, on or from any Property, any property owned, leased or operated by any predecessor of Holdings, any Borrower or any of their Subsidiaries, or any property at which Holdings, any Borrower or any of their Subsidiaries has sent Hazardous Wastes for treatment, storage or disposal, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses result from the gross negligence or willful misconduct of such Indemnitee or any of its Related Parties. The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of any Agent, any Issuing Bank or any Lender. All amounts due under this Section 9.05 shall be payable on written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested. (c) Unless an Event of Default shall have occurred and be continuing, the Domestic Borrower shall be entitled to assume the defense of any action for which indemnification is sought hereunder with counsel of their choice at its expense (in which case the Domestic Borrower shall not thereafter be responsible for the fees and expenses of any separate counsel retained by an Indemnitee except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to each such Indemnitee. Notwithstanding the Domestic Borrower's election to assume the defense of such action, each Indemnitee shall have the right to employ separate counsel and to participate in the defense of such action, and the Domestic Borrower shall bear the reasonable fees, costs and expenses of such separate counsel, if (i) the 137 use of counsel chosen by the Domestic Borrower to represent such Indemnitee would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both a Borrower and such Indemnitee and such Indemnitee shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Borrowers (in which case the Domestic Borrower shall not have the right to assume the defense or such action on behalf of such Indemnitee); (iii) the Domestic Borrower shall not have employed counsel reasonably satisfactory to such Indemnitee to represent it within a reasonable time after notice of the institution of such action; or (iv) the Domestic Borrower shall authorize in writing such Indemnitee to employ separate counsel at the Domestic Borrower's expense. The Domestic Borrower will not be liable under this Agreement for any amount paid by an Indemnitee to settle any claims or actions if the settlement is entered into without the Domestic Borrower's consent, which consent may not be withheld or delayed unless such settlement is unreasonable in light of such claims or actions against, and defenses available to, such Indemnitee. (d) Except as expressly provided in Section 9.05(a) with respect to Other Taxes, which shall not be duplicative with any amounts paid pursuant to Section 2.17, this Section 9.05 shall not apply to Taxes. SECTION 9.06. Right of Set-off. Subject to Section 9.23, if an Event of Default shall have occurred and be continuing, each Lender and each Issuing Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Issuing Bank to or for the credit or the account of (a) any Domestic Loan Party or any other Domestic Subsidiary, against any and all obligations of the Domestic Loan Parties, (b) any UK Loan Party or any of its Subsidiaries, against any and all of the UK Obligations, (c) any French Loan Party or any of its Subsidiaries, against any and all of the French Obligations, and (d) any other Foreign Loan Party or any of its Foreign Subsidiaries , against any and all of the obligations of such Foreign Loan Party, in each case, now or hereafter existing under this Agreement or any other Loan Document held by such Lender or such Issuing Bank, irrespective of whether or not such Lender or such Issuing Bank shall have made any demand under this Agreement or such other Loan Document and although the obligations may be unmatured. The rights of each Lender and each Issuing Bank under this Section 9.06 are in addition to other rights and remedies (including other rights of set-off) that such Lender or such Issuing Bank may have. SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the Agents, any Issuing Bank or any Lender in exercising any right or power hereunder or under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agents, each Issuing Bank and the Lenders hereunder and under the 138 other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by Holdings, any Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on Holdings, any Borrower or any other Loan Party in any case shall entitle such Person to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except (x) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Holdings, the Borrowers and the Required Lenders and (y) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by each party thereto and the Collateral Agent and consented to by the Required Lenders; provided, however, that no such agreement shall (i) decrease or forgive the principal amount of, or extend the final maturity of, or decrease the rate of interest on, any Loan or any L/C Disbursement, without the prior written consent of each Lender directly affected thereby; provided that any amendment to the financial covenant definitions in this Agreement shall not constitute a reduction in the rate of interest for purposes of this clause (i), (ii) increase or extend the Commitment of any Lender or decrease the Commitment Fees or L/C Participation Fees or other fees of any Lender without the prior written consent of such Lender (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the aggregate Commitments shall not constitute an increase of the Commitments of any Lender), (iii) extend or waive any Installment Date or reduce the amount due on any Installment Date or extend any date on which payment of interest on any Loan or any L/C Disbursement or any Fees is due, without the prior written consent of each Lender adversely affected thereby, (iv) amend or modify the provisions of Section 2.18(b) or (c) in a manner that would by its terms alter the pro rata sharing of payments required thereby, without the prior written consent of each Lender adversely affected thereby, (v) amend or modify the provisions of this Section or the definition of the terms "Required Lenders," "Majority Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the prior written consent of each Lender adversely affected thereby (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Loans and Commitments are included on the Closing Date), 139 (vi) release all or substantially all the Collateral or release any of Holdings or any Subsidiary Loan Party from its Guarantee under a Collateral Agreement, unless, in the case of a Subsidiary Loan Party, all or substantially all the Equity Interests of such Subsidiary Loan Party is sold or otherwise disposed of in a transaction permitted by this Agreement, without the prior written consent of each Lender, or (vii) effect any waiver, amendment or modification that by its terms adversely affects the rights in respect of payments or collateral of Lenders participating in any Facility differently from those of Lenders participating in other Facilities, without the consent of the Majority Lenders participating in the adversely affected Facility (it being agreed that the Required Lenders may waive, in whole or in part, any prepayment or Commitment reduction required by Section 2.11 so long as the application of any prepayment or Commitment reduction still required to be made is not changed); provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or an Issuing Bank hereunder without the prior written consent of the Administrative Agent or such Issuing Bank acting as such at the effective date of such agreement, as applicable. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 9.08 and any consent by any Lender pursuant to this Section 9.08 shall bind any assignee of such Lender. (c) Without the consent of any Co-Syndication Agent, Joint Lead Arranger or Lender, the Loan Parties and the Administrative Agent and/or Collateral Agent may (in their respective sole discretion, or shall, to the extent required by any Loan Document) enter into any amendment, modification or waiver of any Loan Document, or enter into any new agreement or instrument, to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Collateral or additional property to become Collateral for the benefit of the Secured Parties, or as required by local law to give effect to, or protect any security interest for the benefit of the Secured Parties, in any property or so that the security interests therein comply with applicable law. (d) Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent, Holdings and the Borrowers (a) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans and the Revolving Facility Loans and the accrued interest and fees in respect thereof and (b) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders. (e) In addition, notwithstanding the foregoing, this Agreement may be amended with the written consent of the Administrative Agent, Holdings, the Borrowers and the Lenders providing the relevant Replacement Term Loans (as defined below) to permit the refinancing of all outstanding Tranche B Term Loans ("Refinanced Term Loans") with a replacement "B" term loan tranche hereunder which shall be Loans hereunder ("Replacement Term Loans"); provided that (a) the aggregate principal amount of such Replacement Term Loans shall not exceed the aggregate principal amount of such Refinanced Term Loans, (b) the 140 Applicable Margin for such Replacement Term Loans shall not be higher than the Applicable Margin for such Refinanced Term Loans, (c) the weighted average life to maturity of such Replacement Term Loans shall not be shorter than the weighted average life to maturity of such Refinanced Term Loans at the time of such refinancing and (d) all other terms applicable to such Replacement Term Loans shall be substantially identical to, or less favorable to the Lenders providing such Replacement Term Loans than, those applicable to such Refinanced Term Loans, except to the extent necessary to provide for covenants and other terms applicable to any period after the latest final maturity of the Term Loans in effect immediately prior to such refinancing. (f) Notwithstanding the foregoing, technical and conforming modifications to the Loan Documents may be made with the consent of Holdings and the Borrowers and the Administrative Agent to the extent necessary to integrate any New Term B Commitments or New Revolving Facility Commitments on substantially the same basis as the Tranche B Term Loans or Revolving Facility Loans, as applicable. SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges that are treated as interest under applicable law (collectively, the "Charges"), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Lender or any Issuing Bank, shall exceed the maximum lawful rate (the "Maximum Rate") that may be contracted for, charged, taken, received or reserved by such Lender in accordance with applicable law, the rate of interest payable hereunder, together with all Charges payable to such Lender or such Issuing Bank, shall be limited to the Maximum Rate, provided that such excess amount shall be paid to such Lender or such Issuing Bank on subsequent payment dates to the extent not exceeding the legal limitation. SECTION 9.10. Entire Agreement. This Agreement, the other Loan Documents and the agreements regarding certain Fees referred to herein constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among or representations from the parties or their Affiliates with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Notwithstanding the foregoing, the Fee Letter shall survive the execution and delivery of this Agreement and remain in full force and effect. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents. SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT 141 AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11. SECTION 9.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 9.13. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one contract, and shall become effective as provided in Section 9.03. Delivery of an executed counterpart to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed original. SECTION 9.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each of Holdings and the Borrowers hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each Borrower further irrevocably consents to the service of process in any action or proceeding in such courts by the mailing thereof by any parties thereto by registered or certified mail, postage prepaid, to such Borrower at the address specified for the Loan Parties in Section 9.01(a). Each Foreign Borrower hereby further agrees that service of process in any such action or proceeding brought in any such New York state court or in any such federal court may be made upon the Domestic Borrower at its address specified in Section 9.01(a), and each Foreign Borrower hereby irrevocably appoints the Domestic Borrower as its authorized agent to accept such service of process, and hereby irrevocably agrees that the failure of the Domestic Borrower to give any notice of such service to such Borrower shall not impair or affect the validity of such service or of any judgment rendered in any action or proceeding based thereon. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Lender or any Issuing Bank may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against Holdings, any Borrower or any Loan Party or their properties in the courts of any jurisdiction. 142 (b) Each of Holdings and the Borrowers hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. SECTION 9.16. Confidentiality. Each of the Lenders, each Issuing Bank and each of the Agents agrees that it shall maintain in confidence any information relating to Holdings, the Borrowers and the other Loan Parties furnished to it by or on behalf of Holdings, the Borrowers or the other Loan Parties (other than information that (a) has become generally available to the public other than as a result of a disclosure by such party, (b) has been independently developed by such Lender, such Issuing Bank or such Agent without violating this Section 9.16 or (c) was available to such Lender, such Issuing Bank or such Agent from a third party having, to such Person's knowledge, no obligations of confidentiality to Holdings, any Borrower or any other Loan Party) and shall not reveal the same other than to its directors, trustees, officers, employees and advisors with a need to know or to any Person that approves or administers the Loans on behalf of such Lender (so long as each such Person shall have been instructed to keep the same confidential in accordance with this Section 9.16), except: (A) to the extent necessary to comply with law or any legal process or the requirements of any Governmental Authority, the National Association of Insurance Commissioners or of any securities exchange on which securities of the disclosing party or any Affiliate of the disclosing party are listed or traded, (B) as part of normal reporting or review procedures to Governmental Authorities or the National Association of Insurance Commissioners, (C) to its parent companies, Affiliates or auditors (so long as each such Person shall have been instructed to keep the same confidential in accordance with this Section 9.16), (D) in order to enforce its rights under any Loan Document in a legal proceeding, (E) to any prospective assignee of, or prospective Participant in, any of its rights under this Agreement (so long as such Person shall have been instructed to keep the same confidential in accordance with this Section 9.16) and (F) to any direct or indirect contractual counterparty in Swap Agreements or such contractual counterparty's professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section). SECTION 9.17. Citigroup Direct Website Communications. (a) Delivery. (i) Each Loan Party hereby agrees that it will use all reasonable efforts to provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to this Agreement and any other Loan Document, including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (A) relates to a request for a new, or a conversion of an existing, borrowing or other extension of credit (including any election of an interest rate or interest period relating thereto), (B) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (C) provides notice of any Default or Event of Default under this Agreement or (D) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any borrowing or other extension of credit hereunder (all such non-excluded communications collectively, the "Communications"), by transmitting the Communications in an 143 electronic/soft medium in a format reasonably acceptable to the Administrative Agent to oploanswebadmin@citigroup.com. Nothing in this Section 9.18 shall prejudice the right of the Agents, the Co-Syndication Agents, the Joint Lead Arrangers or any Lender or any Loan Party to give any notice or other communication pursuant to this Agreement or any other Loan Document in any other manner specified in this Agreement or any other Loan Document. (ii) The Administrative Agent agrees that receipt of the Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents. Each Lender agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform (as defined below) shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents. Each Lender agrees (A) to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lender's e-mail address to which the foregoing notice may be sent by electronic transmission and (B) that the foregoing notice may be sent to such e-mail address. (b) Posting. Each Loan Party further agrees that the Administrative Agent may make the Communications available to the Lenders by posting the Communications on Intralinks or a substantially similar electronic transmission system (the "Platform"). (c) The Platform is provided "as is" and "as available." The Agent Parties (as defined below) do not warrant the accuracy or completeness of the Communications, or the adequacy of the Platform and expressly disclaim liability for errors or omissions in the communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or the Platform. In no event shall the Administrative Agent or any of its affiliates or any of their respective officers, directors, employees, agents advisors or representatives (collectively, "Agent Parties") have any liability to the Loan Parties, any Lender or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Loan Party's or the Administrative Agent's transmission of communications through the internet, except to the extent the liability of any Agent Party is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted primarily from such Agent Party's gross negligence or willful misconduct. SECTION 9.18. Release of Liens and Guarantees. In the event that any Loan Party conveys, sells, leases, assigns, transfers or otherwise disposes of all or any portion of any of the Equity Interests or assets of any Subsidiary Loan Party (other than the Equity Interests of a Borrower) to a Person that is not (and is not required to become) a Loan Party in a transaction not prohibited by Section 6.05, the Administrative Agent and the Collateral Agent shall promptly (and the Lenders hereby authorize the Administrative Agent and the Collateral Agent to) take such action and execute any such documents as may be reasonably requested by Holdings or the Borrowers and at the Borrowers' expense to release any Liens created by any Loan Document in respect of such Equity Interests, and, in the case of a disposition of the Equity Interests of any Subsidiary Loan Party that is not a Borrower in a transaction permitted by Section 6.05 and as a 144 result of which such Subsidiary Loan Party would cease to be a Subsidiary, terminate such Subsidiary Loan Party's obligations under its Guarantee. In addition, the Administrative Agent and the Collateral Agent agree to take such actions as are reasonably requested by Holdings or the Borrowers and at the Borrowers' expense to terminate the Liens and security interests created by the Loan Documents when all the Obligations are paid in full and all Letters of Credit and Commitments are terminated. Any representation, warranty or covenant contained in any Loan Document relating to any such Equity Interests, asset or subsidiary of Holdings shall no longer be deemed to be made once such Equity Interests or asset is so conveyed, sold, leased, assigned, transferred or disposed of. SECTION 9.19. U.S. Patriot Act. Each Lender hereby notifies each Loan Party that pursuant to the requirements of the U.S. Patriot Act, it is required to obtain, verify and record information that identifies Loan Parties, which information includes the name and address of each Loan Party and other information that will allow the Lenders to identify such Loan Party in accordance with the U.S. Patriot Act. SECTION 9.20. Judgment. (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase Dollars with such other currency at Citibank, N.A.'s principal office in London at 11:00 a.m. (London time) on the Business Day preceding that on which final judgment is given. (b) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in a Foreign Currency into Dollars, the parties agree to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase such Foreign Currency with Dollars at Citibank, N.A.'s principal office in London at 11:00 a.m. (London time) on the Business Day preceding that on which final judgment is given. (c) The obligation of each Borrower in respect of any sum due from it in any currency (the "Primary Currency") to any Lender or the Administrative Agent hereunder shall, notwithstanding any judgment in any other currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Administrative Agent (as the case may be), of any sum adjudged to be so due in such other currency, such Lender or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the applicable Primary Currency with such other currency; if the amount of the applicable Primary Currency so purchased is less than such sum due to such Lender or the Administrative Agent (as the case may be) in the applicable Primary Currency, each Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent (as the case may be) against such loss, and if the amount of the applicable Primary Currency so purchased exceeds such sum originally due to any Lender or the Administrative Agent (as the case may be) in the applicable Primary Currency, such Lender or the Administrative Agent (as the case may be) agrees to remit to such Borrower such excess. SECTION 9.21. Substitution of Currency. If a change in any Foreign Currency occurs pursuant to any applicable law, rule or regulation of any governmental, monetary or 145 multi-national authority, this Agreement (including, without limitation, the definition of Adjusted LIBO Rate) will be amended to the extent determined by the Administrative Agent (acting reasonably and in consultation with the Borrowers) to be necessary to reflect the change in currency and to put the Lenders and the Borrowers in the same position, so far as possible, that they would have been in if no change in such Foreign Currency had occurred. SECTION 9.22. Termination or Release. The Security Documents, the guarantees made therein, the Security Interest (as defined therein) and all other security interests granted thereby shall terminate, and a Subsidiary Loan Party shall automatically be released from its obligations thereunder and the security interests in the Collateral granted by any Loan Party shall be automatically released, in each case in accordance with Section 7.14 of the Domestic Collateral Agreement or the comparable provisions of the other Collateral Agreements. SECTION 9.23. Pledge and Guarantee Restrictions. Notwithstanding any provision of this Agreement or any other Loan Document to the contrary (including any provision that would otherwise apply notwithstanding other provisions or that is the beneficiary of other overriding language): (a)(i) no more than 65% of the issued and outstanding Equity Interests of (x) any Foreign Borrower or any Foreign Subsidiary or (y) any Domestic Subsidiary substantially all of whose assets consist of the Equity Interests in "controlled foreign corporations" under Section 957 of the Code shall be pledged or similarly hypothecated to guarantee, secure or support any Obligation of any Domestic Loan Party; (ii) no Foreign Subsidiary or any Domestic Subsidiary substantially all of whose assets consist of the Equity Interests in "controlled foreign corporations" under Section 957 of the Code shall guarantee or support any Obligation of any Domestic Loan Party; (iii) no security or similar interest shall be granted in the assets of any Foreign Subsidiary or any Domestic Subsidiary substantially all of whose assets consist of the Equity Interests in "controlled foreign corporations under Section 957 of the Code (including indirectly by way of an offset or otherwise) which security or similar interests guarantees or supports any Obligation of any Domestic Loan Party; (b) no Subsidiary shall guarantee or support any Obligation of any Loan Party if such guarantee or support would contravene the Agreed Security Principles; (c)(i) no Foreign Subsidiary shall guarantee or support any Obligation of any Foreign Loan Party unless such Foreign Subsidiary directly owns or is owned directly by such Foreign Loan Party and is organized under the same jurisdiction as such Foreign Loan Party; (ii) no security or similar interest shall be granted in the assets of any Foreign Subsidiary (including indirectly by way of an offset or otherwise) which security or similar interest guarantees or supports any Obligation of any Foreign Loan Party unless such Foreign Subsidiary directly owns or is owned directly by 146 such Foreign Loan Party and is organized under the same jurisdiction as such Foreign Loan Party. The parties hereto agree that any pledge, guaranty or security or similar interest made or granted in contravention of this Section 9.23 shall be void ab initio. SECTION 9.24. Matters Pertaining to the French Borrower and to any Additional Foreign Borrower organized under the laws of France. (a) The Lenders as of the Closing Date participating in any loan to the French Borrower and to any Additional Foreign Borrower organized under the laws of France (if any) represent and warrant (i) that they are duly authorized to carry out credit transaction in France pursuant to applicable laws and regulations of France or the European Union and (ii) that participations in loans to any French Borrower and to any Additional Foreign Borrower organized under the laws of France (if any) and commitments to lend to any French Borrower and to any Additional Foreign Borrower organized under the laws of France (if any) under this Agreement shall only be assigned or transferred to institutions that are duly authorized to carry out credit transactions in France, or which may legally acquire rights under loans to a French borrower under applicable laws and regulations of France. (b) To comply with the provisions of articles L.313-4 of the French Monetary and Financial Code and articles L. 313-1 and L. 313-2 of the French Code de la consommation, the French Borrower hereby acknowledges that the effective global rate (taux effectif global or "TEG") for the Tranche B Euro Term Loan made available to it and for the Revolving Facility Loans cannot be calculated for the total duration of this agreement, primarily because of the floating rate of interest applicable to such Loans and the ability of the French Borrower to select the duration of each Interest Period. Accordingly, on the date hereof, an example of calculation of the effective global rate, based upon certain assumptions, is provided to the French Borrower by way of delivery of a TEG letter by the Administrative Agent in the form attached hereto as Exhibit K. In addition, in the event that any French Subsidiary Loan Party will become an Additional Foreign Borrower under the Revolving Facility, the Credit Agreement Supplement for such Additional Foreign Borrower shall contain an acknowledgement of such Additional Foreign Borrower similar to the acknowledgement of the French Borrower contained in this Section 9.24 and a TEG letter substantially in the same form as the TEG letter delivered to the French Borrower. Any TEG letter delivered pursuant to this Section 9.24 shall form an integral part of this agreement. [Signature Pages Follow] 147 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first written above. D-R INTERHOLDING, LLC, as Holdings By: /s/ Thomas R. Denison ------------------------------------ Name: Thomas R. Denison Title: President DRESSER RAND GROUP INC., as the Domestic Borrower By: /s/ Thomas R. Denison ------------------------------------ Name: Thomas R. Denison Title: President D-R HOLDINGS (UK) LTD, as an Initial Foreign Borrower By: /s/ Jean-Francois Chevrier ------------------------------------ Name: Jean-Francois Chevrier Title: President D-R HOLDINGS (France) S.A.S., as an Initial Foreign Borrower By: /s/ Jean-Francois Chevrier ------------------------------------ Name: Jean-Francois Chevrier Title: President [Dresser-Rand Credit Agreement] CITIGROUP GLOBAL MARKETS INC., as Joint Lead Arranger and Joint Book Manager By: /s/ Stephen P. Cunningham ------------------------------------ Name: Stephen P. Cunningham Title: Managing Director CITICORP NORTH AMERICA, INC., as Administrative Agent and as Lender By: /s/ Stephen P. Cunningham ------------------------------------ Name: Stephen P. Cunningham Title: Managing Director CITIBANK INTERNATIONAL PLC, as Lender By: /s/ Alan Green ------------------------------------ Name: Alan Green Title: Vice President [Dresser-Rand Credit Agreement] MORGAN STANLEY SENIOR FUNDING, INC., as Co-Syndication Agent, Joint Lead Arranger and Joint Book Manager By: /s/ Eugene F. Martin ------------------------------------ Name: Eugene F. Martin Title: Vice President [Dresser-Rand Credit Agreement] UBS SECURITIES LLC, as Co-Syndication Agent By: /s/ David Juge ------------------------------------ Name: David Juge Title: Managing Director By: /s/ Oliver O. Trumbo II ------------------------------------ Name: Oliver O. Trumbo II Title: Director UBS LOAN FINANCE LLC, as Lender By: /s/ David Juge ------------------------------------ Name: David Juge Title: Managing Director By: /s/ Oliver O. Trumbo II ------------------------------------ Name: Oliver O. Trumbo II Title: Director [Dresser-Rand Credit Agreement] BEAR STEARNS CORPORATE LENDING INC., as Co-Documentation Agent By: /s/ Victor Bulzacchelli ------------------------------------ Name: Victor Bulzacchelli Title: Vice President [Dresser-Rand Credit Agreement] NATEXIS BANQUES POPULAIRES, as Co-Documentation Agent By: /s/ Renaud d'Herbes ------------------------------------ Name: Renaud d'Herbes Title: Senior Vice President/ Regional Manager By: /s/ Timothy Polvado ------------------------------------ Name: Timothy Polvado Title: Vice President/Manager [Dresser-Rand Credit Agreement] SUMITOMO MITSUI BANKING CORP., NEW YORK, as Lender By: /s/ Leo E. Pagarigan ------------------------------------ Name: Leo E. Pagarigan Title: Senior Vice President [Dresser-Rand Credit Agreement] SOCIETE GENERALE, NEW YORK BRANCH, as Lender By: /s/ Robert E. Woods ----------------------------------- Name: Robert E. Woods Title: Managing Director [Dresser-Rand Credit Agreement] SOVEREIGN BANK, as Lender By: /s/ Daniel M. Grondin ------------------------------------ Name: Daniel M. Grondin Title: Senior Vice President [Dresser-Rand Credit Agreement] BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as Lender By: /s/ Chris Droussiotis ----------------------------------- Name: Chris Droussiotis Title: Vice President [Dresser-Rand Credit Agreement] EX-10.3 17 y68981exv10w3.txt EX-10.3: DOMESTIC GUARANTEE AND COLLATERAL AGREEMENT EXHIBIT 10.3 EXECUTION COPY DOMESTIC GUARANTEE AND COLLATERAL AGREEMENT dated and effective as of October 29, 2004, among D-R INTERHOLDING, LLC, as Guarantor and Pledgor, DRESSER-RAND GROUP INC., as Domestic Borrower, each Domestic Subsidiary Loan Party identified herein, and CITICORP NORTH AMERICA, INC., as Collateral Agent TABLE OF CONTENTS
Page Article I Definitions SECTION 1.01. Credit Agreement......................................................... 1 SECTION 1.02. Other Defined Terms...................................................... 1 Article II Guarantee SECTION 2.01. Guarantee ............................................................... 4 SECTION 2.02. Guarantee of Payment..................................................... 5 SECTION 2.03. No Limitations, etc. .................................................... 5 SECTION 2.04. Reinstatement ........................................................... 7 SECTION 2.05. Agreement To Pay; Subrogation............................................ 7 SECTION 2.06. Information ............................................................. 7 SECTION 2.07. Maximum Liability........................................................ 7 SECTION 2.08. Payments Free and Clear of Taxes, Etc. .................................. 7 Article III Pledge of Securities SECTION 3.01. Pledge .................................................................. 8 SECTION 3.02. Delivery of the Pledged Collateral....................................... 9 SECTION 3.03. Representations, Warranties and Covenants................................ 9 SECTION 3.04. Certification of Limited Liability Company and Limited Partnership Interests................................................................ 11 SECTION 3.05. Registration in Nominee Name; Denominations.............................. 11 SECTION 3.06. Voting Rights; Dividends and Interest, etc. ............................. 12
-i- Article IV Security Interests in Personal Property SECTION 4.01. Security Interest........................................................ 13 SECTION 4.02. Representations and Warranties........................................... 15 SECTION 4.03. Covenants ............................................................... 17 SECTION 4.04. Other Actions ........................................................... 20 SECTION 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral........... 21 Article V Remedies SECTION 5.01. Remedies Upon Default.................................................... 23 SECTION 5.02. Application of Proceeds.................................................. 24 SECTION 5.03. Grant of License To Use Intellectual Property............................ 25 SECTION 5.04. Securities Act, etc. .................................................... 25 SECTION 5.05. Registration, etc. ...................................................... 26 Article VI Indemnity, Subrogation and Subordination SECTION 6.01. Indemnity and Subrogation................................................ 27 SECTION 6.02. Contribution and Subrogation............................................. 27 SECTION 6.03. Subordination............................................................ 27 Article VII Miscellaneous SECTION 7.01. Notices ................................................................. 28 SECTION 7.02. Security Interest Absolute............................................... 28 SECTION 7.03. Binding Effect; Several Agreement........................................ 28 SECTION 7.04. Successors and Assigns................................................... 29

-ii- SECTION 7.05. Collateral Agent's Fees and Expenses; Indemnification.................... 29 SECTION 7.06. Collateral Agent Appointed Attorney-in-Fact.............................. 29 SECTION 7.07. GOVERNING LAW............................................................ 30 SECTION 7.08. Waivers; Amendment....................................................... 30 SECTION 7.09. WAIVER OF JURY TRIAL..................................................... 30 SECTION 7.10. Severability ............................................................ 31 SECTION 7.11. Counterparts ............................................................ 31 SECTION 7.12. Headings ................................................................ 31 SECTION 7.13. Jurisdiction; Consent to Service of Process.............................. 31 SECTION 7.14. Termination or Release................................................... 32 SECTION 7.15. Additional Subsidiaries.................................................. 32 SECTION 7.16. Right of Set-off......................................................... 33 SECTION 7.17. Credit Agreement......................................................... 33

