<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
___________________
MARCH 2, 1994
(Date of Report)
SMITH INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-8514 95-3822631
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation or No.)
organization)
</TABLE>
16740 HARDY STREET
HOUSTON, TEXAS 77032
(Address of principal executive offices)
(713) 443-3370
(Registrant's telephone number,
including area code)
================================================================================
<PAGE> 2
ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS.
On March 2, 1994, but effective as of February 28, 1994, Smith
International Acquisition Corp. (the "Company"), a Delaware corporation, and a
wholly-owned subsidiary of Smith International, Inc. (the "Registrant"),
purchased a 64% general partnership interest in, and certain affiliated
interests of, M-I Drilling Fluids Company, a Texas general partnership ("MID")
(collectively, the "Interests"), from Dresser Industries, Inc. ("Seller").
The Company purchased the Interests for total consideration of: (i)
$80,000,000 in cash, and (ii) a promissory note (the "Note") in the amount of
$80,000,000 payable to Seller. The Note is payable at the Company's option,
but not later than on August 31, 1994.
The terms of the purchase of the Interests, including the purchase
price, were negotiated on an arms'-length basis between the Company and Seller.
The Company paid the purchase price for the Interests with: (i) $25,000,000 of
the Company's funds, (ii) $55,000,000 borrowed from the Registrant and (iii)
the Note.
MID's assets include plant, equipment and property used, and which
will continue to be used, in connection with manufacturing and marketing oil
field drilling fluids and drilling fluid systems.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired. It is presently
impracticable to provide the required financial information
relating to MID. The required financial information will be
filed as soon as practicable, but not later than 60 days from
the date this report must be filed.
(b) Pro Forma Financial Information. It is presently
impracticable to provide the required pro forma financial
information relating to the Registrant. The required pro
forma financial information will be filed as soon as
practicable, but not later than 60 days from the date this
report must be filed.
(c) Exhibits. The following exhibits are attached in accordance
with the provisions of Item 601 of Regulation S-K:
2.1 Purchase and Sale Agreement (excluding exhibits and
schedules to such agreement which are described on
the exhibit index thereto and which will be provided
to the Securities and Exchange Commission on
request), dated as of February 28, 1994, by and
between the Company and Seller.
- 2 -
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SMITH INTERNATIONAL, INC.
(Registrant)
Date: March 14, 1994 By: /s/ NEAL S. SUTTON
Name: Neal S. Sutton
Title: Vice President - Administration,
General Counsel and Secretary
- 3 -
<PAGE> 4
EXHIBIT INDEX
SEQUENTIAL
DOCUMENT
NUMBERING
EXHIBIT PAGE NO.
- ------- ----------
2.1 Purchase and Sale Agreement (excluding exhibits and 5
schedules to such agreement which are described on the
exhibit index thereto and which will be provided to the
Securities and Exchange Commission on request), dated
as of February 28, 1994, by and between Smith
International Acquisition Corp. and Dresser
Industries, Inc.
- 4 -
<PAGE> 1
================================================================================
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
SMITH INTERNATIONAL ACQUISITION CORP.
AND
DRESSER INDUSTRIES, INC.
_______________________
Dated as of February 28, 1994
SECTIONS 11.9 AND 12.8 OF THIS AGREEMENT PROVIDE FOR INDEMNIFICATION FOR
NEGLIGENCE IN CERTAIN CIRCUMSTANCES.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
SALE AND PURCHASE
<TABLE>
<S> <C> <C>
1.1 Sale and Purchase of the Partnership Interest and the Affiliated Interests . . . . . . . . . 1
--------------------------------------------------------------------------
1.2 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-------------------------
1.3 Cancellation of Bonds and Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
------------------------------------
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
--------------------------
2.2 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
----------------------------
ARTICLE III
THE CLOSING
3.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------
3.2 Proceedings at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
----------------------
3.3 Deliveries by Seller to Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---------------------------------
3.4 Deliveries by Purchaser to Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
---------------------------------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
------------------------------
4.2 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
--------------------------
4.3 Ownership and Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
---------------------------
4.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------
4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------------
4.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
----------
4.7 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-------------------
4.8 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-----------------
4.9 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------
4.10 Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------------
</TABLE>
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<PAGE> 3
<TABLE>
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4.11 Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
---------------------
4.12 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
--------------------------
4.13 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
---------------
4.14 Inventory Good and Salable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--------------------------
4.15 Patents, Trademarks, Copyrights and Other Proprietary Rights . . . . . . . . . . . . . . . . 11
------------------------------------------------------------
4.16 Partnership Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
----------------
4.17 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
---------
4.18 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
---------
4.19 Tax Liabilities and Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--------------------------
4.20 Employee Benefit Plans and Arrangements; ERISA. . . . . . . . . . . . . . . . . . . . . . . . 16
----------------------------------------------
4.21 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---------------
4.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---------
4.23 Accuracy of Information Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
---------------------------------
4.24 Illegal or Unauthorized Payments; Political Contributions . . . . . . . . . . . . . . . . . . 20
---------------------------------------------------------
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
------------------------------
5.2 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--------------------------
5.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--------
5.4 Availability of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
---------------------
5.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
----------
5.6 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
-------
ARTICLE VI
COVENANTS OF SELLER
6.1 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
-----------
6.2 Access to Documents; Opportunity to Ask Questions . . . . . . . . . . . . . . . . . . . . . . 22
-------------------------------------------------
6.3 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
-------------------
6.4 Consents and Conditions; Assignment of Assets . . . . . . . . . . . . . . . . . . . . . . . . 23
---------------------------------------------
6.5 Notice of Breach or Material Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-----------------------------------
6.6 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
---------------------
6.7 Greenway Sub-Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
------------------
6.8 Resignations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
------------
ARTICLE VII
COVENANTS OF PURCHASER
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
7.1 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-----------
7.2 Consents and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-----------------------
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
8.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-----------------------------------------
8.2 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
--------------
8.3 Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
---------------------
8.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
--------
8.5 Approval Pursuant to Consent Decree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
-----------------------------------
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
9.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 25
-----------------------------------------
9.2 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------------
9.3 Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
---------------------
9.4 Halliburton Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
-------------------
ARTICLE X
POST-CLOSING COVENANTS
10.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
------------------
10.2 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--------------------
10.3 No Solicitation of Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
----------------------------
10.4 Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-------------
10.5 Financial Statement Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-------------------------
10.6 Tax Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
----------
10.7 Compliance with Consent Decree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
------------------------------
10.8 Dresser Named Entities, Dresser Held Entities and Dresser Branches. . . . . . . . . . . . . . 27
------------------------------------------------------------------
10.9 Retention of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
--------------------
10.10 Italian Branch Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
----------------------------
10.11 Consents and Conditions; Assignment of Assets . . . . . . . . . . . . . . . . . . . . . . . . 28
---------------------------------------------
10.12 The 75 Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
--------------
10.13 Indonesian Tax Refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
---------------------
ARTICLE XI
INDEMNIFICATION AND RELATED MATTERS
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C>
11.1 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-------------------------
11.2 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
----------------------------
11.3 Determination of Damages and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . 29
--------------------------------------------
11.4 Limitation on Indemnification Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-----------------------------------------
11.5 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 30
------------------------------------------
11.6 Notice of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
-------------------------
11.7 Indemnification Procedure for Third-Person Claims . . . . . . . . . . . . . . . . . . . . . . 30
-------------------------------------------------
11.8 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
----------------
11.9 INDEMNIFICATION OF NEGLIGENCE OF INDEMNITEE . . . . . . . . . . . . . . . . . . . . . . . . . 31
-------------------------------------------
11.10 Halliburton Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
-----------------------
ARTICLE XII
ENVIRONMENTAL MATTERS
12.1 Indemnification by Seller for Onsite Liabilities . . . . . . . . . . . . . . . . . . . . . . 31
------------------------------------------------
12.2 Indemnification by Seller for Offsite Liabilities . . . . . . . . . . . . . . . . . . . . . . 32
-------------------------------------------------
12.3 Mining Reclamation Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-----------------------------
12.4 Determination of Damages and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . 33
--------------------------------------------
12.5 Notice of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-------------------------
12.6 Indemnification Procedure for Third-Party Claims . . . . . . . . . . . . . . . . . . . . . . 33
------------------------------------------------
12.7 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
----------------
12.8 INDEMNIFICATION OF NEGLIGENCE OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . 33
------------------------------------------
12.9 Halliburton Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------------------
ARTICLE XIII
TERMINATION
13.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------
13.2 Liabilities After Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------------------------
ARTICLE XIV
MISCELLANEOUS
14.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-------------------
14.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
----------------
14.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-------------
14.4 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--------------
14.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--------
14.6 Table of Contents and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
------------------------------
14.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-------
14.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
------------
</TABLE>
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<PAGE> 6
<TABLE>
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14.9 Binding Effect; No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
-----------------------------
14.10 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
----------
14.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
------------
14.12 Investigation by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--------------------------
14.13 Reduction in Purchase Price Upon Payment of Indemnification Obligation . . . . . . . . . . . 42
----------------------------------------------------------------------
</TABLE>
- v -
<PAGE> 7
List of Exhibits & Schedules
----------------------------
EXHIBITS
Exhibit A Assignment and Assumption Agreement
- ---------
Exhibit B Opinion of Seller's counsel
- ---------
Exhibit C Partnership Agreement
- ---------
Exhibit D Organization Agreement
- ---------
Exhibit E [INTENTIONALLY OMITTED]
- ---------
Exhibit F Greenway Sub-Lease
- ---------
Exhibit G [INTENTIONALLY OMITTED]
- ---------
Exhibit H Halliburton Consent
- ---------
Exhibit I Promissory Note
- ---------
Exhibit J Transition Agreement
- ---------
SCHEDULES
Schedule 4.3(b) Affiliated Interests
- ---------------
Schedule 4.3(c) Subsidiaries
- ---------------
Schedule 4.4 Consents
- ------------
Schedule 4.6 Litigation
- ------------
Schedule 4.12 Absence of Changes
- -------------
Schedule 4.13(a) Owned Real Property
- ----------------
Schedule 4.13(b) Leased Real Property
- ----------------
Schedule 4.13(c) Seller's Assets Used by Partnership
- ----------------
Schedule 4.13(d) Title to Personalty
- ----------------
Schedule 4.15(a) Proprietary Rights
- ----------------
Schedule 4.15(b) Proprietary Rights Leased to Others
- ----------------
Schedule 4.17 Customers
- -------------
Schedule 4.18 Contracts
- -------------
Schedule 4.19(e) Pending Tax Audits
- ----------------
Schedule 4.19(f) Limitations Extensions to Taxing Authorities
- ----------------
Schedule 4.20(a) ERISA Plans
- ----------------
Schedule 4.20(k) Retired Employee Health Plans
- ----------------
Schedule 8.4 Consents to Close
- ------------
Schedule 10.8(a)(i) Dresser Named Entities
- -------------------
Schedule 10.8(a)(ii) Dresser Held Entities
- --------------------
Schedule 10.8(a)(iii) Dresser Branch Assets
- ---------------------
Schedule 12.1 Facilities to be Remediated
- -------------
Exhibits and Schedules
<PAGE> 8
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT, dated as of February 28, 1994 (this
"Agreement"), by and between Smith International Acquisition Corp., a Delaware
corporation ("Purchaser"), and Dresser Industries, Inc., a Delaware corporation
("Seller").