Schedules Schedule I Domestic Subsidiary Loan Parties Schedule II Pledged Stock; Pledged Debt Securities Schedule III Intellectual Property Schedule IV Limited Liability Company Interests Schedule V Commercial Tort Claims Schedule VI Partnership Interests Exhibits Exhibit I Form of Supplement to the Domestic Guarantee and Collateral Agreement Exhibit II Form of Perfection Certificate Exhibit III Form of Intercompany Note -iii- DOMESTIC GUARANTEE AND COLLATERAL AGREEMENT dated and effective as of October 29, 2004 (this "Agreement"), among D-R INTERHOLDING, LLC, a Delaware limited liability company ("Holdings"), DRESSER-RAND GROUP INC., a Delaware corporation ("Acquisition Corp." or the "Domestic Borrower"), each Domestic Subsidiary Loan Party listed on the signature page and any other entity that becomes a party pursuant to Section 7.15 (each, a "Domestic Subsidiary Loan Party") and CITICORP NORTH AMERICA, INC. ("CNAI"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined below). Reference is made to the Credit Agreement dated as of October 29, 2004 (as amended, restated, supplemented, waived or otherwise modified from time to time, the "Credit Agreement"), among Holdings, the Domestic Borrower, the Foreign Borrowers party thereto from time to time, the lenders party thereto from time to time (the "Lenders"), CNAI, as Administrative Agent and as Collateral Agent for the Lenders, MORGAN STANLEY SENIOR FUNDING, INC. ("MS") and UBS SECURITIES LLC ("UBS"), as Co-Syndication Agents, CITIGROUP GLOBAL MARKETS INC., MS and UBS, as Joint Lead Arrangers and Joint Book Managers and NATEXIS BANQUES POPULAIRES and BEAR STEARNS CORPORATE LENDING INC., as Co-Documentation Agents. The Lenders have agreed to extend credit to the Borrowers (as defined in the Credit Agreement) subject to the terms and conditions set forth in the Credit Agreement. The obligations of the Lenders to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. Holdings and the Domestic Subsidiary Loan Parties are Affiliates of the Borrowers, will derive substantial benefits from the extension of credit to the Borrowers pursuant to the Credit Agreement and are willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Credit Agreement. (a) Capitalized terms used in this Agreement and not otherwise defined herein have the respective meanings assigned thereto in the Credit Agreement. All terms defined in the New York UCC (as defined herein) and not defined in this Agreement have the meanings specified therein. The term "instrument" shall have the meaning specified in Article 9 of the New York UCC. (b) The rules of construction specified in Section 1.02 of the Credit Agreement also apply to this Agreement. SECTION 1.02. Other Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "Account Debtor" means any person who is or who may become obligated to any Guarantor under, with respect to or on account of an Account. "Article 9 Collateral" has the meaning assigned to such term in Section 4.01. "Collateral" means Article 9 Collateral and Pledged Collateral. "Control Agreement" means a securities account control agreement or commodity account control agreement, as applicable, in form and substance reasonably satisfactory to the Collateral Agent. "Copyrights" means all of the following now owned or hereafter acquired by any Guarantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise; and (b) all registrations and applications for registration of any such Copyright in the United States or any other country, including registrations, supplemental registrations and pending applications for registration in the United States Copyright Office, including those listed on Schedule III. "Credit Agreement" has the meaning assigned to such term in the preliminary statement of this Agreement. "Domestic Subsidiary Loan Party" has the meaning assigned to such term in the preliminary statement of this Agreement. "Federal Securities Laws" has the meaning assigned to such term in Section 5.04. "General Intangibles" means all "General Intangibles" as defined in the New York UCC, including all choses in action and causes of action and all other intangible personal property of any Guarantor of every kind and nature (other than Accounts) now owned or hereafter acquired by any Guarantor, including corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Swap Agreements and other agreements), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Guarantor to secure payment by an Account Debtor of any of the Accounts. "Guaranteed Obligations" means (a) the Loan Document Obligations and (b) the due and punctual payment and performance of all obligations of each Loan Party under each Swap Agreement (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) that (i) is in effect on the Closing Date with a counterparty that is a Lender or an Affiliate of a Lender as of the Closing Date or (ii) is entered into after the Closing Date with any counterparty that is a Lender or an Affiliate of a Lender at the time such Swap Agreement is entered into. "Guarantors" means Holdings, the Domestic Borrower and each Domestic Subsidiary Loan Party. "Intellectual Property" means all intellectual and similar property of every kind and nature now owned or hereafter acquired by any Guarantor, including inventions, designs, Patents, Copyrights, Trademarks, IP Agreements, trade secrets, domain names, confidential or 2 proprietary technical and business information, know-how, show-how or other data or information and all related documentation. "Intercompany Note" shall mean a promissory note substantially in the form of Exhibit III. "IP Agreements" means all agreements granting to or receiving from a third party any rights to Intellectual Property to which any Guarantor, now or hereafter, is a party. "Loan Document Obligations" means (a) the due and punctual payment by the Borrowers of (i) the unpaid principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans made to the Borrowers, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrowers under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) and obligations to provide cash collateral and (iii) all other monetary obligations of the Borrowers to any of the Secured Parties under the Credit Agreement and each of the other Loan Documents, including obligations to pay fees, expense and reimbursement obligations and indemnification obligations, whether primary, secondary, direct, indirect, contingent, fixed or otherwise (including interest incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) and (b) the due and punctual performance of all other obligations of the Borrowers under or pursuant to the Credit Agreement and each of the other Loan Documents (other than the Guaranteed Obligations referred to in clause (b) of the definition of "Guaranteed Obligations") (including interest incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding). "Material Pledged Debt Securities" has the meaning assigned to such term in Section 3.01. "New York UCC" means the Uniform Commercial Code as from time to time in effect in the State of New York. "Patents" means all of the following now owned or hereafter acquired by any Guarantor: (a) all letters patent of the United States or the equivalent thereof in any other country, and all applications for letters patent of the United States or the equivalent thereof in any other country, including those listed on Schedule III, and (b) all reissues, continuations, divisions, continuations-in-part or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein. "Perfection Certificate" means a certificate substantially in the form of Exhibit II, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Financial Officer of the Domestic Borrower. 3 "Pledged Collateral" has the meaning assigned to such term in Section 3.01. "Pledged Debt Securities" has the meaning assigned to such term in Section 3.01. "Pledged Securities" means any promissory notes, stock certificates or other certificated securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral. "Pledged Stock" has the meaning assigned to such term in Section 3.01. "Pledgor" shall mean each Guarantor. "Secured Parties" means (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, (d) each Issuing Bank, (e) each counterparty to any Swap Agreement entered into with a Loan Party the obligations under which constitute Obligations, (f) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document and (g) the successors and permitted assigns of each of the foregoing. "Security Interest" has the meaning assigned to such term in Section 4.01. "Trademarks" means all of the following now owned or hereafter acquired by any Guarantor: (a) all trademarks, service marks, corporate names, company names, business names, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations thereof (if any), and all registration and recording applications filed in connection therewith in the United States Patent and Trademark Office or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all renewals thereof, including those listed on Schedule III (provided that no security interest shall be granted in United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law) and (b) all goodwill associated therewith or symbolized thereby. ARTICLE II GUARANTEE SECTION 2.01. Guarantee. Each Guarantor absolutely, irrevocably and unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Guaranteed Obligations. Each Guarantor further agrees that the Guaranteed Obligations may be extended, modified, substituted, amended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Guaranteed Obligation. Each Guarantor unconditionally and irrevocably waives notice of nonperformance, acceleration, presentment to, demand of payment from and protest to any Borrower or any other Loan Party of any of the Guaranteed Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. 4 SECTION 2.02. Guarantee of Payment. Each Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any security held for the payment of the Guaranteed Obligations or to any balance of any deposit account or credit on the books of the Collateral Agent or any other Secured Party in favor of any Borrower or any other person. SECTION 2.03. No Limitations, etc. (a) Except for termination of a Guarantor's obligations hereunder as expressly provided for in Section 7.14, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by: (i) the failure of the Administrative Agent, the Collateral Agent or any other Secured Party to assert any claim or demand or to exercise or enforce any right or remedy under the provisions of any Loan Document or otherwise; (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement; (iii) the failure to perfect any security interest in, or the exchange, substitution, release or any impairment of, any Collateral or any other collateral securing the Guaranteed Obligations; (iv) any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations; (v) any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Guaranteed Obligations); (vi) any illegality, lack of validity or enforceability of any Guaranteed Obligation; (vii) any change in the corporate existence, structure or ownership of any Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Borrower or its assets or any resulting release or discharge of any Guaranteed Obligation; (viii) the existence of any claim, set-off or other rights that the Guarantor may have at any time against any Borrower, the Collateral Agent, or any other corporation or person, whether in connection herewith or any unrelated transactions, provided that 5 nothing herein will prevent the assertion of any such claim by separate suit or compulsory counterclaim; and (ix) any other circumstance (including without limitation, the expiration of any statute of limitations) or any existence of or reliance on any representation by the Collateral Agent that might otherwise constitute a defense to, or a legal or equitable discharge of, the Domestic Borrower or the Guarantor or any other guarantor or surety. Each Guarantor expressly authorizes the Secured Parties to take and hold security for the payment and performance of the Guaranteed Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in their sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Guaranteed Obligations, all without affecting the obligations of any Guarantor hereunder. Each Guarantor acknowledges that its guarantee is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in this Article II are knowingly made in contemplation of such benefits. (b) To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of any Borrower or any other Loan Party or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any Borrower or any other Loan Party, other than the indefeasible payment in full in cash of all the Guaranteed Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with any Borrower or any other Loan Party or exercise any other right or remedy available to them against any Borrower or any other Loan Party, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been fully and indefeasibly paid in full in cash. To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against any Borrower or any other Loan Party, as the case may be, or any security. SECTION 2.04. Reinstatement. Each Guarantor agrees that its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Guaranteed Obligation is rescinded or must otherwise be restored by the Administrative Agent or any other Secured Party upon the bankruptcy or reorganization of any Borrower, any other Loan Party or otherwise. SECTION 2.05. Agreement To Pay; Subrogation. In furtherance of the foregoing and not in limitation of any other right that the Collateral Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of any Borrower or any other Loan Party to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each 6 Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Collateral Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Guaranteed Obligation. Upon payment by any Guarantor of any sums to the Collateral Agent as provided above, all rights of such Guarantor against any Borrower, or other Loan Party or any other Guarantor arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article VI. SECTION 2.06. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the financial condition and assets of each Borrower and each other Loan Party, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Collateral Agent or the other Secured Parties will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks. SECTION 2.07. Maximum Liability. Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor (other than Holdings and the Domestic Borrower) hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section 6.02). SECTION 2.08. Payments Free and Clear of Taxes, Etc. (a) Any and all payments made by any Guarantor under or in respect of this Agreement or any other Loan Document shall be made, in accordance with Section 2.17 of the Credit Agreement. ARTICLE III PLEDGE OF SECURITIES SECTION 3.01. Pledge. As security for the payment or performance, as the case may be, in full of the Guaranteed Obligations, each Pledgor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in all of such Pledgor's right, title and interest in, to and under (a) the Equity Interests of any Material Subsidiary directly owned by it as of the Closing Date and any other Equity Interests of any Material Subsidiary directly owned in the future by such Pledgor and any certificates representing all such Equity Interests (the "Pledged Stock"); provided that the Pledged Stock shall not include (i) any Equity Interests of any Material Subsidiary that may be pledged pursuant to any foreign pledge agreement under the terms of the Credit Agreement, (ii) any Equity Interests of any Material Subsidiary listed on Schedule VI hereto, as such schedule may be updated from time to time, (iii) more than 65% of the issued and outstanding voting Equity Interests of any Foreign Subsidiary or any Domestic Subsidiary substantially all of whose assets consist of the Equity Interests in "controlled foreign companies" under Section 957 of the Code, (iv) any Equity Interests of any Subsidiary to the extent that, as of the Closing Date and for so long as, a pledge of such Equity Interests would violate a 7 contractual obligation binding on the issuer or holder of such Equity Interests, (v) any Equity Interests of any Subsidiary acquired after the Closing Date in accordance with the Credit Agreement if, and to the extent that, and for so long as (A) pledging such Equity Interests would violate applicable law or a contractual obligation binding on the issuer or holder of such Equity Interests and (B) such law or obligation existed at the time of the acquisition thereof and was not created or made binding on such Equity Interests in contemplation of or in connection with the acquisition of such Subsidiary, provided that the foregoing clause (B) shall not apply in the case of a joint venture, including a joint venture that is a Subsidiary, and, (vi) Equity Interests in any Foreign Subsidiary if the Domestic Borrower demonstrates to the Collateral Agent and the Collateral Agent determines (in its reasonable discretion) that the cost of pledging the Equity Interests in such Foreign Subsidiary exceeds the value of the security offered thereby; provided that, upon the reasonable request of the Collateral Agent, Domestic Borrower shall, and shall cause any applicable Subsidiary to, use commercially reasonable efforts to have waived or eliminated any contractual obligation of the types described in clauses (iv) and (v) above, other than those set forth in a joint venture agreement to which Holdings or any Subsidiary is a party; provided further, that Pledged Stock shall include the interests listed on Schedule II; (b)(i) the debt securities for borrowed money having an aggregate principal amount in excess of $10,000,000 (other than (i) intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of Holdings, the Domestic Borrower and the Subsidiaries, (ii) any such debt securities that may be pledged pursuant to any foreign pledge agreement under the terms of the Credit Agreement, and (iii) any debt securities listed on Annex A to the Credit Agreement (other than those debt securities listed on Schedule II hereto)) ("Material Pledged Debt Securities") held by such Pledgor as of the Closing Date, (ii) any Material Pledged Debt Securities in the future issued to such Pledgor and (iii) the promissory notes and any other instruments, if any, evidencing such Material Pledged Debt Securities (the "Pledged Debt Securities"); provided, that the Pledged Debt Securities shall include the debt securities listed on Schedule II; (c) subject to Section 3.06, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other proceeds received in respect of, the securities referred to in clauses (a) and (b) above; (d) all rights and privileges of such Pledgor with respect to the securities and other property referred to in clauses (a), (b) and (c) above; and (e) all proceeds of any of the foregoing (the items referred to in clauses (a) through (e) above being collectively referred to as the "Pledged Collateral"). TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth. SECTION 3.02. Delivery of the Pledged Collateral. (a) Each Pledgor agrees promptly to deliver or cause to be delivered to the Collateral Agent, for the ratable benefit of the Secured Parties, any and all Pledged Stock and any and all Pledged Debt Securities to the extent such Pledged Securities, in the case of promissory notes or other instruments evidencing Indebtedness, are required to be delivered pursuant to paragraph (b) of this Section 3.02. (b) Each Pledgor will cause any Material Pledged Debt Securities owed to such Pledgor by any person to be evidenced by a duly executed promissory note that is pledged 8 and delivered to the Collateral Agent, including the Intercompany Note, for the ratable benefit of the Secured Parties, pursuant to the terms hereof. To the extent any such promissory note is a demand note, each Pledgor party thereto agrees, if requested by the Collateral Agent, to immediately demand payment thereunder upon an Event of Default specified under Sections 7.01(b), (c), (f), (h) or (i) of the Credit Agreement. (c) Upon delivery to the Collateral Agent, (i) any Pledged Securities required to be delivered pursuant to the foregoing paragraphs (a) and (b) of this Section 3.02 (other than the Intercompany Note) shall be accompanied by stock powers or note powers, as applicable, duly executed in blank or other instruments of transfer reasonably satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (ii) all other property composing part of the Pledged Collateral delivered pursuant to the terms of this Agreement shall be accompanied to the extent necessary to perfect the security interest in or allow realization on the Pledged Collateral by proper instruments of assignment duly executed by the applicable Pledgor and such other instruments or documents (including issuer acknowledgments in respect of uncertificated securities) as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be attached hereto as Schedule II and made a part hereof; provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered. SECTION 3.03. Representations, Warranties and Covenants. The Pledgors, jointly and severally, represent, warrant and covenant to and with the Collateral Agent, for the ratable benefit of the Secured Parties, that: (a) Schedule II correctly sets forth as of the Closing Date the (x) name and jurisdiction of each issuer of, and the ownership interest (including percentage owned and number of shares or units) of each Pledgor in, the Pledged Stock and (y) amount and obligor under the Material Pledged Debt Securities; (b) the Pledged Stock and Pledged Debt Securities (solely with respect to Pledged Debt Securities issued by a person that is not a Subsidiary of Holdings or an Affiliate of any such Subsidiary, to each Pledgor's knowledge) have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Stock, are fully paid and nonassessable and (ii) in the case of Pledged Debt Securities (solely with respect to Pledged Debt Securities issued by a person that is not a Subsidiary of Holdings or an Affiliate of any such Subsidiary, to each Pledgor's knowledge) are legal, valid and binding obligations of the issuers thereof; (c) except for the security interests granted hereunder, each Pledgor (i) is and, subject to any transfers made in compliance with the Credit Agreement, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Pledgor, (ii) holds the same free and clear of all Liens, other than Liens permitted under Section 6.02 of the Credit Agreement, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than pursuant to a transaction permitted by the Credit Agreement 9 and other than Liens permitted under Section 6.02 of the Credit Agreement and (iv) subject to the rights of such Pledgor under the Loan Documents to dispose of Pledged Collateral, will defend its title or interest hereto or therein against any and all Liens (other than Liens permitted under Section 6.02 of the Credit Agreement), however arising, of all persons; (d) except for restrictions and limitations imposed by the Loan Documents, securities laws generally, the laws of any applicable foreign jurisdiction (with respect to Pledged Collateral pledged after the Closing Date) or otherwise permitted to exist pursuant to the terms of the Credit Agreement, (i) the Pledged Collateral is and will continue to be freely transferable and assignable and (ii) none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Collateral Agent of rights and remedies hereunder; (e) each Pledgor has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated; (f) except for consents or approvals required by laws of any applicable foreign jurisdiction (with respect to Pledged Collateral pledged after the Closing Date), no consent or approval of any Governmental Authority, any securities exchange or any other person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect); (g) by virtue of the execution and delivery by the Pledgors of this Agreement, when any Pledged Securities are delivered to the Collateral Agent, for the ratable benefit of the Secured Parties, in accordance with this Agreement, the Collateral Agent will obtain, for the ratable benefit of the Secured Parties, a legal, valid and perfected first priority lien upon and security interest in such Pledged Securities as security for the payment and performance of the Guaranteed Obligations under the New York UCC, except, in the case of Pledged Securities delivered after the Closing Date, as provided by the laws of any applicable foreign jurisdiction and subject to Liens permitted by the Credit Agreement; and (h) the pledge effected hereby is effective to vest in the Collateral Agent, for the ratable benefit of the Secured Parties, the rights of the Pledgors in the Pledged Collateral as set forth herein, except as provided by the laws of any applicable foreign jurisdiction (with respect to Pledged Collateral pledged after the Closing Date). SECTION 3.04. Certification of Limited Liability Company and Limited Partnership Interests. Except as provided by the laws of any applicable foreign jurisdiction, each interest in any limited liability company or limited partnership controlled by any Loan Party and pledged hereunder shall be represented by a certificate, shall to the extent permitted by applicable laws be a "security" within the meaning of Article 8 of the New York UCC and shall be governed by Article 8 of the New York UCC; provided, however, in the case of (a) the limited liability company interests set forth on Schedule IV, the Domestic Borrower shall cause such interests to be represented by a certificate, to be a "security" within the meaning of Article 8 of the New York UCC and to be governed by Article 8 of the New York UCC, in each case not 10 later than 20 Business Days after the Closing Date and (b) that any limited liability company or limited partnership that, in either case, is organized under the laws of any state of the United States and is a Wholly Owned Subsidiary formed or acquired after the Closing Date, the Domestic Borrower shall cause such interests to be represented by a certificate, to be a "security" within the meaning of Article 8 of the New York UCC and to be governed by Article 8 of the New York UCC, in each case not later than 20 Business Days after the date of formation or acquisition thereof, as applicable. SECTION 3.05. Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in the name of the applicable Pledgor, endorsed or assigned in blank or in favor of the Collateral Agent or, if an Event of Default shall have occurred and be continuing, in its own name as pledgee or the name of its nominee (as pledgee or as sub-agent). Each Pledgor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Pledgor. If an Event of Default shall have occurred and be continuing, the Collateral Agent shall have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement. Each Pledgor shall use its commercially reasonable efforts to cause any Loan Party that is not a party to this Agreement to comply with a request by the Collateral Agent, pursuant to this Section 3.05, to exchange certificates representing Pledged Securities of such Loan Party for certificates of smaller or larger denominations. SECTION 3.06. Voting Rights; Dividends and Interest, etc. (a) Unless and until an Event of Default shall have occurred and be continuing: (i) Each Pledgor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided that such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Securities, the rights and remedies of any of the Collateral Agent or the other Secured Parties under this Agreement, the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same. (ii) The Collateral Agent shall promptly execute and deliver to each Pledgor, or cause to be executed and delivered to such Pledgor, all such proxies, powers of attorney and other instruments as such Pledgor may reasonably request for the purpose of enabling such Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above. (iii) Each Pledgor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws; provided that any noncash dividends, interest, principal or other 11 distributions that would constitute Pledged Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Pledgor, shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent, for the ratable benefit of the Secured Parties, and shall be forthwith delivered to the Collateral Agent, for the ratable benefit of the Secured Parties, in the same form as so received (endorsed in a manner reasonably satisfactory to the Collateral Agent). (b) Upon the occurrence and during the continuance of an Event of Default and after notice by the Collateral Agent to the relevant Pledgors of the Collateral Agent's intention to exercise its rights hereunder, except as provided by the laws of any applicable foreign jurisdiction, all rights of any Pledgor to dividends, interest, principal or other distributions that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.06 shall cease, and all such rights shall thereupon become vested, for the ratable benefit of the Secured Parties, in the Collateral Agent which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Pledgor contrary to the provisions of this Section 3.06 shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent, for the ratable benefit of the Secured Parties, and shall be forthwith delivered to the Collateral Agent, for the ratable benefit of the Secured Parties, in the same form as so received (endorsed in a manner reasonably satisfactory to the Collateral Agent). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02. After all Events of Default have been cured or waived and the Domestic Borrower has delivered to the Collateral Agent a certificate to that effect, the Collateral Agent shall promptly repay to each Pledgor (without interest) all dividends, interest, principal or other distributions that such Pledgor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.06 and that remain in such account. (c) Upon the occurrence and during the continuance of an Event of Default and after notice by the Collateral Agent to the relevant Pledgors of the Collateral Agent's intention to exercise its rights hereunder, except as provided by the laws of any applicable foreign jurisdiction, all rights of any Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.06, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 3.06, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, for the ratable benefit of the Secured Parties, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Pledgors to exercise such rights. 12 After all Events of Default have been cured or waived and the Domestic Borrower has delivered to the Collateral Agent a certificate to that effect, each Pledgor shall have the right to exercise the voting and/or consensual rights and powers that such Pledgor would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above. ARTICLE IV SECURITY INTERESTS IN PERSONAL PROPERTY SECTION 4.01. Security Interest. (a) As security for the payment or performance, as the case may be, in full of the Guaranteed Obligations, each Guarantor hereby assigns and pledges to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest (the "Security Interest") in all right, title and interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Guarantor or in which such Guarantor now has or at any time in the future may acquire any right, title or interest (collectively, the "Article 9 Collateral"): (i) all Accounts; (ii) all Chattel Paper; (iii) all cash and Deposit Accounts; (iv) all Documents; (v) all Equipment; (vi) all Fixtures; (vii) all General Intangibles; (viii) all Instruments; (ix) all Inventory; (x) all Investment Property; (xi) all Letter-of-Credit Rights; (xii) all Commercial Tort Claims; (xiii) all books and records pertaining to the Article 9 Collateral; and (xiv) to the extent not otherwise included, all proceeds, supporting Obligations and products of any and all of the foregoing and all collateral given by any person with respect to any of the foregoing. 13 Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute a grant of a security interest (other than the grant of security interest in the Pledged Stock pursuant to Section 3.01) in, and "Article 9 Collateral" shall not include, (a) any Equity Interests of any Person (except for Equity Interests of any Material Subsidiary listed on Schedule VI hereto as such schedule may be updated from time to time, that can be perfected upon the filing of a financing statement), (b) any Material Pledged Debt Securities or any debt securities that may be pledged pursuant to any foreign pledge agreement under the terms of the Credit Agreement, (c) any assets of any Subsidiary to the extent that, as of the Closing Date, and for so long as, a pledge of such assets would violate a contractual obligation binding on such assets or such Subsidiary, (d) any assets of any Subsidiary acquired after the Closing Date in accordance with the Credit Agreement if, and to the extent that, and for so long as (1) pledging such assets would violate applicable law or a contractual obligation binding on such assets or such Subsidiary and (2) such law or obligation existed at the time of the acquisition thereof or (e) any United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law; provided, that, upon the reasonable request of the Collateral Agent, Domestic Borrower shall, and shall cause any applicable Subsidiary to, use commercially reasonable efforts to have waived or eliminated any contractual obligation of the types described in clauses (c) and (d) above, other than those set forth in a joint venture agreement to which Holdings or any Subsidiary is a party . (b) Each Guarantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings), continuation statements, or other filings and recordings, with respect to the Article 9 Collateral and any other collateral pledged hereunder or any part thereof and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, or such other information as may be required under applicable law including (i) whether such Guarantor is an organization, the type of organization and any organizational identification number issued to such Guarantor, (ii) in the case of Fixtures, a sufficient description of the real property to which such Article 9 Collateral relates and (iii) a description of collateral that describes such property in any other manner as the Collateral Agent may reasonably determine is necessary or advisable to ensure the perfection of the security interest in the Article 9 Collateral or other collateral granted under this Agreement, including describing such property as "all assets" or "all property". Each Guarantor agrees to provide such information to the Collateral Agent promptly upon request. The Collateral Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Guarantor, without the signature of any Guarantor, and naming any Guarantor or the Guarantors as debtors and the Collateral Agent as secured party. (c) The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Guarantor with respect to or arising out of the Article 9 Collateral. 14 SECTION 4.02. Representations and Warranties. The Guarantors jointly and severally represent and warrant to the Collateral Agent and the Secured Parties that: (a) Each Guarantor has good and valid rights in and title to the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than any consent or approval that has been obtained and is in full force and effect. (b) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein, including the exact legal name of each Guarantor, is correct and complete, in all material respects, as of the Closing Date. Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations containing a description of the Article 9 Collateral have been prepared by the Collateral Agent based upon the information provided to the Collateral Agent in the Perfection Certificate for filing in each governmental, municipal or other office specified in Schedule 4 of Appendix I to the Perfection Certificate (or specified by notice from the Domestic Borrower to the Collateral Agent after the Closing Date in the case of filings, recordings or registrations required by Section 5.10 of the Credit Agreement), and constitute all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in Article 9 Collateral consisting of United States Patents, United States registered Trademarks and United States registered Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements or amendments. Each Guarantor represents and warrants that a fully executed agreement in the form hereof (or a short form hereof which form shall be reasonably acceptable to the Collateral Agent) containing a description of all Article 9 Collateral consisting of Intellectual Property with respect to United States Patents (and Patents for which United States registration applications are pending), United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights (and Copyrights for which United States registration applications are pending) has been delivered to the Collateral Agent for recording with the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. Section 261, 15 U.S.C. Section 1060 or 17 U.S.C. Section 205 and the regulations thereunder, as applicable, and reasonably requested by the Collateral Agent, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, in respect of all Article 9 Collateral consisting of such Intellectual Property in which a security interest may be perfected by recording with the United States Patent and Trademark Office and the United States Copyright Office, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Article 9 Collateral consisting of 15 Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the date hereof). (c) The Security Interest constitutes (i) a legal and valid security interest in all the Article 9 Collateral securing the payment and performance of the Guaranteed Obligations under the New York UCC, (ii) subject to the filings described in Section 4.02(b), a perfected security interest in all Article 9 Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (iii) a security interest that shall be perfected in all Article 9 Collateral in which a security interest may be perfected upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable. The Security Interest is not subject to any prior ranking or pari passu ranking Lien and shall be prior to any other Lien on any of the Article 9 Collateral, other than Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement or arising by operation of law. (d) The Article 9 Collateral is owned by the Guarantors free and clear of any Lien, other than Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement or arising by operation of law. None of the Guarantors has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Guarantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (iii) any assignment in which any Guarantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.02 of the Credit Agreement. (e) None of the Guarantors holds any Commercial Tort Claim individually in excess of $10,000,000 as of the Closing Date except as indicated on Schedule V hereto, as such schedule may be updated or supplemented from time to time. (f) All Accounts have been originated by the Guarantors and all Inventory has been acquired by the Guarantors in the ordinary course of business. (g) As to itself and its Intellectual Property, except to the extent not reasonably expected to have a Material Adverse Effect: (i) The operation of such Guarantor's business as currently conducted and the use of the Intellectual Property in connection therewith do not infringe, misappropriate or otherwise violate the intellectual property rights of any third party. (ii) Such Guarantor owns or has the right to use the Intellectual Property. 16 (iii) The Intellectual Property set forth on Schedule III hereto includes all of the patents, patent applications, domain names, trademark registrations and applications and copyright registrations and applications owned by such Guarantor. (iv) The Intellectual Property is subsisting and has not been adjudged invalid or unenforceable in whole or part. SECTION 4.03. Covenants. (a) Each Guarantor agrees promptly to notify the Collateral Agent in writing of any change (i) in its corporate name, (ii) in its identity or type of organization or corporate structure, (iii) in its Federal Taxpayer Identification Number or organizational identification number or (iv) in its jurisdiction of organization. Each Guarantor agrees promptly to provide the Collateral Agent with certified organizational documents reflecting any of the changes described in the immediately preceding sentence. Each Guarantor agrees not to effect or permit any change referred to in the first sentence of this paragraph (a) unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Article 9 Collateral, for the ratable benefit of the Secured Parties. Each Guarantor agrees promptly to notify the Collateral Agent if any material portion of the Article 9 Collateral owned or held by such Guarantor is damaged or destroyed. (b) Subject to the rights of such Guarantor under the Loan Documents to dispose of Collateral, each Guarantor shall, at its own expense, take any and all actions necessary to defend title to the Article 9 Collateral against all persons and to defend the Security Interest of the Collateral Agent, for the ratable benefit of the Secured Parties, in the Article 9 Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02 of the Credit Agreement. (c) Each Guarantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Article 9 Collateral that is in excess of $10,000,000 shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be promptly pledged and delivered to the Collateral Agent, for the ratable benefit of the Secured Parties, duly endorsed in a manner reasonably satisfactory to the Collateral Agent. Without limiting the generality of the foregoing, each Guarantor hereby authorizes the Collateral Agent, with prompt notice thereof to the Guarantors, to supplement this Agreement by supplementing Schedule III or adding additional schedules hereto to specifically identify any asset or item that may constitute Copyrights, Patents, Trademarks or IP Agreements; provided that any Guarantor shall have the right, exercisable within 30 days after it has been notified by the Collateral Agent of the specific identification of such Article 9 Collateral, to advise the Collateral Agent in writing of any inaccuracy of the representations and warranties 17 made by such Guarantor hereunder with respect to such Article 9 Collateral. Each Guarantor agrees that it will use its commercially reasonable efforts to take such action as shall be necessary in order that all representations and warranties hereunder shall be true and correct with respect to such Article 9 Collateral within 30 days after the date it has been notified by the Collateral Agent of the specific identification of such Article 9 Collateral. (d) After the occurrence of an Event of Default and during the continuance thereof, the Collateral Agent shall have the right to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Article 9 Collateral, including, in the case of Accounts or Article 9 Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Article 9 Collateral for the purpose of making such a verification. The Collateral Agent shall have the right to share any information it gains from such inspection or verification with any Secured Party. (e) At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and not permitted pursuant to Section 6.02 of the Credit Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Guarantor fails to do so as required by the Credit Agreement or this Agreement, and each Guarantor jointly and severally agrees to reimburse the Collateral Agent on demand for any reasonable payment made or any reasonable expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that nothing in this Section 4.03(e) shall be interpreted as excusing any Guarantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Guarantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents. (f) Each Guarantor (rather than the Collateral Agent or any Secured Party) shall remain liable for the observance and performance of all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral and each Guarantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance. (g) None of the Guarantors shall make or permit to be made an assignment, pledge or hypothecation of the Article 9 Collateral or shall grant any other Lien in respect of the Article 9 Collateral, except as expressly permitted by the Credit Agreement. None of the Guarantors shall make or permit to be made any transfer of the Article 9 Collateral and each Guarantor shall remain at all times in possession of the Article 9 Collateral owned by it, except as permitted by the Credit Agreement. (h) None of the Guarantors will, without the Collateral Agent's prior written consent, grant any extension of the time of payment of any Accounts included in the Article 9 Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises or 18 settlements granted or made in the ordinary course of business and consistent with prudent business practices or as otherwise permitted by the Credit Agreement. (i) Each Guarantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Guarantor's true and lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Article 9 Collateral under policies of insurance covering the Article 9 Collateral, endorsing the name of such Guarantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Guarantor at any time or times shall fail to obtain or maintain any of the policies of insurance required by the Credit Agreement or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Guarantors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent reasonably deems advisable. All sums disbursed by the Collateral Agent in connection with this Section 4.03(i), including reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Guarantors to the Collateral Agent and shall be additional Guaranteed Obligations secured hereby. SECTION 4.04. Other Actions. In order to further ensure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, for the ratable benefit of the Secured Parties, the Collateral Agent's security interest in the Article 9 Collateral, each Guarantor agrees, in each case at such Guarantor's own expense, to take the following actions with, respect to the following Article 9 Collateral: (a) Instruments and Tangible Chattel Paper. If any Guarantor shall at any time hold or acquire any Instruments or Tangible Chattel Paper evidencing an amount in excess of $10,000,000, such Guarantor shall forthwith endorse, assign and deliver the same to the Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably request. (b) Cash Accounts. No Guarantor shall grant control of any deposit account to any Person other than the Collateral Agent and the bank with which the deposit account is maintained. (c) Investment Property. Except to the extent otherwise provided in Article III, if any Guarantor shall at any time hold or acquire any certificated security, such Guarantor shall forthwith endorse, assign and deliver the same to the Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time reasonably specify. If any security now or hereafter acquired by any Guarantor that is part of the Article 9 Collateral is uncertificated and is issued to such Guarantor or its nominee directly by the issuer thereof, upon the Collateral Agent's reasonable request and following the occurrence of an Event of Default, such Guarantor shall promptly notify the Collateral Agent of such uncertificated securities and pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) cause the issuer to agree to comply with instructions from the Collateral Agent as to such security, without further consent 19 of any Guarantor or such nominee, or (ii) cause the issuer to register the Collateral Agent as the registered owner of such security. If any security or other Investment Property that is part of the Article 9 Collateral, whether certificated or uncertificated, representing an Equity Interest in a third party and having a fair market value in excess of $10,000,000 now or hereafter acquired by any Guarantor is held by such Guarantor or its nominee through a securities intermediary or commodity intermediary, such Guarantor shall promptly notify the Collateral Agent thereof and, at the Collateral Agent's request and option, pursuant to a Control Agreement either (A) cause such securities intermediary or commodity intermediary, as applicable, to agree, in the case of a securities intermediary, to comply with entitlement orders or other instructions from the Collateral Agent to such securities intermediary as to such securities or other Investment Property or, in the case of a commodity intermediary, to apply any value distributed on account of any commodity contract as directed by the Collateral Agent to such commodity intermediary, in each case without further consent of any Guarantor or such nominee, or (B) in the case of Financial Assets or other Investment Property held through a securities intermediary, arrange for the Collateral Agent to become the entitlement holder with respect to such Investment Property, for the ratable benefit of the Secured Parties, with such Guarantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such Investment Property. The Collateral Agent agrees with each of the Guarantors that the Collateral Agent shall not give any such entitlement orders or instructions or directions to any such issuer, securities intermediary or commodity intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by any Guarantor, unless an Event of Default has occurred and is continuing or, after giving effect to any such withdrawal or dealing rights, would occur. The provisions of this paragraph (c) shall not apply to any Financial Assets credited to a securities account for which the Collateral Agent is the securities intermediary. (d) Tort Claims. If any Guarantor shall at any time hold or acquire a Commercial Tort Claim in an amount reasonably estimated to exceed $10,000,000, such Guarantor shall promptly notify the Collateral Agent thereof in a writing signed by such Guarantor, including a summary description of such claim, and grant to the Collateral Agent in writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Collateral Agent. SECTION 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral. (a) Each Guarantor agrees that it will not knowingly do any act or omit to do any act (and will exercise commercially reasonable efforts to prevent its licensees from doing any act or omitting to do any act) whereby any Patent that is material to the normal conduct of such Guarantor's business may become prematurely invalidated or dedicated to the public, and agrees that it shall take commercially reasonable steps with respect to any material products covered by any such Patent as necessary and sufficient to establish and preserve its rights under applicable patent laws. (b) Each Guarantor will, and will use its commercially reasonable efforts to cause its licensees or its sublicensees to, for each material Trademark necessary to the normal conduct of such Guarantor's business, (i) maintain such Trademark in full force free from any adjudication of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark consistent with the quality of such products and services 20 as of the date hereof, (iii) display such Trademark with notice of federal or foreign registration or claim of trademark or service mark as required under applicable law and (iv) not knowingly use or knowingly permit its licensees' use of such Trademark in violation of any third-party rights. (c) Each Guarantor will, and will use its commercially reasonable efforts to cause its licensees or its sublicensees to, for each work covered by a material Copyright necessary to the normal conduct of such Guarantor's business that it publishes, displays and distributes, use copyright notice as required under applicable copyright laws. (d) Each Guarantor shall notify the Collateral Agent promptly if it knows that any Patent, Trademark or Copyright material to the normal conduct of such Guarantor's business may imminently become abandoned, lost or dedicated to the public other than by expiration, or of any materially adverse determination or development, excluding office actions and similar determinations in the United States Patent and Trademark Office, United States Copyright Office, any court or any similar office of any country, regarding such Guarantor's ownership of any such material Patent, Trademark or Copyright or its right to register or to maintain the same. (e) Each Guarantor, either itself or through any agent, employee, licensee or designee, shall (i) inform the Collateral Agent on a semi-annual basis of each application by itself, or through any agent, employee, licensee or designee, for any Patent with the United States Patent and Trademark Office and each registration of any Trademark or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any comparable office or agency in any other country filed during the preceding six-month period, and (ii) upon the reasonable request of the Collateral Agent, execute and deliver any and all agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent's security interest in such Patent, Trademark or Copyright. (f) Each Guarantor shall exercise its reasonable business judgment consistent with the practice in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any comparable office or agency in any other country with respect to maintaining and pursuing each material application relating to any Patent, Trademark and/or Copyright (and obtaining the relevant grant or registration) material to the normal conduct of such Guarantor's business and to maintain (i) each issued Patent and (ii) the registrations of each Trademark and each Copyright in each case that is material to the normal conduct of such Guarantor's business, including, when applicable and necessary in such Guarantor's reasonable business judgment, timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if any Guarantor believes necessary in its reasonable business judgment, to initiate opposition, interference and cancellation proceedings against third parties. (g) In the event that any Guarantor knows or has reason to know that any Article 9 Collateral consisting of a Patent, Trademark or Copyright material to the normal conduct of its business has been or is about to be materially infringed, misappropriated or diluted by a third party, such Guarantor shall promptly notify the Collateral Agent and shall, if such Guarantor deems it necessary in its reasonable business judgment, promptly contact such third party, and if necessary in its reasonable business judgment, sue and recover damages, and take such other actions as are reasonably appropriate under the circumstances. 21 (h) Upon and during the continuance of an Event of Default, each Guarantor shall use commercially reasonable efforts to obtain all requisite consents or approvals from the licensor under each IP Agreement to effect the assignment of all such Guarantor's right, title and interest thereunder to (in the Collateral Agent's sole discretion) the designee of the Collateral Agent or the Collateral Agent. ARTICLE V REMEDIES SECTION 5.01. Remedies Upon Default. Upon the occurrence and during the continuance of an Event of Default, each Pledgor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Guarantors to the Collateral Agent or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or a nonexclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers thereunder cannot be obtained) and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Article 9 Collateral and without liability for trespass to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of or removing the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the applicable Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Pledgor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized in connection with any sale of a security (if it deems it advisable to do so) pursuant to the foregoing to restrict the prospective bidders or purchasers to persons who represent and agree that they are purchasing such security for their own account, for investment, and not with a view to the distribution or sale thereof. Upon consummation of any such sale of Collateral pursuant to this Section 5.01 the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives and releases (to the extent permitted by law) all rights of redemption, stay, valuation and appraisal that such Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Collateral Agent shall give the applicable Pledgors 10 Business Days' written notice (which each Pledgor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Collateral Agent's intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and 22 place for such sale and, in the case of a sale at a broker's board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or the portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In the case of any sale of all or any part of the Collateral made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in the event that any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in the case of any such failure, such Collateral may be sold again upon notice given in accordance with provisions above. At any public (or, to the extent permitted by law, private) sale made pursuant to this Section 5.01, any Secured Party may bid for or purchase for cash, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Pledgor (all such rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property in accordance with Section 5.02 hereof without further accountability to any Pledgor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Pledgor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Guaranteed Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose upon the Collateral and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions. SECTION 5.02. Application of Proceeds. The Collateral Agent shall promptly apply the proceeds, moneys or balances of any collection or sale of Collateral, as well as any Collateral consisting of cash, as follows: FIRST, to the payment of all costs and expenses incurred by the Administrative Agent and the Collateral Agent in connection with such collection or sale or otherwise in connection with this Agreement, any other Loan Document or any of the Guaranteed Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Administrative Agent and the Collateral Agent hereunder or under any other Loan Document on behalf of any Pledgor 23 and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document; SECOND, to the payment in full of the Guaranteed Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the respective amounts of the Guaranteed Obligations owed to them on the date of any such distribution); and THIRD, to the Pledgors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct. The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. SECTION 5.03. Grant of License To Use Intellectual Property. For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Agreement at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Guarantor hereby grants to (in the Collateral Agent's sole discretion) a designee of the Collateral Agent or the Collateral Agent, for the ratable benefit of the Secured Parties, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to any Guarantor) to use, license or sublicense any of the Article 9 Collateral consisting of Intellectual Property (excluding Trademarks) now owned or hereafter acquired by such Guarantor, wherever the same may be located, and including, without limitation, in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof, the right to prosecute and maintain all intellectual property and the right to sue for past infringement of the intellectual property. The use of such license by the Collateral Agent may be exercised, at the option of the Collateral Agent, upon the occurrence and during the continuation of an Event of Default; provided that any license, sublicense or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon the Guarantors notwithstanding any subsequent cure of an Event of Default. SECTION 5.04. Securities Act, etc. In view of the position of the Pledgors in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar federal statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the "Federal Securities Laws") with respect to any disposition of the Pledged Collateral permitted hereunder. Each Pledgor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any 24 subsequent transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Pledgor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its sole and absolute discretion, (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws or, to the extent applicable, Blue Sky or other state securities laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Pledgor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Collateral Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 5.04 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells. SECTION 5.05. Registration, etc. Each Pledgor agrees that, upon the occurrence and during the continuance of an Event of Default, if for any reason the Collateral Agent desires to sell any of the Pledged Collateral at a public sale, it will, at any time and from time to time, upon the written request of the Collateral Agent, use its commercially reasonable efforts to take or to cause the issuer of such Pledged Collateral to take such action and prepare, distribute and/or file such documents, as are required or advisable in the reasonable opinion of counsel for the Collateral Agent to permit the public sale of such Pledged Collateral. Each Pledgor further agrees to indemnify, defend and hold harmless the Administrative Agent, each other Secured Party, any underwriter and their respective officers, directors, affiliates and controlling persons from and against all loss, liability, expenses, costs of counsel (including reasonable fees and expenses to the Collateral Agent of legal counsel), and claims (including the costs of investigation) that they may incur insofar as such loss, liability, expense or claim arises out of or is based upon any alleged untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements in any thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished in writing to such Pledgor or the issuer of such Pledged Collateral by the Collateral Agent or any other Secured Party expressly for use therein. Each Pledgor further agrees, upon such written request referred to above, to use its commercially reasonable efforts to qualify, file or register, or cause the issuer of such Pledged Collateral to qualify, file or register, any of the Pledged Collateral under the Blue Sky or other securities laws of such states as may be reasonably requested by the Collateral Agent and keep effective, or cause to be kept effective, all such qualifications, filings or registrations. Each Pledgor will bear all costs and expenses of carrying out its obligations under this Section 5.05. Each Pledgor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 5.05 only and that such failure would not be 25 adequately compensable in damages and, therefore, agrees that its agreements contained in this Section 5.05 may be specifically enforced. ARTICLE VI INDEMNITY, SUBROGATION AND SUBORDINATION SECTION 6.01. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 6.03), the Domestic Borrower agrees that (a) in the event a payment shall be made by any Guarantor under this Agreement in respect of any Obligation of the Domestic Borrower, the Domestic Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold pursuant to this Agreement or any other Security Document to satisfy in whole or in part an Obligation of the Domestic Borrower, the Domestic Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold. SECTION 6.02. Contribution and Subrogation. Each Guarantor (other than Holdings and the Domestic Borrower) (a "Contributing Guarantor") agrees (subject to Section 6.03) that, in the event a payment shall be made by any other Guarantor (other than Holdings and the Domestic Borrower) hereunder in respect of any Guaranteed Obligation or assets of any other Guarantor (other than Holdings and the Domestic Borrower) shall be sold pursuant to any Security Document to satisfy any Guaranteed Obligation owed to any Secured Party and such other Guarantor (the "Claiming Guarantor") shall not have been fully indemnified by the Domestic Borrower as provided in Section 6.01, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as applicable, in each case multiplied by a fraction of which the numerator shall be the net worth of such Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 7.15, the date of the supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 6.02 shall be subrogated to the rights of such Claiming Guarantor under Section 6.01 to the extent of such payment. SECTION 6.03. Subordination. (a) Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 6.01 and 6.02 and all other rights of indemnity, contribution or subrogation of the Pledgor under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Guaranteed Obligations. No failure on the part of the Domestic Borrower or any Guarantor to make the payments required by Sections 6.01 and 6.02 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor hereunder. 26 (b) Each Guarantor hereby agrees that all Indebtedness and other monetary obligations owed by it to any other Guarantor or any Subsidiary shall be fully subordinated to the indefeasible payment in full in cash of the Guaranteed Obligations. ARTICLE VII MISCELLANEOUS SECTION 7.01. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Domestic Subsidiary Loan Party shall be given to it in care of the Domestic Borrower, with such notice to be given as provided in Section 9.01 of the Credit Agreement. SECTION 7.02. Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest, the security interest in the Pledged Collateral and all obligations of each Pledgor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Guaranteed Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Guaranteed Obligations or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Pledgor in respect of the Guaranteed Obligations or this Agreement. SECTION 7.03. Binding Effect; Several Agreement. This Agreement shall become effective as to any party to this Agreement when a counterpart hereof executed on behalf of such party shall have been delivered to the Administrative Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such party and the Collateral Agent and their respective permitted successors and assigns, and shall inure to the benefit of such party, the Collateral Agent and the other Secured Parties and their respective permitted successors and assigns, except that no party shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each party and may be amended, modified, supplemented, waived or released with respect to any party without the approval of any other party and without affecting the obligations of any other party hereunder. SECTION 7.04. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any 27 Pledgor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective permitted successors and assigns. SECTION 7.05. Collateral Agent's Fees and Expenses; Indemnification. (a) The parties hereto agree that the Collateral Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.05 of the Credit Agreement. (b) The Parties hereto agree that the Collateral Agent shall be entitled to indemnification as provided in Section 9.05 of the Credit Agreement. (c) Any such amounts payable as provided hereunder shall be additional Guaranteed Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.05 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 7.05 shall be payable on written demand therefor. SECTION 7.06. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor hereby appoints the Collateral Agent as the attorney-in-fact of such Pledgor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Collateral Agent's name or in the name of such Pledgor, (a) to receive, endorse, assign or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due under and by virtue of any Collateral; (d) to sign the name of any Pledgor on any invoice or bill of lading relating to any of the Collateral; (e) to send verifications of Accounts to any Account Debtor; (f) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (g) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (h) to notify, or to require any Guarantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (i) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties 28 shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Pledgor for any act or failure to act hereunder, except for their own gross negligence or wilful misconduct. SECTION 7.07. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 7.08. Waivers; Amendment. (a) No failure or delay by the Administrative Agent, the Collateral Agent, any Issuing Bank or any Lender in exercising any right, power or remedy hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy, or any abandonment or discontinuance of steps to enforce such a right, power or remedy, preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The rights, powers and remedies of the Administrative Agent, the Collateral Agent, any Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights, powers or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 7.08, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or the issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, the Collateral Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default or Event of Default at the time. No notice or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement. SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09. 29 SECTION 7.10. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7.11. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 7.03. Delivery of an executed counterpart to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed original. SECTION 7.12. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each party to this Agreement hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Collateral Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Pledgor, or its properties, in the courts of any jurisdiction. (b) Each party to this Agreement hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. SECTION 7.14. Termination or Release. (a) This Agreement, the guarantees made herein, the Security Interest and all other security interests granted hereby shall terminate when all the Obligations have been indefeasibly paid in full in cash and the Lenders have no further commitment to lend under the Credit Agreement, the Revolving L/C Exposure has been reduced to zero and each Issuing Bank has no further obligations to issue Letters of Credit under the Credit Agreement. 30 (b) A Domestic Subsidiary Loan Party shall automatically be released from its obligations hereunder and the security interests in the Collateral of such Domestic Subsidiary Loan Party shall be automatically released upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Domestic Subsidiary Loan Party ceases to be a Subsidiary of Holdings pursuant to the terms of the Credit Agreement. (c) Upon any sale or other transfer by any Pledgor of any Collateral that is permitted under the Credit Agreement to any person that is not a Pledgor, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.08 of the Credit Agreement, the security interest in such Collateral shall be automatically released. (d) If any security interest granted hereby in any Collateral violates Section 9.23 of the Credit Agreement, the security interest in such Collateral shall be automatically released. (e) In connection with any termination or release pursuant to paragraph (a), (b), (c) or (d) of this Section 7.14, the Collateral Agent shall execute and deliver to any Pledgor, at such Pledgor's expense all documents that such Pledgor shall reasonably request to evidence such termination or release and shall assist such Pledgor in making any filing in connection therewith. Any execution and delivery of documents pursuant to this Section 7.14 shall be without recourse to or warranty by the Collateral Agent. SECTION 7.15. Additional Subsidiaries. Upon execution and delivery by the Collateral Agent and any Domestic Subsidiary Loan Party that is required to become a party hereto by Section 5.10 of the Credit Agreement of an instrument substantially in the form of Exhibit I hereto with such changes and modifications thereto as may be required by the laws of any applicable foreign jurisdiction, such Domestic Subsidiary Loan Party shall become a Domestic Subsidiary Loan Party hereunder with the same force and effect as if originally named as a Domestic Subsidiary Loan Party herein. The execution and delivery of any such instrument shall not require the consent of any other party to this Agreement. The rights and obligations of each party to this Agreement shall remain in full force and effect notwithstanding the addition of any new party to this Agreement. SECTION 7.16. Right of Set-off. If an Event of Default shall have occurred and be continuing, each Lender and each Issuing Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Issuing Bank to or for the credit or the account of any Pledgor to this Agreement against any of and all the obligations of such Pledgor now or hereafter existing under this Agreement owed to such Lender or such Issuing Bank, irrespective of whether or not such Lender or such Issuing Bank shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section 7.16 are in addition to other rights and remedies (including other rights of set-off) that such Lender or such Issuing Bank may have. 31 SECTION 7.17. Credit Agreement. If any conflict or inconsistency exists between this Agreement and the Credit Agreement, the Credit Agreement shall govern. [Signature Page Follows] 32 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. D-R INTERHOLDING, LLC, as a Guarantor and Pledgor (in each capacity) By: /s/ Thomas R. Denison -------------------------------------------- Name: Thomas R. Denison Title: President DRESSER-RAND GROUP INC., as Domestic Borrower, Guarantor and Pledgor (in each capacity) By: /s/ Thomas R. Denison -------------------------------------------- Name: Thomas R. Denison Title: President DRESSER-RAND LLC, as a Guarantor and Domestic Subsidiary Loan Party (in each capacity) By: /s/ Stephen A. Riordan ------------------------------------------ Name: Stephen A. Riordan Title: Treasurer DRESSER-RAND COMPANY, as a Guarantor and Domestic Subsidiary Loan Party (in each capacity) By: /s/ Stephen A. Riordan ------------------------------------------ Name: Stephen A. Riordan Title: Treasurer DRESSER-RAND POWER LLC, as a Guarantor and Domestic Subsidiary Loan Party (in each capacity) By: /s/ Stephen A. Riordan ------------------------------------------ Name: Stephen A. Riordan Title: Treasurer Dresser-Rand Global Services, L.L.C., as a Guarantor and Domestic Subsidiary Loan Party (in each capacity) By: /s/ Stephen A. Riordan ------------------------------------------ Name: Stephen A. Riordan Title: Treasurer CITICORP NORTH AMERICA, INC., as Collateral Agent By: /s/ Stephen P. Cunningham ------------------------------------------ Name: Stephen P. Cunningham Title: Managing Director Exhibit I to the Domestic Guarantee and Collateral Agreement SUPPLEMENT NO. __ dated as of (this "Supplement"), to the Domestic Guarantee and Collateral Agreement dated as of October 29, 2004 (the "Domestic Guarantee and Collateral Agreement"), among D-R INTERHOLDING, LLC, a Delaware limited liability company ("Holdings"), DRESSER-RAND GROUP INC., a Delaware corporation ("Acquisition Corp." or the "Domestic Borrower"), each Domestic Subsidiary Loan Party identified therein (each, a "Domestic Subsidiary Loan Party") and CITICORP NORTH AMERICA, INC. ("CNAI"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties. A. Reference is made to the Credit Agreement dated as of October 29, 2004 (as amended, supplemented, waived or otherwise modified from time to time, the "Credit Agreement"), among Holdings, the Domestic Borrower, the Foreign Borrowers party thereto from time to time, the lenders party thereto from time to time (the "Lenders"), CNAI as Administrative Agent and as Collateral Agent for the Lenders, MORGAN STANLEY SENIOR FUNDING, INC. ("MS") and UBS SECURITIES LLC ("UBS"), as Co-Syndication Agents, CITIGROUP GLOBAL MARKETS INC., MS and UBS, as Joint Lead Arrangers and Joint Book Managers and NATEXIS BANQUES POPULAIRES and BEAR STEARNS CORPORATE LENDING INC, as Co-Documentation Agents. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement and the Domestic Guarantee and Collateral Agreement referred to therein. C. The Guarantors have entered into the Domestic Guarantee and Collateral Agreement in order to induce the Lenders to make Loans and each Issuing Bank to issue Letters of Credit. Section 7.15 of the Domestic Guarantee and Collateral Agreement provides that additional Subsidiaries may become Domestic Subsidiary Loan Parties under the Domestic Guarantee and Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Subsidiary") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Domestic Subsidiary Loan Party under the Domestic Guarantee and Collateral Agreement in order to induce the Lenders to make additional Loans and each Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Subsidiary agree as follows: SECTION 1. In accordance with Section 7.15 of the Domestic Guarantee and Collateral Agreement, the New Subsidiary by its signature below becomes a Domestic Subsidiary Loan Party and a Guarantor under the Domestic Guarantee and Collateral Agreement with the same force and effect as if originally named therein as a Domestic Subsidiary Loan Party and a Guarantor, and the New Subsidiary hereby (a) agrees to all the terms and provisions of the Domestic Guarantee and Collateral Agreement applicable to it as a Domestic Subsidiary Loan Party and Guarantor thereunder and (b) represents and warrants that the representations and Exh I-1 warranties made by it as a Guarantor thereunder (as supplemented by the attached supplemental Schedules to the Perfection Certificate) are true and correct, in all material respects, on and as of the date hereof. In furtherance of the foregoing, the New Subsidiary, as security for the payment and performance in full of the Guaranteed Obligations, does hereby create and grant to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, their successors and assigns, a security interest in and Lien on all the New Subsidiary's right, title and interest in and to the Collateral (as defined in the Domestic Guarantee and Collateral Agreement) of the New Subsidiary. Each reference to a "Domestic Subsidiary Loan Party" or a "Guarantor" in the Domestic Guarantee and Collateral Agreement shall be deemed to include the New Subsidiary. The Domestic Guarantee and Collateral Agreement is hereby incorporated herein by reference. SECTION 2. The New Subsidiary represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors' rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied covenants of good faith and fair dealing. SECTION 3. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. This Supplement shall become effective when (a) the Collateral Agent shall have received a counterpart of this Supplement that bears the signature of the New Subsidiary and (b) the Collateral Agent has executed a counterpart hereof. SECTION 4. The New Subsidiary has attached hereto supplemental Schedules 1(a) through 17 to the Perfection Certificate in substantially the same form as the equivalent Schedules to the Perfection Certificate, and the New Subsidiary hereby represents and warrants that the attached Schedules are complete and correct with respect to the New Subsidiary. SECTION 5. Except as expressly supplemented hereby, the Domestic Guarantee and Collateral Agreement shall remain in full force and effect. SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 7. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Domestic Guarantee and Collateral Agreement shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Domestic Guarantee and Collateral Agreement. SECTION 9. The New Subsidiary agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, disbursements and other charges of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Subsidiary and the Collateral Agent have duly executed this Supplement to the Domestic Guarantee and Collateral Agreement as of the day and year first above written. [Name of New Subsidiary] By: __________________________________________ Name: Title: CITICORP NORTH AMERICA, INC., as Collateral Agent By: __________________________________________ Name: Title: EX-10.4 18 y68981exv10w4.txt EX-10.4: TRANSITION SERVICES AGREEMENT Exhibit 10.4 TRANSITION SERVICES AGREEMENT TRANSITION SERVICES AGREEMENT, dated as of October 29, 2004, by and between Ingersoll-Rand Company Limited, a company organized under the laws of Bermuda, on behalf of itself and the other Sellers (as defined in the Purchase Agreement) (together with any of its subsidiaries providing services hereunder, "Seller"), and Dresser-Rand Group Inc., a Delaware corporation, on behalf of itself and the other Buyers (as defined in the Purchase Agreement) (collectively with any of their respective subsidiaries receiving services hereunder, "Buyer"). Seller and Buyer are sometimes hereinafter collectively referred to as the "Parties." WITNESSETH: WHEREAS, Seller and Dresser-Rand Holdings, LLC (f/k/a FRC Acquisitions LLC) ("Holdings") are parties to an Equity Purchase Agreement, dated as of August 25, 2004 (as amended, supplemented or otherwise modified from time to time, the "Purchase Agreement"), relating to the sale by Seller and the other sellers party thereto, and the purchase and assumption by Holdings, of the Business (as defined in the Purchase Agreement); WHEREAS, immediately prior to the Closing (as defined in the Purchase Agreement), Holdings has entered into an Assignment Agreement with Buyer, dated as of October , 2004, whereby Holdings assigned to Buyer its rights and obligations under the Purchase Agreement relating to the purchase of the Acquired Interests (as defined in the Purchase Agreement) and entering into any Transaction Agreements (as defined in the Purchase Agreement) and any other agreements in connection therewith; and WHEREAS, the Purchase Agreement provides that, in connection with the consummation of the transactions contemplated thereby, the Parties will enter into this Agreement pursuant to which Buyer will purchase certain services from Seller during a transition period from the date hereof; NOW, THEREFORE, the Parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. For the purposes of this Agreement, (a) unless otherwise defined herein capitalized terms used herein shall have the meanings assigned to them in the Purchase Agreement and (b) the following terms shall have the meanings hereinafter specified: "Agreement" shall mean this Agreement, including the Schedules hereto, as the same may be amended, supplemented or otherwise modified from time to time. "Buyer" shall have the meaning set forth in the introductory paragraph hereof. "Parties" shall have the meaning set forth in the introductory paragraph hereof. "Purchase Agreement" shall have the meaning set forth in the recitals hereto. "Seller" shall have the meaning set forth in the introductory paragraph hereof. "Service" or "Services" shall mean those services listed and described on Schedule A. SECTION 1.2. Interpretation; Exhibits and Schedules. When a reference is made in this Agreement to a Section or a Schedule, such reference shall be to a Section of, or a Schedule to, this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein shall mean such agreement, instrument or statute as from time to time amended, modified or supplemented. References to a Person are also to its permitted successors and assigns and, in the case of an individual, to his heirs and estate, as applicable. ARTICLE II AGREEMENT TO SELL AND BUY SECTION 2.1. Provision of Services. Seller shall provide to Buyer the Services (it being understood that Services rendered for any particular month shall include the preparation and delivery of any required reports, filings or other work related to such month even though performed after the end of the particular month in question). The applicable fee for each Service shall be the specified fee for such Service set forth in Schedule A. In addition, it is understood that Seller shall not be required to use its own funds for any third party-provided service that is requested by Buyer or any payment obligation of Buyer (including employee compensation payments, employee benefit payments and payments to fund checks issued or wire transfer payments made on behalf of Buyer). Buyer shall be responsible to provide Seller with the funds for each such service and shall be solely responsible for the payment of any additional license fees, royalties and other payments and fees (including licensee fees and application service provider fees) due under any license agreement or other agreement relating to intellectual property (including software) necessary to perform the Services incurred after the prior approval of Buyer as a result of the performance of the Services for the Buyer. In every case, all of the Services shall be provided in accordance with the terms, limitations and conditions set forth herein and on Schedule A. Seller shall maintain all existing insurance coverages of the types that relate to the activities constituting or property relating to the Services. SECTION 2.2. Access. Buyer shall make available on a timely basis to Seller all information and materials reasonably requested by Seller to enable it to provide the Services. Buyer shall give Seller reasonable access, during regular business hours and at such other times as are reasonably required, to the premises of the Business for the purposes of providing Services. SECTION 2.3. Books and Records. Seller shall keep books and records of the Services provided and reasonable supporting documentation of all charges and expenses incurred in providing such Services and shall produce written records that verify the dates and times during which the Services were performed. Seller shall make such books and records available to Buyer, upon reasonable notice, during normal business hours. ARTICLE III SERVICES; PAYMENT; INDEPENDENT CONTRACTOR SECTION 3.1. Service Quality. (a) Unless otherwise agreed in writing by the Parties, the Services shall be performed by Seller for Buyer in a manner and quality that are substantially consistent with Seller's past practice in performing the Services for the Business, and Buyer shall use such Services in substantially the same manner as they were used by Seller in the past practice of the Business. Seller shall act under this Agreement solely as an independent contractor and not as an agent of Buyer. All employees and representatives providing the Services shall be under the direction, control and supervision of Seller (and not of Buyer), and Seller shall have the sole right to exercise all authority with respect to such employees and representatives and in no event shall such employees and representatives be deemed to be employees or agents of Buyer. (b) Seller shall have the right to shut down temporarily for routine maintenance purposes the operation of the facilities providing any Service whenever in its judgment, reasonably exercised, such action is necessary, provided, that such shut down shall not adversely and unduly affect Buyer's operations to which the provision of Services relate. Seller shall notify Buyer as much in advance as reasonably practicable that maintenance is required. Unless not feasible under the circumstances, this notice shall be given in writing. Where written notice is not feasible, Seller shall give prompt oral notice to Buyer, which notice shall be promptly confirmed in writing by Seller. Seller shall be relieved of its obligations to provide Services only for the period of time that its facilities are so shut down but shall use diligent and commercially reasonable efforts to minimize each period of shutdown for such purpose and to schedule such shutdown so as not to inconvenience or disrupt the conduct of the Business by Buyer. Seller shall consult with Buyer prior to temporary shutdowns to the extent reasonably practicable or, if not reasonably practicable, immediately thereafter in order to establish alternative sources for such services. To the extent commercially reasonable, Seller will afford Buyer the benefit of any arrangements for substitute services that Seller makes on its own behalf. SECTION 3.2. Payment. Statements will be rendered each month by Seller to Buyer for Services delivered during the preceding month. Each such statement shall set forth in reasonable detail a description of such Services and the amounts charged therefor and shall be payable 30 days after the date thereof. Any amount not paid within such 30-day period, unless such amount is being challenged, shall be subject to late charges at a rate of 10% per annum pro rated for each day that such amount is overdue. SECTION 3.3. Priorities. In providing Services, Seller shall accord Buyer the same priority it accords its own operations. SECTION 3.4. Taxes. The amounts set forth for each Service on Schedule A do not include any Taxes. Any Taxes required to be charged by Seller under applicable Law are in addition to the amounts to be paid by Buyer hereunder for the Services. SECTION 3.5. Uses of Services. Seller shall be required to provide Services only to Buyer in connection with the Buyer's operation of the Business. Buyer shall not resell any Services to any Person whatsoever or permit the use of the Services by any Person other than in connection with the operation of the Business in the ordinary course by Buyer and its subsidiaries. ARTICLE IV TERM OF SERVICES The provision of Services shall commence on the Closing Date and shall terminate on the first anniversary of the Closing Date; provided, however, that: (i) Buyer may cancel any Service upon 30 days' written notice of cancellation and (ii) Seller may cease to provide a Service upon 90 days' written notice to Buyer if Seller ceases to provide such Service to all of Seller's subsidiaries, divisions and business units. Upon termination of any Services pursuant to this Article IV, except as set forth in Section 7.3, Buyer's obligation to pay Seller for such Services will cease. ARTICLE V FORCE MAJEURE Seller shall not be liable for any interruption, delay or failure to perform any obligation under this Agreement when such interruption, delay or failure results from causes beyond its reasonable control, including, but not limited to, any strikes, lockouts or other labor difficulties, acts of any government, riot, insurrection or other hostilities, embargo, fuel or energy shortage, fire, flood, acts of God, wrecks or transportation delays, or inability to obtain necessary labor, materials or utilities. In any such event, Seller's obligations hereunder shall be postponed for such time as its performance is suspended or delayed on account thereof. Seller will promptly notify Buyer, either orally or in writing, upon learning of the occurrence of such event of force majeure. In the event of a force majeure event, Seller will use commercially reasonable efforts to resume its performance with the least possible delay (including, to the extent commercially reasonable, affording Buyer the benefit of any arrangements for substitute services that Seller makes on its own behalf). ARTICLE VI LIABILITIES SECTION 6.1. Consequential and Other Damages. No Party shall be liable, whether in contract, in tort (including negligence and strict liability), or otherwise, for any special, indirect, incidental or consequential damages whatsoever which in any way arise out of, relate to, or are a consequence of, its performance or nonperformance hereunder, or the provision of or failure to provide any Service hereunder, including, but not limited to, loss of profits, business interruptions and claims of customers. SECTION 6.2. Limitation of Liability. The liability of Seller with respect to this Agreement or in connection with the performance, delivery or provision of any Service provided under this Agreement shall be limited to the Losses of Buyer arising from Seller's willful misconduct, bad faith or negligence; provided that in no event shall the liability exceed the fees previously paid to Seller by Buyer in respect of the Service from which such liability flows. SECTION 6.3. Indemnity. Buyer hereby agrees to indemnify Sellers Indemnified Persons from any and all Losses as defined in the Purchase Agreement resulting from a demand, claim, lawsuit, action or proceeding relating to Seller's conduct in connection with the provision of Services to Buyer under this Agreement, except to the extent such Losses arise out of the willful misconduct, bad faith or negligence of Seller or any of its employees, agents, officers and directors. Seller represents and warrants that it has all necessary right and authority to provide the Services to Buyer hereunder. Seller hereby agrees to indemnify Buyers Indemnified Persons from any and all Losses resulting from a demand, claim, lawsuit, action or proceeding relating to Seller's willful misconduct, bad faith or negligence in connection with the provision of Services to Buyer under this Agreement. SECTION 6.4. Obligation to Correct. In the event of any breach of this Agreement by Seller with respect to any error or defect in the provision of any Service, Seller shall, at Buyer's request, correct such error or defect or re-perform such Service in a timely manner as promptly as practical after Buyer's request at the expense of Seller. ARTICLE VII TERMINATION SECTION 7.1. Termination. This Agreement shall terminate on the earliest to occur of (a) the latest date on which any Service is to be provided as indicated on Schedule A, (b) the date on which the provision of all Services has terminated or been canceled pursuant to Article IV and (c) the date on which this Agreement is terminated pursuant to Section 7.2. SECTION 7.2. Breach of Agreement. If either Party shall cause or suffer to exist any material breach of any of its obligations under this Agreement, including, but not limited to, any failure to perform any Services or to make payments when due, and said Party does not cure such breach within 30 days after receiving written notice thereof from the non-breaching Party, the non-breaching Party may terminate this Agreement, including the provision of Services pursuant hereto, immediately by providing written notice of termination. The failure of a Party to exercise its rights hereunder with respect to a breach by the other Party shall not be construed as a waiver of such rights nor prevent such Party from subsequently asserting such rights with regard to the same or similar defaults. SECTION 7.3. Sums Due. In the event of a termination of this Agreement, Seller shall be entitled to all outstanding amounts due from Buyer for the provision of Services rendered prior to the date of termination. SECTION 7.4. Effect of Termination. Article VI, Section 7.3, Article VIII and this Section 7.4 shall survive any termination of this Agreement. ARTICLE VIII MISCELLANEOUS SECTION 8.1. Notices. (a) 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 (i) personally delivered, (ii) sent by a nationally recognized courier service to the recipient at the address below indicated, (iii) sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) delivered by facsimile with confirmation of receipt: If to Seller: c/o Ingersoll Rand Company 200 Chestnut Ridge Road Woodcliff Lake, New Jersey 07677 Attn: Deputy General Counsel - Transactions (201) 573-3448 (telecopier) (201) 573-3274 (telephone) If to Buyer: Dresser-Rand Group Inc. Paul Clark Drive Olean, NY 14760 Attention: Vincent R. Volpe (716) 375-3178 (telecopier) (716) 375-3000 (telephone) With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, NY 10036 Attention: Howard Ellin (212) 735-2000 (telecopier) (212) 735-3000 (telephone) and to: Dresser-Rand Holdings, LLC c/o First Reserve Corporation One Lafayette Place Greenwich, CT 06830 Attention: Tom Denison (203) 625-8520 (telecopier) (203) 661-6001 (telephone) or to such other address as any Party may, from time to time, designate in a written notice given in like manner. (b) Except as otherwise provided herein, any notice under this Agreement will be deemed to have been given (i) on the date such notice is personally delivered or delivered by facsimile, (ii) the next succeeding Business Day after the date such notice is delivered to the overnight courier service if sent by overnight courier, or (iii) five Business Days after the date such notice is sent by registered or certified mail; provided, however, 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. SECTION 8.2. 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. SECTION 8.3. Entire Agreement. This Agreement and the Purchase Agreement contains the entire understanding of the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof. SECTION 8.4. 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. SECTION 8.5. 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. SECTION 8.6. Consent to Jurisdiction; Waiver of Jury Trial. Each of the Parties irrevocably submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York located in the borough of Manhattan in the City of New York, or if such court does not have jurisdiction, the Supreme Court of the State of New York, New York County, for the purposes of any Proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the Parties irrevocably and fully waives the defense of an inconvenient forum to the maintenance of such Proceeding, and waives any objection it might otherwise have to service of process under law. Each of the Parties further agrees that service of any process, summons, notice or document to such party's respective address listed above in one of the manners set forth in Section 8.1 shall be deemed in every respect effective service of process in any such Proceeding. Nothing herein shall affect the right of any Person to serve process in any other manner permitted by law. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any Proceeding arising out of this Agreement or the transactions contemplated hereby in (a) the United States District Court for the Southern District of New York or (b) the Supreme Court of the State of New York, New York County, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Proceeding brought in any such court has been brought in an inconvenient forum. The Parties hereby irrevocably and unconditionally waive trial by jury in any Proceeding relating to this Agreement or any other agreement entered into in connection therewith and for any counterclaim with respect thereto. SECTION 8.7. Governing Law. This Agreement shall be construed under and governed by the laws of the State of New York without regard to the principles of conflicts of law thereof. SECTION 8.8. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Party without the prior written consent of the other Party; provided, that (i) Buyer may assign any of its rights and obligations under this Agreement to one or more of its wholly owned subsidiaries or any member of the Dresser-Rand Group and may pledge its rights as security to any of its financing sources without the Seller's prior written consent; provided, further, that no assignment by Buyer to any such subsidiary, entity or financing source shall in any way affect Seller's rights or relieve Buyer of any of its obligations under this Agreement, and (ii) Seller may delegate performance of all or any part of its obligations under this Agreement to (x) any subsidiary of Seller or (y) one or more third parties to the extent such third parties are routinely used to provide such Services to other businesses of the Seller and its Affiliates; provided, further, that no such delegation by Seller to any such subsidiary or third party shall in any way affect Buyer's rights or relieve Seller of any of its obligations under this Agreement. Any purported assignment in violation of this Section 8.8 shall be void. SECTION 8.9. No Third Party Beneficiaries. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any Person, other than the Parties and their permitted successors or assigns, any rights or remedies under or by reason of this Agreement. SECTION 8.10. Amendment. This Agreement may not be amended, modified or supplemented except upon the execution and delivery of a written agreement executed by the Parties and specifically referencing this Agreement. SECTION 8.11. Waiver. Any of the terms or conditions of this Agreement that may be lawfully waived may be waived in writing at any time by the Party which is entitled to the benefits thereof. Any waiver of any of the provisions of this Agreement by any Party 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. SECTION 8.12. Confidentiality: Security: Title to Data. (a) Each of the Parties agrees that any confidential information of the other Party received in the course of performance under this Agreement shall be kept strictly confidential by the Parties, except that Seller may disclose such information in a manner consistent with past practice in respect of Services provided to the Business for the purpose of providing Services pursuant to this Agreement to any subsidiary of Seller or to third parties that provide such Services; provided, that Seller shall be responsible for any such subsidiary keeping confidential such confidential information and, with respect to third parties, will take action to keep confidential such confidential information in substantially the same manner as in the past practice of the Business. Upon the termination of this Agreement, each Party shall return to the other Party or destroy all of such other Party's confidential information. Each of the Parties agree to take such actions as may be reasonably necessary, if any to ensure compliance with the Health Insurance Portability and Accountability Act of 1996 in connection with the provision of the Services. (b) Buyer acknowledges that it will acquire no right, title or interest (including any license rights or rights of use) in any firmware or software, and the licenses therefor which are owned by Seller by reason of Seller's provision of the Services provided hereunder; provided, that the foregoing shall not affect any rights of Buyer under the Purchase Agreement. [SIGNATURES ON FOLLOWING PAGE] IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized officer, in each case as of the date first above written. INGERSOLL-RAND COMPANY LIMITED By: /s/ Barbara A. Santoro ------------------------------------- Name: Barbara A. Santoro ----------------------------------- Title: Assistant Secretary ---------------------------------- DRESSER-RAND GROUP INC. By: /s/ Thomas R. Denison ------------------------------------- Name: Thomas R. Denison ----------------------------------- Title: President ---------------------------------- EX-10.5 19 y68981exv10w5.txt EX-10.5: SUPPLY AGREEMENT EXHIBIT 10.5 SUPPLY AGREEMENT This SUPPLY AGREEMENT (this "Agreement") dated October 31, 2004 (the "Effective Date") is by and between Dresser-Rand Company, a New York general partnership having its principal place of business at Paul Clark Drive, P.O. Box 560, Olean, NY 14760 ("Seller"), and Ingersoll-Rand Company, a New Jersey corporation having a place of business at 800-D Beaty St., Davidson, NC 28036 ("Buyer"). WHEREAS, Seller desires to supply and sell to Buyer, and Buyer desires to acquire and purchase from Seller, the frame/running-gear/crankshaft assemblies for Ingersoll-Rand's Pet Star 4 product (the "Products"). NOW, THEREFORE, in consideration of the foregoing mutual premise and the mutual promises contained in this Agreement, Seller and Buyer agree as follows: 1. TERM. The term of this Agreement will commence as of the Effective Date and will continue until December 31, 2009, unless earlier terminated in accordance with the terms herein. 2. PURCHASE ORDERS. Buyer shall submit written purchase orders for the Products to be supplied by Seller pursuant to this Agreement. Each purchase order shall specify the type and quantity of the Products to be supplied and the delivery date. As soon as practicable after its receipt of each purchase order, Seller shall acknowledge its acceptance of the purchase order by the issuance of its order acknowledgment form. Acceptance of each purchase order is subject to the terms and conditions of this Agreement. Any additions, deletions or differences in the terms and conditions of this Agreement (whether contained in Buyer's purchase order or otherwise) which are proposed by Buyer are objected to and hereby rejected unless Seller otherwise specifically agrees in writing. 3. PURCHASE PRICES. (a) The prices for the Products shall be a "not to exceed" base price of $23,000 per unit with escalations as follows: 2005 - 0%, 2006 - 3%, 2007 - 3%, 2008 - 5%, 2009 - 5%. (b) Unless otherwise explicitly specified by Seller in its order acknowledgment form, (i) all Purchase Prices are in U.S. dollars, (ii) all Purchase Prices are F.O.B. Seller's place of business or designated destination and (iii) all transportation and other charges are the responsibility of Buyer, including any increase or decrease in such charges prior to shipment. All shipping and transportation arrangements shall be made by Buyer. Unless Seller otherwise agrees in writing, Buyer shall bear all risk of loss and damage in transit. Seller warrants and guarantees to Buyer that when title to the Products passes to Buyer, such title shall be good and marketable title, free and clear of liens and encumbrances. 4. TAXES; DUTIES. Any prices for Products quoted hereunder do not include any federal, state or other taxes or any applicable duties, import or export fees or similar charges. Wherever applicable, such charges will be added to the invoice as a separate charge to be paid by Buyer. In any event, however, Buyer shall have sole responsibility for the payment of all taxes, duties, fees and similar charges arising directly from the sale of Products pursuant to this Agreement. Notwithstanding the foregoing, Buyer shall not be obligated for the payment of any taxes of the Seller that are measured by or in any way attributable to the income derived from the transactions contemplated by this Agreement. 5. PAYMENT. Seller shall render invoices to Buyer at the time of shipment of each purchase order. Invoices will be dated the day of shipment and at Buyer's request will be transmitted via fax to Buyer's offices. Terms of payment are net 30 days. 6. DEFAULT; CURE. In the event either party shall default under any obligation of such party hereunder, the non-defaulting party shall provide the defaulting party with notice thereof and the defaulting party shall have thirty (30) days from the date of such notice to cure any such default that is capable of cure within said period, failing which the non-defaulting party shall have the right to terminate this Agreement from and after the 31st day following the date of the notice of default. Notwithstanding the foregoing, in the event of a payment default the period to cure such default shall be ten (10) business days. Notice of a default shall be a condition precedent to any termination of this Agreement by reason thereof. 7. FORCE MAJEURE. Neither party hereto shall be liable to the other for any delay or failure in performance of any act required hereunder, or for any damages suffered as a result of such delay or failure, when such delay or failure is, directly or indirectly, caused by, or in any manner arises from, acts of God, or of public enemies, war, terrorism, fires, floods, unusually severe weather, explosions, accidents, epidemics, or any other cause or causes (whether or not similar in nature to any of those specified) beyond such party's control. In no event shall either party be liable to the other for any consequential damages for delay in or failure of performance excused by the foregoing. 8. WARRANTIES. Seller warrants that all Products sold hereunder shall be free from defects in materials and workmanship for a period of six (6) months from the date of Buyer's receipt ("Warranty"). In the event of a breach of this Warranty, Seller shall, at Seller's option, either (i) repair the applicable product at the original F.O.B. point of delivery, (ii) refund an equitable portion of the contract price, or (iii) furnish replacement equipment or parts, as necessary to the original F.O.B. point of delivery. EXCEPT AS SPECIFICALLY SET FORTH IN THE PRECEDING SENTENCES, SELLER MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED WITH RESPECT TO THE PRODUCTS SOLD HEREUNDER. 9. DEFECTIVE OR NONCONFORMING GOODS. Buyer shall have the right, prior to shipment or at any time prior to acceptance, to reject any or all Products which are defective or nonconforming. Products rejected by Buyer shall be held for Seller's instructions and at Seller's risk, and if Seller so directs, the rejected Products will 2 be returned to Seller at Seller's expense. Payment for Products prior to their inspection by Buyer shall not constitute an acceptance thereof, nor will acceptance remove Seller's responsibility for latent defects. 10. EXCLUSION OF DAMAGES. NEITHER PARTY HERETO SHALL IN ANY EVENT BE LIABLE TO THE OTHER OR ANY OTHER PERSON OR ENTITY FOR ANY INCIDENTAL, INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS PURSUANT TO THIS AGREEMENT, EVEN IF THE POSSIBILITY OF SUCH DAMAGES COULD HAVE BEEN FORESEEN. 11. LEGAL EXPENSES. The prevailing party in any litigation concerning the terms of this Agreement and the performance by the parties of their respective obligations hereunder shall be entitled to recover reasonable attorney's fees and costs. 12. JURISDICTION AND VENUE. Both parties hereto 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 for the purpose of resolving any and all controversies and claims between Seller and Buyer arising out of or relating to this Agreement or the underlying transaction. Any controversy or claim arising out of or relating to this Agreement or the underlying transaction shall be resolved in the any state or federal court located within the area encompassed by the Southern District of the State of New York. 13. AMENDMENTS AND WAIVERS. No amendment, modification or waiver of any of the terms and conditions of this Agreement or of any provision of any order acknowledgment form of Seller shall be effective unless it is in writing signed by both Seller and Buyer. No waiver by any party of any breach of any provision hereof will constitute a waiver of any other breach of such provision. A party's failure to object to provisions contained in any communications from the other will not be deemed an acceptance of such provisions or as a waiver of the provisions hereof. 14. ASSIGNMENT. Any assignment of this Agreement by a party without the prior written consent of the other, which consent shall not be unreasonably withheld, shall be void. 15. NOTICE. All notices, unless otherwise provided in this Agreement, shall be in writing addressed to the party at the address set forth in this Agreement and shall be deemed properly given if mailed via registered mail, sent via guaranteed overnight delivery service or hand-delivered. 16. GOVERNING LAW. This Agreement and all purchase orders accepted under this Agreement shall not become effective until accepted by Seller at its offices in Olean, New York, and shall be governed by and interpreted in accordance with the laws of the State of New York without regard to conflicts of law principles. [SIGNATURE PAGE FOLLOWS] 3 IN WITNESS WHEREOF, and intending to be legally bound hereby, the undersigned hereby execute this Agreement as of the date set forth above. DRESSER-RAND COMPANY By: /s/ Vincent R. Volpe Jr. ------------------------------------- Name: Vincent R. Volpe Jr. ----------------------------------- Title: President & CEO ---------------------------------- INGERSOLL-RAND COMPANY By: /s/ Barbara A. Santoro ------------------------------------- Name: Barbara A. Santoro ----------------------------------- Title: Secretary ---------------------------------- EX-10.6 20 y68981exv10w6.txt EX-10.6: LICENSE AGREEMENT Exhibit 10.6 LICENSE AGREEMENT LICENSE AGREEMENT (the "Agreement") made as of this 26th day of October, 2004 (the "Effective Date") by and between Dresser, Inc. ("Dresser") and Dresser-Rand Group Inc. ("Dresser-Rand"). (Dresser and Dresser-Rand each referred to herein as a "Party" and collectively as the "Parties.") WHEREAS, Dresser is the owner of the "Dresser" name and mark (the "Dresser Name"); WHEREAS, Dresser-Rand has been previously licensed to use the Dresser Name solely as part of the combined name and mark "Dresser-Rand", and formatives and derivatives thereof (collectively, the "Dresser-Rand Name"); and WHEREAS, the Parties wish to confirm their agreement that Dresser-Rand may continue to use the Dresser-Rand Name in connection with those types of products and services that it offers as of the Effective Date and on new products and services that are natural extensions of those business lines (the "Dresser-Rand Business Lines"), pursuant to the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Dresser and Dresser-Rand hereby agree as follows: 1. GRANT OF LICENSE. Dresser grants to Dresser-Rand a world-wide, limited, nonexclusive (except as set forth in this Section 1 with respect to the combined name "Dresser-Rand"), terminable (solely as set forth in Section 5) license ("LICENSE") to use as a part of any trade name, corporate name, domain name (or similar or successor system), trademark or service mark, the Dresser Name solely as part of the combined name and mark "Dresser-Rand" in connection with the Dresser-Rand Business Lines and to use in a like manner the formatives and derivatives of Dresser-Rand also solely in connection with the Dresser-Rand Business Lines. Notwithstanding the foregoing sentence, the License is exclusive (even as to Licensor) with respect to the use of the Dresser Name as a part of the combined name and mark "Dresser-Rand" and formatives and derivatives thereto. Dresser-Rand accepts the License subject to all of the terms and conditions herein. All rights owned or held by Dresser but not expressly granted to Dresser-Rand hereunder with respect to the Dresser Name and all other trademarks owned by Dresser are reserved to Dresser. Subject to the terms and conditions herein set forth, the license granted to Dresser-Rand hereunder will include the right of Dresser-Rand to grant sublicenses to use the Dresser Name in connection with the Dresser-Rand Business Lines. For each such sublicensee, Dresser-Rand must either (i) Control the sublicensee or (ii) by law, contract or otherwise, be able to terminate the sublicensee's right to use the Dresser Name should the sublicensee fail to adhere to the Standards and Quality or the other applicable terms and conditions hereof. ("CONTROL" or any grammatical variations thereof shall mean either the ownership, directly or indirectly, of more than 50% of the voting securities of a corporation or other entity or the power to direct the management or policies of such corporation or other entity whether by operation of law, by contract, or otherwise.) Any sublicense granted by Dresser-Rand in violation of the foregoing sentence, without the express written consent of Dresser, shall be void. 2. OWNERSHIP. Dresser-Rand covenants and agrees that, as between the Parties, (a) Dresser and not Dresser-Rand is the sole and exclusive owner of the Dresser Name; (b) Dresser-Rand will do nothing inconsistent with such ownership of Dresser; (c) all use of the Dresser Name by Dresser-Rand, and the goodwill associated therewith, shall inure solely to the benefit of and be on behalf of Dresser; (d) Dresser-Rand shall assist Dresser in recording this Agreement with appropriate government authorities if Dresser requests such assistance; (e) nothing in this Agreement shall give Dresser-Rand any right, title or interest in the Dresser Name other than the right to use the Dresser Name in accordance with this Agreement; (f) other than as set forth in this Section 2, Dresser-Rand will not file any trademark application for registration of any of the Dresser Name or any marks similar thereto without the express written permission of Dresser, (g) Dresser-Rand shall not acquire and shall not claim any title to the Dresser Name adverse to Dresser by virtue of the License or through Dresser-Rand's use of the Dresser Name, and (h) Dresser-Rand shall not contest the title of Dresser to the Dresser Name or contest the validity of the License. Subject to the other terms of this Agreement, Dresser-Rand at its own expense shall have the right to file and maintain in its own name trademark or service mark registrations for the Dresser-Rand Name. As between the Parties, (a) Dresser-Rand shall be the sole and exclusive owner of the combined Dresser-Rand Name (but not the underlying Dresser Name) and all goodwill associated with such combined mark (but not the Dresser Name); (b) except as specifically allowed herein, Dresser will do nothing inconsistent with such ownership of Dresser-Rand; (c) nothing in this agreement shall give Dresser the right to use the Dresser-Rand Name; (d) as a part of its obligations under and subject to Section 11, Dresser shall assist Dresser-Rand in registering the Dresser-Rand Name; and (e) Dresser will not file any trademark application or registration of any of the Dresser-Rand Name. 3. QUALITY STANDARDS. Dresser-Rand shall conduct its business under the Dresser-Rand Name at a level of quality that is not materially lower than that maintained as of the Effective Date ("STANDARDS AND QUALITY"). Dresser-Rand shall not take any action which causes, or is reasonably likely to cause, material destruction, decrease, or diminution of the "Dresser" name or the reputation or goodwill thereof. Dresser-Rand agrees to cooperate with Dresser in facilitating Dresser's monitoring of such nature and quality, to permit commercially reasonable inspections of Dresser-Rand's operation, and to supply Dresser with specimens of the uses of the Dresser Name upon Dresser's reasonable request. 4. ROYALTY. During the first ten years from the Effective Date, Dresser-Rand shall pay to Dresser a total of $5,000,000 as follows: Dresser-Rand shall pay to Dresser $1,000,000 upon the execution of the Agreement and $444,445 within thirty (30) days of each of the nine (9) successive anniversaries of this Agreement. Notwithstanding the foregoing, Dresser-Rand shall not have any obligation to make any such payment for any such year following Dresser's or Dresser-Rand's termination of this Agreement pursuant to Section 5. Dresser-Rand shall have no obligation to make any royalty payments to Dresser under or in connection with this Agreement other than as set forth in this Section 4. The royalty payments set forth in this Section 4 may be prepaid by Dresser-Rand at any time, and Dresser-Rand shall have no obligation to make future royalty payments under this Section 4 to the extent such prepayment covers amounts otherwise due hereunder. 5. TERM. This Agreement shall remain in effect for the first ten (10) years from the Effective Date, and if Dresser-Rand pays to Dresser a total of $5,000,000 in royalties as set forth in Section 4, then this Agreement shall remain in effect in perpetuity (subject to termination as set forth below in this Section 5), provided, however, that in any jurisdiction which prohibits such perpetual licenses the Agreement shall remain in effect for no less than 50 years (and provided further that as between the Parties, neither Party shall challenge the validity of such perpetual grants in any jurisdiction). Notwithstanding the foregoing, (i) Dresser-Rand may terminate this Agreement at any time in its discretion by providing written notice to Dresser, and (ii) Dresser 2 may terminate this Agreement in the event that Dresser-Rand materially breaches Sections 2, 3 or 4 of this Agreement and fails to remedy such default within sixty (60) days after receiving written notice of such default from Dresser (other than a royalty default under Section 4, which must be cured by Dresser-Rand within seven (7) days of receipt of such written notice and may be cured only upon payment by Dresser-Rand to Dresser of the amount due plus a $25,000 late fee), subject to Dresser-Rand's right to phase out use of the Dresser Name portion of the Dresser-Rand Name as soon as reasonably practicable following such termination but in any event within six (6) months following such termination. In the event of any expiration or termination of this Agreement: (a) the provisions of Section 10 shall survive such termination and (b) Dresser-Rand shall (i) within the previously specified period (i.e., within six (6) months) discontinue all use of the Dresser Name and any mark, term, or name confusingly similar thereto and delete the same from its corporate or business name, and (ii) at Dresser's request, cooperate with Dresser to apply to the appropriate authorities to cancel recording of this Agreement from all government records. Dresser-Rand further agrees that in the event of any expiration or termination of this Agreement, all right in the Dresser Name and the goodwill connected therewith shall remain the property of Dresser. 6. ENFORCEMENT. Dresser-Rand shall promptly notify Dresser in writing should it become aware of activity by a third party that reasonably would be construed to constitute an infringement of the Dresser Name. Dresser shall promptly notify Dresser-Rand in writing should it become aware of activity by a third party that reasonably would be construed to constitute an infringement of the Dresser-Rand Name. Dresser shall have the sole initial right to take, and to determine whether or not to take, at Dresser's expense, any action(s) it deems appropriate with respect to any such infringement, and Dresser-Rand shall, at Dresser's expense, reasonably cooperate with Dresser in connection with any such action. If Dresser declines or otherwise fails to take action sufficient to prevent or terminate a particular infringement of the Dresser-Rand Name, then Dresser-Rand may undertake, at Dresser Rand's expense, such action, and Dresser shall, at Dresser-Rand's expense, reasonably cooperate with Dresser-Rand in connection with any such action. All recovery in the form of monetary damages or settlement shall belong to the Party principally bearing the expense of bringing such claim or suit to the extent of the expense incurred by such Party and then shall be apportioned equitably to the Parties according to whether the damages were suffered by the Dresser Name or the Dresser-Rand Name, respectively. 7. BUSINESS LINES. Dresser-Rand may use the Dresser-Rand Name on its current products and services and on new products and services that are logical extensions of those business lines (its "Existing Business"). Likewise, Dresser may use the Dresser Name on its current products and services and on new products and services that are logical extensions of those business lines (its "Existing Business"). Dresser-Rand shall not expand beyond its Existing Business under the Dresser-Rand Name into products or services which are directly and materially competitive with the Dresser as of the Effective Date or such products and services that are natural extensions thereof (the "Dresser Business Lines"), and Dresser shall not expand beyond its Existing Business under the Dresser Name into products or services which are directly and materially competitive with the Dresser-Rand Business Lines. Either Dresser or Dresser-Rand may expand its respective business lines under the Dresser Name or Dresser-Rand Name, respectively, by entering into or acquiring a business that involves products and services that are not in either the Dresser-Rand Business Lines or the Dresser Business Lines (a "New Business"). If Dresser or Dresser-Rand first enter into a New Business in a bona fide manner (e.g., substantially, materially, in good faith, etc.), such New Business shall automatically be deemed incorporated into the Dresser Business Lines (if Dresser enters such New Business prior to Dresser-Rand) or the Dresser-Rand Business Lines (if Dresser-Rand enters such New Business prior to Dresser) for all purposes under this Agreement for so long as such 3 Party engages in such New Business in a bona fide manner. This Section is intended to affect only the names and marks that the Parties use in conducting their respective businesses, but not to otherwise affect the scope of each Party's permissible activities. 8. DR NAME. The Parties acknowledge that nothing in this Agreement shall restrict or control the right of Dresser-Rand to use and register the name and mark "DR" or any derivation thereof in any manner, and that, as between the Parties, Dresser-Rand is the sole and exclusive owner of such name and mark. 9. DISCLAIMERS. Dresser represents and warrants that: (i) the Dresser Name is the subject of a number of United States and foreign trademark registrations for a variety of goods and services; (ii) it has not granted and to its actual knowledge its predecessors-in-interest and affiliates have not granted, any, licenses or other rights in contravention of the License granted by it herein; and (iii) it has no actual knowledge of any threats, claims or actions, or basis for any such claims, alleging a violation of a third party's rights based solely on the use of the term Dresser as a part of the combined name Dresser-Rand. Dresser has not made, and does not make, any representations or warranties of any kind, express or implied, with respect Dresser-Rand's right or ability to use the Dresser-Rand Name. Except as set forth above, Dresser specifically excludes and disclaims all warranties, including any warranties of merchantability or fitness for any particular purpose or use with respect to the Dresser Name, as licensed herein. 10. INDEMNITY. (a) DRESSER AGREES TO INDEMNIFY, HOLD HARMLESS AND DEFEND DRESSER-RAND AND ITS RESPECTIVE PARTNERS, OFFICERS, EMPLOYEES, AGENTS AND OTHER REPRESENTATIVES FROM AND AGAINST ANY AND ALL SUITS, DEMANDS, OR CLAIMS AND ALL COSTS, LOSSES, LIABILITIES, EXPENSES, SETTLEMENTS (WHETHER VOLUNTARY OR OTHERWISE) AND JUDGMENTS INCURRED IN CONNECTION THEREWITH, INCLUDING ATTORNEY'S FEES AND COURT COSTS (SUCH FEES AND COURT COSTS EITHER HAVING BEEN INCURRED IN DEFENSE OF SUCH CLAIMS, DEMANDS OR SUITS OR OTHERWISE), FOR ANY BREACH OF THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 9. (b) DRESSER-RAND ACKNOWLEDGES AND AGREES THAT IT WILL HAVE NO CLAIM AGAINST DRESSER FOR ANY DAMAGE TO PROPERTY OR INJURY TO PERSONS ARISING OUT OF THE OPERATION OF DRESSER-RAND'S BUSINESS. (c) DRESSER-RAND AGREES TO INDEMNIFY, HOLD HARMLESS AND DEFEND DRESSER AND ITS RESPECTIVE PARTNERS, OFFICERS, EMPLOYEES, AGENTS AND OTHER REPRESENTATIVES FROM AND AGAINST ANY AND ALL SUITS, DEMANDS, OR CLAIMS AND ALL COSTS, LOSSES, LIABILITIES, EXPENSES, SETTLEMENTS (WHETHER VOLUNTARY OR OTHERWISE) AND JUDGMENTS INCURRED IN CONNECTION THEREWITH, INCLUDING ATTORNEY'S FEES AND COURT COSTS (SUCH FEES AND COURT COSTS EITHER HAVING BEEN INCURRED IN DEFENSE OF SUCH CLAIMS, DEMANDS OR SUITS OR OTHERWISE), INCLUDING 4 WITHOUT LIMITATION ALL CLAIMS, DEMANDS AND SUITS FOR DAMAGES OR INJURIES, INCLUDING DEATH, TO ANY AND ALL PERSONS OR PROPERTY, WHETHER REAL OR ASSERTED AND WHETHER ARISING IN EQUITY, AT COMMON LAW, OR BY STATUTE, OR UNDER THE LAW OF CONTRACTS, TORTS (INCLUDING WITHOUT LIMITATION, NEGLIGENCE AND STRICT LIABILITY WITHOUT REGARD TO FAULT) OR PROPERTY, OF EVERY KIND OR CHARACTER, AND WHETHER OR NOT DUE IN WHOLE OR IN PART TO DRESSER'S SOLE OR CONCURRENT NEGLIGENCE OR OTHER FAULT, BREACH OF CONTRACT OR WARRANTY, OR STRICT LIABILITY WITHOUT REGARD TO FAULT, BASED UPON, IN CONNECTION WITH, RESULTING FROM OR ARISING OUT OF THIS AGREEMENT (OR THE CORRESPONDING PROVISIONS OF ANY SUBLICENSE BY ANY SUBLICENSEE) OR THE PROVIDING BY DRESSER-RAND OR ANY SUBLICENSEE OF GOODS OR SERVICES UNDER OR IN CONNECTION WITH THE DRESSER NAME. (d) DRESSER AGREES TO INDEMNIFY, HOLD HARMLESS AND DEFEND DRESSER-RAND AND ITS RESPECTIVE PARTNERS, OFFICERS, EMPLOYEES, AGENTS AND OTHER REPRESENTATIVES FROM AND AGAINST ANY AND ALL SUITS, DEMANDS, OR CLAIMS AND ALL COSTS, LOSSES, LIABILITIES, EXPENSES, SETTLEMENTS (WHETHER VOLUNTARY OR OTHERWISE) AND JUDGMENTS INCURRED IN CONNECTION THEREWITH, INCLUDING ATTORNEY'S FEES AND COURT COSTS (SUCH FEES AND COURT COSTS EITHER HAVING BEEN INCURRED IN DEFENSE OF SUCH CLAIMS, DEMANDS OR SUITS OR OTHERWISE), INCLUDING WITHOUT LIMITATION ALL CLAIMS, DEMANDS AND SUITS FOR DAMAGES OR INJURIES, INCLUDING DEATH, TO ANY AND ALL PERSONS OR PROPERTY, WHETHER REAL OR ASSERTED AND WHETHER ARISING IN EQUITY, AT COMMON LAW, OR BY STATUTE, OR UNDER THE LAW OF CONTRACTS, TORTS (INCLUDING WITHOUT LIMITATION, NEGLIGENCE AND STRICT LIABILITY WITHOUT REGARD TO FAULT) OR PROPERTY, OF EVERY KIND OR CHARACTER, AND WHETHER OR NOT DUE IN WHOLE OR IN PART TO DRESSER'S SOLE OR CONCURRENT NEGLIGENCE OR OTHER FAULT, BREACH OF CONTRACT OR WARRANTY, OR STRICT LIABILITY WITHOUT REGARD TO FAULT, BASED UPON, IN CONNECTION WITH, RESULTING FROM OR ARISING OUT OF THIS AGREEMENT OR THE PROVIDING BY DRESSER OF GOODS OR SERVICES UNDER OR IN CONNECTION WITH THE DRESSER NAME. (e) DRESSER-RAND'S AND DRESSER'S RESPECTIVE CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL EXTEND TO ALL CLAIMS, DEMANDS, AND CAUSES OF ACTION ALLEGING ACTS OF NEGLIGENCE, FAULT, OR CONTRIBUTORY NEGLIGENCE ON THE PART OF THE OTHER PARTY; PROVIDED, HOWEVER, EACH PARTY'S CONTRACTUAL OBLIGATION OF INDEMNIFICATION HEREUNDER SHALL NOT EXTEND TO ANY CONSEQUENCES OF 5 THE OTHER PARTY'S NEGLIGENCE, ERROR, BREACH OF CONTRACT OR OMISSIONS. 10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of each of the Parties and their respective successors and assigns. 11. FURTHER ASSURANCES. Each Party hereto shall from time to time, at the request of the other Party, execute and deliver such other documents and take such other actions as such other Party may reasonably request in order to more effectively secure to the requesting Party the rights granted or reserved herein, including, but not limited to, the filing of United States and foreign trademark and trade name registrations to the Dresser Name and the Dresser-Rand Name. To the extent there are expenses consequent to taking such actions, the Party requesting such actions shall reimburse all reasonable out of pocket expenses of the other Party in performing such actions. 12. INDEPENDENT CONTRACTOR. This Agreement shall not be deemed to create a partnership or joint venture. Neither Party hereto shall have the right to obligate or bind the other Party in any manner whatsoever, and nothing herein contained shall give or is intended to give any rights of any kind to any third persons. 13. WAIVER. The failure of either Party hereto to insist in any one or more instances upon performance of any terms or conditions of this Agreement will not be construed as a waiver of future performance of any such term, covenant, or condition and the obligations of any Party with respect to such term, covenant or condition will continue in full force and effect and either Party may, within the time provided by applicable law, enforce any or all of such rights. 14. NOTICES. Any notice required or permitted to be sent shall be in writing and shall be sent by Federal Express or like courier delivery, or if sent by facsimile, with a confirmation copy by mail. Notices shall be sent to the Parties respective principal executive offices and addressed to the "General Counsel". Notice shall be effective upon receipt. 15. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement, and supersedes all prior negotiations, understandings, and agreements, between the Parties concerning the subject matter hereof. No amendment or modification of this Agreement shall be made except by a writing that references this Agreement and that is signed non-electronically by the Party to be bound thereby. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, and all of which together will constitute one document. 16. SEVERABILITY. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, such determination shall not affect the validity or enforceability of any other part or provision of this Agreement, and the invalid or unenforceable provision shall be deemed modified to the least degree necessary to remedy such invalidity. 17. GOVERNING LAW. This Agreement shall be governed and interpreted in accordance with the laws of the State of New York without regard to principles of conflict of laws. 18. GOOD FAITH. Each Party agrees that, in its respective dealings with the other Party under or in connection with the performance of this Agreement, it shall act in good faith. 6 19. DISPUTE RESOLUTION AND ARBITRATION. (a) The Parties will attempt in good faith to promptly resolve any Claim (as defined below). In the event of a Claim, the disputing Party shall give the other Party written notice of the Claim and if the Parties fail to resolve the Claim at the operational level within thirty (30) days of the receipt of such notice, each Party shall nominate a senior officer of its management to meet at a mutually agreed time and place not later than forty five (45) days after the notice of the Claim was received to attempt to resolve such Claim or disagreement. Should a resolution of such Claim or disagreement not be obtained within fifteen (15) days after the meeting of senior officers for such purpose (or in the event that a Party seeks to avoid the obligation to negotiate or in the event that a Party unilaterally and in breach of the Agreement initiates litigation or any other dispute resolution process), either Party may then, by notice to the other, seek to resolve the Claim in accordance with the provisions of this Section 19. (b) The Parties hereby agree to resolve by binding arbitration any and all claims, demands, actions, disputes, controversies, damages, losses, liabilities, judgments, payments of interest, penalties, enforcement of settlement agreements, deficiencies, any and all demands not yet matured into one of the foregoing, and other matters in question arising out of or relating to this Agreement, the alleged breach thereof, or in any way relating to the subject matter of this Agreement (each of which is referred to as a "CLAIM"), even though some or all of such Claims allegedly are extra-contractual in nature and even though some or all of such Claims sound in contract, tort or otherwise, at law or in equity, in accordance with Commercial Arbitration Rules (the Supplementary Procedures for Large, Complex Disputes, if applicable) of the American Arbitration Association (the "AAA") in effect at the time of the Claims, as modified by the procedures set forth in EXHIBIT A hereto. The Parties hereby acknowledge and agree that this Agreement and the obligations to be performed hereunder constitute interstate commerce. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date. Dresser, Inc. Dresser-Rand Group Inc. By: /s/ James A. Nattier By: /s/ Vincent R. Volpe Jr. ------------------------------ ---------------------------- Print Name: James A. Nattier Print Name: Vincent R. Volpe Jr. Title: Executive VP & CFO Title: President & CEO Date: 10/26/04 Date: 10/26/04 - ----------- | APPROVED| | BY GHD | | --- | | LEGAL | - ----------- 7 EXHIBIT A ARBITRATION PROCEDURES (1) Number and Selection of Arbitrators. The arbitration shall be conducted by a single arbitrator except that, if the amount in controversy exceeds $1,000,000 or involves equitable relief, either Party may require, by notice given to the other, that the matter be heard by a panel of three arbitrators. If the claimant elects to require three arbitrators, the election must be set forth in the Notice and Demand for Arbitration. If the respondent elects to require three arbitrators, notice of the election must be provided to the claimant and the AAA within twenty one (21) days from the date the Notice and Demand for Arbitration is given. If neither Party so elects in the manner and within the time set forth above, the matter shall be heard by a single arbitrator. If there is to be a single arbitrator, the arbitrator shall be selected pursuant to the Commercial Arbitration Rules of the AAA. If there are to be three arbitrators, each Party shall have twenty one (21) days from the date the Notice and Demand for Arbitration is given to select an arbitrator and notify the AAA and the other Party of the selection. The Party-appointed arbitrators shall then select the third arbitrator, who shall act as chairperson of the panel. If the Party-appointed arbitrators fail to agree upon a third arbitrator within twenty one (21) days from the date the Notice and Demand for Arbitration is given, the third arbitrator shall be selected by the AAA. Any neutral arbitrator, whether appointed by the AAA or by the Party-appointed arbitrators, shall be licensed to practice law and shall have not less than 15 years of experience as an attorney or judge. In addition, the neutral arbitrator shall have experience with trademarks and complex business disputes. While the third arbitrator shall be neutral, the two Party-appointed arbitrators are not required to be neutral and it shall not be grounds for removal of either of the two Party-appointed arbitrators or for vacating the arbitrators' award that either of such arbitrators has past or present minimal relationships with the Party that appointed such arbitrator. Evident partiality on the part of an arbitrator exists only where the circumstances are such that a reasonable person would have to conclude there in fact existed actual bias and a mere appearance or impression of bias will not constitute evident partiality or otherwise disqualify an arbitrator. Minimal or trivial past or present relationships between the neutral arbitrator and the Party selecting such arbitrator or any of the other arbitrators, or the failure to disclose such minimal or trivial past or present relationships, will not by themselves constitute evident partiality or otherwise disqualify any arbitrator. Each arbitrator must agree in writing to his or her acceptance as an arbitrator to abide by the terms and conditions of this Agreement. (2) Location of Arbitration. The arbitration shall be conducted in Houston, Texas, at the office of the AAA or such other location agreed upon by the Parties. (3) Discovery. The Chair shall conduct discovery and resolve all discovery disputes. The Chair shall authorize such discovery as may be shown to be necessary to ensure a fair hearing; provided that, such discovery is completed within twenty (20) days of the date of the final hearing. Except as needed for presentation in lieu of a live appearance, each Party shall be limited to five (5) business days (9:00 a.m. to 5:00 p.m.) of depositions. This limitation shall apply to each separate arbitration that may be conducted pursuant to this Agreement. Discovery shall be conducted in accordance with the Federal Rules of Civil Procedure, except that: 8 (i) no deposition shall exceed eight (8) hours and all depositions must be completed within one hundred twenty (120) days from the date the Notice and Demand for Arbitration is given. (ii) there shall be no requests for admissions, (iii) each Party shall be limited to no more than fifteen (15) interrogatories, including subparts. (iv) each Party shall be limited to no more than two document requests, including subparts, and (v) documentary discovery shall be limited to documents directly relevant to the matter in dispute. All privileges under state and federal law, including attorney-client, work product, and party communication privileges, shall be preserved and protected. (vi) all experts engaged by a Party must be disclosed to the other Party within sixty (60) days from the date the Notice and Demand for Arbitration is given. All discovery requests must be served within twenty (90) days from the date the Notice and Demand for Arbitration is given. A Party shall not be required to respond to discovery requests served on the Party after that deadline. (4) Evidence. The arbitrators shall not be bound by the rules of evidence or of civil procedure, but rather may consider such writings and oral presentations as such arbitrator or the Parties may deem desirable or necessary. Prior to testifying, whether directly in the presence of the arbitrators or through depositions, each witness shall be sworn to tell the truth, subject to the perjury laws of the state in which the Final Arbitration hearing is held. (5) Scope of Arbitrators' Powers. The arbitrators may award injunctive relief of any other legal or equitable remedy available from a court, including the joinder of Parties or consolidation of this arbitration with any other involving common issues of law or fact which may promote judicial economy. (6) Remedy. This dispute resolution procedure is intended to be the exclusive method of resolving any Claim. (7) Enforcement: Finality. Either Party may apply to the courts of the United States District Court for the Southern District of Texas, to enforce any portion of this arbitration agreement (as provided in 8 U.S.C. (section) 3) or to enter judgment upon the award (as provided in 8 U.S.C. (section) 9). In addition, the award rendered by the arbitration shall be final and judgment thereon may be entered by any court having jurisdiction over the Party against whom enforcement is sought. Each Party agrees that this arbitration agreement and the decision and the award of the arbitrators shall be treated as final and binding without the right of appeal to the courts and as an absolute and final bar to any suit instituted in any federal, state or local court relating to the dispute, except as provided in the Federal Arbitration Act. (8) Arbitration Confidentiality. All aspects of an Arbitration conducted pursuant to this Agreement shall be and remain confidential and all participants shall be bound by 9 judicially enforceable obligations of strict confidentiality except to the extent the Parties agree in writing to waive in whole or part such confidentiality. (9) Applicable Law. The enforcement of this agreement to arbitrate and all procedural aspects of this agreement to arbitrate, including, but not limited to, the construction and interpretation of this agreement to arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or defenses as to arbitrarily, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act. In deciding the substance of any such claim, dispute or disagreement, the arbitrators shall apply the substantive laws of the State of New York; provided, however, that THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD PUNITIVE DAMAGES UNDER ANY CIRCUMSTANCES (WHETHER IT BE EXEMPLARY DAMAGES, TREBLE DAMAGES, OR ANY OTHER PENALTY OR PUNITIVE TYPE OF DAMAGES) REGARDLESS OF WHETHER SUCH DAMAGES MAY BE AVAILABLE UNDER NEW YORK LAW, THE PARTIES HEREBY WAIVING THEIR RIGHT, IF ANY, TO RECOVER AND SUCH PUNITIVE DAMAGES IN CONNECTION WITH ANY SUCH CLAIMS, DISPUTES OR DISAGREEMENTS REGARDLESS OF WHETHER SUCH CLAIM, DISPUTE OR DISAGREEMENT ARISES UNDER THE LAW OF CONTRACTS, TORTS (INCLUDING, WITHOUT LIMITATION, NEGLIGENCE OF EVERY KIND AND STRICT LIABILITY WITHOUT FAULT), OR PROPERTY, OR AT COMMON LAW OR IN EQUITY OR OTHERWISE AND REGARDLESS OF THE METHOD BY WHICH THE DISPUTE IS RESOLVED, (I.E., REGARDLESS OF WHETHER THE DISPUTE IS ARBITRATED, LITIGATED OR RESOLVED IN ANY OTHER FASHION). The arbitrators shall certify in their award that they have faithfully applied the terms and conditions of this Agreement and that no part of their award includes any amount for exemplary or punitive damages. (10) Timing of Arbitration. The arbitration hearing shall be scheduled to be held no later than one hundred fifty (150) days after the date the Notice and Demand for Arbitration is given. (5) The Arbitrators' Award. The decision of the arbitrator, or a majority of the arbitrators, shall be reduced to writing and shall be delivered to the Parties no later than 15 days following the close of the arbitration hearing. Each Party shall bear the Party's own attorneys' fees and other costs and expenses incurred in connection with the arbitration, including without limitation the fees and expenses of the arbitrator to be appointed by such Party in the case of a three-arbitrator panel. The Parties shall share the other arbitrator's fees and any fees charged by the AAA equally. 10 EX-10.7 21 y68981exv10w7.txt EX-10.7: LICENSE AGREEMENT Exhibit 10.7 LICENSE AGREEMENT THIS LICENSE AGREEMENT made as of this 29th day of October, 2004 ("Effective Date") by and between Dresser-Rand Company, with its principal place of business at Paul Clark Drive, Olean, NY 14760 ("Dresser-Rand"), Dresser-Rand A.S., with its principal place of business at Kirkegardsveien 45 NO-3601 Kongsberg, Norway ("DR Norway"), Ingersoll-Rand Energy Systems Corporation, having a business address at 30 New Hampshire Avenue, Portsmouth, NH 03801 ("ESC") and the Energy Systems Division of Ingersoll-Rand Company having a business address at 800-A Beaty Street, Davidson, North Carolina 28036 ("ESD"), (with ESC and ESD sometimes being collectively referred to as "Energy Systems"). W I T N E S S E T H: WHEREAS, Dresser-Rand and DR Norway were engaged by Energy Systems to perform certain services related to the development of Energy Systems' 250 kilowatt microturbine and based such development on DR Norway's KG2 Gas Turbine ("KG2"); WHEREAS, Ingersoll-Rand Company Limited ("Seller"), and Dresser-Rand Holdings, LLC (f/k/a FRC Acquisitions LLC) ("Buyer") are parties to an Equity Purchase Agreement, dated as of August 24, 2004 (as amended, supplemented or otherwise modified from time to time, the "Purchase Agreement"), relating to the sale by Seller and certain of its Affiliates, and the purchase and assumption by Buyer and certain of its Affiliates, of certain equity interests and shares of stock relating to Dresser-Rand and its Subsidiaries' Business (as defined in the Purchase Agreement); WHEREAS, the Purchase Agreement provides that, in connection with the consummation of the transactions contemplated thereby, the parties will enter into this Agreement pursuant to which Dresser-Rand and DR Norway will grant to Energy Systems certain intellectual property use rights and agree to certain covenants related thereto; WHEREAS, this is the License Agreement referred to in the Purchase Agreement and referred to therein as Exhibit D; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound, do hereby agree as follows: 1. Dresser-Rand and DR Norway hereby unconditionally and irrevocably grant to Energy Systems, and Energy Systems hereby accepts, a perpetual fully paid up, non-exclusive, worldwide right and license (without the right to sublicense) to practice and use any and all patents, patent applications, trade secrets and know how owned by Dresser-Rand or DR Norway used in the production of, or incorporated into the 250 kilowatt microturbines manufactured and sold by Energy Systems as of the Effective Date, to manufacture, have manufactured, use, market and sell microturbines with a generating capacity of 1000 kilowatts or less. 2. Dresser-Rand and DR Norway agree that they will not bring or cause to be brought any action relating to the infringement of any intellectual property right licensed pursuant to Paragraph 1, in any court or with any government agency, anywhere in the world, against Energy Systems or its distributors, agents, resellers, employees, principals, customers based on their manufacture, use, sales or offer for sale of any microturbine made or sold by Energy Systems. Energy Systems and IR will hold D-R and D-R Norway harmless from any claim arising on or relating to their microturbines. 3. 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. 4. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. 5. 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. 6. Each of the parties irrevocably submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York located in the borough of Manhattan in the City of New York, or if such court does not have jurisdiction, the Supreme Court of the State of New York, New York County, for the purposes of any proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties irrevocably and fully waives the defense of an inconvenient forum to the maintenance of such proceeding, and waives any objection it might otherwise have to service of process under law. Nothing herein shall affect the right of any Person to serve process in any other manner permitted by law. Each of the parties irrevocably and unconditionally waives any objection to the laying of venue of any proceeding arising out of this Agreement or the transactions contemplated hereby in (a) the United States District Court for the Southern District of New York or (b) the Supreme Court of the State of New York, New York County, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such proceeding brought in any such court has been brought in an inconvenient forum. The parties hereby irrevocably and unconditionally waive trial by jury in any proceeding relating to this Agreement or any other agreement entered into in connection therewith and for any counterclaim with respect thereto. 7. This Agreement shall be construed under and governed by the laws of the State of New York without regard to the principles of conflicts of law thereof. 8. This Agreement may not be amended, modified or supplemented except upon the execution and delivery of a written agreement executed by the parties and specifically referencing this Agreement. 9. Any of the terms or conditions of this Agreement that may be lawfully waived may be waived in writing at any time by the Party which is entitled to the benefits thereof. Any waiver of any of the provisions of this Agreement by any Party 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. 10. Energy Systems acknowledges that the licenses granted to it hereunder are personal in nature. Except with the express prior written consent of each of Dresser-Rand and DR Norway, which consent may be withheld by either Dresser-Rand or DR Norway in their sole discretion, Energy Systems may not assign or transfer this Agreement or its rights or obligations hereunder; provided, that the foregoing restriction shall not apply to any sale, merger, consolidation or other business combination of Energy Systems to or with any person. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day and year first above written. DRESSER-RAND COMPANY By: /s/ Vincent R. Volpe Jr. ------------------------------------- Name: Vincent R. Volpe Jr. Title: President & CEO DRESSER-RAND A.S. By: /s/ Barbara A. Santoro ------------------------------------- Name: Barbara A. Santoro Title: Attorney-in-fact INGERSOLL-RAND ENERGY SYSTEMS CORPORATION By: /s/ Barbara A. Santoro ------------------------------------- Name: Barbara A. Santoro Title: Attorney-in-fact ENERGY SYSTEMS DIVISION OF INGERSOLL-RAND COMPANY By: /s/ Barbara A. Santoro ------------------------------------- Name: Barbara A. Santoro Title: Secretary EX-10.8 22 y68981exv10w8.txt EX-10.8: AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT Exhibit 10.8 AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF DRESSER-RAND HOLDINGS, LLC . . . Table of Contents
Page ---- ARTICLE I ORGANIZATION, ETC. Section 1.1 Continuation..................................................1 Section 1.2 Company Name..................................................1 Section 1.3 Authorized Persons............................................2 Section 1.4 Term of Company...............................................2 Section 1.5 Registered Agent and Office...................................2 Section 1.6 Principal Place of Business...................................2 Section 1.7 Fiscal Year; Taxable Year.....................................2 ARTICLE II PURPOSE AND POWERS OF THE COMPANY Section 2.1 Purpose.......................................................2 Section 2.2 Powers of the Company.........................................3 Section 2.3 Certain Tax Matters...........................................3 ARTICLE III MEMBERS AND INTERESTS GENERALLY Section 3.1 Powers of Members.............................................3 Section 3.2 Interests Generally...........................................3 Section 3.3 Meetings of Members...........................................4 Section 3.4 Business Transactions of a Member with the Company............6 Section 3.5 No Cessation of Membership upon Bankruptcy....................6 Section 3.6 Noncompetition; Confidentiality and Nonsolicitation...........6 Section 3.7 "Blue Pencil"................................................10 Section 3.8 Other Business for Managing Members and First Reserve........10 Section 3.9 Additional Members...........................................10 ARTICLE IV MANAGEMENT Section 4.1 The Managing Members.........................................11 Section 4.2 Action of the Managing Members...............................11 Section 4.3 Managing Members as Agents...................................12 Section 4.4 Actions and Determinations of the Company....................12 Section 4.5 Officers.....................................................12
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Page ---- ARTICLE V INVESTMENT REPRESENTATIONS, WARRANTIES AND COVENANTS Section 5.1 Representations, Warranties and Covenants of Members.........12 Section 5.2 Additional Representations and Warranties of Management Members......................................................14 ARTICLE VI CAPITAL ACCOUNTS; CAPITAL CONTRIBUTIONS Section 6.1 Capital Accounts.............................................15 Section 6.2 Initial Capital Contributions................................15 Section 6.3 Additional Capital Contributions.............................15 Section 6.4 Negative Capital Accounts....................................16 ARTICLE VII ADDITIONAL TERMS APPLICABLE TO PROFITS UNITS Section 7.1 Certain Terms................................................16 Section 7.2 Effects of Termination of Employment on Profits Units........17 ARTICLE VIII ALLOCATIONS Section 8.1 Book Allocations of Net Profit and Net Loss..................19 Section 8.2 Special Book Allocations.....................................20 Section 8.3 Tax Allocations..............................................20 ARTICLE IX DISTRIBUTIONS Section 9.1 Distributions Generally......................................21 Section 9.2 Distributions In Kind........................................21 Section 9.3 No Withdrawal of Capital.....................................21 Section 9.4 Withholding..................................................22 Section 9.5 Restricted Distributions.....................................22 Section 9.6 Tax Distributions............................................22 Section 9.7 Transaction Costs............................................23 ARTICLE X BOOKS AND RECORDS Section 10.1 Books, Records and Financial Statements......................23 Section 10.2 Filings of Returns and Other Writings; Tax Matters Partner......................................................23 Section 10.3 Accounting Method............................................24
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Page ---- ARTICLE XI LIABILITY, EXCULPATION AND INDEMNIFICATION Section 11.1 Liability....................................................24 Section 11.2 Exculpation..................................................24 Section 11.3 Elimination of Fiduciary Duties..............................25 Section 11.4 Indemnification..............................................25 Section 11.5 Expenses.....................................................25 Section 11.6 Severability.................................................25 ARTICLE XII TRANSFERS OF INTERESTS Section 12.1 Restrictions on Transfers of Interests by Managing Members......................................................26 Section 12.2 Restrictions on Transfers of Interests by Management Members......................................................26 Section 12.3 Permitted Transfers by Management Members....................26 Section 12.4 Effect of Assignment.........................................26 Section 12.5 Overriding Provisions........................................27 Section 12.6 Involuntary Transfers........................................27 Section 12.7 Sales by First Reserve.......................................28 Section 12.8 Assignments..................................................28 Section 12.9 Substitute Members...........................................28 Section 12.10 Release of Liability.........................................29 Section 12.11 Tag-Along and Drag-Along Rights..............................29 Section 12.12 Right of First Refusal.......................................31 Section 12.13 Effect of Initial Public Offering or Change in Control.......31 ARTICLE XIII DISSOLUTION, LIQUIDATION AND TERMINATION Section 13.1 Dissolving Events............................................32 Section 13.2 Dissolution and Winding-Up...................................32 Section 13.3 Distributions in Cash or in Kind.............................33 Section 13.4 Termination..................................................33 Section 13.5 Claims of the Members........................................33 ARTICLE XIV INITIAL PUBLIC OFFERING Section 14.1 Rights Upon an Initial Public Offering.......................33
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Page ---- ARTICLE XV MISCELLANEOUS Section 15.1 Notices......................................................34 Section 15.2 Securities Act Matters.......................................35 Section 15.3 Headings.....................................................35 Section 15.4 Entire Agreement.............................................35 Section 15.5 Counterparts.................................................36 Section 15.6 Governing Law; Attorneys' Fees...............................36 Section 15.7 Waiver.......................................................36 Section 15.8 Invalidity of Provision......................................36 Section 15.9 Further Actions..............................................36 Section 15.10 Amendments...................................................37 Section 15.11 No Third Party Beneficiaries.................................37 Section 15.12 Injunctive Relief............................................37 Section 15.13 Arbitration..................................................37 Section 15.14 Power of Attorney............................................38 ARTICLE XVI DEFINED TERMS Section 16.1 Definitions..................................................39
iv AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF DRESSER-RAND HOLDINGS, LLC This Amended and Restated Limited Liability Company Agreement of Dresser- Rand Holdings, LLC (the "Company"), effective as of October 29, 2004, is among the individuals or entities listed under the heading "Managing Members" on Schedule A hereto (each a "Managing Member"), the individuals listed under the heading "Management Members" on Schedule A hereto (each a "Management Member"), and any other Person who shall become a member of the Company in accordance with the terms of this Agreement (the "Members"). WHEREAS, First Reserve GP IX, L.P. and First Reserve GP X, L.P. previously formed First Reserve Acquisitions LLC, a limited liability company, pursuant to the Delaware Act by entering into a Limited Liability Company Agreement, dated as of August 25, 2004 and causing to be filed a Certificate of Formation of the Company with the office of the Secretary of State of the State of Delaware on July 29, 2004; and WHEREAS, First Reserve GP IX, L.P. and First Reserve GP X, L.P. desires to admit additional members of the Company, and together with such additional members, desire to continue the Company as a limited liability company under the Delaware Act under the new name "Dresser-Rand Holdings, LLC" and to amend and restate the original Limited Liability Company Agreement in its entirety; NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby amend and restate the original Limited Liability Company Agreement in its entirety and agree as follows: ARTICLE I ORGANIZATION, ETC. Section 1.1 Continuation. The Members hereby agree to continue the Company as a limited liability company under and pursuant to the provisions of the Delaware Act and agree that the rights, duties and liabilities of the Members shall be as provided in the Delaware Act, except as otherwise provided herein. Section 1.2 Company Name. The name of the Company shall be Dresser-Rand Holdings, LLC. The business of the Company may be conducted under such other names as the Managing Members may from time to time designate, provided that the Company complies with all relevant state laws relating to the use of fictitious and assumed names. Section 1.3 Authorized Persons. Thomas R. Denison as an authorized person within the meaning of the Delaware Act, has executed, delivered and filed the Certificate and any amendments thereto and restatements thereof with the Secretary of State of the State of Delaware. On the date hereof, his powers as an authorized person shall cease and each Managing Member shall be designated as an authorized person within the meaning of the Delaware Act. Each Managing Member may execute, deliver and file (or direct the execution, delivery and filing of) all such other certificates and documents, including amendments to or restatements of the Certificate, and to do such other acts as may be appropriate to comply with all requirements for the continuation and operation of a limited liability company, the ownership of property, and the conduct of business under the laws of the State of Delaware and any other jurisdiction in which the Company may own property or conduct business. Section 1.4 Term of Company. The term of the Company commenced on the date of the initial filing of the Certificate with the Secretary of State of the State of Delaware. The Company may be terminated in accordance with the terms and provisions hereof, and shall continue unless and until dissolved as provided in Article XIII. The existence of the Company as a separate legal entity shall continue until the cancellation of the Certificate as provided in the Delaware Act. Section 1.5 Registered Agent and Office. The Company's registered agent and office in the State of Delaware shall be Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, DE 19808. The Managing Members may designate another registered agent and/or registered office from time to time in accordance with the then applicable provisions of the Delaware Act and any other applicable laws. Section 1.6 Principal Place of Business. The principal place of business of the Company shall be located at One Lafayette Place, Greenwich, CT 06830. The location of the Company's principal place of business may be changed by the Managing Members from time to time in accordance with the then applicable provisions of the Delaware Act and any other applicable laws. Section 1.7 Fiscal Year; Taxable Year. The fiscal year of the Company for financial accounting purposes shall end on December 31. The taxable year of the Company for federal, state and local income tax purposes shall end on December 31. ARTICLE II PURPOSE AND POWERS OF THE COMPANY Section 2.1 Purpose. The purposes of the Company are, and the nature of the business to be conducted and promoted by the Company is, engaging in any lawful act or activity for which limited liability companies may be formed under the Delaware Act and 2 engaging in all acts or activities as the Company deems necessary, advisable or incidental to the furtherance of the foregoing. Section 2.2 Powers of the Company. The Company shall have the power and authority to take any and all actions that are necessary, appropriate, advisable, convenient or incidental to or for the furtherance of the purposes set forth in Section 2.1. Section 2.3 Certain Tax Matters. The Company shall not elect, and the Managing Members shall not permit the Company to elect, to be treated as an association taxable as a corporation for U.S. federal, state or local income tax purposes under Treasury Regulations section 301.7701-3 or under any corresponding provision of state or local law. The Company and the Managing Members shall not permit the registration or listing of the Interests on an "established securities market," as such term is used in Treasury Regulations section 1.7704-1. ARTICLE III MEMBERS AND INTERESTS GENERALLY Section 3.1 Powers of Members. The Members shall have the power to exercise any and all rights or powers granted to the Members pursuant to the express terms of this Agreement. The approval or consent of the Members shall not be required in order to authorize the taking of any action by the Company unless and then only to the extent that (i) this Agreement shall expressly provide therefor, (ii) such approval or consent shall be required by non-waivable provisions of the Delaware Act or (iii) the Managing Members shall determine that obtaining such approval or consent would be appropriate or desirable. The Members, as such, shall have no power to bind the Company. Section 3.2 Interests Generally. As of the date hereof, the Company has two authorized classes of Interests: Common Units and Profits Units (which will consist of Service Units or Exit Units as described below). Additional classes of Interests may be authorized from time to time by the Managing Members without obtaining the consent of any Member or class of Members. Except as otherwise provided in this Article III, Interests in a particular class may be issued from time to time, at such prices and on such terms as the Managing Members may determine, without obtaining the consent of any Member or class of Members. (a) Common Units. (i) General. Subject to the provisions of Section 7.2(c), the holders of Common Units will have voting rights with respect to their Common Units as provided in Section 3.3(d) and shall have the rights with respect to profits and losses of the Company and distributions from the Company as are set forth herein. 3 The number of Common Units of each Member as of any given time shall be set forth on Schedule A, as it may be updated from time to time. (ii) Price. The Common Units issued at the time of and in connection with the Initial Capital Contribution shall have a price of $4.33 per Common Unit. As provided in Section 3.9, the price, payment terms and schedule for the Capital Contributions applicable to any other Common Unit will be determined by the Managing Members in connection with the issuance of such Common Units. (b) Profits Units. (i) General. The Company will have two sub-classes of Profits Units: Service Units and Exit Units. There shall be one initial tranche of Service Units and five initial tranches of Exit Units (the sole difference among the Exit Unit tranches being the vesting terms indicated in Section 7.l(a)). Additional tranches of Service Units or Exit Units may be authorized from time to time by the Managing Members. Subject to the provisions of Section 7.2(c), the holders of Profits Units will have voting rights with respect to their Profits Units as provided in Section 3.3(d) and shall have the rights with respect to profits and losses of the Company and distributions from the Company as are set forth herein, provided that (i) additional terms and conditions applicable to a Profits Unit may be established by the Managing Members in connection with the issuance of such Profits Unit and (ii) Profits Units shall be subject to vesting and other terms and conditions (including the applicable Benchmark Amount) set forth in Article VII. The number and type of Profits Units issued to a Management Member as of any given time shall be set forth on Schedule A, as it may be updated from time to time. (ii) Price. The holders of Profits Units are not required to make any Capital Contribution to the Company in exchange for their Profits Units, it being recognized that such Interests shall be issued only to Management Members who own Common Units and shall be issued in consideration of services provided to or for the benefit of the Company. Section 3.3 Meetings of Members. (a) Meetings; Notice of Meeting. Meetings of the Members, including any special meeting, may be called by the Managing Members from time to time. Notice of any such meeting shall be given to all Members not less than five nor more than 30 business days prior to the date of such meeting and shall state the location, date and hour of the meeting and, in the case of a special meeting, the nature of the business to be transacted. Meetings shall be held at the location (within or without the State of Delaware) at the date and hour set forth in the notice of the meeting. 4 (b) Waiver of Notice. No notice of any meeting of Members need be given to any Member who submits a signed waiver of notice, whether before or after the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Members need be specified in a written waiver of notice. The attendance of any Member at a meeting of Members shall constitute a waiver of notice of such meeting, except when the Member attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. (c) Quorum. Except as otherwise required by applicable law or by the Certificate, the presence in person or by proxy of the holders of record of a Majority in Interest shall constitute a quorum for the transaction of business at such meeting. (d) Voting. If the Managing Members have fixed a record date, every holder of record of Units entitled to vote at a meeting of Members or to consent in writing in lieu of a meeting of Members as of such date shall be entitled to one vote for each such Unit outstanding in such Member's name at the close of business on such record date. If no record date has been so fixed, then every holder of record of such Units entitled to vote at a meeting of Members or to consent in writing in lieu of a meeting of Members shall be entitled to one vote for each Unit outstanding in his name on the close of business on the day next preceding the day on which notice of the meeting is given or the first consent in respect of the applicable action is executed and delivered to the Company, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. Except as otherwise required by applicable law, the Certificate or this Agreement, the vote of a majority of the Units entitled to vote represented in person or by proxy at any meeting at which a quorum is present shall be sufficient for the transaction of any business at such meeting. (e) Proxies. Each Member may authorize any Person to act for such Member by proxy on all matters in which a Member is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Member or such Member's attorney-in-fact. No proxy shall be valid after the expiration of three years from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Member executing it unless otherwise provided in such proxy, provided that such right to revocation shall not invalidate or otherwise affect actions taken under such proxy prior to such revocation. (f) Organization. Each meeting of Members shall be conducted by such Person as the Managing Members may designate. (g) Action Without a Meeting. Unless otherwise expressly provided in this Agreement, any action that may be taken at any meeting of the Members may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting 5 forth the action so taken, shall be signed by a Majority in Interest. Within 30 days of the taking of such action without a meeting by less than unanimous written consent, the Managing Members shall make a good faith attempt to deliver notice of the taking of the action to those Members who have not consented in writing. Section 3.4 Business Transactions of a Member with the Company. Subject to the prior approval of the Managing Members, a Member may lend money to, borrow money from, act as surety or endorser for, guarantee or assume one or more specific obligations of, provide collateral for, or transact any other business with the Company. Section 3.5 No Cessation of Membership upon Bankruptcy. A Person shall not cease to be a Member of the Company upon the happening, with respect to such Person, of any of the events specified in Section 18-304 of the Delaware Act. Section 3.6 Noncompetition; Confidentiality and Nonsolicitation. The covenants and restrictions contained in this Section 3.6 shall be in addition to and not in lieu of any covenants or restrictions applying to any Management Member pursuant to any employment, severance or services agreement between such Management Member and the Company or any of its subsidiaries. At or after the time a Management Member becomes a Member, the Managing Members may agree with such Management Member that the provisions of this Section 3.6 shall be modified or made inapplicable, on such terms as the Managing Members and such Management Member may agree. (a) Certain Acknowledgements and Understandings. (i) Each Management Member acknowledges that: (A) the business of the Company is intensely competitive and such Management Member's provision of services to or for the benefit of the Company will require such Management Member to have access to and knowledge of confidential information of the Company, including, but not limited to, formulae, manufacturing processes, distribution systems, research and development methods and techniques, the identity of the Company's customers, the identity of the representatives of customers with whom the Company has dealt, the kinds of services provided by the Company to customers and offered to be performed for potential customers, the manner in which such services are performed or offered to be performed, the service needs of actual or prospective customers, pricing information, information concerning the creation, acquisition or disposition of products and services, customer maintenance listings, computer software applications and other programs, personnel information and trade secrets ("Confidential Information"); (B) the direct or indirect disclosure of any such Confidential Information would place the Company at a competitive disadvantage and would do damage, monetary or otherwise, to the Company's business; (C) the engaging by such Management Member in any of the activities prohibited by this Section 3.6 may constitute 6 improper appropriation and/or use of such information and trade secrets; and (D) the Confidential Information constitutes a protectible business interest of the Company; provided that Confidential Information shall not include information that (I) was publicly available before the date hereof, (II) was known by such Management Member from a source other than in connection with his provision of services to or for the benefit of the Company, (III) is acquired by such Management Member from a third party who or that was not subject to any restrictions as to its disclosure, (IV) becomes publicly available subsequent to the date hereof, other than as a result of an action by such Management Member, or (V) constitutes U.S. federal income tax treatment or tax structure of the Company (including transactions undertaken by the Company) and all materials of any kind (including opinions or other tax analyses) that are provided to such Management Member relating to such tax treatment and tax structure. (ii) Each Management Member further acknowledges that: (A) the market for the Company's business extends throughout the United States and the rest of the world, and that such Management Member, individually and through the Company, is among a limited number of people engaged in the Company's business on a nationwide and global basis; (B) the restrictive covenants and the other agreements contained herein are an essential part of this Agreement; and (C) such Management Member has been, or has had the opportunity to be, fully advised by counsel in connection with the negotiation, preparation, execution and delivery of this Agreement. (iii) For purposes of this Section 3.6, with respect to a Management Member, the "business of the Company" means, except as otherwise provided herein, the businesses conducted by the Company and its direct or indirect subsidiaries, including, but not limited to Dresser-Rand, Inc., during the period the Executive provides services to or for the benefit of the Company. (iv) A Management Member's registered or beneficial ownership of up to five percent of any class of the capital stock of a competing corporation registered under the Securities Exchange Act of 1934, as amended, shall not constitute a violation of any of the provisions of this Section 3.6, provided that such Management Member does not actively participate in the business of such corporation during the period to which the provisions of this Section 3.6 apply. (b) Noncompetition. During the period a Management Member whose Capital Commitment equals or exceeds $100,000 provides services to or for the benefit of the Company and for two years thereafter, such Management Member shall not, directly or indirectly, whether individually, as a director, stockholder, owner, partner, employee, principal or agent of any business, or in any other capacity, for such Management Member's benefit or for the benefit of any other Person, engage in, or otherwise be 7 employed by or act as a consultant or lender to, or be a director, officer, employee, principal, licensor, trustee, broker, agent, stockholder, member, owner, joint venturer or partner of, any business or organization anywhere in the world that directly competes with the business of the Company as the same shall be constituted at any time during, or as to which the Company had specific plans known to such Management Member to engage in during or following, the term of such Management Member's provision of services to or for the benefit of the Company. (c) Non-Solicitation of Employees. During the period a Management Member provides services to or for the benefit of the Company and for two years thereafter (the "Restriction Period"), a Management Member shall not, directly or indirectly, in any city, town, county, parish or other municipality in any state of the United States or anywhere else in the world where the Company or any of its direct or indirect subsidiaries (including, but not limited to, Dresser-Rand, Inc.) has business operations, for such Management Member's benefit or for the benefit of any other Person, whether individually, as a director, stockholder, owner, partner, employee, principal or agent of any business, or in any other capacity, solicit the employment or services of, or hire, any person who to the knowledge of such Management Member is employed by or is a consultant to the Company or any of its direct or indirect subsidiaries (including, but not limited to, Dresser-Rand, Inc.) as of the date of such Management Member's termination or within the preceding six months, unless such person is not an employee of, or a consultant to, the Company at the time of such solicitation by the Executive and was not been an employee of, or consultant to the Company for six months prior thereto. (d) Non-Solicitation of Customers or Potential Customers. During the Restriction Period, a Management Member shall not, directly or indirectly, in any city, town, county, parish or other municipality in any state of the United States or anywhere else in the world where the Company or any of its direct or indirect subsidiaries (including, but not limited to, Dresser-Rand, Inc.) has business operations, for such Management Member's benefit or for the benefit of any other Person, whether individually, as a director, stockholder, owner, partner, employee, principal or agent of any business, or in any other capacity: (i) solicit business directly competitive with the business of the Company from any customer of the business of the Company as of the date such Management Member ceases to provide services to or for the benefit of the Company; or (ii) solicit business directly competitive with the business of the Company from any potential customer of the business of the Company that, to the knowledge of such Management Member, within six months before such Management Member's termination, either (A) has been the subject of a written or oral bid, offer or proposal by the Company or any of its direct or indirect 8 subsidiaries (including, but not limited, to Dresser-Rand, Inc.) or (B) to which the Company or any of its direct or indirect subsidiaries (including, but not limited, to Dresser-Rand, Inc.) has undertaken substantial preparation towards making such a bid, proposal or offer. (e) Confidentiality. While a Management Member provides services to or for the benefit of the Company and at all times thereafter, such Management Member shall not, directly or indirectly, whether individually, as a director, stockholder, owner, partner, employee, principal or agent of any business, or in any other capacity, make known, disclose, furnish, make available or utilize any of the Confidential Information, other than in the proper performance of his or her duties to or for the benefit of the Company, or as required by a court of competent jurisdiction or other administrative or legislative body; provided that, in such event, such Management Member shall promptly notify the Company so that the Company may seek a protective order or other appropriate remedy. If reasonably practicable, a Management Member shall notify the Company prior to disclosing any Confidential Information to a court or other administrative or legislative body. A Management Member shall return all Confidential Information, including all photocopies, extracts and summaries thereof, and any such information stored electronically on tapes, computer disks or in any other manner to the Company at any time upon request by the Company and upon the termination of his or her provision of services to or for the benefit of the Company for any reason. (f) Remedies. (i) Forfeiture; Obligation to Repay. If a Management Member breaches any of such Management Member's obligations contained in this Section 3.6, without limiting any other remedies the Company may have (including those provided for in Section 3.6(f)(ii)), (A) any Profits Units held by such Managing Member shall be immediately forfeited and (B) such Management Member shall be obligated to repay to the Company immediately upon demand by the Company any amounts distributed with respect to such Management Member's Profits Units at any time within the preceding two-year period. (ii) Injunctive Relief with Respect to Covenants. Each Management Member acknowledges and agrees that the covenants and obligations of such Management Member with respect to noncompetition (if any), nonsolicitation and confidentiality herein relate to special, unique and extraordinary matters and that a violation or threatened violation of any of the terms of such covenants or obligations will cause the Company irreparable injury for which adequate remedies are not available at law. Each Management Member agrees, to the fullest extent permitted by applicable law, that the Company shall be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) restraining such Management Member from committing any 9 violation of the covenants or obligations contained in this Section 3.6. These injunctive remedies are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity or as provided in Section 3.6(f)(i). In connection with the foregoing provisions of this Section 3.6, each Management Member represents that his economic means and circumstances are such that such provisions will not prevent him from providing for himself and his family on a basis satisfactory to him. Section 3.7 "Blue Pencil". It is expressly understood and agreed that although each Management Member and the Company consider the restrictions contained in this Section 3.6 to be reasonable, if a final determination is made by an arbitrator to whom the parties have assigned the matter or a court of competent jurisdiction that any restriction contained in this Agreement is an unenforceable restriction against any Management Member, the provisions of this Agreement shall not be rendered void but shall be reformed to apply as to such maximum time and to such maximum extent as such arbitrator or court may determine or indicate to be enforceable. Alternatively, if such arbitrator or court finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be reformed so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. Section 3.8 Other Business for Managing Members and First Reserve. Any Managing Member, First Reserve Affiliate or other Affiliate of any Managing Member may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Company or any of its subsidiaries, and the Company and the Members shall have no rights by virtue of this Agreement in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Company or any of its subsidiaries, shall not be deemed wrongful or improper. No Managing Member, First Reserve Affiliate, or other Affiliate of any Managing Member shall be obligated to present any particular investment opportunity to the Company even if such opportunity is of a character that, if presented to the Company, could be taken by the Company, and any Managing Member, First Reserve Affiliate, or other Affiliate of any Managing Member shall have the right to take for such Person's own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment opportunity. Section 3.9 Additional Members. (a) Admission. Upon the approval of the Managing Members, the Company may admit one or more additional Members (each an "Additional Member"), including additional Management Members to the Company, to be treated as a "Member" or one of the "Members" for all purposes hereunder. Each Person shall be admitted as an Additional Member at the time such Person (i) executes a joinder agreement to this 10 Agreement, (ii) complies with the applicable resolution, if any, with respect to such admission and (iii) is named as a Member in Schedule A hereto. The Managing Members are authorized to amend Schedule A to reflect any issuance of Units and any such admission and any actions pursuant to Section 3.9(b) below. (b) Rights of Additional Members. Upon the admission of an Additional Member, the Managing Members shall: (i) determine the Capital Contribution (if any) of such Additional Member and the time or times at which such Capital Contribution shall be contributed to the Company; (ii) determine the number of Units to be granted to such Additional Member and whether such Units shall be Common Units, Profits Units or Units of an additional class of Interests authorized by the Managing Members, and in the case of any Profits Units, the applicable Benchmark Amount and terms thereof, and in the case of Common Units, the price to be paid therefor; (iii) determine if such Additional Member will be a Management Member or a Managing Member or a member of a class holding such rights and obligations as the Managing Members may specify; and (iv) amend Schedule A to reflect the actions taken pursuant to this Section 3.9. ARTICLE IV MANAGEMENT Section 4.1 The Managing Members. The business and affairs of the Company shall be managed by the Managing Members. The Managing Members shall have full, exclusive and complete discretion to manage and control the business and affairs of the Company, to make all decisions affecting the business and affairs of the Company and to take all such actions as they deem necessary or appropriate to accomplish the purposes of the Company as set forth herein, including, but not limited to, to exercise all of the powers of the Company set forth in Section 2.2 of this Agreement. Each Managing Member is hereby designated as a "manager" (within the meaning of the Delaware Act) of the Company. Section 4.2 Action of the Managing Members. Any action, determination or judgment of the Managing Members under this Agreement shall be taken or made only with the consent of the Managing Members holding a numerical majority of the Units then held by all Managing Members. On any action that is to be voted on by the Managing Members, such action may be taken without a meeting and without a vote if a 11 consent or consents in writing, setting forth the action to be taken, shall be signed by the Managing Members holding a numerical majority of the Units then held by all Managing Members. Section 4.3 Managing Members as Agents. The Managing Members, to the extent of their powers set forth in this Agreement, are agents of the Company for the purpose of the Company's business, and the actions of the Managing Members taken in accordance with such powers shall bind the Company. Section 4.4 Actions and Determinations of the Company. Any determination or action provided to be made or taken by the Company may be made or taken by the Managing Members in accordance with the terms of this Agreement. Section 4.5 Officers. The Managing Members may, from time to time as they deem advisable, appoint officers of the Company (the "Officers") and assign such officers titles (including, but not limited to, Chief Executive Officer, President, Vice President, Secretary and Treasurer). Unless the Managing Members decide otherwise, if the title is one commonly used for officers of a business corporation formed under the Delaware General Corporation Law, the assignment of such title shall constitute the delegation to such person of the authorities and duties that are normally associated with that office. Any delegation pursuant to this Section 4.5 may be revoked at any time by the Managing Members. Any Officer may be removed with or without cause by the Managing Members, except as otherwise provided in any services or employment agreement between such Officer and the Company. ARTICLE V INVESTMENT REPRESENTATIONS, WARRANTIES AND COVENANTS Section 5.1 Representations, Warranties and Covenants of Members. (a) Investment Intention and Restrictions on Disposition. Each Member represents and warrants that such Member is acquiring the Interests solely for such Member's own account for investment and not with a view to resale in connection with any distribution thereof. Each Member agrees that such Member will not, directly or indirectly, Transfer any of the Interests (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of any of the Interests) or any interest therein or any rights relating thereto or offer to Transfer, except in compliance with the Securities Act, all applicable state securities or "blue sky" laws and this Agreement, as the same shall be amended from time to time. Any attempt by a Member, directly or indirectly, to Transfer, or offer to Transfer, any Interests or any interest therein or any rights relating thereto without complying with the provisions of this Agreement, shall be void and of no effect. 12 (b) Securities Laws Matters. Each Member acknowledges receipt of advice from the Company that (i) the Interests have not been registered under the Securities Act or qualified under any state securities or "blue sky" laws, (ii) it is not anticipated that there will be any public market for the Interests, (iii) the Interests must be held indefinitely and such Member must continue to bear the economic risk of the investment in the Interests unless the Interests are subsequently registered under the Securities Act and such state laws or an exemption from registration is available, (iv) Rule 144 promulgated under the Securities Act ("Rule 144") is not presently available with respect to sales of any securities of the Company and the Company has made no covenant to make Rule 144 available and Rule 144 is not anticipated to be available in the foreseeable future, (v) when and if the Interests may be disposed of without registration in reliance upon Rule 144, such disposition can be made only in limited amounts and in accordance with the terms and conditions of such Rule and the provisions of this Agreement, (vi) if the exemption afforded by Rule 144 is not available, public sale of the Interests without registration will require the availability of an exemption under the Securities Act, (vii) restrictive legends shall be placed on any certificate representing the Interests and (viii) a notation shall be made in the appropriate records of the Company indicating that the Interests are subject to restrictions on transfer and, if the Company should in the future engage the services of a transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to the Interests. (c) Ability to Bear Risk. Each Member represents and warrants that (i) such Member's financial situation is such that such Member can afford to bear the economic risk of holding the Interests for an indefinite period and (ii) such Member can afford to suffer the complete loss of such Member's investment in the Interests. (d) Access to Information; Sophistication; Lack of Reliance. Each Member represents and warrants that (i) such Member is familiar with the business and financial condition, properties, operations and prospects of the Company and that such Member has been granted the opportunity to ask questions of, and receive answers from, representatives of the Company concerning the Company and the terms and conditions of the purchase of the Interests and to obtain any additional information that such Member deems necessary, (ii) such Member's knowledge and experience in financial and business matters is such that such Member is capable of evaluating the merits and risk of the investment in the Interests and (iii) such Member has carefully reviewed the terms and provisions of this Agreement and has evaluated the restrictions and obligations contained therein. In furtherance of the foregoing, each Member represents and warrants that (i) no representation or warranty, express or implied, whether written or oral, as to the financial condition, results of operations, prospects, properties or business of the Company or as to the desirability or value of an investment in the Company has been made to such Member by or on behalf of the Company, (ii) such Member has relied upon such Member's own independent appraisal and investigation, and the advice of such Member's own counsel, tax advisors and other advisors, regarding the risks of an investment in the Company and 13 (iii) such Member will continue to bear sole responsibility for making its own independent evaluation and monitoring of the risks of its investment in the Company. For purposes of this Section 5.l(d), the Company includes the businesses to be acquired pursuant to the Equity Purchase Agreement. (e) Accredited Investor. Each Member represents and warrants that such Member is either an "accredited investor" (as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act) or has notified the Company in writing prior to his or her acquisition of an Interest that he or she may not be such an "accredited investor." In connection with the execution of this Agreement, each Member agrees to deliver such certificates to that effect as the Managing Members may request, including attestation as to such Person's status as an "accredited investor". Section 5.2 Additional Representations and Warranties of Management Members. Each Management Member represents and warrants that (i) such Management Member has duly executed and delivered this Agreement, (ii) all actions required to be taken by or on behalf of the Management Member to authorize it to execute, deliver and perform its obligations under this Agreement have been taken and this Agreement constitutes such Management Member's legal, valid and binding obligation, enforceable against such Management Member in accordance with the terms hereof, (iii) if the Management Member resides in a state with a community property system, the Management Member has caused his or her spouse, if any, to execute a Spousal Waiver in the form of Exhibit A attached hereto and delivered such Spousal Waiver to the Company, (iv) the execution and delivery of this Agreement and the consummation by the Management Member of the transactions contemplated hereby in the manner contemplated hereby do not and will not conflict with, or result in a breach of any terms of, or constitute a default under, any agreement or instrument or any applicable law, or any judgment, decree, writ, injunction, order or award of any arbitrator, court or governmental authority which is applicable to the Management Member or by which the Management Member or any material portion of his (or her) properties is bound, (v) no consent, approval, authorization, order, filing, registration or qualification of or with any court, governmental authority or third person is required to be obtained by such Management Member in connection with the execution and delivery of this Agreement or the performance of such Management Member's obligations hereunder and (vi) such Management Member is a resident of the state indicated as such Management Member's mailing address on Schedule A hereto. 14 ARTICLE VI CAPITAL ACCOUNTS; CAPITAL CONTRIBUTIONS Section 6.1 Capital Accounts. (a) Establishment of Capital Accounts. A separate capital account (a "Capital Account") shall be established and maintained for each Member. The initial balance in each Member's Capital Account shall be zero. (b) Adjustments. As of the end of each Accounting Period, the balance in each Member's Capital Account shall be adjusted by (i) increasing such balance by such Member's (A) allocable share of Net Profit (allocated in accordance with Section 8.1) and (B) the amount of cash and the Fair Market Value of any property (as of the date of the contribution thereof and net of any liabilities encumbering such property) contributed to the Company by such Member during such Accounting Period, if any, and (ii) decreasing such balance by (A) the amount of cash and the Fair Market Value of any property (as of the date of the distribution thereof and net of any liabilities encumbering such property) distributed to such Member during such Accounting Period and (B) such Member's allocable share of Net Loss (allocated in accordance with Section 8.1). Each Member's Capital Account shall be further adjusted with respect to any special allocations pursuant to Section 8.2. The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations section 1.704-l(b) and section 1.704-2 and shall be interpreted and applied in a manner consistent with such Treasury Regulations. Section 6.2 Initial Capital Contributions. On the Initial Capital Contribution Date, each of the Members shall make a cash contribution to the capital of the Company in the amount equal to such Member's Capital Commitment as set forth on Schedule A. Section 6.3 Additional Capital Contributions. No Member shall be required to make any capital contribution to the Company in respect of the Interests then owned by such Member in excess of such Member's Capital Commitment except (i) as may be provided pursuant to Section 3.9 in the case of an Additional Member or (ii) as may be agreed by such Member and the Company (with the consent of the Managing Members). The provisions of this Section 6.3 are intended solely to benefit the Members and, to the fullest extent permitted by applicable law, shall not be construed as conferring any benefit upon any creditor of the Company (and no such creditor shall be a third-party beneficiary of this Agreement), and no Member shall have any duty or obligation to any creditor of the Company to make any additional capital contributions or to cause the Managing Members to consent to the making of additional capital contributions. Members shall be deemed to have contributed such additional capital upon issuance of additional Interests equal to the cash purchase price for such Interests or, if no cash is paid or there is non-cash consideration, in the amount of the Fair Market Value of such 15 non-cash consideration as determined by the Managing Members in good faith at or prior to issuance of such Interests. Section 6.4 Negative Capital Accounts. Except as required by applicable law, no Member shall be required to make up a negative balance in its Capital Account. ARTICLE VII ADDITIONAL TERMS APPLICABLE TO PROFITS UNITS Section 7.1 Certain Terms. (a) Vesting. Unless otherwise agreed to by the Managing Members and a Management Member, a Management Member's Profits Units shall vest in accordance with the provisions this Section 7.l(a). (i) Service Units. The Service Units shall vest in five equal annual installments on each of the first through fifth anniversaries of the issuance date, subject to the Management Member's continuous provision of services to or for the benefit of the Company until the applicable vesting date. All of a Management Member's Service Units shall also vest immediately prior to the occurrence of a Change in Control. (ii) Exit Units. Subject to the Management Member's continuous provision of services to or for the benefit of the Company until the time of the applicable Exit Event, Management Members shall be entitled to a distribution with respect to a tranche of Exit Units in accordance with the provisions of Section 9.1 if and only if the Exit Value immediately following such Exit Event equals or exceeds the multiple of the Initial Price set forth opposite such tranche in the following table:
Exit Unit Tranche Minimum Exit ----------------- Value Required -------------- ~~A 2.25x the Initial Price B 2.50x the Initial Price C 2.75x the Initial Price~~
16
Exit Unit Tranche Minimum Exit ----------------- Value Required -------------- ~~D 3.00x the Initial Price E 3.25x the Initial Price~~
Any tranche of Exit Units that does not become vested in an Exit Event that is a Change in Control shall automatically be canceled and the holder thereof will not be entitled to any distributions with respect thereto. (iii) Calculations. All calculations required or contemplated by this Section 7.l(a) shall be made in the sole determination of the Managing Members and shall be final and binding on the Company, each Management Member and any Person claiming by or through such Management Member. (b) Benchmark Amount. The Managing Members shall determine the Benchmark Amount with respect to each Profits Unit at the time such Profits Unit is issued to a Management Member, which shall be reflected on Schedule A. The Benchmark Amount with respect to Profits Units issued in connection with the Initial Capital Contribution will be $4.33. Section 7.2 Effects of Termination of Employment on Profits Units. (a) Certain Terminations of Employment. Unless otherwise determined by the Managing Members in a manner more favorable to such Management Member, if a Management Member ceases to provide services to or for the benefit of the Company as a result of a termination of such relationship by the Company or any subsidiary of the Company without Cause, by the Management Member for Good Reason or as a result of the Management Member's death or Disability, then such Member's Profits Units shall be treated as follows: (i) The Company (A) shall determine the amount that would be distributed to each of the Members (including all of the Management Members) if all the assets of the Company were sold for cash in an amount equal to the Fair Market Value thereof at the time of such termination and the net proceeds thereof, after payment of estimated expenses related to such sale transaction and payment of other liabilities of the Company, were distributed in a transaction that constituted a Change in Control pursuant to Section 13.2, taking into account all of the then outstanding Service Units which would be deemed to vest as a result of such deemed transaction, and such portion of the Exit Units as would be entitled to 17 share in such distribution in accordance with the terms thereof, and (B) shall, using the amounts determined in the preceding clause (A), determine the amount that would be distributed to such Management Member with respect to (I) all such Management Member's Service Units that had actually vested on or before such termination in accordance with the terms thereof and, notwithstanding such Management Member's termination, such Management Member's Exit Units as may be entitled to share in such distribution in accordance with the terms thereof (such total amount, the "Aggregate Profits Unit Value") and (II) each Common Unit on a per Unit basis (the "Common Unit Value"). (ii) All of such Member's Profits Units shall be cancelled and such Management Member (or his or her estate or beneficiary) shall receive a number of Common Units equal to the Aggregate Profits Unit Value divided by the Common Unit Value and the Managing Members shall amend Schedule A to reflect such conversion. (iii) The Company shall provide notice to the Management Member as promptly as reasonably practical following the Company's calculations pursuant to this Section 7.2(a) setting forth in reasonable detail such calculations. Any dispute regarding the determination of the Fair Market Value of the Company's assets shall be resolved in the manner set forth in Section 7.2(e). (b) Other Termination of Employment. Unless otherwise determined by the Managing Members in a manner more favorable to such Management Member, if the Management Member ceases to provide services to or for the benefit of the Company for any reason other than one listed in Section 7.2(a), any unvested Service Units and all Exit Units issued to such Management Member shall be cancelled upon such termination, and the Management Member's Profits Units shall be converted into Common Units applying the provisions of Section 7.2(a)(i), Section 7.2(a)(ii), and Section 7.2(a)(iii), but after taking into account the application of the forfeiture provisions of this Section 7.2(b). (c) Inactive Management Members. If a Management Member ceases to provide services to or for the benefit of the Company in connection with the termination of employment of such Member for any reason, the Units held by such Member shall cease to have voting rights and such Members shall be thereafter referred to herein as an "Inactive Management Member" with only the rights of an Inactive Management Member specified herein. Notwithstanding the foregoing, except as otherwise expressly provided herein the economic rights of an Inactive Member shall be unchanged and such Inactive Management Member shall continue to be treated, for U.S. federal, state and local income tax purposes, as a Member to the extent such Inactive Management Member retains any Units following such termination, and any allocations or distributions made to such Inactive Management Member shall be deemed for tax purposes to be made to such Inactive Management Member in its capacity as a Member. 18 (d) Special Distribution. If a Management Member ceases to provide services to or for the benefit of the Company in connection with the termination of employment of such Member for any reason, the Company may distribute to such Management Member, in complete liquidation of his Units, shares of the common stock of Dresser-Rand Group Inc. having a Fair Market Value equal to the Common Unit Value as of the date of the termination. Any such shares shall be subject to the Stockholders Agreement, dated as of October , 2004, among the Company, Dresser-Rand Group Inc. and the other parties thereto, as the same may be amended, modified, supplemented or restated, from time to time (the "Stockholders Agreement"), including the repurchase provisions in such agreement (it being understood that Section 4.2 of the Stockholders Agreement (or successor provision thereto) may provide for a different calculation of "Fair Market Value" under certain circumstances). (e) Disputes Regarding Valuation. Should any Inactive Member (the "Challenging Member") desire to challenge the determination by the Managing Members as to the Fair Market Value of the Company's assets as contemplated by Section 7.2(a)(i), within five (5) days of receiving the notice provided for in Section 7.2(a)(iii), such Challenging Member may notify the Company that such Member wishes to challenge said determination, which notice shall include the valuation asserted by the Challenging Member, and retain Morgan Stanley & Co., Inc. (or such other investment banking firm reasonably agreed upon by the Challenging Member and the Managing Members) to determine such Fair Market Value. The investment bank selected shall be empowered solely to choose between the Fair Market Value determined by the Managing Members and the Fair Market Value asserted by the Challenging Stockholder. The decision of said investment bank shall be delivered in writing to the Managing Members not more than fourteen (14) days after its retention. The cost and expense of the investment bank shall be paid by the Company if the Management Member's asserted Fair Market Value is chosen by such investment bank, and shall be paid by the Challenging Member if the Managing Member's asserted Fair Market Value is so chosen. Failure of a Management Member to exercise its right to challenge a valuation within the time period and in the manner prescribed in this Section 7.2(e) shall be deemed to be an acceptance of the Management Member's determination of Fair Market Value. ARTICLE VIII ALLOCATIONS Section 8.1 Book Allocations of Net Profit and Net Loss. Except as provided in Section 8.2, Net Profit or Net Loss, as the case may be, with respect to any Accounting Period, including each item of income, gain, loss and deduction of the Company, shall be allocated among the Capital Accounts as of the end of such Accounting Period in a manner that as closely as possible gives effect to the provisions of Article IX and the other relevant provisions of this Agreement. 19 Section 8.2 Special Book Allocations. (a) Qualified Income Offset. If any Member unexpectedly receives any adjustment, allocation or distribution described in Treasury Regulations section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) and such adjustment, allocation or distribution causes or increases a deficit in such Member's Capital Account in excess of its obligation to make additional Capital Contributions (a "Deficit"), items of gross income and gain for such Accounting Period and each subsequent Accounting Period shall be specifically allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Deficit of such Member as quickly as possible; provided that an allocation pursuant to this Section 8.2(a) shall be made only if and to the extent that such Member would have a Deficit after all other allocations provided for in this Article VIII have been tentatively made as if this Section 8.2(a) were not in this Agreement. This Section 8.2(a) is intended to comply with the qualified income offset provision of Treasury Regulations section 1.704-l(b)(2)(ii)(d) and shall be interpreted in a manner consistent therewith. (b) Partnership Minimum Gain. Except as otherwise provided in Treasury Regulations section 1.704-2(f), if there is a net decrease in Partnership Minimum Gain during any Accounting Period, each Member shall be specially allocated items of Company income and gain for such Accounting Period in proportion to, and to the extent of, an amount equal to the portion of such Member's share of the net decrease in Partnership Minimum Gain, determined in accordance with Treasury Regulations section 1.704-2(g). This Section 8.2(b) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulations section 1.704-2(f) and shall be interpreted consistently therewith. (c) Restorative Allocations. Any special allocations of items of income or gain pursuant to this Section 8.2 shall be taken into account in computing subsequent allocations pursuant to this Agreement, so that the net amount for any item so allocated and all other items allocated to each Member pursuant to this Agreement shall be equal, to the extent possible, to the net amount that would have been allocated to each Member pursuant to the provisions of this Agreement if such special allocations had not occurred. Section 8.3 Tax Allocations. The income, gains, losses, credits and deductions recognized by the Company shall be allocated among the Members, for U.S. federal, state and local income tax purposes, to the extent permitted under the Code and the Treasury Regulations, in the same manner that each such item is allocated to the Members' Capital Accounts. Notwithstanding the foregoing, the Managing Members shall have the power to make such allocations for U.S. federal, state and local income tax purposes as may be necessary to maintain substantial economic effect, or to insure that such allocations are in accordance with the Members' Interests, in each case within the meaning of the Code and the Treasury Regulations, it being anticipated that no Management Member or Additional 20 Management Member shall be allocated taxable income in excess of the amount of cash to be received by such Member or Additional Member. In accordance with section 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for U.S. federal income tax purposes and its fair market value at the time of contribution. ARTICLE IX DISTRIBUTIONS Section 9.1 Distributions Generally. (a) The Company may make distributions to the Members and Inactive Management Members to the extent that the cash available to the Company is in excess of the reasonably anticipated needs of the business (including reserves). (b) Subject to Section 9.l(c), any such distributions shall be made to the Members or Inactive Management Members in proportion to the number of all Units held by each such Member as of the time of such distribution. For these purposes, Exit Units shall be deemed held by a Management Member if and to the extent that, at the time of such distribution, they are deemed eligible to share in such distribution pursuant to Section 7.l(a)(ii). (c) The cumulative amount of all distributions made pursuant to Section 9.l(b) in respect of any Profits Unit shall be reduced until the total amount of reductions pursuant to this Section 9.l(c) that otherwise would have been distributed in respect of such Profits Unit equals the Benchmark Amount in respect of such Profits Unit, and such amount shall instead be distributed to the holders of the Common Units and the holders of any Profits Units with respect to which the cumulative reduction as a result of this Section 9.l(c) has equaled the applicable Benchmark Amount. Section 9.2 Distributions In Kind. In the event of a distribution of Company property, such property shall for all purposes of this Agreement be deemed to have been sold at its Fair Market Value and the proceeds of such sale shall be deemed to have been distributed to the Members. Section 9.3 No Withdrawal of Capital. Except as otherwise expressly provided in Article XIII, no Member shall have the right to withdraw capital from the Company or to receive any distribution or return of such Member's Capital Contributions. 21 Section 9.4 Withholding. (a) Each Member shall, to the fullest extent permitted by applicable law, indemnify and hold harmless each Person who is or who is deemed to be the responsible withholding agent for U.S. federal, state or local income tax purposes against all claims, liabilities and expenses of whatever nature (other than any claims, liabilities and expenses in the nature of penalties and accrued interest thereon that result from such Person's fraud, willful misfeasance, bad faith or gross negligence) relating to such Person's obligation to withhold and to pay over, or otherwise pay, any withholding or other taxes payable by the Company or as a result of such Member's participation in the Company, provided that such liability of any Member shall not exceed the sum of the balance of such Member's Capital Account, after giving effect to all adjustments hereunder, and the aggregate amount of all prior distributions made to such Member by the Company. (b) Notwithstanding any other provision of this Article IX, (i) each Member hereby authorizes the Company to withhold and to pay over, or otherwise pay, any withholding or other taxes payable by the Company or any of its Affiliates with respect to such Member or as a result of such Member's participation in the Company and (ii) if and to the extent that the Company shall be required to withhold or pay any such taxes (including any amounts withheld from amounts payable to the Company to the extent attributable, in the judgment of the Members, to the such Member's Interest), such Member shall be deemed for all purposes of this Agreement to have received a payment from the Company as of the time such withholding or tax is required to be paid, which payment shall be deemed to be a distribution with respect to such Member's Interest to the extent that the Member (or any successor to such Member's Interest) is then entitled to receive a distribution. To the extent that the aggregate of such payments to a Member for any period exceeds the distributions to which such Member is entitled for such period, such Member shall make a prompt payment to the Company of such amount. (c) If the Company makes a distribution in kind and such distribution is subject to withholding or other taxes payable by the Company on behalf of any Member, such Member shall make a prompt payment to the Company of the amount of such withholding or other taxes by wire transfer. Section 9.5 Restricted Distributions. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution to any Member on account of its Interest if such distribution would violate Section 18-607 of the Delaware Act or other applicable law. Section 9.6 Tax Distributions. If the Company undergoes any transaction resulting in net taxable income to the Company's Members, the Company shall make distributions in an amount equal to such income multiplied by a reasonable tax rate 22 determined by the Managing Members if and to the extent the Managing Members determine in their sole discretion that the Company has funds reasonably available therefor. Section 9.7 Transaction Costs. Any transaction costs, including transfer taxes and legal, accounting and investment banking fees incurred by the Company, First Reserve or any First Reserve Affiliate in connection with a Change in Control, Exit Event or other transaction triggering Tag-Along Rights or Drag-Along Rights shall, unless the applicable purchaser refuses, be borne by the Company in the event of a merger, consolidation or sale of assets and shall otherwise be borne by the Members on a pro rata basis based on the consideration received by each Member in such Change in Control, Exit Event or other transaction. ARTICLE X BOOKS AND RECORDS Section 10.1 Books, Records and Financial Statements. At all times during the continuance of the Company, the Company shall maintain, at its principal place of business, separate books of account for the Company that shall show a true and accurate record of all costs and expenses incurred, all charges made, all credits made and received and all income derived in connection with the operation of the Company's business in accordance with generally accepted accounting principles consistently applied, and, to the extent inconsistent therewith, in accordance with this Agreement. Such books of account, together with a copy of this Agreement and the Certificate, shall at all times be maintained at the principal place of business of the Company and shall be open to inspection and examination at reasonable times by each Member and its duly authorized representative for any purpose reasonably related to such Member's Interest, provided that the Company may maintain the confidentiality of Schedule A. Section 10.2 Filings of Returns and Other Writings; Tax Matters Partner. (a) The Company shall timely file all Company tax returns and shall timely file all other writings required by any governmental authority having jurisdiction to require such filing. Within 90 days after the end of each taxable year (or as soon as reasonably practicable thereafter), the Company shall send to each Person that was a Member at any time during such year copies of Schedule K-1, "Partner's Share of Income, Credits, Deductions, Etc.", or any successor schedule or form, with respect to such Person, together with such additional information as may be necessary for such Person to file his, her or its United States federal income tax returns. (b) First Reserve GP X, L.P. shall be the tax matters partner of the Company, within the meaning of section 6231 of the Code (the "Tax Matters Partner") unless a 23 Majority in Interest votes otherwise. Each Member hereby consents to such designation and agrees that upon the request of the Tax Matters Partner, such Member will execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be necessary or appropriate to evidence such consent. (c) Promptly following the written request of the Tax Matters Partner, the Company shall, to the fullest extent permitted by applicable law, reimburse and indemnify the Tax Matters Partner for all reasonable expenses, including reasonable legal and accounting fees, claims, liabilities, losses and damages incurred by the Tax Matters Partner in connection with any administrative or judicial proceeding with respect to the tax liability of the Members, except to the extent arising from the bad faith, gross negligence, willful violation of law, fraud or breach of this Agreement by such Tax Matters Partner. (d) The provisions of this Section 10.2 shall survive the termination of the Company or the termination of any Member's Interest and shall remain binding on the Members for as long a period of time as is necessary to resolve with the Internal Revenue Service any and all matters regarding the U.S. federal income taxation of the Company or the Members. Section 10.3 Accounting Method. For both financial and tax reporting purposes, the books and records of the Company shall be kept on the accrual method of accounting applied in a consistent manner and shall reflect all Company transactions and be appropriate and adequate for the Company's business. ARTICLE XI LIABILITY, EXCULPATION AND INDEMNIFICATION Section 11.1 Liability. Except as otherwise provided by the Delaware Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Covered Person shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Covered Person. Section 11.2 Exculpation. No Covered Person shall be liable to the Company or any other Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner believed to be within the scope of authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person's gross negligence, willful misconduct or willful breach of this Agreement. 24 Section 11.3 Elimination of Fiduciary Duties. Any duties (including fiduciary duties) of a Covered Person to the Company or to any other Covered Person that would otherwise apply at law or in equity are hereby eliminated to the fullest extent permitted under the Delaware Act and any other applicable law, provided that (i) the foregoing shall not eliminate the obligation of each Covered Person to act in compliance with the express terms of this Agreement and (ii) the foregoing shall not be deemed to eliminate the implied contractual covenant of good faith and fair dealing. Section 11.4 Indemnification. To the fullest extent permitted by applicable law, a Covered Person shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner believed to be within the scope of authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason of such Covered Person's gross negligence, willful misconduct or willful breach of this Agreement with respect to such acts or omissions; provided that any indemnity under this Section 11.4 shall be provided out of and to the extent of Company assets only, and no Covered Person shall have any personal liability on account thereof. Section 11.5 Expenses. To the fullest extent permitted by applicable law, expenses (including, but not limited to, reasonable attorneys' fees, disbursements, fines and amounts paid in settlement) incurred by a Covered Person in defending any claim, demand, action, suit or proceeding relating to or arising out of their performance of their duties on behalf of the Company shall, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall ultimately be determined by a court of competent jurisdiction that the Covered Person is not entitled to be indemnified as authorized in Section 11.4. Section 11.6 Severability. To the fullest extent permitted by applicable law, if any portion of this Article shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify each Covered Person and may indemnify each employee or agent of the Company as to costs, charges and expenses (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Company, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated. 25 ARTICLE XII TRANSFERS OF INTERESTS Section 12.1 Restrictions on Transfers of Interests by Managing Members. No Managing Member may Transfer any Interests including but not limited to any other Member, or by gift, or by operation of law or otherwise, other than a Transfer (a) subject to Section 12.9, to a First Reserve Affiliate or other Affiliate of the Managing Members (provided that, prior to any such transferee ceasing to be a First Reserve Affiliate or other Affiliate of a Managing Member, such transferee shall be obligated to transfer such Interests back to such Managing Member and the Managing Member shall thereupon again be subject to this Agreement) or (b) in accordance with Section 12.7 ("Sales by First Reserve"). Section 12.2 Restrictions on Transfers of Interests by Management Members. No Management Member may Transfer any Interests including, but not limited to, to any other Member, or by gift, or by operation of law or otherwise, provided that Interests may be Transferred (a) pursuant to Section 12.3(a) ("Estate Planning Transfers, Transfers Upon Death"), (b) in accordance with Section 12.6 ("Involuntary Transfers"), (c) pursuant to Section 12.11(a) ("Tag-Along Rights"), (d) pursuant to Section 12.11(b) ("Drag-Along Rights"), (e) to First Reserve or a First Reserve Affiliate on terms accepted by First Reserve or the First Reserve Affiliate, as applicable, or (f) pursuant to the prior written approval of the Managing Members. Section 12.3 Permitted Transfers by Management Members. (a) Estate Planning Transfers; Transfers upon Death of a Management Member. (i) Interests held by Management Members may be transferred for estate- planning purposes of such Management Member, authorized by the prior written approval, which shall not be unreasonably withheld, of the Managing Members, to (A) a trust under which the distribution of the Interests may be made only to beneficiaries who are such Management Member, his or her spouse, his or her parents, members of his or her immediate family or his or her lineal descendants, (B) a charitable remainder trust, the income from which will be paid to such Management Member during his or her life, (C) a corporation, the shareholders of which are only such Management Member, his or her spouse, his or her parents, members of his or her immediate family or his or her lineal descendants or (D) a partnership or limited liability company, the partners or members of which are only such Management Member, his or her spouse, his or her parents, members of his or her immediate family or his or her lineal descendants. Interests may be transferred as a result of the laws of descent. Section 12.4 Effect of Assignment. The Company shall, from the effective date of any permitted assignment of an Interest (or part thereof), thereafter pay all further 26 distributions on account of such Interest (or part thereof) to the assignee of such Interest (or part thereof). Section 12.5 Overriding Provisions. (a) Any Transfer in violation of this Article XII shall be null and void ab initio, and the provisions of Section 12.4 shall not apply to any such Transfers. The approval of any Transfer in any one or more instances shall not limit or waive the requirement for such approval in any other or future instance. (b) All Transfers permitted under this Article XII are subject to this Section 12.5 and Section 12.9. (c) Any proposed Transfer by a Member pursuant to the terms of this Article XII shall, in addition to meeting all of the other requirements of this Agreement, satisfy the following conditions: (i) the Transfer will not be effected on or through an "established securities market" or a "secondary market or the substantial equivalent thereof," as such terms are used in Treasury Regulations section 1.7704-1, and, at the request of the Managing Members, the transferor and the transferee will have each provided the Company a certificate to such effect; and (ii) the proposed transfer will not result in the Company having more than 99 Members, within the meaning of Treasury Regulations section 1.7704-1(h)(l) (determined pursuant to the rules of Treasury Regulations section 1.7704-1(h)(3)). The Managing Members may in their sole discretion waive the condition set forth in clause (ii) of this Section 12.5(c). (d) The Company shall promptly amend Schedule A to reflect any permitted transfers of Interests pursuant to this Article XII. Section 12.6 Involuntary Transfers. Except as otherwise provided in this Agreement, any Transfer of title or beneficial ownership of Interests upon default, foreclosure, forfeit, divorce, court order or otherwise than by a voluntary decision on the part of a Management Member (each, an "Involuntary Transfer") shall be void unless the Management Member complies with this Section 12.6 and enables the Company to exercise in full its rights hereunder. Upon any Involuntary Transfer, the Company shall have the right to purchase such Interests pursuant to this Section 12.6 and the person or entity to whom such Interests have been Transferred (the "Involuntary Transferee") shall have the obligation to sell such Interests in accordance with this Section 12.6. Upon the Involuntary Transfer of any Interest, such Management Member shall promptly (but in no event later than two days after such Involuntary Transfer) furnish written notice to the Company indicating that the Involuntary Transfer has occurred, specifying the name of the Involuntary Transferee, giving a detailed description of the circumstances giving rise to, and stating the legal basis for, the Involuntary Transfer. Upon the receipt of the notice described in the preceding sentence, and for 60 days thereafter, the Company shall 27 have the right to purchase, and the Involuntary Transferee shall have the obligation to sell, all (but not less than all) of the Interests acquired by the Involuntary Transferee for a purchase price equal to the lesser of (i) the Fair Market Value of such Interest and (ii) the amount of the indebtedness or other liability that gave rise to the Involuntary Transfer plus the excess, if any, of the Carrying Value of such Interests over the amount of such indebtedness or other liability that gave rise to the Involuntary Transfer. Section 12.7 Sales by First Reserve. At any time following the closing of the Equity Purchase Agreement, the Managing Members who are First Reserve Affiliates may sell their Interests to a third party; provided that such sale is made in compliance with the provisions of Section 12.9 and Section 12.11. Section 12.8 Assignments. (a) Assignment by the Company. The Company shall have the right to assign to First Reserve all or any portion of its rights and obligations under Section 12.6, provided that any such assignment or assumption is accepted by First Reserve. If the Company has not exercised its right to purchase Interests pursuant to any such Section within 15 days of receipt by the Company of the letter, notice or other occurrence giving rise to such right, then First Reserve shall have the right to require the Company to assign such right. First Reserve shall have the right to assign to one or more of the Managing Members who are First Reserve Affiliates all or any of its rights to purchase Interests pursuant to this Section 12.8. (b) Assignment Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the Members hereto and their respective heirs, legal representatives, successors and assigns, provided that (i) any Management Member may not assign any of its rights or obligations hereunder without the consent of the Managing Members unless, in the case of a Management Member, such assignment is in connection with a Transfer explicitly permitted by this Agreement and, prior to such assignment, such assignee complies with the requirements of Section 12.9 and (ii) the Managing Members may not assign any of their rights or obligations hereunder without the consent of a majority in interest of the Management Members unless such assignment is in connection with a Transfer explicitly permitted by this Agreement and, prior to such assignment, such assignee complies with the requirements of Section 12.9. Section 12.9 Substitute Members. In the event any Management Member or Managing Member Transfers its Interest in compliance with the other provisions of this Article XII (other than Section 12.6), the transferee thereof shall have the right to become a substitute Management Member or substitute Managing Member, as the case may be, but only upon satisfaction of the following: 28 (a) execution of such instruments as the Managing Members deem reasonably necessary or desirable to effect such substitution; and (b) acceptance and agreement in writing by the transferee of the Member's Interest to be bound by all of the terms and provisions of this Agreement and assumption of all obligations under this Agreement (including breaches hereof) applicable to the transferor and in the case of a transferee of a Management Member who resides in a state with a community property system, such transferee causes his or her spouse, if any, to execute a Spousal Waiver in the form of Exhibit A attached hereto. Upon the execution of the instrument of assumption by such transferee and, if applicable, the Spousal Waiver by the spouse of such transferee, such transferee shall enjoy all of the rights and shall be subject to all of the restrictions and obligations of the transferor of such transferee. Section 12.10 Release of Liability. In the event any Member shall sell such Member's entire Interest (other than in connection with a Change in Control) in compliance with the provisions of this Agreement, including, but not limited to, pursuant to the last sentence of Section 12.6, without retaining any interest therein, directly or indirectly, then the selling Member shall, to the fullest extent permitted by applicable law, be relieved of any further liability arising hereunder for events occurring from and after the date of such Transfer, provided that no such Transfer shall relieve any Management Member of his obligations pursuant to Section 3.6 hereof and such obligations shall survive any termination of such Management Member's membership in the Company for the applicable restriction periods set forth in Section 3.6. Section 12.11 Tag-Along and Drag-Along Rights. (a) Tag-Along Rights. If at any time First Reserve proposes to Transfer Interests in the Company, other than any Transfer to a First Reserve Affiliate or other Affiliate of First Reserve, then at least thirty (30) days prior to effecting such Transfer, First Reserve shall give each Management Member written notice of such proposed Transfer. Each Management Member shall then have the right (the "Tag-Along Right"), exercisable by written notice to First Reserve, to participate pro rata in such sale by selling a pro rata portion of such Management Member's Common Units on the same terms (including with respect to representations, warranties and indemnification) as First Reserve, provided that any representations and warranties relating specifically to any Member shall only be made by that Member and any indemnification provided by the Members shall be based on the relative Interests being sold by each Member in the proposed sale, either on a several, not joint, basis or solely with recourse to an escrow established for the benefit of the proposed purchaser and shall be limited to an amount no greater than the amount of proceeds received by such Managing Member; provided, further, that the form of consideration to be received by First Reserve or any Managing Member in connection with the proposed sale may be different from that received by the Management Members so long as the value of the consideration to be received by First 29 Reserve or any Managing Member is the same or less than what they would have received had they received the same form of consideration as the Management Members (as reasonably determined by the Managing Members in good faith). If First Reserve sells less than 100% of its Interests in the Company, and any Management Member exercises its rights under this Section 12.1l(a), participation "pro rata in such sale" shall be based on relative Capital Contributions unless the Managing Members deem the provisions of Article XIII operative. (b) Drag-Along Rights. (i) If at any time First Reserve (A) proposes to Transfer Interests in the Company, other than any Transfer to a First Reserve Affiliate or other Affiliate of First Reserve or (B) desires to effect a Change in Control, First Reserve shall have the right (the "Drag-Along Right"), upon written notice to the other Members, to require that each other Member join pro rata in such sale on the same terms (including with respect to representations, warranties and indemnification) as First Reserve, provided that any representations and warranties relating specifically to any Member shall only be made by that Member and any indemnification provided by the Members shall be based on the relative purchase price being received by each Member in the proposed sale, either on a several, not joint, basis or solely with recourse to an escrow established for the benefit of the proposed purchaser; provided, further, that the form of consideration to be received by First Reserve or any Managing Member in connection with the proposed sale may be different from that received by the Management Members so long as the value of the consideration to be received by First Reserve or any Managing Member is the same or less than what they would have received had they received the same form of consideration as the Management Members (as reasonably determined by the Managing Members in good faith). For purposes of this Section 12.1l(b), for each Member, "joining First Reserve in such sale" shall include voting its Interests consistently with First Reserve, transferring its Interests to a corporation organized in anticipation of such sale in exchange for capital stock of such corporation, executing and delivering agreements and documents that are being executed and delivered by First Reserve and providing such other cooperation as First Reserve may reasonably request. (ii) Any Change in Control may be structured as an auction and may be initiated by the delivery to the Company and the other Members of a written notice that First Reserve has elected to initiate an auction sale procedure. First Reserve shall be entitled to take all steps reasonably necessary to carry out an auction of the Company, including, but not limited to, selecting an investment bank, providing confidential information (pursuant to confidentiality agreements), selecting the winning bidder and negotiating the requisite documentation. The Company and each Member shall provide assistance with respect to these actions as reasonably requested. (iii) If First Reserve sells less than 100% of its Interests in the Company, joining "pro rata in such sale" shall be based on relative Capital Contributions unless the Managing Members deem the provisions of Article XIII operative. 30 (iv) If a Change in Control is structured as a sale of Interests by the Members, rather than a distribution of proceeds by the Company, the purchase agreement governing such Interest sale will have provisions therein that replicate, to the greatest extent possible, the economic result that would have been attained under Article XIII had the Change in Control been structured as a distribution of proceeds. Section 12.12 Right of First Refusal. If at any time a Management Member receives a bona fide offer from any person (an "Offering Party") to purchase Interests held by such Management Member (a "Purchase Offer") that such Management Member wishes to accept, the Management Member shall cause such Purchase Offer to be reduced to writing and a true copy shall be attached to a written notice from the Management Member to the Company and First Reserve given at least thirty (30) days prior to the proposed Transfer and describing in reasonable detail the proposed Transfer, including, but not limited to, the number of Interests to be Transferred, the nature of the Transfer, the consideration to be paid, the proposed closing date, and, if known, the name and address of each prospective purchaser or transferee (such notice, the "Sale Notice"). The Sale Notice shall contain an irrevocable offer to sell such Interests to the Company and First Reserve or any Managing Member at a purchase price equal to the price contained in, and on the same terms and conditions of, the Purchase Offer; provided that the Company, First Reserve or any Managing Member may pay cash to the Management Member in an amount equal to the then-current fair market value of any portion of such offer constituting non-cash consideration offered by the Offering Party in the Purchase Offer. At any time within ten (10) days after the date of receipt by the Company of the Sale Notice, the Company may elect to purchase all or any portion of the Interests covered by the Purchase Offer at the same price and on the same terms and conditions as the Purchase Offer, and at any time prior to the latest date specified for closing in the Purchase Offer. If at the end of such ten (10) day period the Company has not elected to purchase all Interests covered by such Purchase Offer, the Management Member shall redeliver the Sale Notice to First Reserve along with a statement as to the number of Interests to be purchased by the Company (if any). Within ten (10) days after receipt by First Reserve of such redistributed Sale Notice, First Reserve or any Managing Member, by providing notice to the Management Member, may elect to purchase all or part of any remaining Interests covered by the Purchase Offer at the same price and on the same terms and conditions as the Purchase Offer, at any time within the latest date specified for closing in the Purchase Offer. This Section 12.12 shall not apply to any Transfer pursuant to Section 12.3, Section 12.6 and Section 12.11. Section 12.13 Effect of Initial Public Offering or Change in Control. The provisions of Section 12.2 and Section 12.12 shall cease to apply following a Change of Control. The provisions of Section 12.1, Section 12.2, Section 12.6, Section 12.7, Section 12.11 and Section 12.12 shall cease to apply following an Initial Public Offering. 31 ARTICLE XIII DISSOLUTION, LIQUIDATION AND TERMINATION Section 13.1 Dissolving Events. The Company shall be dissolved and its affairs wound up in the manner hereinafter provided upon the happening of any of the following events: (a) the Members shall vote or agree in writing to dissolve the Company pursuant to the required votes set forth in Section 3.3(d); or (b) any event that under applicable law would cause the dissolution of the Company, provided that, unless required by applicable law, the Company shall not be wound up as a result of any such event and the business of the Company shall continue. Notwithstanding the foregoing, the death, retirement, resignation, expulsion, bankruptcy or dissolution of any Member or the occurrence of any other event that terminates the continued membership of any Member in the Company under the Delaware Act shall not, in and of itself, cause the dissolution of the Company. In such event, the remaining Member(s) shall continue the business of the Company without dissolution. Section 13.2 Dissolution and Winding-Up. Upon the dissolution of the Company, the assets of the Company shall be liquidated or distributed under the direction of and to the extent determined by the Managing Members and the business of the Company shall be wound up. Within a reasonable time after the effective date of dissolution of the Company, the Company's assets shall be distributed in the following manner and order: (a) First, to creditors in satisfaction of indebtedness (other than any loans or advances that may have been made by any of the Members to the Company), whether by payment or the making of reasonable provision for payment, and the expenses of liquidation, whether by payment or the making of reasonable provision for payment, including the establishment of reasonable reserves (which may be funded by a liquidating trust) determined by the Managing Members or the liquidating trustee, as the case may be, to be reasonably necessary for the payment of the Company's expenses, liabilities and other obligations (whether fixed, conditional, unmatured or contingent); (b) Second, to the payment of loans or advances that may have been made by any of the Members to the Company; and (c) Third, to the Members in accordance with Section 9.1, taking into account any amounts previously distributed under Section 9.1. provided that no payment or distribution in any of the foregoing categories shall be made until all payments in each prior category shall have been made in full, and provided, further, that if the payments due to be made in any of the foregoing categories exceed the 32 remaining assets available for such purpose, such payments shall be made to the Persons entitled to receive the same pro rata in accordance with the respective amounts due to them. Section 13.3 Distributions in Cash or in Kind. Upon the dissolution of the Company, the Managing Members shall use all commercially reasonable efforts to liquidate all of the Company's assets in an orderly manner and apply the proceeds of such liquidation as set forth in Section 13.2, provided that if in the good faith judgment of the Managing Members, a Company asset should not be liquidated, the Managing Members shall cause the Company to allocate, on the basis of the Fair Market Value of any Company assets not sold or otherwise disposed of, any unrealized gain or loss based on such value to the Members' Capital Accounts as though the assets in question had been sold on the date of distribution and, after giving effect to any such adjustment, distribute such assets in accordance with Section 13.2 as if such Fair Market Value had been received in cash, subject to the priorities set forth in Section 13.2, and provided, further, that the Managing Members shall in good faith attempt to liquidate sufficient Company assets to satisfy in cash (or make reasonable provision for) the debts and liabilities referred to in Section 13.2. Section 13.4 Termination. The Company shall terminate when the winding up of the Company's affairs has been completed, all of the assets of the Company have been distributed and the Certificate has been canceled, all in accordance with the Delaware Act. Section 13.5 Claims of the Members. The Members and former Members shall look solely to the Company's assets for the return of their Capital Contributions, and if the assets of the Company remaining after payment of or due provision for all debts, liabilities and obligations of the Company are insufficient to return such Capital Contributions, the Members and former Members shall have no recourse against the Company or any other Member. ARTICLE XIV INITIAL PUBLIC OFFERING Section 14.1 Rights Upon an Initial Public Offering. In connection with an Initial Public Offering, the Managing Members may, subject only to the approval of First Reserve, convert each Member's Interests through whatever type of transaction(s) the Managing Members select, into an economically equivalent number of shares of common stock or other equity interests, equity-related interests (including options), debt, or any combination thereof, in or of the successor entity to the Company organized in connection with such Initial Public Offering, provided that the Management Members shall not be treated adversely compared with the treatment of the Managing Members. 33 Each Managing Member who or that is a First Reserve Affiliate will have substantially similar rights with respect to the interests of the successor corporation as provided to the Company in the Stockholders Agreement at the time of the closing of the Equity Purchase Agreement, including, but not limited to, registration rights and each Management Member will have substantially similar rights as provided to a "Management Stockholder" (within the meaning of such agreement as in effect from time to time). ARTICLE XV MISCELLANEOUS Section 15.1 Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered personally, (b) mailed, certified or registered mail with postage prepaid, (c) sent by next-day or overnight mail or delivery or (d) sent by fax, as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof): (a) If to the Company: Dresser-Rand Holdings, LLC c/o First Reserve Corporation One Lafayette Place Greenwich, Connecticut 06830 Attention: Thomas R. Denison Telecopy No.: (203) 661-6729 with a copy (which shall not constitute notice) to: Debevoise & Plimpton LLP 919 Third Avenue New York, New York 10022 Attention: David P. Mason, Esq. Facsimile No.: (212) 909-6836 34 (b) If to First Reserve: First Reserve Corporation One Lafayette Place Greenwich, Connecticut 06830 Attention: Thomas R. Denison Telecopy No.: (203) 661-6729 with a copy (which shall not constitute notice) to: Debevoise & Plimpton LLP 919 Third Avenue New York, New York 10022 Attention: David P. Mason, Esq. Facsimile No.: (212) 909-6836 (c) If to a Member, at the address set forth opposite such Member's name on Schedule A attached hereto, or at such other address as such Member may hereafter designate by written notice to the Company. All such notices, requests, demands, waivers and other communications shall be deemed to have been received (w) if by personal delivery, on the day delivered, (x) if by certified or registered mail, on the fifth business day after the mailing thereof, (y) if by next-day or overnight mail or delivery, on the day delivered, or (z) if by fax, on the day delivered, provided that such delivery is confirmed. Section 15.2 Securities Act Matters. Each Member understands that in addition to the restrictions on transfer contained in this Agreement, he or she must bear the economic risks of his or her investment for an indefinite period because the Interests have not been registered under the Securities Act. Section 15.3 Headings. The headings to sections in this Agreement are for purposes of convenience only and shall not affect the meaning or interpretation of this Agreement. Section 15.4 Entire Agreement. This Agreement constitutes the entire agreement among the Members with respect to the subject matter hereof, and supersedes any prior agreement or understanding among them with respect to the matters referred to herein. This Agreement supersedes all prior agreements and understandings among the Members with respect to such matters. There are no representations, warranties, promises, inducements, covenants or undertakings relating to the Units, other than those expressly set forth or referred to herein. 35 Section 15.5 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Section 15.6 Governing Law; Attorneys' Fees. This Agreement and the rights and obligations of the Members hereunder and the Persons subject hereto shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware, without giving effect to the choice of law principles thereof. The substantially prevailing party in any action or proceeding relating to this Agreement shall be entitled to receive an award of, and to recover from the other party or parties, any fees or expenses incurred by him, her or it (including, but not limited to, reasonable attorneys' fees and disbursements) in connection with any such action or proceeding. Section 15.7 Waiver. Except as may otherwise be provided by applicable law in connection with the winding-up, liquidation and dissolution of the Company, each Member hereby irrevocably waives any and all rights that it may have to maintain an action for partition of any of the Company's property. Waiver by any Member hereto of any breach or default by any other Member of any of the terms of this Agreement shall not operate as a waiver of any other breach or default, whether similar to or different from the breach or default waived. No waiver of any provision of this Agreement shall be implied from any course of dealing between the Members hereto or from any failure by any Member to assert its or his or her rights hereunder on any occasion or series of occasions. EACH MEMBER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY. Section 15.8 Invalidity of Provision. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. Section 15.9 Further Actions. Each Member shall execute and deliver such other certificates, agreements and documents, and take such other actions, as may reasonably be requested by the Company in connection with the continuation of the Company and the achievement of its purposes, including, but not limited to, (a) any documents that the Company deems necessary or appropriate to continue the Company as a limited liability company in all jurisdictions in which the Company or its subsidiaries conduct or plan to conduct business and (b) all such agreements, certificates, tax statements and other documents as may be required to be filed in respect of the Company. 36 Section 15.10 Amendments. This Agreement may not be amended, modified or supplemented except by a written instrument signed by the Managing Members; provided that First Reserve may, pursuant to Section 3.9, make such modifications to this Agreement, including Schedule A, as are necessary to admit additional Members. Notwithstanding the foregoing, no amendment, modification or supplement shall adversely affect the Management Members as a class without the consent of a majority in interest (exclusive of Profits Units) of the Management Members. The Company shall notify all Members after any such amendment, modification or supplement, other than any amendments to Schedule A, as permitted herein, has taken effect. Section 15.11 No Third Party Beneficiaries. Except as otherwise provided herein, this Agreement is not intended to confer upon any Person, except for the parties hereto, any rights or remedies hereunder. Section 15.12 Injunctive Relief. The Units cannot readily be purchased or sold in the open market, and for that reason, among others, the Company and the Members will be irreparably damaged in the event this Agreement is not specifically enforced. Each of the Members therefore agrees that, in the event of a breach of any provision of this Agreement, the aggrieved party may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach of this Agreement. Such remedies shall, however, be cumulative and not exclusive, and shall be in addition to any other remedy which the Company or any Member may have. Each Member hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts in New York for the purposes of any suit, action or other proceeding arising out of or based upon this Agreement or the subject matter hereof. Each Member hereby consents to service of process made in accordance with Section 15.1. Section 15.13 Arbitration. Any controversy, dispute, or claim arising out of, in connection with, or in relation to, the interpretation, performance or breach of this Agreement, including, but not limited to, the validity, scope, and enforceability of this section, may at the election of any party, be solely and finally settled by arbitration conducted in New York, New York, by and in accordance with the then existing rules for commercial arbitration of the American Arbitration Association, or any successor organization and with the Expedited Procedures thereof (collectively, the "Rules"). Each of the parties hereto agrees that such arbitration shall be conducted by a single arbitrator selected in accordance with the Rules; provided that such arbitrator shall be experienced in deciding cases concerning the matter which is the subject of the dispute. Any of the parties may demand arbitration by written notice to the other and to the Arbitrator set forth in this Section 15.13 ("Demand for Arbitration"). Each of the parties agrees that if possible, the award shall be made in writing no more than 30 days following the end of the proceeding. Any award rendered by the arbitrator shall be final and binding and judgment may be entered on it in any court of competent jurisdiction. Each of the parties 37 hereto agrees to treat as confidential the results of any arbitration (including, but not limited to, any findings of fact and/or law made by the arbitrator) and not to disclose such results to any unauthorized person. The parties intend that this agreement to arbitrate be valid, enforceable and irrevocable. Section 15.14 Power of Attorney. Each Member hereby constitutes and appoints First Reserve as his or her true and lawful representative and attorney-in-fact in his or her name, place and stead to make, execute, acknowledge, record and file the following: (a) any amendment to the Certificate which may be required by the laws of the State of Delaware because of: (i) any duly made amendment to this Agreement, or (ii) any change in the information contained in such Certificate, or any amendment thereto; (b) any other certificate or instrument which may be required to be filed by the Company under the laws of the State of Delaware or under the applicable laws of any other jurisdiction in which counsel to the Company determines that it is advisable to file; (c) any certificate or other instrument which First Reserve or the Managing Members deems necessary or desirable to effect a termination and dissolution of the Company which is authorized under this Agreement; (d) any amendments to this Agreement, duly adopted in accordance with the terms of this Agreement; and (e) any other instruments that First Reserve may deem necessary or desirable to carry out fully the provisions of this Agreement; provided that any action taken pursuant to this power shall not, in any way, increase the liability of the Members beyond the liability expressly set forth in this Agreement, and provided, further, that where action by the Managing Members is required, such action shall have been taken. Such attorney-in-fact is not by the provisions of this Section 15.13 granted any authority on behalf of the undersigned to amend this Agreement, except as provided for in this Agreement. Such power of attorney is coupled with an interest and shall continue in full force and effect notwithstanding the subsequent death or incapacity of the Member granting such power of attorney. 38 ARTICLE XVI DEFINED TERMS Section 16.1 Definitions. "Accounting Period" means, for the first Accounting Period, the period commencing on the day after the Initial Capital Contribution Date and ending on the next Adjustment Date. All succeeding Accounting Periods shall commence on the day after an Adjustment Date and end on the next Adjustment Date. "Additional Member" has the meaning given in Section 3.9(a). "Adjustment Date" means the last day of each fiscal year of the Company or any other date determined by the Managing Members, in their sole discretion, as appropriate for an interim closing of the Company's books. "Affiliate" means, with respect to a specified Person, any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the specified Person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. "Aggregate Profits Unit Value" has the meaning given in Section 7.2(a)(i). "Agreement" means this Amended and Restated Limited Liability Company Agreement of the Company, as this agreement may be amended, modified, supplemented or restated from time to time after the date hereof. "Benchmark Amount" means the amount set with respect to a Profits Unit pursuant to Section 7.1(b). "Capital Account" has the meaning given in Section 6.l(a). "Capital Commitment" means, with respect to any Member, the amount set forth opposite the name of such Member on Schedule A hereto under the heading "Capital Commitment." "Capital Contribution" means, for any Member, the total amount of cash and the Fair Market Value of any property contributed to the Company by such Member. "Carrying Value" means with respect to any Interest purchased by the Company, the value equal to the Capital Contribution, if any, made by the selling Management 39 Member in respect of any such Interest less the amount of distributions made in respect of such Interest. "Cause" means a termination of a Management Member's employment by the Company or any subsidiary of the Company that employs such individual (or by the Company on behalf of any such subsidiary) due to such Management Member's (i) refusal or neglect to perform substantially his or her employment-related duties, (ii) personal dishonesty, incompetence, willful misconduct or breach of fiduciary duty, (iii) conviction of a crime constituting a felony or his or her willful violation of any applicable law (other than a traffic violation or other offense or violation outside of the course of employment that in no way adversely affects the Company and its subsidiaries or its reputation or the ability of the Management Member to perform his or her employment-related duties or to represent the Company or any subsidiary of the Company that employs such Management Member as determined by the Managing Members in its sole discretion) or (iv) material breach of any written covenant or agreement with the Company or any of its subsidiaries not to disclose any information pertaining to the Company or such subsidiary or not to compete or interfere with the Company or such subsidiary, provided that, in the case of any Management Member who, as of the date of determination, is party to an effective services, severance or employment agreement with the Company or any subsidiary, "Cause" shall have the meaning, if any, specified in such agreement. "Certificate" means the Certificate of Formation of the Company and any and all amendments thereto and restatements thereof filed on behalf of the Company with the office of the Secretary of State of the State of Delaware pursuant to the Delaware Act. "Challenging Member" has the meaning given in Section 7.2(e). "Change in Control" means: (a) a transaction or series of related transactions in which any Person acquires voting equity interests in the Company representing 50% of more of the voting power of the voting equity interests (other than First Reserve Affiliates, Affiliates of the Company or other Affiliates of a Managing Member); (b) any merger, consolidation, amalgamation, recapitalization or similar transaction of the Company that results in any Person other than First Reserve Affiliates, Affiliates of the Company or other Affiliates of a Managing Member acquiring more than 50% of the voting power of the Company or its successor in such merger, consolidation, amalgamation, recapitalization or similar transaction; 40 (c) a transaction or series of related transactions involving the sale, transfer or other disposition of all of the assets of the Company and its subsidiaries, taken as a whole, to one or more Persons or entities that are not, immediately prior to such sale, transfer or other disposition, First Reserve Affiliates, Affiliates of the Company or other Affiliates of any Managing Member. in each case, other than an Initial Public Offering or an initial public offering of a subsidiary of the Company. "Code" means the Internal Revenue Code of 1986, as amended. "Common Unit" means one of a class of Interests in the Company, as described in Section 3.2(a). "Common Unit Value" has the meaning given in Section 7.2(a)(i). "Confidential Information" has the meaning given in Section 3.6(a)(i). "Covered Person" means a current or former Member, a First Reserve Affiliate, an Affiliate of a current or former Member, any officer, director, shareholder, partner, member, employee, representative or agent of a current or former Member or any of their respective Affiliates, or any current or former officer, employee or agent of the Company or any of its Affiliates. "Deficit" has the meaning given in Section 8.2(a). "Delaware Act" means the Delaware Limited Liability Company Act, 6 Del. C. Section 18-101, et seq., as amended from time to time. "Demand for Arbitration" has the meaning given in Section 15.13. "Disability" means any termination of a Management Member's employment under such circumstances that the Managing Members determines to qualify as a Disability for purposes of this Agreement, provided that, in the case of any Management Member who, as of the date of determination, is party to an effective services, severance or employment agreement with the Company or any subsidiary, "Disability" shall have the meaning, if any, specified in such agreement. "Drag-Along Rights" have the meaning given in Section 12.11(b). "Equity Purchase Agreement" means the Equity Purchase Agreement, dated as of August 26, 2004, by and among the Company and Ingersoll-Rand Company Limited, as amended from time to time. 41 "Exit Event" means a merger, consolidation, sale of Interests, sale of assets or other transaction where First Reserve receives cash, cash equivalents or marketable publicly-traded securities in exchange for all or a portion of its Units. "Exit Units" means a sub-class of Profits Units, as described in Section 3.2(b). "Exit Value" means, for each Exit Event, the product of (i) the price per First Reserve Unit received upon an Exit Event, which shall be determined assuming that all proceeds from the Exit Event are distributed in accordance with Section 13.2 and that all Profits Units are issued and outstanding at the date of the Exit Event (but excluding Profits Units (including, but not limited to, Exit Units issued hereunder) that by their terms are canceled in conjunction with the occurrence of such Exit Event) and (ii) the First Reserve Units. "Exit Value" shall be a cumulative number, such that the "Exit Value" resulting from any prior Exit Events shall be added to the "Exit Value" obtained in the current "Exit Event" in order to determine the "Exit Value" following any Exit Event. "Fair Market Value" means, as of any date, (a) for purposes of determining the value of any property contributed to or distributed or sold by the Company, (i) in the case of publicly-traded securities, the average of their last sales prices on the applicable trading exchange or quotation system on each trading day during the five trading-day period ending on such date and (ii) in the case of any other property, the fair market value of such property, as determined in good faith by the Managing Members, or (b) for purposes of determining the value of any Member's Interest in connection with Section 12.6 ("Involuntary Transfers") or otherwise, (i) the fair market value of such Interest as reflected in the most recent appraisal report prepared, at the request of the Managing Members, by an independent valuation consultant or appraiser of recognized national standing, reasonably satisfactory to First Reserve, or (ii) in the event no such appraisal exists or the date of such report is more than one year prior to the date of determination, the fair market value of such Interest as determined in good faith by the Managing Members. "First Reserve" means First Reserve Fund IX, L.P., and First Reserve Fund X, L.P., each a Delaware limited partnership. "First Reserve Affiliate" means each of First Reserve Corporation; First Reserve Fund IX, L.P.; First Reserve Fund X, L.P.; First Reserve GP IX, Inc.; First Reserve GP X, Inc.; any other investment funds managed or advised, directly or indirectly, by First 42 Reserve Corporation (including funds formed after the date hereof), and any subsidiaries, employees, Affiliates, or direct or indirect general partners of any of the foregoing entities. "Good Reason" means a termination of a Management Member's employment by the Management Member following (i) a reduction in the Management Member's annual base salary or incentive compensation opportunity (other than a reduction which is proportionate to the reductions applicable to substantially all senior executives) and (ii) a material reduction in the Management Member's duties and responsibilities, provided that, in the case of any Management Member who, as of the date of determination, is party to an effective services, severance or employment agreement with the Company or any subsidiary, "Good Reason" shall have the meaning, if any, specified in such agreement. "Inactive Management Member" has the meaning given in Section 7.2(c). "Initial Capital Contribution Date" means the date of the closing pursuant to the Equity Purchase Agreement, or, for Management Members, such other date as the Managing Members designate. "Initial Price" means the product of (i) First Reserve's average cost per Unit of the aggregate number of Units held by First Reserve (the "First Reserve Units") times (ii) the total number of First Reserve Units. "Initial Public Offering" or "IPO" means the first underwritten public offering of the common stock of any corporation that is a successor to the Company to the general public through a registration statement filed with the Securities and Exchange Commission that covers (together with prior effective registrations) (i) not less than 25% of the then outstanding shares of common stock of such successor corporation on a fully diluted basis or (ii) shares of such successor corporation that will be traded on any of the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers Automated Quotation System after the close of any such general public offering. "Interest" means a limited liability interest in the Company, which represents the interest of each Member in and to the profits and losses of the Company and such Member's right to receive distributions of the Company's assets, as set forth in this Agreement. "Involuntary Transfer" has the meaning given in Section 12.6. "Involuntary Transferee" has the meaning given in Section 12.6. "Managing Member" has the meaning set forth in the recitals to this Agreement. 43 "Management Members" has the meaning set forth in the recitals to this Agreement. A Management Member shall be deemed not to be a "manager" within the meaning of the Delaware Act. "Majority in Interest" means, as of any given record date or other applicable time, the holders of a majority of the outstanding Units held by Members as of such date that are entitled to vote at a meeting of Members or to consent in writing in lieu of a meeting of Members. "Member" has the meaning set forth in the recitals to this Agreement and includes any Person admitted as an additional or substitute Member of the Company pursuant to this Agreement. "Net Profits" and "Net Losses" means, with respect to any Accounting Period, net income or net loss of the Company for such Accounting Period, determined in accordance with Section 703(a) of the Code, including any items that are separately stated for purposes of Section 702(a) of the Code, as determined in accordance with federal income tax accounting principles with the following adjustments: (a) any income of the Company that is exempt from United States federal income tax shall be included as income; (b) any expenditures of the Company described in Section 705(a)(2)(B) of the Code or treated as expenditures pursuant to Section 1.704-l(b)(2)(iv)(i) of the Treasury Regulations shall be treated as current expenses; (c) any items of income, gain, loss or deduction specially allocated pursuant to this Agreement, including pursuant to Section 8.2, shall be excluded from the determination of Net Profit and Net Loss; and (d) treating as an item of gain (loss) the excess (deficit), if any, of the gross fair market value of property distributed in such Accounting Period over (under) the amount at which such property was carried on the books of the Company. "Offering Party" has the meaning given in Section 12.12. "Officers" has the meaning given in Section 4.5 "Partnership Minimum Gain" has the meaning set forth in sections 1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations. 44 "Person" means any individual, corporation, association, partnership (general or limited), joint venture, trust, estate, limited liability company, or other legal entity or organization. "Profits Units" means either Service or Exit Units, as described in Section 3.2(b). "Purchase Offer" has the meaning given in Section 12.12. "Restriction Period" has the meaning given in Section 3.6(c). "Rules" has the meaning given in Section 15.13. "Sale Notice" has the meaning given in Section 12.12. "Securities Act" means the Securities Act of 1933 as amended from time to time. "Service Units" means a sub-class of Profits Units, as described in Section 3.2 and Section 7.1. "Stockholders Agreement" has the meaning given in Section 7.2(d). "Tag-Along Right" has the meaning given in Section 12.1l(a). "Tax Matters Partner" has the meaning given in Section 10.2(b). "Third Party" means, in respect of any Transfer, one or more Persons other than the Company, a First Reserve Affiliate, any Member, or any of their respective Affiliates. "Transfer" means to directly or indirectly transfer, sell, assign, pledge, hypothecate or otherwise dispose of. "Treasury Regulations" means the Regulations of the Treasury Department of the United States issued pursuant to the Code. "Units" mean any class of Interests provided for herein. 45 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written. MANAGING MEMBERS FIRST RESERVE FUND X, L.P. By: First Reserve GP X, L.P., the General Partner By: First Reserve GP X, Inc., its general partner By: /s/ Thomas R. Denison --------------------- Name: Thomas R. Denison FIRST RESERVE FUND IX, L.P. By: First Reserve GP IX, L.P., the General Partner By: First Reserve GP IX, Inc., its general partner By: /s/ Thomas R. Denison --------------------- Name: Thomas R. Denison EX-10.9 23 y68981exv10w9.txt EX-10.9: EMPLOYMENT AGREEMENT EXHIBIT 10.9 EMPLOYMENT AGREEMENT This Employment Agreement is entered into as of this 27th day of October, 2004 (the "Agreement"), by and among Vincent R. Volpe Jr. ("Executive"), Dresser-Rand Holdings, LLC, a Delaware limited liability company (the "Parent") and Dresser-Rand Group Inc., a Delaware corporation (the "Company"). WHEREAS, pursuant to the Equity Purchase Agreement, dated as of August 25,2004, by and among the Parent and Ingersoll-Rand Company Limited, a company organized under the laws of Bermuda (the "Purchase Agreement"), the Parent will acquire the entities constituting the Dresser-Rand Group (the "Acquisition"); WHEREAS, the Company wishes to employ Executive upon the terms set forth herein effective as of the Closing Date (as such term is defined in the Purchase Agreement); and WHEREAS, Executive wishes to be so employed by the Company. NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: 1. EMPLOYMENT. The Company hereby agrees to employ Executive, and Executive hereby agrees to serve, subject to the provisions of this Agreement, as President and Chief Executive Officer of the Company. On or prior to the Effective Date (as such term is described in Section 19 hereof), the Board of Directors of the Company (the "Board") shall take all action necessary so that, immediately following the Effective Date, Executive shall be appointed to the Board, provided, however, that resignation of Executive from the Board shall not be deemed a breach of this Agreement. Executive shall manage, supervise and control all of the business of the Company, subject only to the supervision of the Board. Executive shall devote substantially all of his business time, attention and energies to the performance of the duties assigned to him hereunder, and to perform such duties faithfully, diligently and to the best of his abilities, and adhere in all material respects to the Company's policies and procedures. Executive agrees to refrain from engaging in any business activity that does, will or could reasonably be deemed to conflict with the best interests of the Company. 2. TERM. This Agreement shall commence on the Effective Date (as such term is described in Section 19 hereof) and continue until terminated in accordance with Section 4 hereof (the "Term"). 3. COMPENSATION. (a) Salary. Executive's salary shall be at the annual rate of not less than $500,000 ("Base Salary"), payable in accordance with the Company's regular payroll practices. All applicable withholding taxes and appropriate deductions for insurance contributions shall be deducted from such payments. The Board of Directors of the Company and the Parent will review the total compensation of Executive at least once every twelve months. (b) Bonus. Bonus compensation to be paid to Executive shall be determined by the Board, pursuant to the terms and conditions of a bonus plan (the "Bonus Plan") to be established by the Company on or before the Effective Date. The Bonus Plan shall provide for a bonus of up to one hundred percent (100%) of Base Salary based upon a sliding scale of financial and operating targets and qualitative targets. At the election of Executive, which shall be made in writing to the Company at least ten (10) business days prior to the anticipated date of payment of any such bonus, the bonus shall be paid in either (i) cash, (ii) shares of common stock of the Company ("Shares"), at the per Share price most recently determined by the Board, or (iii) a combination thereof. For 2004, in addition to the annual bonus described above, the Company shall pay Executive a one-time special bonus equal to the bonus that would have been paid to Executive with respect to such year pursuant to the Ingersoll-Rand performance share program, at the same time as provided by such program. If Executive receives any portion of his bonus payable hereunder in Shares at any time during which the Parent owns shares of the Company, Executive will immediately contribute the Shares he so receives to Parent in exchange for an equivalent number of Parent "Common Units" (as defined in the Limited Liability Company Agreement of the Parent attached as Schedule A (as in effect from time to time, the "Parent LLC Agreement"). Such Common Units shall be issued pursuant to a subscription agreement substantially in the form attached as Schedule B (the "Subscription Agreement"). (c) Benefits. Benefits shall be provided to Executive in accordance with the terms and conditions of such benefit plans and programs as are maintained by the Company for individuals in positions comparable to those of Executive, as such plans are amended from time to time. (d) Vacation. Executive shall be entitled to four (4) weeks of paid vacation during each full year of Executive's employment hereunder, to be taken at a time which does not conflict with Executive's duties hereunder. Accrued vacation may be carried forward and used in subsequent calendar years. (e) Vehicle. The Company shall provide Executive with a leased vehicle of Executive's choice which shall have a purchase price value not to exceed 2 $60,000. The Company will reimburse Executive for all insurance, maintenance and gasoline costs incurred in connection with this vehicle. (f) Expense Reimbursement. Executive shall be reimbursed for the expenses incurred in connection with the performance of Executive's duties hereunder in accordance with the Company's expense reimbursement policies. The Board shall designate an individual to whom Executive shall submit expense reimbursement requests and the approval by such individual of any such request shall be deemed to be conclusive. Executive shall also be reimbursed for reasonable out-of-pocket documented legal fees and expenses incurred in connection with the review and negotiation of this Agreement and the management equity documents that are the subject of Sections 3(g) and 3A of this Agreement and Schedules A, B and D hereto and in connection with matters related thereto. (g) Profits Units. Executive shall receive "Profits Units" under the Parent LLC Agreement representing 40% of the total number of each type of Profits Units available for grant under the Parent LLC Agreement. The total number of Profits Units available for grant under the Parent LLC Agreement shall equal 10% of the total number of Common Units as determined immediately following the Acquisition, and among the Service Units and Exit Unit tranches shall be as follows: Service Units - 3%, Exit Units Tranche A - 3%; Exit Units Tranche B - 1%; Exit Units Tranche C - 1%; Exit Units Tranche D - 1% and Exit Units Tranche E - 1%. 3A. EQUITY PARTICIPATION. (a) Executive shall be offered the opportunity to purchase up to two million dollars of Common Units at the same price per Common Unit paid by funds affiliated with First Reserve Corporation ("FRC") in connection with the Acquisition. Any such Common Units will be acquired pursuant to a Subscription Agreement. (b) If Executive's employment terminates in the manner described in Section 4(a)(i), Section 4(a)(iv) or Section 4(a)(v), and Parent does not distribute Shares to Executive pursuant to Section 7.2(d) of the Parent LLC Agreement within 60 days following such termination, Executive (or Executive's estate, beneficiary or legal representative) may, by written notice delivered on or before the date that is 90 days after the date of such termination, require the Parent to so distribute Shares to Executive, but only those Shares attributable to Executive's Common Units and Service Units, and such Shares shall be subject to, and have the benefits of, the Stockholder Agreement of the Company substantially in the form attached as Schedule D, provided that Parent shall not be required to distribute such Shares until two years following the Acquisition have elapsed (in which case such distribution shall be postponed until the first business day after the expiration of such two-year period). Within 20 days following any such distribution to Executive, the Company shall repurchase all such Shares at the 3 "Repurchase Price" determined as of the date of termination pursuant to the Stockholder Agreement (as if the Company were to repurchase the shares pursuant to Section 4.1 thereof), such repurchase to be consummated no later than 30 days following its receipt of such notice, provided that the Company's obligations to repurchase Shares shall be suspended during the pendency of any dispute regarding the Repurchase Price pursuant to the Stockholder Agreement. (c) Notwithstanding any other provision of this Agreement, the Company shall not be permitted or obligated to make any payment with respect to a repurchase of Shares from Executive if (i) such repurchase (or the payment of a dividend by a Subsidiary to the Company to fund such repurchase) would result in a violation of the terms or provisions of, or result in a default or an event of default under any guaranty, financing or security agreement or document entered into by the Company or any Subsidiary from time to time (the "Financing Agreements"), (ii) such repurchase would violate any of the terms or provisions of the charter or bylaws of the Company or (iii) the Company has no funds legally available to make such payment under applicable law. If payment with respect to a repurchase by the Company otherwise required under Section 3A(b) is prevented by the terms of the preceding sentence: (i) the payment of the applicable Repurchase Price shall be postponed and will take place at the first opportunity thereafter when the Company has funds legally available to make such payment and when such payment will not result in any default, event of default or violation under any of the Financing Agreements or in a violation of any term or provision of the charter or bylaws of the Company, (ii) such repurchase obligation shall rank against other similar repurchase obligations with respect to shares of Common Stock according to priority in time of the effective date of the termination of employment giving rise to such repurchase (provided that any repurchase commitment arising from Disability or death shall have priority over any other repurchase obligation) and (iii) the Repurchase Price (except in the case of a termination for Cause) shall be increased by an amount equal to interest on such Purchase Price for the period during which payment is delayed at a rate equal to 6% per annum. 4. TERMINATION. (a) Notwithstanding any provision of this Agreement to the contrary, the employment of Executive hereunder shall terminate on the first to occur of the following dates: (i) the date of Executive's death or Disability (as defined below); (ii) the date on which the Company shall give Executive written notice of termination for Cause (as defined below); 4 (iii) the date on which Executive gives the Company written notice of Voluntary Termination without Good Reason (as defined below); (iv) the date on which Executive gives the Company written notice of Voluntary Termination with Good Reason (as defined below); (v) the date on which the Company shall give Executive notice of termination for any reason other than the reasons set forth in (i) through (iv) above. (b) In the event Executive's employment hereunder shall terminate for any reason set forth in Section 4(a)(i), (iv) or (v), subject to Executive's compliance with Section 4(e), Executive (or the Trustee named in Executive's Last Will and Testament, if applicable) shall be entitled to receive, as Executive's sole and exclusive remedy, (1) a severance payment equal to twice Executive's Base Salary (determined as of the date of such termination), payable in equal installments at such times as Executive would normally receive payroll checks as if Executive's employment had not been terminated through the severance payment period and subject to withholding of all applicable taxes with respect thereto and deductions for insurance contributions), (2) any earned but unpaid salary and payment for accrued but unused vacation days through the date of termination, (3) any bonus previously earned in full but not yet paid for fiscal years of the Company prior to the fiscal year in which Executive's termination of employment occurs and (4) a pro rata portion (based on the number of days worked by Executive during the fiscal year of the Company in which Executive's termination of employment occurs) of the maximum target bonus payable under the bonus plan in effect for the fiscal year in which Executive's termination of employment occurs, and (5) continued medical, dental, disability and life insurance coverage in the same manner as provided to Executive and his eligible dependents immediately prior to such termination for two years following such termination. (c) The Company shall be entitled at any time, upon written notice to Executive, to terminate Executive's employment hereunder for Cause. In the event that Executive's employment hereunder shall be terminated for Cause, or due to a Voluntary Termination by Executive without Good Reason, Executive shall be entitled to receive, as his sole and exclusive remedy, (1) any earned but unpaid salary and payment for accrued but unused vacation days through the date of termination and (2) any bonus previously earned in full but not yet paid for fiscal years of the Company prior to the fiscal year in which Executive's termination of employment occurs. (d) In the event that Executive's employment hereunder shall be terminated for Cause, or due to a Voluntary Termination by Executive without Good Reason, then the Company, at its sole option, shall be entitled to enforce the covenant not to compete set forth in Section 6 for a period of up to two years following such termination. In the event that the Company elects to trigger such option, the Company 5 agrees to pay Executive, subject to Executive's compliance with Section 4(e) and in addition to any amounts paid pursuant to Section 4(c), an amount equal to twice Executive's Base Salary (determined as of the date of such termination), payable in installments at such times as Executive would normally receive payroll checks as if Executive's employment had not been terminated through the severance payment period and subject to withholding of all applicable taxes with respect thereto and deductions for insurance contributions and to provide continued medical, dental, disability and life insurance coverage in the same manner as provided to Executive and his eligible dependents immediately prior to such termination for two years following such termination of employment. In the event that Executive willfully and materially breaches any of the terms of Article 6 during the aforementioned remainder of the Term, then the Company shall be entitled to immediately cease making further payments to Executive, retroactively treat Executive's termination as a termination for Cause and recover from Executive any consideration that has been paid to Executive pursuant to this Section 4(d) and, in addition, shall be entitled to seek damages and such other relief (including an injunction against Executive) to which it is entitled under the law. Executive agrees that any payment under this Section 4(d) constitutes full and adequate consideration to Executive's obligations under Article 6. (e) As condition to the receipt of any payment made pursuant to Sections 4(b) or (d), the Company, in its sole discretion, may require Executive to first execute a release, in the form attached hereto as Schedule D, releasing the Company, the Parent and their respective subsidiaries and affiliates, and all of their respective officers, directors, employees, and agents, from any and all claims and from any and all causes of action of any kind or character, including, but not limited to, all claims and causes of action arising out of Executive's employment with the Company or the termination of such employment; provided that Executive shall not be expected to waive any rights accruing under this Agreement; and provided further that if Executive refuses to sign such release Executive will still be bound by the provisions of Article 6 as if Executive signed such Release and received payments pursuant to Section 4(b) or (d), as applicable. (f) For purposes of this Agreement, "Cause", shall mean the occurrence of any of the following, as reasonably determined by the Company: (i) the material failure or refusal by Executive to perform his duties hereunder (including, without limitation, Executive's inability to perform such duties as a result of alcohol or drug abuse, chronic alcoholism or drug addiction); (ii) any willful, intentional or grossly negligent act by Executive having the effect of materially injuring the interest, business or prospects of the Company, the Parent or any of their respective subsidiaries or affiliates, or any divisions Executive may manage; 6 (iii) the material violation or material failure by Executive to comply with the Company's material published rules, regulations or policies, as in effect from time to time; (iv) Executive's conviction of a felony offense or a misdemeanor offense involving moral turpitude, fraud, theft or dishonesty; (v) any willful or intentional, misappropriation or embezzlement of the property of the Company, the Parent or any of their respective subsidiaries or affiliates (whether or not a misdemeanor or felony); or (vi) a material breach of any one or more of the covenants of this Agreement by Executive. Provided, however, that in the event that the Company determines to terminate Executive's employment pursuant to clauses (i), (iii) or (vi) of this definition of Cause, such termination shall only become effective if the Company shall first give Executive written notice of such Cause, which notice shall identify in reasonable detail the manner in which the Company believes Cause to exist and indicates the steps required to cure such Cause, if curable, and Executive shall fail within thirty (30) days of such notice to substantially remedy or correct the same. (g) For purposes of this Agreement, "Disability" shall mean Executive's physical or mental in capacity to perform his essential functions with or without reasonable accommodations for a period of not less than 90 days within a given twelve month period with such condition likely to remain continuously and permanently as determined by the Company. (h) For purposes of this Agreement, "Voluntary Termination without Good Reason" shall mean any termination by Executive of Executive's employment with the Company other than a Voluntary Termination with Good Reason. (i) For purposes of the Agreement, "Voluntary Termination with Good Reason" shall mean the termination by Executive of Executive's employment with the Company within forty-five (45) days following the occurrence of any of the following events without his consent which is not cured by the Company as described below: (i) the Company materially and adversely changes Executive's title, duties or responsibilities, provided, however, that resignation of Executive from the Board shall not be deemed such a change; (ii) the Company materially reduces the compensation or benefits to which Executive is entitled under this Agreement; 7 (iii) a relocation of Executive's principal place of employment to a location that is more than fifty miles outside of either (x) Olean, New York or (y) any location that Executive has recommended to the Board as a location for the Company's headquarters; (iv) a material breach of any one or more of the Covenants of this Agreement by the Company or the Parent; or (v) the succession or assignment of this Agreement in violation of Section 20 hereof. Provided, however, that Executive must provide the Company with written notice within fifteen (15) days following the first date on which Executive knows of the occurrence of an event or action constituting Good Reason and the Company shall have thirty (30) days following receipt of such notice to cure such event or action. 5. COMPENSATION IN EVENT OF TERMINATION; SURVIVAL. Upon termination of Executive's employment for any reason, this Agreement shall terminate and the Company shall have no further obligation to Executive except as provided in Section 4, and insurance coverage in accordance with applicable law; provided, however, that the provisions set forth in Sections 6, 7, 8 and 9 hereof shall remain in full force and effect after the termination of Executive's employment, notwithstanding the termination or expiration of this Agreement. 6. CONFIDENTIALITY, NONCOMPETITION, ETC. (a) Executive acknowledges that: (i) the business of the Company is intensely competitive and that Executive's employment by the Company will require that Executive have access to and knowledge of confidential information of the Company, including, but not limited to, formulae, manufacturing processes, distribution systems, research and development methods and techniques, the identity of the Company's customers, the identity of the representatives of customers with whom the Company has dealt, the kinds of services provided by the Company to customers and offered to be performed for potential customers, the manner in which such services are performed or offered to be performed, the service needs of actual or prospective customers, pricing information, information concerning the creation, acquisition or disposition of products and services, customer maintenance listings, computer software applications and other programs, personnel information and other trade secrets (the "Confidential Information"); (ii) the direct or indirect disclosure of any such Confidential Information would place the Company at a competitive disadvantage and would do damage, monetary or otherwise, to the Company's business; (iii) the engaging by Executive in any of the activities prohibited by this Section 6 may constitute improper appropriation and/or use of such information 8 and trade secrets and (iv) the Company engages in its business throughout the world. Confidential Information shall not include information which (i) was publicly available prior to the date hereof, (ii) was known by Executive from a source other than through Executive's employment with the Company, (iii) is acquired by Executive from a third party who was not subject to any restrictions as to its disclosure, or (iv) becomes publicly available subsequent to the date hereof, other than as a result of an action by Executive. Executive expressly acknowledges the trade secret status of the Confidential Information and that the Confidential Information constitutes a protectible business interest of the Company. Accordingly, the Company and Executive agree as follows: (i) For purposes of this Section 6, the business of the Company shall mean the businesses conducted by the Company, the Parent, and each of their respective subsidiaries during the period of Executive's employment by the Company under this Agreement. (ii) During Executive's employment by the Company and at all times following the termination of Executive's employment for any reason, Executive shall not, directly or indirectly, whether individually, as a director, stockholder, owner, partner, employee, principal or agent of any business, or in any other capacity, make known, disclose, furnish, make available or utilize any of the Confidential Information, other than in the proper performance of the duties contemplated herein, or as required by a court of competent jurisdiction or other administrative or legislative body; provided, however, that, in such event, Executive shall promptly notify the Company so that the Company may seek a protective order or other appropriate remedy. If reasonably practicable, Executive shall notify the Company prior to disclosing any of the Confidential Information to a court or other administrative or legislative body. Executive agrees to return all Confidential Information, including all photocopies, extracts and summaries thereof, and any such information stored electronically on tapes, computer disks or in any other manner to the Company at any time upon request by the Company and upon the termination of his employment for any reason. (b) Executive acknowledges that (i) the market for the Company's business extends throughout the United States and the rest of the world, and that Executive, individually and through the Company, is among a limited number of people engaged in the Company's business on a nationwide and global basis and (ii) the restrictive covenants and the other agreements contained herein are an essential part of this Agreement. Executive further represents and warrants and acknowledges and agrees that Executive has been, or has had the opportunity to be, fully advised by counsel in connection with the negotiation, preparation, execution and delivery of this Agreement, (c) During Executive's employment by the Company and following a termination of Executive's employment for the period with respect to which payments are made to Executive pursuant to Section 4(b) or, at the Company's option, Section 4(d), 9 Executive shall not in any city, town, county, parish or other municipality in any state of the United States or anywhere else in the world that the Company, the Parent, or any of their respective subsidiaries, successors or assigns engages in its business, directly or indirectly engage in Competition (as defined below); provided, however, that it shall not be a violation of this sub-paragraph for Executive to become the registered or beneficial owner of up to five percent (5%) of any class of the capital stock of a competing corporation registered under the Securities Exchange Act of 1934,as amended, provided that Executive does not actively participate in the business of such corporation until such time as this covenant expires. (d) For purposes of this Agreement, "Competition" means, for Executive's benefit or for the benefit of any other person, firm or entity, any of the following: (i) engaging in, or otherwise being employed by or acting as a consultant or lender to, or being a director, officer, employee, principal, licensor, trustee, broker, agent, stockholder, member, owner, joint venturer or partner of, any other business or organization anywhere in the world which directly competes with the business of the Company as the same shall be constituted at any time during, or as to which the Company had specific plans known to Executive to engage in during or following, the term of his employment; (ii) soliciting from any customer doing business with the Company as of Executive's termination, business directly competitive with the business of the Company with such customer or such party; (iii) soliciting from any potential customer of the Company known to Executive business directly competitive with the business of the Company which has been the subject of a written or oral bid, offer or proposal by the Company known to Executive, or of substantial preparation known to Executive with a view to making such a bid, proposal or offer, within six (6) months prior to Executive's termination; or (iv) soliciting the employment or services of, or hiring, any person who was known to Executive to be employed by or was known to Executive to be a consultant to the Company upon the termination of Executive's employment, or within six (6) months prior thereto unless such person is not an employee of, or a consultant to, the Company at the time of such solicitation by the Executive and has not been an employee of, or consultant to the Company for six months prior thereto. (e) In the event Executive breaches any of the provisions of this Section 6, the Company, the Parent and their respective subsidiaries, affiliates, successors or assigns shall have the following rights and remedies, each of which shall be 10 independent of the others and severally enforceable, and each of which shall be in addition to, and not in lieu of, any other rights or remedies available to the Company, the Parent or any of their respective subsidiaries, affiliates, successors or assigns at law or in equity under this Agreement or otherwise: (i) The right and remedy to have each and every one of the covenants in this Section 6 specifically enforced and the right and remedy to obtain injunctive relief, it being agreed that any breach or threatened breach of any of the non-competition or other restrictive covenants and agreements contained herein would cause irreparable injury to the Company, the Parent, and their respective subsidiaries, affiliates, successors or assigns and that money damages would not provide an adequate remedy at law to the Company, the Parent and their respective subsidiaries, affiliates, successors or assigns. (ii) Executive acknowledges and agrees that the restrictive covenants and agreements contained herein are reasonable and valid in geographic, temporal and subject matter scope and in all other respects. If, however, any court subsequently determines that any of such covenants or agreements, or any part thereof, is invalid or unenforceable, the remainder of such covenants and agreements shall not thereby be affected and shall be given full effect without regard to the invalid portions. (iii) If any court determines that any of the restrictive covenants and agreements, or any part thereof, is unenforceable because of the duration or scope of such provision, such court shall have the power to reduce the duration or scope of such provision, as the case may be, and, in its reduced form, such provision shall then be enforceable to the maximum extent permitted by applicable law. (f) The Company and Executive agree that both during and after termination of this Agreement they shall not make any statement, written or verbal, in any forum or media, or take any action, that is intended to injure or damage the goodwill, reputation or business prospects of each other. 7. RETURN OF COMPANY PROPERTY. Executive agrees that following the termination of employment for any reason, Executive shall return all property of the Company, the Parent, and any of their respective subsidiaries, affiliates and any divisions thereof Executive may have managed which is then in or thereafter comes into Executive's possession, including, but not limited to, documents, contracts, agreements, plans, photographs, books, notes, electronically stored data and all copies of the foregoing as well as any automobile or other materials or equipment supplied by the Company to Executive. 8. OWNERSHIP OF INVENTIONS. Executive shall disclose promptly, to such person(s) as may be designated by the Company for this purpose from 11 time-to-time, any and all information relating to all Inventions (as hereinafter defined) which Executive makes or conceives or first reduces to practice during his employment hereunder. The term "Inventions" for purposes of this Agreement shall mean all inventions, improvements, works of authorship, formulas, processes, methods, computer programs, databases, and trade secrets (whether patentable or not) made or conceived or first reduced to practice by Executive solely, or jointly with others, (i) in the performance of his duties, (ii) with the use of time, material or facilities of the Company, (iii) which relate to the Company's business, including any actual or anticipated product, method, apparatus, substance or article of manufacture within the Company's field of activity or its research and development efforts, or (iv) which results from or is suggested by work performed for the Company. Executive acknowledges that all Inventions shall be the exclusive property of the Company and, to the extent that the ownership of such Invention does not vest in the Company as a matter of law, he hereby assigns and shall continue to assign to the Company, without further compensation, his entire right, title and interest in and to all such Inventions and shall execute all documents which the Company may deem necessary with respect thereto. Executive shall make, at the sole discretion and expense of the Company, such applications for United States and foreign patents covering any Inventions as the Company may request. Executive shall execute, acknowledge and deliver all papers, including applications, renewals, assignments, and applications for re-issue, and do all other rightful acts which the Company may consider necessary, to secure the Company's full rights to the Inventions to secure patents or other registrations thereon, and to enforce the Company's rights therein. The foregoing obligations shall survive the termination of employment with the Company; provided, however, that the Company will compensate Executive at a reasonable rate after such termination for time or expenses actually spent at the Company's request on such matters. Executive represents, warrants and covenants that: (i) he does not have applications for patents pending, either domestic or foreign, (ii) there is no invention now in his possession which he will claim to be excluded herefrom, (iii) his performance of the foregoing disclosure and assignment provisions, and his performance of his duties as an employee of the Company will not breach any invention assignment or proprietary information agreement with any former employer or other party, and (iv) he will not bring to the Company or use in the performance of his duties with the Company any documents or materials of a former employer or third party that are not generally available to the public or have not been legally transferred to the Company. 9. INDEMNIFICATION. (a) The Company shall indemnify Executive against liability to the fullest extent permitted by the State of New York and the by-laws of the Company for any and all losses, claims and liabilities resulting from Executive's performance of services for the Company under this Agreement; provided, however, that such indemnification shall not extend to any liabilities directly arising from the gross 12 negligence or bad faith actions (or omissions) of Executive or from any material breach by Executive of this Agreement. (b) The Company shall advance, to the extent not prohibited by law, the expenses incurred by Executive in connection with any action, suit or proceeding in which Executive is made a party by reason of Executive's performance of services for the Company under this Agreement (a "Proceeding") and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances (which shall include (x) a written statement from Executive certifying, in good faith, that Executive is entitled to indemnification under the provisions of this Agreement and (y) invoices received by Executive in connection with such expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that could cause Executive to waive any privilege accorded by applicable law shall not be included with the invoice) from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made, without regard to Executive's ability to repay the expenses. Advances shall include any and all reasonable expenses incurred by or on behalf of Executive in pursuing an action to enforce this right of advancement (including expenses incurred preparing and forwarding statements to the Company to support the advances claimed) or any other rights of Executive under this Agreement. Executive shall undertake to the fullest extent permitted by law to repay the advance if and to the extent that it is ultimately determined by a non-appealable judgment rendered by a court of competent jurisdiction or an arbitrator that Executive is not entitled to be indemnified by the Company. 10. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement between the parties with respect to its subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of every kind and nature between them and neither party shall be bound by any term or condition other than as expressly set forth or provided for in such agreements. This Agreement may not be changed or modified except by an agreement in writing, signed by the parties hereto. 11. EACH PARTY THE DRAFTER. This Agreement and the provisions contained herein shall not be construed or interpreted for or against any party to this Agreement because that party drafted or caused that party's legal representative to draft any of its provisions. 12. WAIVER. The failure of either party to this Agreement to enforce any of its terms, provisions or covenants shall not be construed as a waiver of the same or of the right of such party to enforce the same. Waiver by either party hereto of any breach or default by the other party of any term or provision of this Agreement shall not operate as a waiver of any other breach or default. 13 13. SEVERABILITY. In the event that any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remainder of the Agreement shall not in any way be affected or impaired thereby. Moreover, if any one or more of the provisions contained in this Agreement shall be held to be excessively broad as to duration, activity or subject, such provisions shall be construed by limiting and reducing them so as to be enforceable to the maximum extent allowed by applicable law. 14. NOTICES. Any notice given hereunder shall be in writing and shall be deemed to have been given when delivered by messenger or courier service (against appropriate receipt), or mailed by registered or certified mail (return receipt requested), addressed as follows: If to the Company: Paul Clark Drive Olean, NY 14760 If to Executive: 964 Prospect Ave. Olean, NY 14760 or at such other address as shall be indicated to either party in writing. Notice of change of address shall be effective only upon receipt. 15. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of law rules. 16. JURISDICTION; FORUM. By the execution and delivery of this Agreement, the Company and Executive submit to the personal jurisdiction of any state or federal court in the State of New York in any suit or proceeding arising out of or relating to this Agreement. To the extent that either party hereto has or hereafter may acquire any immunity from jurisdiction of any New York court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the parties each irrevocably waives such immunity in respect of its obligations with respect to this Agreement. The parties hereto agree that an appropriate, convenient and non-exclusive forum for any and all disputes between the parties hereto arising out of this Agreement or the transactions contemplated hereby shall be in any state or federal court in the State of New York. THE PARTIES HERETO AGREE THAT THEY HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION TO ENFORCE, OR INTERPRET, THE PROVISIONS OF THIS AGREEMENT. 17. INTERPRETATION. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or 14 interpretation of this Agreement. Whenever the words "include" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." 18. COUNTERPARTS. This Agreement may be executed in one or more counterparts, which, together, shall constitute one and the same agreement. 19. EFFECTIVE DATE. The Effective Date of this Agreement shall be the Closing Date. This Agreement shall have no force or effect prior to the Closing Date. In the event that the Purchase Agreement is terminated and the Acquisition is not consummated, this Agreement shall have no force or effect. 20. REQUIRING SUCCESSOR TO ASSUME. The Company will require any successor or assign to all or substantially all of the business and/or assets of the Company (whether direct or indirect, by purchase of assets, merger, consolidation or otherwise) to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year first above written. DRESSER-RAND GROUP INC. By: /s/ Mark A. McComiskey ------------------------------- Name: Mark A. McComiskey Title: Secretary DRESSER-RAND HOLDINGS, LLC By: /s/ Mark A. McComiskey ------------------------------- Name: Mark A. McComiskey Title: Secretary EXECUTIVE By: /s/ Vincent R. Volpe Jr. ------------------------------- Vincent R. Volpe Jr. 15 EX-10.10 24 y68981exv10w10.txt EX-10.10: EMPLOYMENT AGREEMENT EXHIBIT 10.10 DRESSER-RAND DRESSER-RAND S.A. 31, Bld Winston Churchill 76080 Le Havre cedex 7013 France Telephone 35.25.81.25 Telex 190004 Fax 35.25.19.48 Mr. Jean-Francois Chevrier Impasse des Silex Tailles 78270 BONNIERES Le Havre, July 25, 1990 Sir, We hereby confirm our proposal for an employment contract of unlimited duration under the terms specified in the following. Hiring date: THURSDAY NOVEMBER 1, 1990 or earlier, date to be confirmed by you. Position: Manager in charge of the Le Havre operation You will report directly to the Chairman-CEO of DRESSER-RAND S.A. Hierarchical index: Manager - Position III C - 240 Place of work: Le Havre operation Your salary will be FF 480,000 per year, payable in 12 monthly installments. The minimal wages guaranteed by the National Collective Bargaining Agreement of the Engineers and Managers in the Metal Industry ("Convention Collective Nationale des Ingenieurs et Cadres de la Metallurgie") amount to FF 299,702 per year (corresponding to a monthly work schedule of 166.83 hours). Given the role assigned to you, your presence cannot be determined in a rigid manner and will relate to the needs of your job. Your salary takes these time constraints into account. Your salary will be reviewed after three months from the beginning of your contract and should be increased to FF 500,000 per year. Supposing that you start your employment on November 1, 1990, your new base salary will be effective on February 1, 1991. Starting October 1, 1990 (i.e., the first day of our fiscal year 1991) you will be eligible to participate in DRESSER-RAND's bonus plan, which is based on the Company's financial results. If all the goals are reached, this plan provides for a bonus of 15% of your yearly base salary. The maximum bonus attributable under this plan is 20% of the yearly base salary. Since you did not take part to the elaboration of the 1991 operational plan, you will receive a bonus of no less than 10% of your base salary for the fiscal year 1991. You will be entitled to a company car in conformity with the procedure attached hereto. Page 2 - Contract of Mr. Chevrier Your employment contract will be subject to the rules of the National Bargaining Agreement of the Engineers and Managers in the Metal Industry as well as the internal regulations of the company. A trial period of three months will start on the date when you take office and can possibly be extended for the same duration. The validity of this contract is subject to the results of your medical examination, to be made on the first day when you take office, being positive. We acknowledge that the studies of your daughter make your relocation in the region of Le Havre impossible before the end of the school year 1990/1991, i.e. in June 1991. At this time, the Company will help you with the relocation in accordance with the procedure attached hereto. In addition, the Company will help you pay the rental costs incurred in connection with your temporary installation in an apartment near Le Havre until you relocate and rent/buy a new residence. Such help will be granted until July 31, 1991 at the latest. The details will need to be discussed with J.C. MATTON, the Financial Manager for Europe, who is based in our plant in Le Havre. Please declare your agreement with the above by returning a copy of this letter with the handwritten mention "read and approved" followed by the date and your signature. Yours truly, R.E. TRON JAMES F. CAMPBELL CHAIRMAN-CEO MANAGER, HUMAN RESOURCES-EUROPE DRESSER-RAND S.A. P.J. (7) (GSC LOGO) Regime GSC Social Guaranty for the Business Managers COMPANY DRESSER RAND SA M. LANGREE DIDIER 31 BLD WINSTON CHURCHILL 76600 LE HAVRE CERTIFICATE OF AFFILIATION Reference No. (to be used in any communications) 200029 /56206026900023 The above-mentioned company has been affiliated to the Regime of Social Guaranty for the Business Managers commencing March 1, 1998 in favor of:
Base regime Complementary regime ----------------------------- ----------------------------------- ---------------------------------- Suppl. Suppl AFFILIATED Effective Date Class Duration Effective Class Duration (months) Date (months) ----------------------------- --------------- -------- ---------- -------------- -------- ---------- JEAN FRANCOIS CHEVRIER 01/01/2003 6 6 01/01/2003 H 6 first affiliation 03/01/1998 03/01/1998 ---------------------------------------------------------------------------------------------------- Cancels and replaces the preceding certificate made as of August 24, 1998 ----------------------------------------------------------------------------------------------------
Made in Paris on June 18, 2003 For the insurers of the REGIME GSC GROUPAMA-CCAMA [Signature] EX-12.1 25 y68981exv12w1.txt EX-12.1: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES . . . EXHIBIT 12.1 COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES (IN THOUSANDS)
1999 Jan '00 Feb > Dec '00 2001 2002 2003 ------- ------- ------------- ------- ------- ------- Adjusted pre-tax income from operations (a) 43,304 (13,011) (5,751) (21,488) 27,432 32,064 Fixed Charges: Interest expense 1,939 63 1,386 2,328 4,299 2,854 Rentals (b) 5,641 418 4,603 5,075 5,109 4,547 ------- ------- ------- ------- ------- ------- Total Fixed charges (c) 7,580 481 5,989 7,403 9,408 7,401 ------- ------- ------- ------- ------- ------- Earning before income taxes and fixed charges 50,884 (12,530) 238 28,891 36,840 39,465 ------- ------- ------- ------- ------- ------- Ratio of Earnings to Fixed Charges (d) 6.7x --x --x 3.9x 3.9x 5.3x Deficiency -- 13,011 5,751 -- --