WHEREAS, Seller owns a 64% general partnership interest in M-I
Drilling Fluids Company, a Texas general partnership (the "Partnership");
WHEREAS, in connection with the formation of the Partnership, Seller
and Halliburton Company, a Delaware corporation ("Halliburton"), entered into a
Partnership Agreement, dated as of December 1, 1986, as amended by Seller and
Halliburton in Amendments Number 1, 2 and 3, dated as of January 23, 1987,
October 21, 1988 and April 30, 1990, respectively (collectively, the
"Partnership Agreement") and an Organization Agreement, by and between Seller
and Halliburton, dated as of December 1, 1986 (the "Organization Agreement");
WHEREAS, Seller owns certain equity interests (the "Affiliated
Interests") in affiliated entities (the "Affiliated Entities") as set forth on
Schedule 4.3(b);
WHEREAS, the Partnership and the Affiliated Entities have been engaged
in certain businesses prior to the Closing Date, including without limitation,
the businesses of producing and marketing oil field drilling fluids and
drilling fluid systems (collectively, the "Business");
WHEREAS, Seller desires to sell and Purchaser desires to purchase the
entire right, title and interest of Seller in the Partnership (the "Partnership
Interest") and Seller desires to sell and Purchaser desires to purchase the
entire right, title and interest of Seller and its Affiliates in the Business
and the Affiliated Entities;
WHEREAS, in connection with and incident to the purchase and sale of
the Partnership Interest and the Affiliated Interests, Seller desires to
transfer, or cause to be transferred, and Purchaser desires to assume, or cause
to be assumed, certain rights, obligations and liabilities of Seller with
respect to the Partnership and the Affiliated Entities; and
WHEREAS, certain capitalized terms used herein are defined in Section
14.1;
NOW, THEREFORE, in consideration of the premises and the mutual
representations warranties, covenants and agreements hereinafter set forth, and
upon the terms and subject to the conditions hereinafter set forth, Purchaser
and Seller hereby agree as follows:
ARTICLE I
SALE AND PURCHASE
1.1 Sale and Purchase of the Partnership Interest and the
Affiliated Interests. Upon the terms and subject to the conditions hereinafter
set forth, at the Closing, (a) Seller shall sell, assign, transfer,
- 1 -
<PAGE> 9
convey and deliver to Purchaser, free and clear of all Liens other than
Permitted Liens, and Purchaser shall purchase, acquire and accept from Seller,
the Partnership Interest and (b) Seller shall sell or cause to be sold,
assigned, transferred, conveyed and delivered to Purchaser, free and clear of
all Liens, and Purchaser shall purchase, acquire and accept from Seller or
Seller's subsidiaries, all of Seller's and its subsidiaries' right, title and
interest in and to the Affiliated Entities (regardless of the existence of any
consent requirement or right of first refusal with respect to such transfer),
including but not limited to the Affiliated Interests, which ownership
interests are as set forth on Schedule 4.3(b). In furtherance of the
foregoing, and not by way of limitation, at the Closing, Seller shall cause the
Partnership Agreement to be amended to reflect Purchaser's acquisition of the
Partnership Interest and the substitution of Purchaser for Seller as a partner
in the Partnership.
1.2 Assumption of Liabilities. Subject to the terms and
conditions hereof (including, but not limited to, Articles XI and XII)
effective as of the Closing, Purchaser shall assume and thereafter pay, perform
and discharge the liabilities, obligations, damages and expenses of Seller
under the Partnership Agreement and the Organization Agreement; provided,
however, that Purchaser shall not assume and Seller covenants that it shall
remain liable for the payment or performance of liabilities or obligations, if
any, (a) that were required to be paid or performed by Seller or it Affiliates
before the Closing pursuant to the terms of the Partnership Agreement and the
Organization Agreement, (b) that arise under, or as a result of a breach of,
Section 1.2.1 of the Partnership Agreement or Sections 2.4, 2.9.1, 2.9.2 (the
first sentence), 3.2.3(b), 3.2.3(c), 3.3.4, 3.7, 3.9.2, 4.2 or (as to the
period before the Closing) 8.6 of the Organization Agreement, or (c) resulting
from or in respect of the pending Indonesian tax disputes relating to PT
Dresser Magcobar Indonesia. By virtue of such assumption, Seller hereby
covenants that Purchaser shall be entitled to the benefit of, and have the
right to enforce all of, Seller's rights or claims under the Partnership
Agreement and the Organization Agreement.
1.3 Cancellation of Bonds and Guarantees. Subsequent to the
Closing, to the extent permitted by Law, Seller shall have the right to cancel
any bond, guarantee or undertaking by Seller now applicable to the Partnership,
its subsidiaries, the Affiliated Entities, or the Business to the extent such
is not assigned or transferred to Purchaser pursuant to Section 1.2; provided,
however, that Seller shall not cancel any such bond, guarantee or undertaking
until Purchaser has replaced, or caused the termination of the requirement for
any such, bond, guarantee or undertaking. Purchaser shall replace such bonds,
guarantees and undertakings, or cause the requirements therefor to be
terminated, as soon as practicable after the Closing. The failure of Seller to
cancel any bond, guarantee or undertaking shall not affect the respective
rights, obligations, liabilities and indemnifications of Seller by Purchaser
under this Agreement.
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price and Payment. The aggregate purchase price to
be paid by Purchaser to Seller for the Partnership Interest, the Affiliated
Interests and Seller's or its Affiliates' right, title and interest in the
Business shall be $160,000,000 (the "Purchase Price"). At Closing, Purchaser
shall pay Seller (a) one-half of the Purchase Price in cash (U.S. dollars) by
wire transfer of immediately available funds to the account or accounts
designated by Seller, instructions for which wire transfer shall be
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provided by Seller to Purchaser not less than two business days before Closing;
and (b) the other half of the Purchase Price by executing and delivering to
Seller the Promissory Note.
2.2 Allocation of Purchase Price. Purchaser and Seller shall, by
letter agreement executed and delivered at the Closing, determine a procedure
for allocating the Purchase Price among the Partnership Interest and the
Affiliated Interests. Subject to the requirements of any applicable tax law,
all tax returns and reports filed by Purchaser and Seller shall be prepared
consistently with such allocation.
ARTICLE III
THE CLOSING
3.1 Closing Date. The Closing shall take place at the offices of
the Partnership, Suite 2100, 3 Greenway Plaza, Houston, Texas, commencing at
10:00 A.M., Houston time, on February 28, 1994, or at such other place and at
such other time and date as may be mutually agreed upon by Purchaser and
Seller. The date of the Closing is referred to in this Agreement as the
"Closing Date."
3.2 Proceedings at Closing. All proceedings to be taken, all
payments to be made and all documents to be executed and delivered by all
parties at the Closing shall be deemed to have been taken, paid, executed and
delivered simultaneously, and no proceedings shall be deemed taken, no payments
shall be deemed made nor any documents executed or delivered until all have
been taken, paid, executed and delivered.
3.3 Deliveries by Seller to Purchaser. At the Closing, Seller
shall execute (where necessary) and deliver, or shall cause to be executed
(where necessary) and delivered, to Purchaser the following:
(a) an Assignment and Assumption Agreement with respect
to the Partnership Interest and Seller and its
Affiliates' right, title and interest in the Business
in the form of Exhibit A (the "Assignment and
Assumption Agreement");
(b) certificates or other instruments representing the
Affiliated Interests, in negotiable form and duly
endorsed in blank or accompanied by a stock power or
other instrument of transfer duly executed in blank;
(c) the certificate referred to in Section 8.1(c), signed
by a duly authorized officer of Seller;
(d) a receipt for the Purchase Price;
(e) the Halliburton Consent;
(f) the Transition Agreement;
(g) the Resignations;
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(h) the Letter Agreement described in Section 2.2;
(i) the Greenway Sub-Lease;
(j) the opinion of Seller's legal counsel in
substantially the form set forth on Exhibit B; and
(k) such other documents and instruments as may be
reasonably necessary to consummate the transactions
contemplated herein.
3.4 Deliveries by Purchaser to Seller. At the Closing, Purchaser
shall execute (where necessary) and deliver, or shall cause to be executed
(where necessary) and delivered, to Seller the following:
(a) immediately available funds in the amount of the cash
portion of the Purchase Price as provided in Section
2.1;
(b) the Promissory Note;
(c) the certificate referred to in Section 9.1(c), signed
by a duly authorized officer of Purchaser;
(d) the Assignment and Assumption Agreement;
(e) the Letter Agreement described in Section 2.2;
(f) the Greenway Sub-Lease; and
(g) such other documents and instruments as may be
reasonably necessary to consummate the transactions
contemplated herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
4.1 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to conduct business as a foreign corporation and is
in good standing in the State of Texas and in each other jurisdiction in which
it is required to be so qualified, except where the failure to be so qualified
would not have a material adverse effect, individually or in the aggregate, on
the Business, the Partnership or the ability of Seller to consummate the
transactions contemplated hereby. Seller has all requisite corporate power and
authority to carry on its business as it is now being conducted, and to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
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4.2 Authorization of Agreement. Seller has full corporate power
and authority to execute and deliver this Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement or to be
executed by Seller in connection with the consummation of the transactions
contemplated by this Agreement (all such other agreements, documents,
instruments and certificates required to be executed by Seller being
collectively referred to herein as the "Seller Documents") and to perform fully
its obligations hereunder and thereunder. The execution, delivery and
performance by Seller of this Agreement and of Seller Documents has been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement has been, and each Seller Document will be at or prior to the
Closing, duly executed and delivered by Seller, and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and the Seller Documents when so executed and
delivered will constitute, legal, valid and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). None of the
execution and delivery by Seller of this Agreement and the Seller Documents, or
the consummation of the transactions contemplated hereby or thereby, or
compliance by Seller with any of the provisions hereof or thereof will: (i)
violate, or result in the breach of, any provision of the certificate of
incorporation or bylaws of Seller, (ii) violate, result in the breach or
termination of, or constitute a default under any Contract or Order to which
Seller is a party or by which it or any of its assets are bound or subject,
(iii) constitute a violation of any Law or Order applicable to Seller, or (iv)
result in the creation of any Lien (other than any Lien in favor of Purchaser),
other than any such violations or Liens that do not adversely affect the
Partnership, the Affiliated Entities, the Business or the current use of the
assets of the Partnership or the Affiliated Entities, or title to the
Partnership Interests or the Affiliated Interests.
4.3 Ownership and Capital Stock.
(a) Seller owns the Partnership Interest free and clear of all
Liens and upon transfer and assignment to Purchaser of the Partnership
Interest, Purchaser will acquire title to the Partnership Interest, free and
clear of any Liens. The Partnership Interest represents a 64% interest in the
Partnership.
(b) Schedule 4.3(b) sets forth a description of the Affiliated
Interests, the total amount of outstanding equity interests of each Affiliated
Entity, the identity of the owners of such equity interests other than Seller
and the percentage ownership of each holder of an equity interest in each
Affiliated Entity. Except as set forth on Schedule 4.3(b), all of the
Affiliated Interests are duly authorized, validly issued, fully paid and
nonassessable, and, in the case of each corporate or similar limited liability
entity, with no personal liability attaching to the ownership thereof and have
not been issued in violation of any preemptive rights. Seller or its
subsidiaries, is the beneficial and record owner of the Affiliated Interests to
be sold to Purchaser pursuant to this Agreement, and upon transfer, assignment
and delivery of such Affiliated Interests and payment therefor in accordance
with the terms of this Agreement and any Contract pursuant to which the
Affiliated Interests are issued, Purchaser will acquire title to the Affiliated
Interests, free and clear of any Liens other than Permitted Liens. There are
no outstanding securities of the Affiliated Entities convertible into or
evidencing the right to purchase or subscribe for any equity interests of the
Affiliated Entities, there are no outstanding or authorized options, warrants,
calls, subscriptions, rights, commitments or any other Contracts of any
character obligating any Affiliated Entity to issue any
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of its equity interests or any securities convertible into or evidencing the
right to purchase or subscribe for any such equity interests. Other than the
Partnership Agreement, the Organization Agreement and the Contracts set forth
on Schedule 4.3(b), Seller is not a party to any Contract or understanding with
respect to the voting sale or transfer of the Affiliated Interests.
(c) Except for the Affiliated Interests and the Partnership's
interests in the subsidiaries as set forth on Schedule 4.3(c) (the
"Subsidiaries"), the Partnership does not own, directly or indirectly, any
equity interest of any other entity, nor does it have an equity, profit
sharing, participation or other interest in any corporation, partnership, joint
venture or other entity.
4.4 Consents. Except as set forth on Schedule 4.4, no consent,
waiver, approval, or authorization of, or declaration or filing with, or
notification to, any Person is required: (a) on the part of Seller, the
Partnership, the Subsidiaries or the Affiliated Entities in connection with the
execution and delivery by Seller of this Agreement or the Seller Documents,
consummation of the transactions contemplated hereby or thereby or the
compliance by Seller with any of the provisions hereof or thereof, or (b) for
Seller or its Affiliates to transfer to the Partnership or any Affiliated
Entity, the Affiliated Interests, rights or Contracts that Seller or its
Affiliates hold for the Partnership's benefit or that are necessary to conduct
the Business as conducted immediately before the Closing.
4.5 Financial Statements.
(a) Seller has furnished to Purchaser true, correct and complete
copies of the following financial statements of the Partnership (collectively,
the "Financial Statements"):
(i) the unaudited combined balance sheets of the
Partnership at October 31, 1993 and 1992 and the related combined
statements of earnings, partners' equity and cash flows for the fiscal
years then ended;
(ii) the audited combined balance sheet of the Partnership
and the Affiliated Entities at October 31, 1991 and the related
combined statement of earnings, partners' equity and cash flows for
the fiscal year then ended; and
(iii) the unaudited combined balance sheet of the
Partnership at December 31, 1993 and the related combined statement of
earnings for the two-month period then ended, certified by the
Partnership's chief financial and chief accounting officer as having
been prepared from the books and records of the Partnership (which
books and records have been maintained in the ordinary course of the
Business consistent with past practices) (the "Interim Statements").
The Financial Statements fairly reflect the assets, liabilities and
financial position of the Partnership as of the respective dates thereof and
the results of operations and changes in cash flow of the Partnership for the
periods then ended, and are prepared in conformity with GAAP, subject in the
case of the Interim Statements to year end adjustments consisting only of
normal, recurring accruals. Since October 31, 1993, there has been no change
in accounting principles applicable to, or methods of accounting utilized by,
the Partnership, except as specifically described in the Financial Statements.
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(b) The books and records of the Partnership and the Affiliated
Entities have been and are being maintained in accordance with all
applicable legal and accounting requirements.
(c) Neither the Partnership nor any Controlled Subsidiary or
Affiliated Entity has any debt, obligation or liability that would be
required to be disclosed in audited financial statements in accordance
with GAAP (whether accrued, absolute, contingent, liquidated or
otherwise) arising out of any transaction entered into at or before
the Closing, or any act or omission at or before the Closing, or any
state of facts existing at or before the Closing, or based upon the
transactions or events occurring at or before the Closing: (i) to the
extent set forth on or reserved against in the Financial Statements or
the notes thereto, or (ii) liabilities incurred, and obligations under
agreements entered into, in the usual and ordinary course of business
since October 31, 1993.
4.6 Litigation. Except as set forth on Schedule 4.6, there is no
Legal Proceeding pending or, to the knowledge of Seller, threatened: (i)
against the Partnership, the Controlled Subsidiaries or the Affiliated Entities
which is not covered by insurance and, if determined adversely, which would
have a Material Adverse Effect; (ii) that seeks to enjoin or obtain damages in
respect of the consummation of the transactions contemplated by this Agreement;
or (iii) that questions the validity of this Agreement, the Partnership
Agreement, the Organization Agreement, any of the Seller Documents or any
action taken or to be taken by Seller or any of its Affiliates in connection
with the consummation of the transactions contemplated hereby or thereby.
4.7 Compliance with Law. Except as to matters covered by Sections
4.20 and 4.21 and Article XII:
(a) Except for the Consent Decree, neither the
Partnership nor any Controlled Subsidiary or
Affiliated Entity is a party to or subject to any
Order entered in any Legal Proceeding brought by any
Person.
(b) The Partnership, the Controlled Subsidiaries and the
Affiliated Entities are and have been at all times in
compliance in all material respects with all
applicable Laws, material Permits and Orders.
4.8 Books and Records; Partnership Agreement and Organization
Agreement. Accurate, complete and current copies of the minute books of the
Partnership, the Management Committee of the Partnership, any other committee
thereof and each Affiliated Entity have been provided to Purchaser and contain
copies of all minutes of meetings, resolutions and other proceedings of the
Management Committee of the Partnership and any other committee thereof or any
Affiliated Entity. Attached as Exhibits C and D, respectively, are true and
complete copies of the Partnership Agreement and the Organization Agreement.
The Partnership Agreement and the Organization Agreement are in full force and
effect and are valid, binding, subsisting and enforceable, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Seller is not, and
to Seller's knowledge Halliburton is not, in default under the Partnership
Agreement or the Organization Agreement, and there is no existing breach,
violation, default, event of default or event, occurrence or act by Seller or
any of its Affiliates or, to
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Seller's knowledge, by Halliburton that, with or without the giving of notice,
lapse of time or the occurrence of any other event, would constitute a default.
4.9 Brokers. Except to the extent Merrill Lynch & Co. has acted
on Seller's behalf, no Person has acted directly or indirectly as a broker,
finder or financial advisor for Seller or the Partnership in connection with
the negotiations relating to or the transactions contemplated by this Agreement
and no Person is entitled to any fee, commission or like payment in respect
thereof based in any way on any agreement, arrangement or understanding made by
or on behalf of Seller. Seller hereby acknowledges that it is solely
responsible and liable for any fees or expenses to which Merrill Lynch & Co.
may be entitled in connection with the consummation of the transactions
contemplated by this Agreement.
4.10 Power and Authority. The Partnership and each Controlled
Subsidiary and Affiliated Entity has all power and authority, and all material
Permits required by Governmental Bodies, to own, lease and operate its
properties and assets and to carry on its business as currently being
conducted.
4.11 Partnership Interests.
(a) Seller and Halliburton are the only partners in the
Partnership, and their interests therein, including their percentage ownership
thereof, are as set forth in the Partnership Agreement. No additional capital
contribution to the Partnership has been made pursuant to Section 2.7.2 of the
Partnership Agreement.
(b) Except as set forth in the Partnership Agreement, there is no
outstanding subscription, Contract, option or other right obligating the
Partnership or, to Seller's knowledge, Halliburton to issue, sell, exchange or
otherwise dispose of, or to purchase, redeem or otherwise acquire, any interest
in the Partnership.
(c) Seller and its representatives on the Partnership's Management
Committee have the sole right to vote or direct the voting of the Partnership
Interest at their discretion on any matter submitted to a vote of the partners
of the Partnership. Except as set forth in the Partnership Agreement, there
are no voting or buy-sell arrangements pertaining to the Partnership Interest.