Historical Historical Pro Forma Pro Forma Sept '03 Sept '04 2003 Sept '04 ------- ------- ------- ------- Adjusted pre-tax income from operations (a) (1,504) 43,375 (33,322) (10,770) Fixed Charges: Interest expense 1,911 1,398 59,818 44,121 Rentals (b) 3,410 3,275 4,547 3,275 ------- ------- ------- ------- Total Fixed charges (c) 5,321 4,673 64,365 47,396 ------- ------- ------- ------- Earning before income taxes and fixed charges 3,817 48,048 31,043 36,626 ------- ------- ------- ------- Ratio of Earnings to Fixed Charges (d) --x 10.3x --x --x Deficiency 1,504 -- 33,322 10,770
- ---------- (a) For this purpose, earnings include pre-tax income from continuing operations before equity earnings (losses) in partially-owned affiliates and minority interest. (b) The Company uses one-third of rental expense as an estimation of the interest factor on its rental expense. (c) Fixed charges include interest, whether expenses or capitalized, and an estimate of interest within rental expense. (d) The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. (e) The deficiencies for the periods where earnings were inadequate to cover fixed changes are noted in the schedule above. EX-21.1 26 y68981exv21w1.txt EX-21.1: LIST OF SUBSIDIARIES . . . Exhibit 21.1
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION Dresser-Rand Company New York Dresser-Rand Canada, Inc. Canada Dresser-Rand Compressor Co., Ltd. Shanghai PRC Dresser-Rand Global Services, LLC Delaware Dresser-Rand India Private Limited India Dresser-Rand Italia S.r.l Italy Dresser-Rand (Nigeria) Ltd. Nigeria Dresser-Rand S.A.-France France Dresser-Rand Services srl Mexico Multiphase Power and Processing Delaware Technologies, LLC Dresser-Rand de Mexico S.A. Mexico Dresser-Rand Holding Company Delaware Dresser-Rand International B.V. Netherlands Dresser-Rand Machinery Repair Belgie N.V. Belgium Dresser-Rand Power, Inc. Delaware Dresser-Rand Services B.V. Netherlands Dresser-Rand do Brasil, Ltda. Brazil Paragon Engineering Services, Inc. Texas Dresser-Rand Asia Pacific Sdn. Bhd Malaysia Dresser-Rand de Venezuela, S.A. Venezuela Dresser-Rand Japan, Ltd Japan Dresser-Rand Compressor (Suzhou) Ltd. PRC IR Deutsch Holding GmbH Germany Turbodyne Electric Power Corporation Delaware Dresser-Rand Comercio e Industria Ltda. Brazil PT Dresser-Rand Services Indonesia Indonesia Dresser-Rand A/S Norway Dresser-Rand Czech S.R.O. Czech Republic Dresser-Rand B.V Netherlands Dresser-Rand & Enserv Services Sdn. Bhd. Malaysia Dresser-Rand Overseas Sales Company Delaware Dresser-Rand Sales Company S.A. Switzerland Service Center Uzbekistan Dresser-Rand Company Ltd.-UK UK Dresser-Rand (UK) Ltd. UK Dresser-Rand Services, S.a.r.l Switzerland Dresser-Rand (SEA) Pte. Ltd. Singapore
EX-23.2 27 y68981exv23w2.txt EX-23.2: CONSENT OF PRICEWATERHOUSECOOPERS LLP Exhibit 23.2 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the use in this Registration Statement on Form S-4 of Dresser-Rand Group, Inc. of our reports dated August 12, 2004, except for Notes 19 and 20, which are as of February 10, 2005, relating to the combined financial statements and August 12, 2004 relating to the financial statement schedule of Dresser-Rand Company, which appear in such Registration Statement. We also consent to the references to us under the headings "Experts" and "Selected Historical Combined Financial Information" in such Registration Statement. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Florham Park, New Jersey February 11, 2005 EX-25.1 28 y68981exv25w1.txt EX-25.1: FORM T-1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) [ ] --------------------- CITIBANK, N.A. (Exact name of trustee as specified in its charter) 13-5266470 (I.R.S. employer identification no.) ~~399 PARK AVENUE, NEW YORK, NEW YORK 10043 (Address of principal executive office) (Zip Code)~~