4.12 Absence of Certain Changes. Except as set forth on Schedule
4.12, since October 31, 1993, each of the Partnership, the Controlled
Subsidiaries and the Affiliated Entities has not:
(a) except for changes in general economic conditions,
suffered any material adverse change in its business,
results of operations, working capital or any items
or elements thereof, assets, liabilities or condition
(financial or otherwise), or relationships with
customers or suppliers of the Partnership or such
Controlled Subsidiary or Affiliated Entity;
(b) suffered any damage or destruction to or loss of its
assets not covered by insurance that does or could
reasonably be expected to have an adverse effect
exceeding an aggregate of $100,000 on the business,
results of operations, assets
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or condition (financial or otherwise) of the
Partnership or such Controlled Subsidiary or
Affiliated Entity;
(c) except in the ordinary course of business consistent
with past practice and in amounts that do not have
(individually or in the aggregate) an adverse affect
exceeding an aggregate of $100,000 on the business,
finances or properties of the Partnership, the
Controlled Subsidiaries and the Affiliated Entities,
taken as a whole, acquired or disposed of any asset,
or incurred, assumed, guaranteed, endorsed or prepaid
any indebtedness, liability or obligation, mortgaged
or pledged any of its assets (tangible or intangible)
or subjected or permitted to be subjected any assets
(tangible or intangible) to any Lien;
(d) forgiven, compromised, canceled, released, waived or
permitted to lapse any material rights or claims of
the Partnership or such Controlled Subsidiary or
Affiliated Entity;
(e) entered into or terminated any Contract or agreed to
make or made any changes in Contracts other than
renewals or extensions thereof and Contracts entered
into in the ordinary course of business consistent
with past practice;
(f) written up, written down or written off the book
value of any assets in excess of $100,000 except for
depreciation and amortization in accordance with
GAAP;
(g) declared, paid or set aside for payment any
distribution to the partners of the Partnership other
than daily cash distributions in accordance with
Section 2.3.1 of the Partnership Agreement;
(h) increased the compensation of or paid or accrued any
bonuses to any employee or contributed to any
employee benefit plan, other than in the ordinary
course of business consistent with past practice and
in accordance with established policies, practices or
requirements;
(i) entered into any employment, consulting, compensation
or collective bargaining agreement with any Person or
group, other than any such agreement that is
terminable (i) without payment of Damages or
severance payments by the Partnership or such
Controlled Subsidiary or Affiliated Entity in excess
of the greater of one month's compensation, in the
case of employment agreements, and $2,500 and (ii) at
will or with not more than 30 days notice;
(j) entered into, adopted or amended any employee benefit
or similar plan;
(k) made any loan or advance to either of its partners,
any employee, other than advances for travel in the
normal course of business or in connection with
established benefit plans of the Partnership or any
shareholder, officer, director or employee of either
of its partners; or
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(l) entered into or terminated any other material
Contract or transaction other than in the ordinary
course of business consistent with past practice and
in amounts that could not (individually or in the
aggregate) reasonably be expected to adversely affect
the business, finances, properties or prospects of
the Partnership.
4.13 Title to Assets.
(a) Schedule 4.13(a) sets forth all parcels of real
property owned by the Partnership, the Controlled Subsidiary and the Affiliated
Entities and contains the addresses of such property. Where available,
Purchaser has been provided full and accurate legal descriptions of such
property and all improvements located thereon and the approximate acreage
contained therein. Unless otherwise set forth on Schedule 4.13(a), the
Partnership or the applicable Controlled Subsidiary or Affiliated Entity, as
the case may be, currently has good and indefeasible title to all of the
parcels of such property, in each case free and clear of all Liens other than
Permitted Liens.
(b) Schedule 4.13(b) sets forth all parcels of real
property leased or operated by the Partnership, the Controlled Subsidiaries and
the Affiliated Entities (all of such real property together with the property
set forth on Schedule 4.13(a) collectively, the "Real Property"), and contains
the address and landlord of such property. Unless otherwise set forth on
Schedule 4.13(b), the Partnership or the applicable Controlled Subsidiary or
Affiliated Entity, as the case may be, currently has a good and indefeasible
leasehold estate in all of the parcels of such property, in each case free and
clear of all Liens other than Permitted Liens.
(c) Each of the Partnership, the Controlled Subsidiaries
and the Affiliated Entities has good and indefeasible title to: (i) the
personal property reflected in its books and records as being owned by it,
including the personal property reflected in the Financial Statements (except
for assets subject to financing leases required to be capitalized under GAAP,
all of which are so reflected in the Financial Statements or notes thereto),
all assets purchased by the Partnership or the applicable Controlled Subsidiary
or Affiliated Entity, as the case may be, since October 31, 1993, and (ii)
other than those assets of Seller set forth on Schedule 4.13(c) used in
connection with certain services Seller provides to the Partnership, the
Controlled Subsidiaries and the Affiliated Entities, (1) all assets used by or
necessary for the conduct of the Business (excluding leased property reflected
as such in the Financial Statements and the Partnership's financial books and
records), and (2) all computer data files and magnetic media containing stored
information used in the Business, excluding information provided by customers
of the Partnership, the Controlled Subsidiaries and the Affiliated Entities
relating to the business of the Partnership's and the Affiliated Entities'
customers, whether or not reflected in the Financial Statements or on such
books and records.
(d) Except as set forth on Schedule 4.13(d), each of the
Partnership, the Controlled Subsidiaries and the Affiliated Entities owns the
assets identified in Section 4.13(c) (other than the assets of Seller described
on Schedule 4.13(c)) free and clear of any Liens other than Permitted Liens.
(e) All accounts receivable of the Partnership, the
Controlled Subsidiaries and the Affiliated Entities were generated by the
Partnership or the applicable Controlled Subsidiary or Affiliated Entity, as
the case may be, in the usual and ordinary course of business.
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(f) Immediately after the Closing, except as set forth on
Schedule 4.13(c), the Partnership, the Controlled Subsidiary and the Affiliated
Entities will own or lease all assets legally required for or necessary to the
conduct of the Business as conducted before the Closing.
4.14 Inventory Good and Salable. All items of raw material and
work-in-progress included in the Partnership's, the Controlled Subsidiaries'
and the Affiliated Entities' inventories were acquired or purchased in the
ordinary course of the Business.
4.15 Patents, Trademarks, Copyrights and Other Proprietary Rights.
(a) The Proprietary Rights consist of:
(i) all items set forth onSchedule
4.15(a), which sets forth a true and correct
description of all registered trademarks,
trade names, service marks, patents and
copyrights, all applications for any of the
foregoing and all license, royalty,
assignment and other similar agreements
relating to the foregoing (including
expiration dates if applicable), all material
agreements (including, but not limited to,
computer software, drawings and designs)
relating to technology, know-how or processes
that the Partnership, the Controlled
Subsidiary or the Affiliated Entities own or
are licensed or authorized to use by others
or licenses or authorizes others to use; and
(ii) all other trademarks, trade
names, service marks, patents, copyrights,
licenses, software, drawings designs and
similar items currently used or owned, in
whole or in part, by the Partnership, the
Controlled Subsidiaries and the Affiliated
Entities or to which the Partnership, a
Controlled Subsidiary or an Affiliated
Entities is contractually or equitably
entitled.
(b) The Partnership, the Controlled Subsidiary or the
Affiliated Entities, as the case may be, has the right to use the Proprietary
Rights without infringing or violating the rights of any other Person, and no
consent of third Persons will be required for the use thereof by the
Partnership or the applicable Controlled Subsidiary or Affiliated Entity, as
the case may be, upon consummation of the transactions contemplated by this
Agreement. No written claim has been asserted or, to Seller's knowledge,
threatened by any other Person to the Partnership's, the Controlled
Subsidiaries' or the Affiliated Entities' ownership of or right to use any of
the Proprietary Rights or challenging or questioning the validity or
effectiveness of any such license or agreement. Each of the Proprietary Rights
is valid and subsisting, has not been canceled, abandoned or otherwise
terminated and, if applicable, has been duly issued or filed. Set forth on
Schedule 4.15(b) is a true and accurate description of all Proprietary Rights
licensed to other Persons or which other Persons are otherwise entitled to use.
(c) The Partnership, the Controlled Subsidiaries and the
Affiliated Entities own or possess adequate Licenses to use the Proprietary
Rights presently used or necessary to conduct its business. There are no
outstanding claims that any product, activity or operation of the Partnership
or
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any Controlled Subsidiary or Affiliated Entity infringes upon or involves, or
has resulted in the infringement of, any proprietary right of any other Person,
and no Legal Proceeding has been instituted, is pending or, to Seller's
knowledge, threatened that challenges the rights of the Partnership or any
Controlled Subsidiary or Affiliated Entity with respect thereto. Except as
provided in the licenses set forth on Schedule 4.15(a), each of the
Partnership, the Controlled Subsidiaries and the Affiliated Entities has not
given and is not bound by any agreement of indemnification for any Proprietary
Right as to any property manufactured, used or sold by the Partnership or the
applicable Controlled Subsidiary or Affiliated Entity, as the case may be.
(d) To Seller's knowledge, no Person is infringing upon
any Proprietary Rights nor has misappropriated or improperly disclosed any
Trade Secret.
(e) To Seller's knowledge, no operation of the
Partnership, the Affiliated Entities or the Controlled Subsidiaries is
infringing, or has infringed, any foreign or domestic patent, trademark,
service mark, trade name or copyright of any Person, or is involved in any
misappropriation or improper use or disclosure of any Trade Secrets, of any
Person.
(f) All proofs of use, renewals and all fees, annuities
and other payments that are due with respect to the Proprietary Rights have
been met or paid.
(g) No Proprietary Right is the subject of any pending
interference, reexamination, opposition, cancellation or other protest
proceedings.
(h) All material obligations required to be performed to
date, by the Partnership, the Controlled Subsidiaries and the Affiliated
Entities pursuant to agreements with respect to the Proprietary Rights have
been performed and, to Seller's knowledge, no Person party to any such
agreement is materially in default in any respect thereunder.
4.16 Partnership Name. There are no Legal Proceedings pending or,
to Seller's knowledge, threatened against or affecting the Partnership which
would result in any impairment of the right of the Partnership to use its name.
To Seller's knowledge, the use of the name of the Partnership does not infringe
the rights of any third Person nor is it confusingly similar with the name of
any third Person.
4.17 Customers. Set forth on Schedule 4.17 is a complete and
accurate list of the Partnership's, the Controlled Subsidiaries' and the
Affiliated Entities top 20 customers during the 12-month period ended October
31, 1993 in terms of sales of the Partnership and the Affiliated Entities.
4.18 Contracts. Set forth on Schedule 4.18 are complete and
accurate lists of the following Contracts (including summaries of oral
Contracts) to which the Partnership or any Controlled Subsidiary or Affiliated
Entity is a party or bound:
(a) collective bargaining agreements or other agreements
with any labor union, employee representative or
group of employees;
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<PAGE> 20
(b) bonus, pension, profit sharing, vacation, retirement,
stock purchase, stock option, incentive or deferred
compensation, employee welfare, medical,
hospitalization or life insurance or similar plan
(including without limitation each "employee welfare
benefit plan" and "employee pension benefit plan," as
defined in sections 3(1) and 3(2) of ERISA maintained
by the Partnership or any Affiliated Entity or to
which the Partnership or any Affiliated Entity
contributes and any multi-employer plan), contract,
understanding or fringe benefit with respect to any
or all of the employees of the Partnership;
(c) written employment, consulting or similar Contracts;
(d) agreement for the purchase of fixed assets or for the
purchase and delivery of services, materials,
inventories, raw materials, supplies or equipment
outside the ordinary course of business or in excess
of $250,000;
(e) each Contract with a customer or supplier that
involves annual payments in excess of $100,000 or
aggregate remaining payments to or by the Partnership
or any Controlled Subsidiary or Affiliated Entity of
more than $100,000;
(f) distribution, marketing, sales or agency agreements;
(g) Contracts containing noncompetition agreements or
negative or restrictive financial covenants binding
on the Partnership or any Controlled Subsidiary or
Affiliated Entity;
(h) insurance policies and the most current inspection
report or recommendation relating to the coverage
provided by each such policy;
(i) leases, whether as lessor or lessee, involving annual
rental payments in excess of $50,000 individually or
$200,000 in the aggregate;
(j) loan agreements, mortgages, indentures, debt
instruments or commitments involving indebtedness for
borrowed money or for purchase money in excess of
$50,000 individually or $200,000 in the aggregate;
(k) guaranty or suretyship, indemnification or
contribution agreements, or performance bonds,
involving obligations in excess of $50,000
individually or $200,000 in the aggregate;
(l) agreement or arrangement with any Affiliate or any
"associate" (as such term is defined in Rule 405
promulgated under the Securities Act of 1933, as
amended) of the Partnership or any Controlled
Subsidiary or Affiliated Entity, any officer of the
Partnership or any Controlled Subsidiary or
Affiliated Entity, either of the partners of the
Partnership or any of their officers, directors or
shareholders;
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<PAGE> 21
(m) agreement or obligation of the Partnership or any
Controlled Subsidiary or Affiliated Entity to pay any
royalty or similar charge for the use or exploitation
of any tangible or intangible property other than a
lease or an agreement under which the Partnership or
any Controlled Subsidiary or Affiliated Entity is
lessee of any tangible property or real property;
(n) except for the types of agreements covered by another
subsection of this Section, agreement or other
commitment or arrangement with any Person continuing
for a period beyond the Closing Date that involves an
expenditure or receipt by the Partnership or any
Controlled Subsidiary or Affiliated Entity in excess
of $50,000 individually or $200,000 in the aggregate;
(o) joint venture, partnership, joint operating or
similar agreement;
(p) standard warranties for products the Partnership or
any Controlled Subsidiary or Affiliated Entity
manufactures or supplies; and
(q) other Contracts not made in the ordinary course of
business or that are material to the operations,
business, prospects or financial condition of the
Partnership or any Controlled Subsidiary or
Affiliated Entity.
To the extent requested, each of the Partnership, the Controlled
Subsidiaries and the Affiliated Entities has furnished accurate and complete
copies of the foregoing Contracts to Purchaser. All such Contracts are in full
force and effect and are valid, binding, subsisting and enforceable, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Each of the
Partnership, the Controlled Subsidiaries and the Affiliated Entities is not,
and to Seller's knowledge no other party is, in default under any of such
Contracts, and there is no existing breach, violation, default, event of
default or event, occurrence or act by the Partnership or any Controlled
Subsidiary or Affiliated Entity or, to Seller's knowledge, by any other party
thereto that, with or without the giving of notice, lapse of time or the
occurrence of any other event, would constitute a default. Except as to
insurance policies in Seller's or any of its subsidiaries' name, the
consummation of the transactions contemplated by this Agreement will not affect
the continuance in full force and effect of such Contracts. Seller has no
knowledge of any plan or intention of any other party to any such Contract to
exercise any right to cancel or terminate any such Contract in advance of its
normal maturity or termination date, and Seller does not know of any fact that
would justify the exercise of such right. None of the Partnership's or any
Controlled Subsidiaries' or Affiliated Entities' customers or suppliers, which
during the fiscal year ended October 31, 1993 accounted for 5% or more of the
Partnership's or any Controlled Subsidiaries' of Affiliated Entities' sales or
purchases, has refused, or indicated to the Partnership, the Controlled
Subsidiaries, the Affiliated Entities or Seller that it will or may refuse, to
purchase or supply goods or services, as the case may be, or that it will or
may substantially reduce the amount of goods or services that it is willing to
purchase from, or sell to, the Partnership or any Controlled Subsidiary or
Affiliated Entity after the date hereof or that it will or may substantially
increase the price for such goods or services.
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<PAGE> 22
4.19 Tax Liabilities and Status.
(a) Filed. To the best of Seller's knowledge, all Tax Returns
required to be filed with, or furnished to, any Taxing Authority by the
Partnership or any Controlled Subsidiary or Affiliated Entity as of the Closing
Date, have been timely filed or furnished to the appropriate Person when due in
accordance with all applicable laws.
(b) Paid. To the best of Seller's knowledge, the Partnership, the
Controlled Subsidiaries and the Affiliated Entities have timely paid, withheld
or established adequate reserves for all Taxes due prior to the Closing Date.
(c) Correctness. To the best of Seller's knowledge, all Tax
returns, reports, or forms filed by the Partnership, the Controlled
Subsidiaries and the Affiliated Entities correctly and fairly reflect the Taxes
of the Partnership, the Controlled Subsidiaries or the Affiliated Entities, as
the case may be, for the periods covered thereby.
(d) Not Delinquent. To the best of Seller's knowledge, except
with respect to certain amended state partnership returns reflecting changes
resulting from a 1987 Internal Revenue Service examination that have not yet
been filed, neither the Partnership, the Controlled Subsidiaries nor any
Affiliated Entity is delinquent in the payment of any Tax, nor is there any Tax
deficiency or delinquency asserted or threatened against the Partnership, the
Controlled Subsidiaries or any Affiliated Entity, nor is there any unpaid
assessment, proposal for additional Taxes, deficiency, or delinquency in the
payment of any of the Taxes of the Partnership, the Controlled Subsidiaries or
any Affiliated Entity that could be asserted by any Taxing Authority with
respect to any period ending on or before the Closing Date.
(e) Audit. To the best of Seller's knowledge, except as set forth
on Schedule 4.19(e), there are no pending, or to Seller's knowledge,
threatened, income tax audits of the Partnership and the five largest
Affiliated Entities or Controlled Subsidiaries (based on October 31, 1993
revenues, a list of which Affiliated Entities or Controlled Subsidiaries is set
forth on Schedule 4.19(e)).
(f) No Extensions. To the best of Seller's knowledge, except as
set forth on Schedule 4.19(f), neither the Partnership nor any Controlled
Subsidiary or Affiliated Entity has granted any extension to any Taxing
Authority of the limitations period during which any Tax liability may be
assessed or collected.
(g) No Violations. To the best of Seller's knowledge, neither the
Partnership nor any Controlled Subsidiary or Affiliated Entity has violated or
failed to comply with any Tax law that would result in the assessment or
collection of a material amount of Taxes from the Partnership, the Controlled
Subsidiaries and the Affiliated Entities by a Taxing Authority.
(h) Withholding. To the best of Seller's knowledge, all monies
required to be withheld or collected by the Partnership, the Controlled
Subsidiaries and the Affiliated Entities and the portion of any such Taxes to
be paid by the Partnership, the Controlled Subsidiaries and the Affiliated
Entities to Taxing Authorities have been collected or withheld and either paid
to the respective Taxing Authority or set aside in accounts for such purposes.
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<PAGE> 23
(i) Financial Statements. To the best of Seller's knowledge, the
liabilities shown in the Financial Statements (rather than any notes thereto)
and to be accrued on the books and records of the Partnership through the
Closing Date for Taxes (rather than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income), computed as if the
partial year beginning with the first day of the fiscal year and ending with
the Closing Date were a complete Tax year ending on the Closing Date, (i) will
be adequate accruals with respect to the Tax liabilities of the Partnership,
the Controlled Subsidiaries and the Affiliated Entities, and (ii) have been and
will be accrued in a manner consistent with the practices previously used by
the Partnership, the Controlled Subsidiaries and the Affiliated Entities for
accruing Tax liabilities. For this Agreement, all references to the
Partnership, the Controlled Subsidiaries and the Affiliated Entities shall
include any entities that merged with or into the Partnership, the Controlled
Subsidiaries and the Affiliated Entities.
(j) New York Real Property. The Partnership, the Controlled
Subsidiaries and the Affiliated Entities do not own any interest in real
property in the State of New York.
(k) Tax Indemnity Agreements. To the best of Seller's knowledge,
the Partnership, the Controlled Subsidiaries and the Affiliated Entities are
currently under no Contractual obligation to indemnify any other person with
respect to Taxes. The Partnership, the Controlled Subsidiaries and the
Affiliated Entities are not and never have been a party to or bound by any Tax
sharing, Tax allocation, or similar agreement or arrangement.