--------------------- DRESSER-RAND GROUP INC. (Exact name of obligor as specified in its charter) DELAWARE 20-1780492 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification Code no.) PAUL CLARK DRIVE 14760 OLEAN, NEW YORK (Address of principal executive offices)

--------------------- 7 3/8% SENIOR SUBORDINATED NOTES DUE 2014 (Title of the indenture securities) ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject.
NAME ADDRESS ---- ------- Comptroller of the Currency.......... Washington, D.C. Federal Reserve Bank of New York..... New York, NY 33 Liberty Street New York, NY Federal Deposit Insurance Corporation........................ Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. None. ITEM 16. LIST OF EXHIBITS. List below all exhibits filed as a part of this Statement of Eligibility. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as exhibits hereto. Exhibit 1 -- Copy of Articles of Association of the Trustee, as now in effect. (Exhibit 1 to T-1 to Registration Statement No. 2-79983) Exhibit 2 -- Copy of certificate of authority of the Trustee to commence business. (Exhibit 2 to T-1 to Registration Statement No. 2-29577). Exhibit 3 -- Copy of authorization of the Trustee to exercise corporate trust powers. (Exhibit 3 to T-1 to Registration Statement No. 2-55519) Exhibit 4 -- Copy of existing By-Laws of the Trustee. (Exhibit 4 to T-1 to Registration Statement No. 33-34988) Exhibit 5 -- Not applicable. Exhibit 6 -- The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939. (Exhibit 6 to T-1 to Registration Statement No. 33-19227.) Exhibit 7 -- Copy of the latest Report of Condition of Citibank, N.A. (as Exhibit 7 -- attached) Exhibit 8 -- Not applicable. Exhibit 9 -- Not applicable. --------------------- 1 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, Citibank, N.A., a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York and State of New York, on the 1st day of, December 2004. CITIBANK, N.A. By /s/ LOUIS PISCITELLI ------------------------------------ Louis Piscitelli 2 EXHIBIT 7 CHARTER NO 1461 COMPTROLLER OF THE CURRENCY NORTHEASTERN DISTRICT REPORT OF CONDITION CONSOLIDATING DOMESTIC AND FOREIGN SUBSIDIARIES OF CITIBANK, N.A OF NEW YORK IN THE STATE OF NEW YORK, AT THE CLOSE OF BUSINESS ON SEPTEMBER 30 2004, PUBLISHED IN RESPONSE TO CALL MADE BY COMPTROLLER OF THE CURRENCY, UNDER TITLE 12, UNITED STATES CODE, SECTION 161. CHARTER NUMBER 1461 COMPTROLLER OF THE CURRENCY NORTHEASTERN DISTRICT.
THOUSANDS OF DOLLARS -------------------- ASSETS Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin.......... $ 15,975,000 Interest-bearing balances................................... 22,130,000 Held-to-maturity securities................................. 47,000 Available-for-sale securities............................... 98,145,000 Federal funds sold in domestic Offices...................... 2,000 Federal funds sold and securities purchased under agreements to resell................................................. 16,592,000 Loans and leases held for sale.............................. 8,764,000 Loans and lease financing receivables: Loans and Leases, net of unearned income.................... 362,798,000 LESS: Allowance for loan and lease losses................... 8,487,000 Loans and leases, net of unearned income, allowance, and reserve................................................... 354,311,000 Trading assets.............................................. 76,074,000 Premises and fixed assets (including capitalized leases).... 4,081,000 Other real estate owned..................................... 63,000 Investments in unconsolidated subsidiaries and associated companies................................................. 408,000 Customers' liability to this bank on acceptances outstanding............................................... 1,394,000 Intangible assets: Goodwill................................. 8,802,000 Intangible assets: Other intangible assets.................. 11,380,000 Other assets................................................ 33,177,000 ------------ TOTAL ASSETS................................................ $651,345,000 ============ LIABILITIES Deposits: In domestic offices............................... $121,163,000 Noninterest-bearing......................................... 22,047,000 Interest-bearing............................................ 99,116,000 In foreign offices, Edge and Agreement subsidiaries, and IBFs...................................................... 315,817,000 Noninterest-bearing......................................... 24,003,000 Interest-bearing............................................ 291,814,000 Federal funds purchased in domestic Offices................. 13,606,000 Federal funds purchased and securities sold under agreements to repurchase............................................. 10,367,000 Demand notes issued to the U.S Treasury..................... 0 Trading liabilities......................................... 40,813,000