4.20 Employee Benefit Plans and Arrangements; ERISA.
(a) Except as disclosed on Schedule 4.18(a) and (b),
neither the Partnership, nor any ERISA Affiliate, sponsors, maintains, or
otherwise is a party to any pension, profit sharing, thrift or other retirement
plan, employee stock ownership plan, deferred compensation plan or arrangement,
stock option, stock purchase, performance share, bonus or other incentive plan,
severance plan, health, group insurance or other welfare plan, or other similar
plan, agreement, policy or understanding, whether formal or informal, including
without limitation any "employee benefit plan" within the meaning of Section
3(3) of ERISA whether or not such plan is intended to be qualified under
Section 401(a) of the Code and whether or not such plan, agreement, policy or
understanding is or has been administered or maintained in compliance with
ERISA, under which the Partnership or an ERISA Affiliate has any current or
future obligation or liability or under which any present or former employee's
dependents or beneficiaries, has any current or future right to benefits (each
such plan, agreement, policy or understanding being hereinafter referred to
individually as a "Plan"). Neither the Partnership nor any ERISA Affiliate has
any formal plan or commitment, whether legally binding or not, to create any
additional Plan or modify or change any existing Plan that would affect any
present or former employee of the Partnership, or such present or former
employee's dependents or beneficiaries. Schedule 4.20(a) identifies each Plan
which is (i) subject to Title IV of ERISA (a "Title IV Plan"), (ii) maintained
in connection with any trust described in Section 501(c)(9) of the Code or
(iii) intended to be qualified under Section 401(a) of the Code.
(b) No liability under Title IV of ERISA has been incurred by the
Partnership or any ERISA Affiliate since the effective date of ERISA that has
not been satisfied in full, and no condition exists that presents a material
risk to the Partnership or an ERISA Affiliate of incurring a liability under
Title IV
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<PAGE> 24
of ERISA, other than liability for premiums due to the PBGC. Moreover, there
are no circumstances pursuant to which the Partnership may be liable to the
PBGC with respect to any Title IV Plan sponsored or previously sponsored by an
entity other than the Partnership, including any predecessor of the
Partnership, any former employer of any present or former employee of the
Partnership if such former employer (or the assets of such former employer) was
acquired by or merged into the Partnership, or any ERISA Affiliate of the
Partnership.
(c) The PBGC has not instituted proceedings to terminate any Title
IV Plan and no condition exists that presents a material risk that such
proceedings will be instituted. No "reportable event", within the meaning of
Section 4043 of ERISA and regulations promulgated thereunder, and no event
described in Sections 4062 or 4063 of ERISA, have occurred in connection with
any Plan. With respect to each Title IV Plan, the fair market value of the
assets of each such plan (excluding for these purposes any accrued but unpaid
contributions) exceed the present value of accrued benefits under such Title IV
Plan determined on a termination basis using the actuarial assumptions
established by the PBGC and currently in effect.
(d) Full payment has been made, or will be made in accordance with
Section 404(a)(6) of the Code, of all amounts which the Partnership is required
to pay under the terms of each Plan as of the last day of the most recent Plan
year thereof ended prior to the date of this Agreement. All such amounts
properly accrued through the Closing Date with respect to the current Plan year
thereof will be paid by the Partnership on or prior to the Closing Date or have
been properly accrued in the Financial Statements. No Plan or any trust
established thereunder has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived. No ERISA Affiliate of the Partnership has failed to make a
contribution to a Plan which could reasonably be expected to subject the
Partnership to any liability under ERISA.
(e) Neither the Partnership nor any ERISA Affiliate has ever
participated in, or has any liability or contingent liability under, a
multiemployer plan, as defined in Section 3(37) of ERISA.
(f) Each of the Plans covering any employee or former employee of
the Partnership has been maintained and administered in all material respects
in accordance with applicable Laws, including but not limited to the Age
Discrimination in Employment Act, as amended, the Older Workers Benefit
Protection Act of 1990, Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1986, as amended ("COBRA"), ERISA and the Code, and all
notices that are required to be given under applicable Law to employees or
their dependents or beneficiaries with respect to each Plan have been timely
given. All reports required by any governmental agency with respect to each of
the Plans, including annual reports on Form 5500, covering any employee or
former employee of the Partnership have been timely filed. To the best of
Seller's knowledge, there are no pending, threatened or anticipated claims or
actions with respect to any Plan covering any employee or former employee of
the Partnership (other than routine claims for benefits by employees covered
under any such Plan and their beneficiaries). No "prohibited transaction", as
defined in Section 406 of ERISA or Section 4975 of the Code has occurred with
respect to any Plan, excluding transactions effected pursuant to a statutory or
administrative exemption. No Tax under Section 4980B of the Code has been
incurred, or is reasonably expected to be incurred, in respect of any Plan that
is a group health plan as defined in Section 4980B(g)(2) of the Code.
(g) No Lien has been filed by any person or entity on the assets
of the Partnership or any ERISA Affiliate relating to the operation or
maintenance of the Plans and no Lien exists by operation of Law or otherwise on
the assets of the Partnership as a result of the operation or maintenance of
the Plans,
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<PAGE> 25
and Seller has no knowledge of the existence of facts or circumstances that
would reasonably likely result in the imposition of such a Lien.
(h) Each Plan that is intended to be "qualified" within the
meaning of Section 401(a) of the Code is, and has been during the period from
its adoption to date, so qualified, both as to form and operation and all
necessary governmental approvals, including a favorable determination as to the
qualification under the Code of each of such Plans and each amendment thereto,
have been obtained. Each trust created under any such Plan and each trust
described in Section 501(c)(9) of the Code is exempt from federal income
taxation under Section 501(a) of the Code and has been so exempt during the
period from creation to date. Future compliance with the requirements of ERISA
and the Code as in effect on the Closing Date or any collective bargaining
agreements to which the Partnership is a party will not result in any increase
in the rate of benefit accrual under any of the Plans.
(i) No Plan is, or has been during the twelve-month period ending
on the Closing Date, under investigation or audit by any regulatory authority,
including the Internal Revenue Service or the Department of Labor, and neither
the Partnership nor a representative of any Plan has been notified by any
regulatory authority of an intent to commence an investigation or audit of a
Plan. There are no proceedings or requests for rulings, determinations or
opinions pending with the Internal Revenue Service or the Department of Labor
with respect to any Plan.
(j) With respect to any Plan that is maintained for the benefit of
employees of the Partnership, the Controlled Subsidiaries or the Affiliated
Entities located outside of the United States, (i) such Plan has been funded
and maintained in compliance with all Laws applicable thereto and the
requirements of such Plan's governing documents and (ii) no liability exists
with respect to such Plan which has given rise to, or could give rise to, a
Lien on any of the assets of the Partnership or any Controlled Subsidiary or
Affiliated Entity.
(k) Except as disclosed on Schedule 4.20(k), the Partnership does
not provide, and is not obligated to provide, benefits, including without
limitation death, health, medical, or hospitalization benefits (whether or not
insured), with respect to its current or former employees, their dependents or
beneficiaries beyond their retirement or other termination of employment other
than (i) coverage mandated by applicable Law, (ii) death benefits or retirement
benefits under any "employee pension benefit plan", as that term is defined in
Section 3(2) of ERISA, (iii) deferred compensation benefits accrued as
liabilities in the Financial Statements or (iv) benefits the full cost of which
is borne by the current or former employee (or his beneficiary). Any benefit
provided under a Plan to current or former employees of the Partnership, their
dependents or beneficiaries beyond their retirement or other termination of
employment may be modified or terminated by the Partnership at any time without
liability to the Partnership.
(l) The consummation of the transactions contemplated by this
Agreement will not: (i) entitle any current or former employee or officer of
the Partnership to severance pay, unemployment compensation or any other
payment, except as expressly provided in this Agreement, (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due any such
employee or officer, (iii) cause any amounts payable with respect to the Plans
to fail to be deductible for federal income tax purposes by virtue of Section
280G of the Code or (iv) to Seller's knowledge, result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code for
which an exemption is not available.
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<PAGE> 26
(m) A true and complete copy of: (i) each Plan that covers any
employee or former employee of the Partnership (and, if applicable, related
trust agreements) and all amendments thereto and written interpretations
thereof have been furnished to Purchaser together with the most recent
favorable determination letter, if any, with respect to each Plan, (ii) the
most recent annual reports prepared in connection with any such Plan (Form 5500
including all applicable schedules), (iii) the most recent actuarial valuation
report prepared in connection with any such Plan and (iv) the most recently
disseminated summary plan description relating to each Plan and any summary of
material modifications made after the date thereof.
4.21 Labor Relations. (a) To the best of Seller's knowledge,
no employee who is material to the operations of the Business has any plans to
terminate his relationship with the Partnership or the applicable Controlled
Subsidiary or Affiliated Entity and to Seller's knowledge, the Partnership or
the applicable Controlled Subsidiary or Affiliated Entity has no intention of
terminating the relationship with any such employee.
(b) Neither the Partnership, the Controlled Subsidiaries nor the
Affiliated entities permit employees to carryover unused vacation time to
subsequent years or are obligated to make, or have agreed to make, payments to
employees in lieu of vacation time.
(c) Except as set forth on Schedule 4.18(a), there exists no
collective bargaining agreement or other labor union contract applicable to any
employee of the Partnership or any Controlled Subsidiary or Affiliated Entity.
The Partnership, the Controlled Subsidiaries and the Affiliated Entities have
not received any written notification of any unfair labor practice charges or
complaints pending before any agency having jurisdiction thereof nor are there
any current union representation claims involving any of the employees of the
Partnership or the applicable Controlled Subsidiary or Affiliated Entity.
Further, Seller is not aware of any such threatened charges or claims.
(d) Seller is not aware of any union organizing activities or
proceedings involving, or any pending petitions for recognition of, a labor
union or association as the exclusive bargaining agent for, or where the
purpose is to organize, any group or groups of employees of the Partnership or
any Controlled Subsidiary or Affiliated Entity. There is not currently
pending, with regard to any of its facilities, any proceeding before the
National Labor Relations Board, wherein any labor organization is seeking
representation of any employees of the Partnership or any Controlled Subsidiary
or Affiliated Entity.