THOUSANDS OF DOLLARS -------------------- Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): ss................. 54,040,000 Bank's liability on acceptances executed and outstanding.... 1,394,000 Subordinated notes and debentures........................... 13,430,000 Other liabilities........................................... 29,102,000 ------------ TOTAL LIABILITIES........................................... $599,732,000 ============ MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES.............. 460,000 EQUITY CAPITAL Perpetual preferred stock and related surplus............... 1,950,000 Common stock................................................ 751,000 Surplus..................................................... 25,903,000 Retained Earnings........................................... 24,390,000 ------------ Accumulated other comprehensive income...................... (1,841,000) Other equity capital components............................. 0 ------------ TOTAL EQUITY CAPITAL........................................ $ 51,153,000 ------------ TOTAL LIABILITIES AND EQUITY CAPITAL........................ $651,345,000 ============
I, William Gonska, Vice President of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief. WILLIAM GONSKA, VICE PRESIDENT We, the undersigned directors, attest to the correctness of this Report of Condition We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct. ALAN S. MACDONALD WILLIAM R. RHODES ROBERT B. WILLUMSTAD DIRECTORS EX-99.1 29 y68981exv99w1.txt EX-99.1: FORM OF LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL FOR TENDER OF ALL OUTSTANDING 7 3/8% SENIOR SUBORDINATED NOTES DUE 2014 IN EXCHANGE FOR NEW 7 3/8% SENIOR SUBORDINATED NOTES DUE 2014 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OF DRESSER-RAND GROUP, INC. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2005 (THE "EXPIRATION DATE") UNLESS EXTENDED BY DRESSER-RAND GROUP, INC. The Exchange Agent is: CITIBANK, N.A. For Delivery by Registered or By Facsimile: By Hand Delivery: Overnight Courier Delivery: Citibank, N.A. Citibank, N.A. Citibank, N.A. Attn: Agency & Trust Services 111 Wall Street, 15th Floor 111 Wall Street, 15th Floor (212) 657-1020 New York, NY 10005 New York, NY 10005 Attn: Agency & Trust Services Attn: Agency & Trust Services

For Information or Confirmation by Telephone: (800) 422-2066 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus dated , 200 (the "Prospectus") of Dresser-Rand Group, Inc. (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together describe the Company's offer (the "Exchange Offer") to exchange $420,000,000 aggregate principal amount of its 7 3/8% Senior Subordinated Notes due 2014, guaranteed by certain subsidiaries of the Company (collectively, the "Guarantors"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act") (the "Exchange Notes"), for any and all of its outstanding 7 3/8% Senior Subordinated Notes due 2014 (the "Outstanding Notes"), guaranteed by the Guarantors, in integral multiples of $1,000 from the holders thereof. The Outstanding Notes are unconditionally guaranteed (the "Outstanding Guarantees") by the Guarantors on a senior subordinated basis, and the Exchange Notes will be unconditionally guaranteed (the "New Guarantees") by the Guarantors on a senior subordinated basis. Upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal, the Guarantors offer to issue the New Guarantees with respect to all Exchange Notes issued in the Exchange Offer in exchange for the Outstanding Guarantees of the Outstanding Notes for which such Exchange Notes are issued in the Exchange Offer. Throughout this Letter of Transmittal, unless the context otherwise requires, references to the "Exchange Offer" include the Guarantors' offer to exchange the New Guarantees for the Outstanding Guarantees, references to the "Exchange Notes" include the related New Guarantees and references to the "Outstanding Notes" include the related Outstanding Guarantees. The terms of the Exchange Notes are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Outstanding Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof (except as provided herein or in the Prospectus) and are not subject to any covenant regarding registration under the Securities Act. Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus. YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT, WHOSE ADDRESS AND TELEPHONE NUMBER APPEAR ON THE FRONT PAGE OF THIS LETTER OF TRANSMITTAL. The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. List below the Outstanding Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and aggregate principal amounts should be listed on a separate signed schedule affixed hereto.
- ------------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF OUTSTANDING NOTES TENDERED HEREWITH - ------------------------------------------------------------------------------------------------------------------------------ AGGREGATE PRINCIPAL NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED PRINCIPAL AMOUNT (PLEASE FILL IN) NUMBER(S)* BY OUTSTANDING NOTES* TENDERED** - ------------------------------------------------------------------------------------------------------------------------------ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Total: - ------------------------------------------------------------------------------------------------------------------------------ * Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Outstanding Notes. See instruction 2. - ------------------------------------------------------------------------------------------------------------------------------
Holders of Outstanding Notes whose Outstanding Notes are not immediately available or who cannot deliver all other required documents to the Exchange Agent on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Outstanding Notes according to the guaranteed delivery procedures set forth in the Prospectus. Unless the context otherwise requires, the term "holder" for purposes of this Letter of Transmittal means any person in whose name Outstanding Notes are registered or any other person who has obtained a properly completed bond power from the registered holder or any person whose Outstanding Notes are held of record by The Depository Trust Company ("DTC"). [ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name of Registered Holder(s) --------------------------------------------------- Name of Eligible Guarantor Institution that Guaranteed Delivery ---------------- Date of Execution of Notice of Guaranteed Delivery ----------------------------- If Delivered by Book-Entry Transfer: Name of Tendering Institution -------------------------------------------------- Account Number ----------------------------------------------------------------- Transaction Code Number -------------------------------------------------------- 2 [ ] CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO A PERSON OTHER THAN THE PERSON SIGNING THIS LETTER OF TRANSMITTAL: Name --------------------------------------------------------------------------- Address --------------------------------------------------------------------------- [ ] CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO AN ADDRESS DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL: Name --------------------------------------------------------------------------- Address --------------------------------------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OUTSTANDING NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: --------------------------------------------------------------------------- Address: --------------------------------------------------------------------------- If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Outstanding Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. A broker-dealer may not participate in the Exchange Offer with respect to Outstanding Notes acquired other than as a result of market-making activities or other trading activities. Any holder who is an "affiliate" of the Company or who has an arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, or any broker-dealer who purchased Outstanding Notes from the Company to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act must comply with the registration and prospectus delivery requirements under the Securities Act. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of the Outstanding Notes indicated above. Subject to, and effective upon, the acceptance for exchange of all or any portion of the Outstanding Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Outstanding Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of the Company, in connection with the Exchange Offer) to cause the Outstanding Notes to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Outstanding Notes and to acquire the Exchange Notes issuable upon the exchange of such tendered Outstanding Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Outstanding Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of the tendered Outstanding Notes or transfer ownership of such Outstanding Notes on the account books maintained by the book-entry transfer facility. The undersigned further agrees that acceptance of any and all validly 3 tendered Outstanding Notes by the Company and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement dated as of October 29, 2004, among the Company, the guarantors named therein and Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc., UBS Securities LLC, Bear, Sterns & Co. Inc., Natexis Bleichroeder Inc., Sovereign Securities Corporation, LLC and Daiwa Securities America Inc., as representatives of the placement agents named in Schedule I to the corresponding Purchase Agreement (the "Registration Rights Agreement"), and that the Company shall have no further obligations or liabilities thereunder except as provided in Section 6 of such agreement. The undersigned will comply with its obligations under the Registration Rights Agreement. The undersigned has read and agrees to all terms of the Exchange Offer. The Exchange Offer is subject to certain conditions as set forth in the Prospectus under the caption "The Exchange Offer -- Conditions to the Exchange Offer." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the Outstanding Notes tendered hereby and, in such event, the Outstanding Notes not exchanged will be returned to the undersigned at the address shown above, promptly following the expiration or termination of the Exchange Offer. In addition, the Company may amend the Exchange Offer at any time prior to the Expiration Date if any of the conditions set forth under "The Exchange Offers -- Conditions to the Exchange Offer" occur. The undersigned understands that tenders of Outstanding Notes pursuant to any one of the procedures described in the Prospectus and in the instructions attached hereto will, upon the Company's acceptance for exchange of such tendered Outstanding Notes, constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. By tendering the Outstanding Notes and executing this Letter of Transmittal, the undersigned represents that (1) the Exchange Notes acquired in the exchange will be obtained in the ordinary course of business of the undersigned, (2) the undersigned has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such Exchange Notes, (3) the undersigned is not an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act and (4) if the undersigned or the person receiving such Exchange Notes, whether or not such person is the undersigned, is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes. If the undersigned or the person receiving such Exchange Notes, whether or not such person is the undersigned, is a broker-dealer that will receive Exchange Notes for its own account in exchange for Outstanding Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that (1) it has not entered into any arrangement or understanding with the Company or an affiliate of the Company to distribute the Exchange Notes and (2) it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. If the undersigned is a person in the United Kingdom, the undersigned represents that its ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business. An "affiliate" of the Company or any holder of Outstanding Notes tendering its Outstanding Notes in the Exchange Offer with the intention to participate, or for the purpose of participating, in a distribution of the Exchange Notes or any broker-dealer that acquired the Outstanding Notes directly from the Company and not as a result of market-making activities or other trading activities (i) cannot rely on the position of the staff of the Securities and Exchange Commission enunciated in its interpretive letter with respect to Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated (available June 5, 1991) and Shearman & Sterling (available July 2, 1993) or similar interpretive letters and (ii) absent an exemption under the Securities Act, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the Exchange Notes. Such broker-dealers may not use the prospectus for the exchange offer in connection with such resales. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tendered Outstanding Notes may be withdrawn at any time prior to the Expiration Date in accordance with the terms of this Letter of Transmittal. Except as stated in the Prospectus, this tender is irrevocable. 4 Certificates for all Exchange Notes delivered in exchange for tendered Outstanding Notes and any Outstanding Notes delivered herewith but not exchanged, and registered in the name of the undersigned, shall be delivered to the undersigned at the address shown below the signature of the undersigned. The undersigned, by completing the box entitled "Description of Outstanding Notes Tendered Herewith" above and signing this letter, will be deemed to have tendered the Outstanding Notes as set forth in such box. 5 TENDERING HOLDER(S) SIGN HERE (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9) MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S) FOR OUTSTANDING NOTES HEREBY TENDERED OR IN WHOSE NAME OUTSTANDING NOTES ARE REGISTERED ON THE BOOKS OF DTC OR ONE OF ITS PARTICIPANTS, OR BY ANY PERSON(S) AUTHORIZED TO BECOME THE REGISTERED HOLDER(S) BY ENDORSEMENTS AND DOCUMENTS TRANSMITTED HEREWITH. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH THE FULL TITLE OF SUCH PERSON. SEE INSTRUCTION 3. - - ----------------------------------------------------------------------- - - -------------------------------------------------------------------------------- (SIGNATURE(S) OF HOLDER(S)) Date --------------------------------------------------------------------------- Name(s) ------------------------------------------------------------------------ (PLEASE PRINT) Capacity (full title) ----------------------------------------------------------- Address ------------------------------------------------------------------------ (INCLUDING ZIP CODE) Daytime Area Code and Telephone No. -------------------------------------------- Taxpayer Identification No. ---------------------------------------------------- GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTION 3) - - Authorized Signature - ------------------------------------------------ Date --------------------------------------------------------------------------- Name --------------------------------------------------------------------------- Title -------------------------------------------------------------------------- Name of Firm ------------------------------------------------------------------- Address of Firm ---------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No. ---------------------------------------------------- 6 SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if Exchange Notes or Outstanding Notes not tendered are to be issued in the name of someone other than the registered holder of the Outstanding Notes whose name(s) appear(s) above. Issue: [ ] Outstanding Notes not tendered to: [ ] Exchange Notes to: Name(s) - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Daytime Area Code and Telephone No. - -------------------------------------------------------------------------------- ------------------------------------------------------ Tax Identification No. ------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if Exchange Notes or Outstanding Notes not tendered are to be sent to someone other than the registered holder of the Outstanding Notes whose name(s) appear(s) above, or such registered holder(s) at an address other than that shown above. Mail: [ ] Outstanding Notes not tendered to: [ ] Exchange Notes to: Name(s) - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No. - -------------------------------------------------------------------------------- ------------------------------------------------------ 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. A holder of Outstanding Notes may tender the same by (i) properly completing and signing this Letter of Transmittal or a facsimile hereof (all references in the Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates, if applicable, representing the Outstanding Notes being tendered and any required signature guarantees and any other documents required by this Letter of Transmittal, to the Exchange Agent at its address set forth above on or prior to the Expiration Date, or (ii) complying with the procedure for book-entry transfer described below, or (iii) complying with the guaranteed delivery procedures described below. Holders of Outstanding Notes may tender Outstanding Notes by book-entry transfer by crediting the Outstanding Notes to the Exchange Agent's account at DTC in accordance with DTC's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer. DTC participants that are accepting the Exchange Offer should transmit their acceptance to DTC, which will edit and verify the acceptance and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will then send a computer-generated message (an "Agent's Message") to the Exchange Agent for its acceptance in which the holder of the Outstanding Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter of Transmittal, the DTC participant confirms on behalf of itself and the beneficial owners of such Outstanding Notes all provisions of this Letter of Transmittal (including any representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent. DELIVERY OF THE AGENT'S MESSAGE BY DTC WILL SATISFY THE TERMS OF THE EXCHANGE OFFER AS TO EXECUTION AND DELIVERY OF A LETTER OF TRANSMITTAL BY THE PARTICIPANT IDENTIFIED IN THE AGENT'S MESSAGE. DTC PARTICIPANTS MAY ALSO ACCEPT THE EXCHANGE OFFER BY SUBMITTING A NOTICE OF GUARANTEED DELIVERY THROUGH ATOP. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OUTSTANDING NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT OR HAND DELIVERY SERVICE BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY DELIVERY. NO OUTSTANDING NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY. Holders whose Outstanding Notes are not immediately available or who cannot deliver their Outstanding Notes and all other required documents to the Exchange Agent on or prior to the Expiration Date or comply with book-entry transfer procedures on a timely basis must tender their Outstanding Notes pursuant to the guaranteed delivery procedure set forth in the Prospectus. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Guarantor Institution (as defined below); (ii) prior to the Expiration Date, the Exchange Agent must have received from such Eligible Guarantor Institution a letter, telegram or facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) setting forth the name and address of the tendering holder, the names in which such Outstanding Notes are registered, and, if applicable, the certificate numbers of the Outstanding Notes to be tendered; and (iii) all tendered Outstanding Notes (or a confirmation of any book-entry transfer of such Outstanding Notes into the Exchange Agent's account at a book-entry transfer facility) as well as this Letter of Transmittal and all other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three New York Stock Exchange trading days after the date of execution of such letter, telegram or facsimile transmission, all as provided in the Prospectus. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Outstanding Notes for exchange. 8 2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Outstanding Notes will be accepted only in the principal amount of $1,000 and integral multiples of $1,000. If less than the entire principal amount of Outstanding Notes evidenced by a submitted certificate is tendered, the tendering holder must fill in the aggregate principal amount of Outstanding Notes tendered in the box entitled "Description of Outstanding Notes Tendered Herewith." A newly issued certificate for the Outstanding Notes submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All Outstanding Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise clearly indicated. If not yet accepted, a tender pursuant to the Exchange Offer may be withdrawn prior to the Expiration Date. To be effective with respect to the tender of Outstanding Notes, a written notice of withdrawal must: (i) be received by the Exchange Agent at the address for the Exchange Agent set forth above before the Company notifies the Exchange Agent that it has accepted the tender of Outstanding Notes pursuant to the Exchange Offer; (ii) specify the name of the person who tendered the Outstanding Notes to be withdrawn; (iii) identify the Outstanding Notes to be withdrawn (including the principal amount of such Outstanding Notes, or, if applicable, the certificate numbers shown on the particular certificates evidencing such Outstanding Notes and the principal amount of Outstanding Notes represented by such certificates); (iv) include a statement that such holder is withdrawing its election to have such Outstanding Notes exchanged; and (v) be signed by the holder in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantee). The Exchange Agent will return the properly withdrawn Outstanding Notes promptly following receipt of notice of withdrawal. If Outstanding Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Outstanding Notes or otherwise comply with the book-entry transfer facility's procedures. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by the Company, and such determination will be final and binding on all parties. Any Outstanding Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Outstanding Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Outstanding Notes tendered by book-entry transfer into the Exchange Agent's account at the book entry transfer facility pursuant to the book-entry transfer procedures described above, such Outstanding Notes will be credited to an account with such book-entry transfer facility specified by the holder) promptly after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by following one of the procedures described under the caption "The Exchange Offer -- Procedures for Tendering Outstanding Notes" in the Prospectus at any time prior to the Expiration Date. 3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the Outstanding Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Outstanding Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of Outstanding Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Outstanding Notes. When this Letter of Transmittal is signed by the registered holder or holders (which term, for the purposes described herein, shall include the book-entry transfer facility whose name appears on a security listing as the owner of the Outstanding Notes) of Outstanding Notes listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required. If this Letter of Transmittal is signed by a person other than the registered holder or holders of the Outstanding Notes listed, such Outstanding Notes must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to the Company and duly executed by the registered holder, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the Outstanding Notes. 9 If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Guarantor Institution. Signatures on this Letter of Transmittal must be guaranteed by an Eligible Guarantor Institution, unless Outstanding Notes are tendered: (i) by a holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter of Transmittal; or (ii) for the account of an Eligible Guarantor Institution (as defined below). In the event that the signatures in this Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by an eligible guarantor institution which is a member of a firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an "Eligible Guarantor Institution"). If Outstanding Notes are registered in the name of a person other than the signer of this Letter of Transmittal, the Outstanding Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company, in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Guarantor Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, as applicable, the name and address to which the Exchange Notes or certificates for Outstanding Notes not exchanged are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the tax identification number of the person named must also be indicated. Holders tendering Outstanding Notes by book-entry transfer may request that Outstanding Notes not exchanged be credited to such account maintained at the book-entry transfer facility as such holder may designate. 5. TRANSFER TAXES. The Company shall pay all transfer taxes, if any, applicable to the transfer and exchange of Outstanding Notes to it or its order pursuant to the Exchange Offer, except in the case of deliveries of certificates for Outstanding Notes for Exchange Notes that are to be registered or issued in the name of any person other than the holder of Outstanding Notes tendered thereby. If a transfer tax is imposed for any reason other than the transfer and exchange of Outstanding Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exception therefrom is not submitted herewith the amount of such transfer taxes will be billed directly to such tendering holder. 6. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 7. MUTILATED, LOST, STOLEN OR DESTROYED SECURITIES. Any holder whose Outstanding Notes have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated below for further instructions. 8. SUBSTITUTE FORM W-9 Each holder of Outstanding Notes whose Outstanding Notes are accepted for exchange (or other payee) is generally required to provide a correct taxpayer identification number ("TIN") (e.g., the holder's Social Security or federal employer identification number) and certain other information, on Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify that the holder (or other payee) is not subject to backup withholding. 10 Failure to provide the information on the Substitute Form W-9 may subject the holder (or other payee) to a $50 penalty imposed by the Internal Revenue Service and 28% federal income tax backup withholding on payments made in connection with the Outstanding Notes. The box in Part 3 of the Substitute Form W-9 may be checked if the holder (or other payee) has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked and a TIN is not provided by the time any payment is made in connection with the Outstanding Notes, 28% of all such payments will be withheld until a TIN is provided and, if a TIN is not provided within 60 days, such withheld amounts will be paid over to the Internal Revenue Service. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth above. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number indicated above. 10. IRREGULARITIES. All questions as to the validity, form, eligibility (including time of receipt), and acceptance of Letters of Transmittal or Outstanding Notes will be resolved by the Company, whose determination will be final and binding. The Company reserves the absolute right to reject any or all Letters of Transmittal or tenders that are not in proper form or the acceptance of which would, in the opinion of the Company's counsel, by unlawful. The Company also reserves the right to waive any irregularities or conditions of tender as to the particular Outstanding Notes covered by any Letter of Transmittal or tendered pursuant to such Letter of Transmittal. Neither the Company, the Exchange Agent nor any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Company's interpretation of the terms and conditions of the Exchange Offer shall be final and binding. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE OR COPY THEREOF (TOGETHER WITH CERTIFICATES OF OUTSTANDING NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under U.S. federal income tax law, a holder of Outstanding Notes whose Outstanding Notes are accepted for exchange may be subject to backup withholding unless the holder provides [Citibank, N.A.], as Paying Agent (the "Paying Agent"), through the Exchange Agent with either (i) such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 attached hereto, certifying (A) that the TIN provided on Substitute Form W-9 is correct (or that such holder of Outstanding Notes is awaiting a TIN), (B) that the holder of Outstanding Notes is not subject to backup withholding because (x) such holder of Outstanding Notes is exempt from backup withholding, (y) such holder of Outstanding Notes has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (z) the Internal Revenue Service has notified the holder of Outstanding Notes that he or she is no longer subject to backup withholding and (C) that the holder of Outstanding Notes is a U.S. person (including a U.S. resident alien); or (ii) an adequate basis for exemption from backup withholding. If such holder of Outstanding Notes is an individual, the TIN is such holder's social security number. If the Paying Agent is not provided with the correct TIN, the holder of Outstanding Notes may also be subject to certain penalties imposed by the Internal Revenue Service. Certain holders of Outstanding Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. However, exempt holders of Outstanding Notes should indicate their exempt status on Substitute Form W-9. For example, a corporation should complete the Substitute Form W-9, providing its TIN and indicating that it is exempt from backup withholding. In order for a foreign individual to qualify as an exempt recipient, the holder must submit a Form W-8BEN, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8BEN can be obtained from the Paying Agent. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. 11 If backup withholding applies, the Paying Agent is required to withhold 28% of any payments made to the holder of Outstanding Notes or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service, provided the required information is furnished. The box in Part 3 of the Substitute Form W-9 may be checked if the surrendering holder of Outstanding Notes has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the holder of Outstanding Notes or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Paying Agent will withhold 28% of all payments made prior to the time a properly certified TIN is provided to the Paying Agent and, if the Paying Agent is not provided with a TIN within 60 days, such amounts will be paid over to the Internal Revenue Service. The holder of Outstanding Notes is required to give the Paying Agent the TIN (e.g., social security number or employer identification number) of the record owner of the Outstanding Notes. If the Outstanding Notes are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 12 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Guidelines for Determining the Proper Identification Number for the Payee (You) to Give the Payer. -- Social security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. All "Section" references are to the Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue Service.
- --------------------------------------------------------------- GIVE THE SOCIAL SECURITY NUMBER FOR THIS TYPE OF ACCOUNT: OF -- - --------------------------------------------------------------- 1. Individual The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined fund, the first individual on the account.(1) 3. Custodian Account of a minor The minor(2) (Uniform Gift to Minors Act) 4. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust that is The actual owner(1) not a legal or valid trust under state law 5. Sole proprietorship The owner(3) - ---------------------------------------------------------------