(e) Seller is not aware of any strikes, work stoppages, work
slowdowns, or lockouts nor of any threats thereof, by or with respect to any of
the employees of the Partnership or any Controlled Subsidiary or Affiliated
Entity. There have been no labor disputes, strikes, slowdowns, work stoppages,
lockouts or similar matters involving employees of the Partnership or any
Controlled Subsidiary or Affiliated Entity.
(f) There are not pending any material grievances filed by any
Controlled Subsidiary's, Affiliated Entity's or the Partnership's employees
within any collective bargaining unit or by representatives of employees within
any collective bargaining unit.
4.22 Insurance. The Partnership, the Controlled Subsidiaries and
the Affiliated Entities have not been refused any insurance coverage sought or
applied for, and the Partnership, the Controlled Subsidiaries and the
Affiliated Entities have no reason to believe that it will be unable to renew
its
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<PAGE> 27
existing insurance coverage or obtain substantially comparable coverage as and
when the same shall expire upon terms at least as favorable as those presently
in effect, other than possible increases in premiums that do not result from
any act or omission of the Partnership or any Controlled Subsidiary or
Affiliated Entity. To Seller's knowledge, the Partnership has not failed to
give any notice or present any presently existing claims under any insurance
policy in due and timely fashion.
4.23 Accuracy of Information Furnished. No representation or
warranty by Seller in this Agreement, any Schedule hereto or in any certificate
or other documents provided herein to be executed by Seller and delivered to
Purchaser under this Agreement contains any untrue statement of a material fact
or omits to state any material fact necessary to make the statements herein or
therein not false or misleading. The Partnership have provided to Purchaser
originals or true, correct and complete copies of all information and documents
requested by or on behalf of Purchaser.
4.24 Illegal or Unauthorized Payments; Political Contributions.
Neither the Partnership, any of its Affiliates, any of their officers or
employees, nor to the best knowledge of Seller, any Affiliated Entity or
subsidiary of the Partnership that is not its Affiliate or officers or
employees of any of them, any agents or other representatives of the
Partnership or any Affiliated Entities nor any other business entity or
enterprise with which the Partnership or any Affiliated Entity is or has been
affiliated, has, directly or indirectly, made or authorized any payment,
contribution or gift or money, property or services, whether or not in
contravention of applicable law, (a) as a kickback or bribe to any Person or
(b) to any political organization, or the holder of or any aspirant to any
elective or appointive public office, except for personal political
contributions not involving the direct or indirect use of funds of the
Partnership or such Affiliated Entities.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that:
5.1 Organization and Good Standing. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite corporate power and authority to carry
on its business as it is now being conducted, and to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby.
5.2 Authorization of Agreement. Purchaser has full corporate
power and authority to execute and deliver this Agreement and each other
agreement, document, instrument or certificate contemplated by this Agreement
or to be executed by Purchaser in connection with the consummation of the
transactions contemplated by this Agreement (all such other agreements,
documents, instruments and certificates required to be executed by Purchaser
being hereinafter referred to collectively as the "Purchaser Documents") and to
perform fully its obligations hereunder and thereunder. The execution,
delivery and performance by Purchaser of this Agreement and each Purchaser
Document has been duly authorized by all necessary action on the part of
Purchaser. This Agreement has been, and the Purchaser Documents will be at or
prior to the Closing, duly executed and delivered by Purchaser and (assuming
the due authorization, execution and delivery by the other parties hereto and
thereto) this Agreement constitutes, and the Purchaser Documents when so
executed and delivered will constitute, legal, valid and binding obligations of
Purchaser, enforceable against Purchaser in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium
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<PAGE> 28
and similar laws affecting creditors' rights and remedies generally and general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Neither the execution and delivery by
Purchaser of this Agreement and the Purchaser Documents, nor the consummation
of the transactions contemplated hereby or thereby, or compliance by Purchaser
with any of the provisions hereof or thereof, will (i) violate, or result in
the breach of, any provision of the certificate of 4.13 incorporation or
by-laws of Purchaser, (ii) violate, result in the breach or termination of, or
constitute a default under any Contract or Order to which Purchaser is a party
or by which it or any of its properties or assets is bound or subject, or (iii)
constitute a violation of any law applicable to Purchaser, except, in each
case, for violations, conflicts, breaches or defaults which individually or in
the aggregate would not materially hinder or impair the transactions
contemplated hereby.
5.3 Consents. Except for the consent of Principal Mutual Life
Insurance Company, John Hancock Mutual Life Insurance Company, John Hancock
Variable Life Insurance Company, IDS Life Insurance Company, IDS Life Insurance
Company of New York and American Enterprise Life Insurance Company under the
Note Agreements, each by and between Smith International, Inc. on the one hand
and the applicable foregoing party on the other, dated as of August 31, 1992,
as amended, no consent, waiver, approval, Order, Permit or authorization of, or
declaration or filing with, or notification to, any Person or Governmental Body
is required on the part of Purchaser in connection with the execution and
delivery of this Agreement or the Purchaser Documents or the compliance by
Purchaser with any of the provisions hereof or thereof.
5.4 Availability of Funds. Purchaser has available sufficient
funds to enable it to consummate the transactions contemplated by this
Agreement.
5.5 Litigation. There is no Legal Proceeding pending or, to the
knowledge of Purchaser, threatened, that seeks to enjoin or obtain Damages in
respect of the consummation of the transactions contemplated by this Agreement
or that questions the validity of this Agreement, the Purchaser Documents or
any action taken or to be taken by Purchaser in connection with the
consummation of the transactions contemplated hereby or thereby.
5.6 Brokers. Except to the extent The First Boston Corporation
has acted on Purchaser's behalf, no Person has acted directly or indirectly as
a broker, finder or financial advisor for Purchaser in connection with the
negotiations relating to or the transactions contemplated by this Agreement and
no Person is entitled to any fee or commission or like payment in respect
thereof based in any way on agreements, arrangements or understandings made by
or on behalf of Purchaser. Purchaser hereby acknowledges that it is solely
responsible and liable for any fees or expenses to which The First Boston
Corporation may be entitled in connection with the consummation of the
transactions contemplated by this Agreement.
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<PAGE> 29
ARTICLE VI
COVENANTS OF SELLER
From and after the date hereof and until the Closing, Seller hereby
covenants and agrees with Purchaser that:
6.1 Cooperation. Seller shall use its reasonable commercial best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with the terms and conditions hereof.
6.2 Access to Documents; Opportunity to Ask Questions. Seller
shall provide Purchaser with such information as Purchaser from time to time
reasonably may request with respect to the Partnership or the Affiliated
Entities, as the case may be, and shall permit Purchaser and any of the
directors, officers, employees, counsel, representatives, accountants and
auditors (collectively, the "Purchaser Representatives") reasonable access,
during normal business hours and upon reasonable prior notice, to the
properties, corporate records and books of accounts of the Partnership or the
Affiliated Entities, as Purchaser from time to time reasonably may request,
provided, however, that Seller shall not be obligated to provide Purchaser with
any information the provision of which may be prohibited by law or contractual
obligation. No disclosure by Seller whatsoever during any investigation by
Purchaser shall constitute an enlargement of or additional warranty or
representation of Seller beyond those expressly set forth in this Agreement or
affect Purchaser's right to rely on the representations and warranties of
Seller in this Agreement. All information and access obtained by Purchaser in
connection with the transactions contemplated by this Agreement shall be
subject to the terms and conditions of the letter agreement relating to
confidentiality, dated as of November 1, 1993, between Seller and Smith
International, Inc. (the "Confidentiality Agreement").
6.3 Conduct of Business. Except as otherwise may be contemplated
by this Agreement, required by any of the documents listed in the Schedules
hereto or as Purchaser otherwise may consent to in writing (which consent shall
not be unreasonably withheld), Seller shall:
(a) comply with the terms of the Partnership Agreement and the
Organization Agreement;
(b) not cause the Partnership or the Affiliated Entities to
conduct the Business other than in the ordinary course of business, consistent
with past practice, and, subject to the terms of the Consent Decree, shall
cause the Partnership and the Affiliated Entities to conduct the Business in
the ordinary course of business consistent with past practice;
(c) not cause the Partnership, the Affiliated Entities or Seller's
representatives on the Management Committee of the Partnership to take any
action other than to, and, subject to the terms of the Consent Decree and the
Partnership Agreement, shall not cause the Partnership, the Affiliated Entities
and the Partnership's Management Committee to: (i) maintain and preserve the
Business and its goodwill and the Partnership's and the Affiliated Entities'
relationships with customers, suppliers and others having business relations
with the Partnership and the Affiliated Entities, (ii) keep available the
services of the present employees of the Partnership and the Affiliated
Entities, and (iii) maintain all of the assets and properties of the
Partnership and the Affiliated Entities in their current condition, normal wear
and tear excepted; and
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(d) not cause the Partnership, the Affiliated Entities or Seller's
representatives on the Partnership's Management Committee to, and, subject to
the terms of the Consent Decree and the Partnership Agreement, shall cause the
Partnership and the Affiliated Entities to, engage in any action or omit to
take any action if such action or omission would have constituted a breach of
the representations and warranties in Section 4.12 had the action or omission
occurred between October 31, 1993 and the date hereof.
6.4 Consents and Conditions; Assignment of Assets. Seller shall
use its best efforts to obtain all approvals, consents or waivers from Persons
necessary to assign the Partnership Interest and transfer the Affiliated
Interests to Purchaser at the Closing and shall be obligated to pay any
reasonable consideration therefor to the third Person from whom such approval,
consent or waiver is requested, but shall not be required to initiate any Legal
Proceeding or release any right, benefit or claim to obtain such approval,
consent or waiver.
6.5 Notice of Breach or Material Change. Seller shall promptly
inform Purchaser in writing of any change of which it becomes aware that would
constitute a breach of Seller's representations and warranties in Article IV or
that Seller reasonably expects to have a Material Adverse Effect.
6.6 Acquisition Proposals. Seller shall not solicit or encourage,
and shall not, subject to the Consent Decree, permit the Partnership or any
Affiliate to solicit or encourage, inquiries or proposals with respect to,
furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition, business combination or purchase by
any Person involving all or any substantial part of the Business, the
Partnership or substantially all the assets thereof, the Affiliated Interests
or the Affiliated Entities; provided, however, that the foregoing covenant
shall not apply to information provided by the Partnership in connection with a
proposed sale by Halliburton of its interest in the Partnership.