- --------------------------------------------------------------- GIVE THE SOCIAL SECURITY NUMBER FOR THIS TYPE OF ACCOUNT: OF -- - --------------------------------------------------------------- 6. Sole proprietorship The owner(3) 7. A valid trust, estate, or The legal entity(4) pension trust 8. Corporate The corporation 9. Association, club, religious, The organization charitable, educational, or other tax-exempt organization account 10. Partnership The partnership 11. A broker or registered The broker or nominee nominee 12. Account with the Department The public entity of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - ---------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or your employer identification number (if you have one). (4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 13 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Card, at the local Social Administration office, or Form SS-4, Application for Employer Identification Number, by calling 1 (800) TAX-FORM, and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from withholding include: - An organization exempt from tax under Section 501(a), an individual retirement account (IRA), or a custodial account under Section 403(b)(7), if the account satisfies the requirements of Section 401(f)(2). - The United States or a state thereof, the District of Columbia, a possession of the United States, or a political subdivision or wholly-owned agency or instrumentality of any one or more of the foregoing. - An international organization or any agency or instrumentality thereof. - A foreign government and any political subdivision, agency or instrumentality thereof. Payees that may be exempt from backup withholding include: - A corporation. - A financial institution. - A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a). - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A middleman known in the investment community as a nominee or custodian. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A foreign central bank of issue. - A trust exempt from tax under Section 664 or described in Section 4947. Payments of dividends and patronage dividends generally exempt from backup withholding include: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. - Payments of patronage dividends not paid in money. - Payments made by certain foreign organizations. - Section 404(k) payments made by an ESOP. Payments of interest generally exempt from backup withholding include: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - Payments described in Section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451. - Payments made by certain foreign organizations. - Mortgage interest paid to you. Certain payments, other than payments of interest, dividends, and patronage dividends, that are exempt from information reporting are also exempt from backup withholding. For details, see the regulations under sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N. EXEMPT PAYEES DESCRIBED ABOVE MUST FILE FORM W-9 OR A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART 2 OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. PRIVACY ACT NOTICE -- Section 6109 requires you to provide your correct taxpayer identification number to payers, who must report the payments to the IRS. The IRS uses the number for identification purposes and may also provide this information to various government agencies for tax enforcement or litigation purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 28% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to payer. Certain penalties may also apply. PENALTIES (1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE.
- ---------------------------------------------------------------------------------------------------------------- PAYER'S NAME: DRESSER-RAND GROUP, INC. - ---------------------------------------------------------------------------------------------------------------- PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT ---------------------------- RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Name SUBSTITUTE ---------------------------- FORM W-9 Social Security Number DEPARTMENT OF THE OR TREASURY ---------------------------- INTERNAL REVENUE SERVICE Employer Identification Number --------------------------------- PART 3 -- Awaiting TIN [ ] ---------------------------------------------------------------------------------
PAYER'S REQUEST PART 2 -- CERTIFICATION -- Under the penalties of perjury, I certify that: FOR TAXPAYER (1) The number shown on this form is my correct Taxpayer Identification Number IDENTIFICATION (or I am waiting for a number to be issued to me), NUMBER (TIN) (2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) I am a U.S. person (including a U.S. resident alien). ------------------------------------------------------------------------------- CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). ------------------------------------------------------------------------------- The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding. Sign Here SIGNATURE ----------------------------------------------------------------- DATE------------------------------------------------------------------------ - -----------------------------------------------------------------------------------------------------------

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 28% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 28% of all reportable payments made to me will be withheld. SIGNATURE - ------------------------------------------------------ DATE --------------------, - ------ EX-99.2 30 y68981exv99w2.txt EX-99.2: FORM OF LETTER TO BROKERS DEALERS COMMERCIAL BANKS TRUST COMPANIES AND OTHER NOMINEES EXHIBIT 99.2 DRESSER-RAND GROUP, INC. OFFER TO EXCHANGE NEW 7 3/8% SENIOR SUBORDINATED NOTES DUE 2014 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED FOR ALL OUTSTANDING 7 3/8% SENIOR SUBORDINATED NOTES DUE 2014 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2005, UNLESS EXTENDED BY DRESSER-RAND GROUP, INC. , 200 To Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees: As described in the enclosed Prospectus, dated , 200 (as the same may be amended or supplemented from time to time, the "Prospectus"), and form of Letter of Transmittal (the "Letter of Transmittal"), Dresser-Rand Group, Inc. (the "Company") is offering to exchange $420,000,000 aggregate principal amount of the Company's 7 3/8% Senior Subordinated Notes due 2014, guaranteed by certain subsidiaries of the Company (collectively, the "Guarantors"), that have been registered under the Securities Act of 1933, as amended (the "Securities Act") (collectively, the "Exchange Notes"), for any and all of its outstanding 7 3/8% Senior Subordinated Notes due 2014 (collectively, the "Outstanding Notes"), guaranteed by the Guarantors, in integral multiples of $1,000 (the "Exchange Offer"). The terms of the Exchange Notes are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Outstanding Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof (except as provided in the Letter of Transmittal or in the Prospectus) and are not subject to any covenant regarding registration under the Securities Act. The Outstanding Notes are unconditionally guaranteed (the "Outstanding Guarantees") by the Guarantors on a senior subordinated basis, and the Exchange Notes will be unconditionally guaranteed (the "New Guarantees") by the Guarantors on a senior subordinated basis. Upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal, the Guarantors offer to issue the New Guarantees with respect to all Exchange Notes issued in the Exchange Offer in exchange for the Outstanding Guarantees of the Outstanding Notes for which such Exchange Notes are issued in the Exchange Offer. Throughout this letter, unless the context otherwise requires, references to the "Exchange Offer" include the Guarantors' offer to exchange the New Guarantees for Outstanding Guarantees, references to the "Exchange Notes" include the related New Guarantees and references to the "Outstanding Notes" include the related Outstanding Guarantees. The Company will accept for exchange any and all Outstanding Notes properly tendered according to the terms of the Prospectus and the Letter of Transmittal. Consummation of the Exchange Offer is subject to certain conditions described in the Prospectus. WE ARE ASKING YOU TO CONTACT YOUR CLIENTS FOR WHOM YOU HOLD OUTSTANDING NOTES REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE OR WHO HOLD OUTSTANDING NOTES REGISTERED IN THEIR OWN NAMES. The Company will not pay any fees or commissions to you for soliciting tenders of Outstanding Notes pursuant to the Exchange Offer. However, you will be reimbursed by the Company for customary and reasonable mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients, including the reasonable expenses of overnight courier services. The Company will pay all transfer taxes, if any, applicable to the tender of the Outstanding Notes to it or its order, except as otherwise provided in the Prospectus and Letter of Transmittal. For your information and for forwarding to your clients for whom you hold the Outstanding Notes held of record in your name or in the name of your nominee, enclosed are copies of the following documents: 1. The Prospectus; 2. The Letter of Transmittal for your use and for the information of your clients, together with a Substitute Form W-9 and Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (providing information relating to U.S. federal income tax backup withholding); 3. A form of Notice of Guaranteed Delivery; and 4. A printed form of letter, including a Letter of Instructions, which you may use to correspond with your clients for whose accounts you hold Outstanding Notes held of record in your name or in the name of your nominee, with space provided for obtaining such clients' instructions regarding the Exchange Offer. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE TO OBTAIN THEIR INSTRUCTIONS. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 2005 unless the Exchange Offer is extended by the Company. the time at which the Exchange Offer expires is referred to as the "Expiration Date." Tendered Outstanding Notes may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to 5:00 p.m. on the Expiration Date. To participate in the Exchange Offer, certificates for Outstanding Notes, or a timely confirmation of a book-entry transfer of such Outstanding Notes into the Exchange Agent's account at The Depository Trust Company, together with a duly executed and properly completed Letter of Transmittal or facsimile thereof, with any required signature guarantees, and any other required documents, must be received by the Exchange Agent by the Expiration Date as indicated in the Letter of Transmittal and the Prospectus. If holders of the Outstanding Notes wish to tender, but it is impracticable for them to forward their Outstanding Notes prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus, under "The Exchange Offer -- Guaranteed Delivery Procedures" and the Letter of Transmittal. Any inquiries you may have with respect to the Exchange Offer should be addressed to Citibank, N.A., the Exchange Agent for the Exchange Offer, at their address and telephone number set forth in the enclosed Prospectus and Letter of Transmittal. Additional copies of the enclosed materials may be obtained from the exchange agent. Very truly yours, DRESSER-RAND GROUP, INC. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF EITHER OF THEM IN CONNECTION WITH THE EXCHANGE OFFER, OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS EXPRESSLY CONTAINED THEREIN. 2 EX-99.3 31 y68981exv99w3.txt EX-99.3: FORM OF LETTER TO CLIENTS EXHIBIT 99.3 DRESSER-RAND GROUP, INC. OFFER TO EXCHANGE NEW 7 3/8% SENIOR SUBORDINATED NOTES DUE 2014 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED FOR ALL OUTSTANDING 7 3/8% SENIOR SUBORDINATED NOTES DUE 2014 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2005, UNLESS EXTENDED BY THE DRESSER-RAND GROUP, INC. , 200 To Our Clients: Enclosed for your consideration are a Prospectus, dated , 200 (as the same may be amended or supplemented from time to time, the "Prospectus"), and form of Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") by Dresser-Rand Group, Inc. (the "Company") to exchange $420,000,000 aggregate principal amount of the Company's 7 3/8% Senior Subordinated Notes due 2014, guaranteed by certain subsidiaries of the Company (collectively, the "Guarantors"), that have been registered under the Securities Act of 1933, as amended (the "Securities Act") (collectively, the "Exchange Notes"), for any and all of its outstanding 7 3/8% Senior Subordinated Notes due 2014 (collectively, the "Outstanding Notes"), guaranteed by the Guarantors, in integral multiples of $1,000. The terms of the Exchange Notes are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Outstanding Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof (except as provided in the Letter of Transmittal or in the Prospectus) and are not subject to any covenant regarding registration under the Securities Act. The Outstanding Notes are unconditionally guaranteed (the "Outstanding Guarantees") by the Guarantors on a senior subordinated basis, and the Exchange Notes will be unconditionally guaranteed (the "New Guarantees") by the Guarantors on a senior subordinated basis. Upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal, the Guarantors offer to issue the New Guarantees with respect to all Exchange Notes issued in the Exchange Offer in exchange for the Outstanding Guarantees of the Outstanding Notes for which such Exchange Notes are issued in the Exchange Offer. Throughout this letter, unless the context otherwise requires, references to the "Exchange Offer" include the Guarantors' offer to exchange the New Guarantees for Outstanding Guarantees, references to the "Exchange Notes" include the related New Guarantees and references to the "Outstanding Notes" include the related Outstanding Guarantees. The Company will accept for exchange any and all Outstanding Notes properly tendered according to the terms of the Prospectus and the Letter of Transmittal. Consummation of the Exchange Offer is subject to certain conditions described in the Prospectus. The enclosed materials are being forwarded to you as the beneficial owner of Outstanding Notes held by us for your account but not registered in your name. A tender of such Outstanding Notes may only be made by us as the registered holder and pursuant to your instructions. Therefore, the Company urges beneficial owners of Outstanding Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such registered holder promptly if such beneficial owners wish to tender their Outstanding Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish to tender any or all such Outstanding Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and the Letter of Transmittal before instructing us as to whether or not to tender your Outstanding Notes. Your instructions to us should be forwarded as promptly as possible in order to permit us to tender Outstanding Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 P.M., New York City Time, on , 2005, unless the Exchange Offer is extended by the Company. The time the Exchange Offer expires is referred to as the "Expiration Date." Tenders of Outstanding Notes may be withdrawn at any time prior to the Expiration Date. IF YOU WISH TO HAVE US TENDER ANY OR ALL OF YOUR OUTSTANDING NOTES, PLEASE SO INSTRUCT US BY COMPLETING, EXECUTING AND RETURNING TO US THE INSTRUCTION FORM ON THE REVERSE HEREOF. The accompanying Letter of Transmittal is furnished to you for your information only and may not be used by you to tender Outstanding Notes held by us and registered in our name for your account or benefit. If we do not receive written instructions in accordance with the procedures presented in the Prospectus and the Letter of Transmittal, we will not tender any of the Outstanding Notes on your account. Please carefully review the enclosed material as you consider the Exchange Offer. 2 INSTRUCTIONS TO REGISTERED HOLDER FROM BENEFICIAL OWNER OF 7 3/8% SENIOR SUBORDINATED NOTES DUE 2014 The undersigned hereby acknowledges receipt of the Prospectus dated , 200 (as the same may be amended or supplemented from time to time, the "Prospectus"), and a Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") by Dresser-Rand Group, Inc. (the "Company") to exchange $1,000 in principal amount of the Company's new 7 3/8% Senior Subordinated Notes due 2014 (the "Exchange Notes"), guaranteed by Dresser-Rand Group, Inc. and certain subsidiaries of the Company (collectively, the "Guarantors"), for each $1,000 in principal amount of outstanding 7 3/8% Senior Subordinated Notes due 2014 (the "Outstanding Notes"), guaranteed by the Guarantors, upon the terms and subject to the conditions set forth in the Prospectus and Letter of Transmittal. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder, as to the action to be taken by you relating to the Exchange Offer with respect to the Outstanding Notes held by you for the account of the undersigned. The aggregate face amount of the Outstanding Notes held by you for the account of the undersigned is (fill in amount): $ of the Outstanding Notes. With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): [ ] To TENDER the following Outstanding Notes held by you for the account of the undersigned (insert principal amount of Outstanding Notes to be tendered, if any): $ of the Outstanding Notes. [ ] NOT to TENDER any Outstanding Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Outstanding Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner of the Outstanding Notes, including but not limited to the representations that (i) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (ii) the undersigned is not participating, does not intend to participate, and has no arrangement of understanding with any person to participate, in the distribution of Exchange Notes, (iii) the undersigned acknowledges that any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended, in connection with any resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission set forth in certain no-action letters (see the section of the Prospectus entitled "The Exchange Offer -- Resale of Exchange Notes"), (iv) the undersigned understands that a secondary resale transaction described in clause (iii) above should be covered by an effective registration statement containing the selling securityholder information required by Item 507 of Regulation S-K of the Commission, (v) the undersigned is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company, (vi) if the undersigned is not a broker-dealer, that it is not participating in, does not intend to participate in, and has no arrangement or understanding with any person to participate in, the distribution of Exchange Notes and (vii) if the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Outstanding Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes received in respect of such Outstanding Notes pursuant to the Exchange Offer, however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act; (b) to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of Outstanding Notes. 3 SIGN HERE Dated - -------------------------------------------------------------------------------, 2004 Signature(s) - -------------------------------------------------------------------------------- Print Name(s) - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE INCLUDE ZIP CODE) Telephone Number - -------------------------------------------------------------------------------- (PLEASE INCLUDE AREA CODE) Tax Identification Number - -------------------------------------------------------------------------------- (SOCIAL SECURITY NUMBER OR EMPLOYER IDENTIFICATION NUMBER) My Account Number With You - -------------------------------------------------------------------------------- 4 EX-99.4 32 y68981exv99w4.txt EX-99.4: FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.4 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF ALL OUTSTANDING 7 3/8% SENIOR SUBORDINATED NOTES DUE 2014 IN EXCHANGE FOR NEW 7 3/8% SENIOR SUBORDINATED NOTES DUE 2014 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OF DRESSER-RAND GROUP, INC. Registered holders of outstanding 7 3/8% Senior Subordinated Notes due 2014 (the "Outstanding Notes") who wish to tender their Outstanding Notes in exchange for a like principal amount of new 7 3/8% Senior Subordinated Notes due 2014 (the "Exchange Notes") and whose Outstanding Notes are not immediately available or who cannot deliver their Outstanding Notes and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to Citibank, N.A. (the "Exchange Agent") prior to the Expiration Date, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) or mail to the Exchange Agent. See "The Exchange Offer -- Procedures for Tendering Outstanding Notes" in the Prospectus. THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: CITIBANK, N.A. By Mail: By Facsimile: By Hand or Overnight Delivery: Citibank, N.A. Citibank, N.A. Citibank, N.A. 111 Wall Street, 15th Floor Attn: Agency & Trust Services 111 Wall Street, 15th Floor New York, NY 10005 (212) 657-1020 New York, NY 10005 Attn: Agency & Trust Services Attn: Agency & Trust Services

Confirm Receipt of Facsimile by Telephone: (800) 422-2066 --------------------- DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Guarantor Institution (as defined in the Letter of Transmittal), such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. Ladies and Gentlemen: The undersigned hereby tenders the principal amount of Outstanding Notes indicated below, upon the terms and subject to the conditions contained in the Prospectus dated , 200 of Dresser-Rand Group, Inc. (the "Prospectus"), receipt of which is hereby acknowledged.
- --------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF OUTSTANDING NOTES TENDERED - --------------------------------------------------------------------------------------------------------------------------------- NAME AND ADDRESS OF CERTIFICATE NUMBER(S) OF REGISTERED HOLDER AS IT OUTSTANDING NOTES TENDERED PRINCIPAL AMOUNT APPEARS ON THE OUTSTANDING (OR ACCOUNT NUMBER AT OUTSTANDING NAME OF TENDERING HOLDER NOTES (PLEASE PRINT) BOOK-ENTRY FACILITY) NOTES TENDERED - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
SIGN HERE Name of Registered or Acting Holder: - ------------------------------------------------------------------------------ Signature(s): - -------------------------------------------------------------------------------- Name(s) (Please Print): - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- Telephone Number: - -------------------------------------------------------------------------------- Date: - -------------------------------------------------------------------------------- IF OUTSTANDING NOTES WILL BE TENDERED BY BOOK-ENTRY TRANSFER, PROVIDE THE FOLLOWING INFORMATION: DTC Account Number: - -------------------------------------------------------------------------------- Date: - -------------------------------------------------------------------------------- THE FOLLOWING GUARANTEE MUST BE COMPLETED GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of its addresses set forth on the reverse hereof, the certificates representing the Outstanding Notes (or a confirmation of book-entry transfer of such Outstanding Notes into the Exchange Agent's account at the book-entry transfer facility), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the Expiration date (as defined in the Letter of Transmittal). Name of Firm: ----------------------------------------- ----------------------------------------------- (AUTHORIZED SIGNATURE) Address: Title: - ----------------------------------------------- ----------------------------------------------- Name: - ----------------------------------------------- ----------------------------------------------- (ZIP CODE) (PLEASE TYPE OR PRINT) Area Code and Telephone No.: Date: - ----------------------------------------------- -----------------------------------------------

~~NOTE: DO NOT SEND OUTSTANDING NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. 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M?3K\&LR3=!/=OHP^E4+4I$QIM79\`5[4>_$E\+*H&H8GKI(_#\@N06L$@0C* M$890#.7T$KGJ5"=X):>>DY,;K^]ONSK6+U:[.#6J4)`]MU2=VAEJU=)>,;^7U(;_ET,:GT132(^B`1?0K?]+%*7\_S7SQB-)\KV'TJTRA7DD[1;0\S3@S7O/5[/:;G8=K.#L M"K^3^%$?B<-J^OR.)\7D33_ZVP^$ZW."EPM3"4/A`M+G?>]X)K'VU(OM/037 M!BZ#\X5U?=I6GK)9K7+1&A.9(#4R.H92'S_J/E.J(P7L"09<)#]:O8>+P-M# M0$>BBCH2/ -----END PRIVACY-ENHANCED MESSAGE-----


Delaware	3511	20-1780492
(State or other jurisdiction of incorporation)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)






		Proposed Maximum	Proposed Maximum	Amount of
Title of Each Class of	Amount to be	Offering	Aggregate	Registration
Securities to be Registered	Registered	Price Per Note	Offering Price(1)	Fee


7 3/8% Senior Subordinated Notes due 2014	$420,000,000	100%	$420,000,000	$49,434.00

Guarantees of 7 3/8% Senior Subordinated Notes due 2014	N/A(2)	(2)	(2)	(2)


					Address, Including Zip Code
					and Telephone Number,
Exact Name of					Including Area Code,
Registrant Guarantor as	State or Other Jurisdiction of		I.R.S. Employer		of Registrant Guarantor’s
Specified in its Charter	Incorporation or Organization		Identification Number		Principal Executive Offices

Dresser-Rand LLC		Delaware		20-2216392	Paul Clark Drive, Olean, NY 14760 (716) 375-3000
Dresser-Rand Power LLC		Delaware		74-1716222	Paul Clark Drive, Olean, NY 14760 (716) 375-3000
Dresser-Rand Company	New York			20-1897619	Paul Clark Drive, Olean, NY 14760 (716) 375-3000
Dresser-Rand Global Services, L.L.C.		Delaware		22-3845135	Paul Clark Drive, Olean, NY 14760 (716) 375-3000


		• enter into transactions with affiliates; and

		• effect consolidations or mergers.

		These covenants are subject to a number of important qualifications and exceptions. See “Description of the Notes.”

No Public Market		The exchange notes will be freely transferable but will be new securities for which there will not initially be a market. Accordingly, there is no assurance that a market for the exchange notes will develop or as to the liquidity of any market. The placement agents in the private offering of the outstanding notes have advised the issuer that they currently intend to make a market in the exchange notes. The placement agents are not obligated, however, to make a market in the exchange notes, and any such market-making may be discontinued by the placement agents in their discretion at any time without notice.




Sources


			Uses


(In millions)
New senior secured credit facility:(1)			Purchase of equity interests of the
Revolving credit facility(2)	$	5.0	Dresser-Rand Entities(3)	$	1,134.0
Term Loan B		395.0	Cash(3)		72.6
Senior subordinated notes		420.0	Existing indebtedness(4)		2.9
Existing indebtedness(4)		2.9	Transaction fees and expenses		43.4
Equity invested by First Reserve		430.0

Total Sources of Funds	$	1,252.9	Total Uses of Funds	$	1,252.9


	Page

Prospectus Summary		1
Risk Factors		20
The Transactions		34
Use of Proceeds		38
Capitalization		39
Unaudited Pro Forma Financial Information		40
Selected Historical Combined Financial Information		46
Management’s Discussion and Analysis of Financial Condition and Results of Operations		49
Industry Overview		65
Business		69
Management		82
Security Ownership of Certain Beneficial Owners		90
Certain Related Party Transactions		91
Description of Other Indebtedness		92
The Exchange Offer		96
Description of the Notes		108
United States Federal Income Tax Consequences of the Exchange Offer		162
Plan of Distribution		163
Legal Matters		164
Experts		164
Where You Can Find More Information		164
Index to Combined Financial Statements		F-1
EX-3.1: CERTIFICATE OF INCORPORATION
EX-3.2: BYLAWS OF DRESSER-RAND GROUP INC.
EX-3.3: CERTIFICATE OF FORMATION OF DRESSER-RAND LLC
EX-3.4: AMENDED AND RESTATED OPERATING AGREEMENT OF DRESSER-RAND LLC
EX-3.5: CERTIFICATE OF FORMATION OF DRESSER-RAND POWER LLC
EX-3.6: AMENDED AND RESTATED OPERATING AGREEMENT OF DRESSER-RAND POWER LLC
EX-3.7: BUSINESS CERTIFICATE FOR PARTNERS OF DRESSER-RAND COMPANY
EX-3.8: SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT OF DRESSER-RAND COMPANY
EX-3.9: AMENDED AND RESTATED CERTIFICATE OF FORMATION OF DRESSER-RAND GLOBAL SERVICES LLC
EX-3.10: AMENDED AND RESTATED OPERATING AGREEMENT OF DRESSER-RAND GLOBAL SERVICES, L.L.C.
EX-4.1: INDENTURE
EX-4.2: REGISTRATION RIGHTS AGREEMENT
EX-5.1: OPINION OF SIMPSON THACHER & BARTLETT LLP
EX-10.1: EQUITY PURCHASE AGREEMENT
EX-10.2: CREDIT AGREEMENT
EX-10.3: DOMESTIC GUARANTEE AND COLLATERAL AGREEMENT
EX-10.4: TRANSITION SERVICES AGREEMENT
EX-10.5: SUPPLY AGREEMENT
EX-10.6: LICENSE AGREEMENT
EX-10.7: LICENSE AGREEMENT
EX-10.8: AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
EX-10.9: EMPLOYMENT AGREEMENT
EX-10.10: EMPLOYMENT AGREEMENT
EX-12.1: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
EX-21.1: LIST OF SUBSIDIARIES
EX-23.2: CONSENT OF PRICEWATERHOUSECOOPERS LLP
EX-25.1: FORM T-1
EX-99.1: FORM OF LETTER OF TRANSMITTAL
EX-99.2: FORM OF LETTER TO BROKERS DEALERS COMMERCIAL BANKS TRUST COMPANIES AND OTHER NOMINEES
EX-99.3: FORM OF LETTER TO CLIENTS
EX-99.4: FORM OF NOTICE OF GUARANTEED DELIVERY


	•	“standard” equipment used for low-horsepower, lower-pressure and lower-volume applications; and

	•	custom-engineered equipment, built to customer specifications, engineered for the specific operating environment and application in which it will be put to use. This equipment is generally used in high-pressure/volume applications, typically consists of large equipment packages, and is generally used in large scale production operations.


(4)	Expenses included in EBITDA that will be reduced or increased due to change in ownership:


(6)	The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings include pre-tax income from continuing operations and fixed charges include interest, whether expensed or capitalized, and an estimate of interest within rental expense. Our earnings were inadequate to cover fixed charges for the nine months ended September 30, 2003 by approximately $1.5 million, on a pro forma basis for the year ended December 31, 2003 by approximately $32.4 million and on a pro forma basis for the nine months ended September 30, 2004 by approximately $10.1 million.

(7)	Gives effect to the transactions (assuming no working capital or other adjustments pursuant to the equity purchase agreement) as if they had occurred as of September 30, 2004. Total assets reflect our preliminary estimates of the purchase price allocation, which will change upon finalization of appraisals and other valuation studies that we will obtain in connection with the acquisition.

(8)	Operating working capital is defined as accounts receivable plus inventories plus prepaid expenses, less accounts payable and accruals and customer advance payments.


	*There may be adverse consequences if you do not exchange your outstanding notes.*


	Our substantial indebtedness could adversely affect our financial condition and prevent the issuer and the guarantors from fulfilling their obligations under the exchange notes and the guarantees.


	*We require a significant amount of cash to service our indebtedness. Our ability to generate cash depends on many factors beyond our control.*


	The issuer and certain of the guarantors are holding companies, and their only source of cash to satisfy their payment obligations with respect to the exchange notes is distributions from their respective subsidiaries.


	Your right to receive payments on the exchange notes will be junior to the issuer’s existing and future senior indebtedness, and the guarantees of the exchange notes will be junior to all the guarantors’ existing and future senior indebtedness.


	*Our secured creditors will be entitled to be paid in full from the proceeds of our pledged assets before those proceeds will be available for payment on the exchange notes.*


	The covenants in the new senior secured credit facility and the indenture governing the exchange notes impose restrictions that may limit our operating and financial flexibility and may limit our ability to make payments on the exchange notes.


	*The guarantees may not be enforceable because of fraudulent conveyance laws.*


	*Your ability to transfer the exchange notes may be limited by the absence of an active trading market.*


	We have identified material weaknesses in our internal controls, which could affect our ability to ensure timely and reliable financial reports and the ability of our auditors to attest to the effectiveness of our internal controls.


	*We will soon be subject to financial reporting and other requirements for which our accounting and other management systems and resources may not be adequately prepared.*


	*Our operating results could be harmed during economic or industry downturns.*


	*We may not be successful in implementing our business strategy to increase our aftermarket parts and services revenue.*


	*We face intense competition that may cause us to lose market share and harm our financial performance.*


	*We may not be able to complete, or achieve the expected benefits from, any future acquisitions, which could adversely affect our growth.*


	*Economic, political and other risks associated with international sales and operations could adversely affect our business.*


	*If we lose our senior management, our business may be adversely affected.*


	*Environmental compliance costs and liabilities could affect our financial condition adversely.*


	*Failure to maintain a safety performance that is acceptable to our clients could result in the loss of future business.*


	*Our business could suffer if we are unsuccessful in negotiating new collective bargaining agreements.*


	*We are controlled by First Reserve, whose interests may not be aligned with yours.*


	*Our historical financial information may not be comparable to future periods.*


	*We did not have a recent operating history as a stand-alone company prior to the acquisition.*


	*We may be faced with unexpected product claims or regulations as a result of the hazardous applications in which our products are used.*


	Third parties may infringe our intellectual property or we may infringe the intellectual property of third parties, and we may expend significant resources enforcing or defending our rights or suffer competitive injury.


	*Natural gas operations entail inherent risks that may result in substantial liability to us.*