6.7 Greenway Sub-Lease. At or prior to Closing, Seller and the
Partnership shall execute and deliver the Greenway Sub-Lease.
6.8 Resignations. Seller shall obtain the Resignations before the
Closing.
ARTICLE VII
COVENANTS OF PURCHASER
From and after the date hereof, and until the Closing Date, Purchaser
hereby covenants and agrees with Seller that:
7.1 Cooperation. Purchaser shall use its reasonable commercial
best efforts to cause the consummation of the transactions contemplated hereby
in accordance with the terms and conditions hereof.
7.2 Consents and Conditions. Purchaser shall use its best efforts
to obtain all approvals, consents or waivers from Persons necessary to assign
the Partnership Interest and transfer the Affiliated Interests to Purchaser or
assign any claim, right or benefit arising thereunder or resulting therefrom as
soon as practicable; provided, however, that in no event shall Purchaser be
obligated to pay any
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consideration therefor to the third Person from whom such approval, consent or
waiver is requested, or institute any legal action or release any right,
benefit or claim to obtain such approval, consent or waiver.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to consummate the purchase of the Partnership
Interest and the Affiliated Interests on the Closing Date is, at the option of
Purchaser, subject to the satisfaction or waiver of the following conditions:
8.1 Representations, Warranties and Covenants.
(a) Each representation and warranty of Seller contained
herein shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as though the same had been made on
and as of the Closing Date.
(b) Seller shall have performed and complied in all
material respects with the covenants and provisions of this Agreement required
to be performed or complied with by it at or prior to the Closing Date.
(c) Purchaser shall have received a certificate of
Seller, dated as of the Closing Date and signed by Seller's Chairman,
Vice-Chairman, President or any Vice-President certifying as to the fulfillment
of the conditions set forth in this Section 8.1.
8.2 No Prohibition. No Law or Order of any Governmental Body
shall be in effect which restrains or prohibits Purchaser from consummating the
transactions contemplated hereby.
8.3 Delivery of Documents. Seller shall have executed and/or
delivered to Purchaser at the Closing the items set forth in Section 3.3.
8.4 Consents. All consents and approvals set forth on Schedule
8.4 shall have been duly given, including the Halliburton Consent.
8.5 Approval Pursuant to Consent Decree. Pursuant to the terms of
the Consent Decree, the United States of America, as Plaintiff, shall have
provided written notice to Seller that it has no objections to the consummation
of the transactions contemplated hereby and approving Seller's financing a
portion of the Purchase Price pursuant to the Promissory Note.
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ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligation of Seller to consummate the sale, transfer and
assignment to Purchaser of the Partnership Interest and the Affiliated
Interests on the Closing Date is, at the option of Seller, subject to the
satisfaction of the following conditions.
9.1 Representations, Warranties and Covenants.
(a) Each representation and warranty of Purchaser contained herein
shall be true and correct in all material respects as of the Closing Date with
the same force and effect as though the same had been made on and as of the
Closing Date.
(b) Purchaser shall have performed and complied in all material
respects with the covenants and provisions in this Agreement required herein to
be performed or complied with by it at or prior to the Closing Date.
(c) Seller shall have received a certificate of Purchaser, dated
as of the Closing Date and signed by an executive officer of Purchaser,
certifying as to the fulfillment of the conditions set forth in this Section
9.1.
9.2 No Prohibition. No Law or Order of any Governmental Body
shall be in effect which restrains or prohibits Seller from consummating the
transactions contemplated hereby.
9.3 Delivery of Documents. Purchaser shall have executed and
delivered to Seller, at the Closing the items set forth in Section 3.4.
9.4 Halliburton Consent. Seller shall have received the
Halliburton Consent.
ARTICLE X
POST-CLOSING COVENANTS
10.1 Further Assurances. From time to time after the Closing Date,
each party hereto shall, at its sole cost and expense, at the reasonable
request of the other party, execute and deliver such other and further
instruments of sale, assignment, assumption, transfer and conveyance and take
such other and further action as reasonably requested in order to give effect
to the transactions contemplated hereby, including, without limitation,
obtaining any requisite or approvals for the transfer of any Contract not
obtained before the Closing.
10.2 Public Announcements. Neither Seller (nor any of its
Affiliates) nor Purchaser (nor any of its Affiliates) shall make any public
statement, including, without limitation, any press release, with respect to
this Agreement and the transactions contemplated hereby, without the prior
written consent of the other party (which consent may not be unreasonably
withheld), except as may be required by Law.
10.3 No Solicitation of Employees. Seller hereby covenants and
agrees that during the two -year period immediately following the Closing,
Seller will not, and will cause its Affiliates to not, directly or indirectly,
(a) solicit for employment by Seller, its Affiliates or anyone else, any
employee of the
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Partnership or any Affiliated Entity or any person who was an employee of the
Partnership or any Affiliated Entity within the four-month period immediately
preceding such solicitation or employment, other than such person (i) whose
employment was terminated by the Partnership or such Affiliated Entity or (ii)
who independently responded to a general published solicitation for employment
by Seller or its Affiliates; or (b) induce or attempt to induce, any employee
of the Partnership or any Affiliated Entity to terminate such employee's
employment.
10.4 Trade Secrets.
(a) For five years following the Closing Date, except as
may be required by Law, Seller hereby covenants and agrees not to, or permit
any of its Affiliates to, directly or indirectly, divulge or disclose to any
Person at any time or for any purpose whatsoever any documented Trade Secret
and not to use or permit its Affiliates to use any such Trade Secret in any way
in connection with the production or marketing of oil field drilling fluids and
drilling fluid systems.
(b) Seller agrees that upon its receipt of any subpoena,
process or other request to produce or divulge, directly or indirectly, any
Trade Secrets to any Person, Seller shall timely notify and promptly deliver a
copy of the subpoena, process or other request to Seller in accordance with
Section 14.7. For this purpose, Seller irrevocably nominates and appoints
Purchaser as a general partner of the Partnership (including any attorney
Purchaser or the Partnership retains), as its true and lawful attorney-in-fact,
to act in Seller's name, place and stead to perform any act that Seller might
perform to defend and protect against any disclosure of any Trade Secret.
(c) Purchaser acknowledges that it is aware that an
Affiliate of Seller is in the business of manufacturing and marketing drilling
fluids and drilling fluid systems and that Seller for itself, or through an
Affiliate or Affiliates will continue to conduct such business after the
Closing.
10.5 Financial Statement Audit. As soon as practicable after the
Closing Date, but in no event later than 60 days after the Closing Date, Seller
shall, at Seller's expense, cause Price Waterhouse to audit the Financial
Statements of the Partnership and deliver its unqualified report thereon to
Seller and Purchaser as of and for each of the two years ended October 31, 1993
in conformity with GAAP.
10.6 Tax Audits. Upon receipt of notification of an audit or tax
assessment of the Partnership or any Partnership or any Affiliated Entity from
any Taxing Authority for any period ending on or before the Closing Date:
(a) Purchaser or the Partnership will notify Seller within fifteen
days of receipt of notice of such audit or tax assessment;
(b) Seller will retain the right to participate fully in the audit
proceedings or the assessment response, including participation in meeting or
hearings with taxing authorities and engagement of outside professional
advisors and also including the right to challenge any proposed audit
adjustments or proposed or final assessments, including litigation, or to
settle such audit or assessment proceedings, provided such actions do not
materially and adversely affect Purchaser or Partnership interests, and Seller
will retain the rights of access to Partnership books and records and
Partnership personnel services for the purpose of supplying information
relevant to such audit or assessment or to an audit of or assessment to Seller;
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(c) Purchaser or the Partnership will provide Seller with adequate
notice of all meetings or hearings referred to in Section 10.6(b);
(d) Purchaser or the Partnership will provide copies within
fifteen days (or sooner as reasonably required by reference to any response
deadline imposed in connection with such audit or assessment) of all written
communications received from such taxing authority; and
(e) All expenses associated with Seller's election to exercise its
right to contest any audit or assessment proceedings, including outside
professional fees and costs of litigation [and settlement], will be borne by
Seller.
(f) If any non-pass through jurisdiction Taxing Authority makes an
adjustment to the Partnership or Affiliated Entities' taxable income, gain,
loss, deductions, credits or similar items in a period ending on or before the
Closing Date that result in the payment of Damages by Seller to Purchaser, and
which provide a tax benefit to the Partnership (or a partner) or Affiliated
Entities in a period ending after the Closing Date, Purchaser will reimburse
Seller for its proportionate share of the tax effect of such adjustment. The
tax reimbursement shall not be payable until the future adjustment to the
Partnership's or Affiliated Entities' taxable, income, gain, loss, deductions,
credits or similar item is reportable by the Partnership (or a partner) or
Affiliated Entity.
10.7 Compliance with Consent Decree. In accordance with Section
III.B of the Consent Decree, Purchaser agrees that the Consent Decree shall be
binding upon it.
10.8 Dresser Named Entities, Dresser Held Entities and Dresser
Branches.
(a) After the Closing, Seller and Purchaser shall use all
reasonable efforts to as soon as practicable: (i) cause the names of any
Affiliates of the Partnership or Affiliated Entities that include the name
"Dresser" or a derivative thereof (including the entities listed on Schedule
10.8(a)(i)) (collectively, the "Dresser Named Entities") to be changed to drop
the name "Dresser;" (ii) cause the legal ownership of the Affiliated Entities
or subsidiaries of the Partnership (including the entities listed on Schedule
10.8(a)(ii)) (collectively, the "Dresser Held Entities") that are currently
held by Seller or its Affiliates as a result of foreign legal complexities to
be transferred to the Partnership; and (iii) cause the assets and operations of
the Partnership that are currently held by foreign branches of Seller or its
Affiliates (including the branches listed on Schedule 10.8(a)(iii))
(collectively, the "Dresser Branch Assets") to be transferred to the
Partnership.
(b) During the period (the "Transition Period") commencing on the
Closing Date and ending on the earlier of (i) the date of the change of the
names of the Dresser Named Entities as provided in subsection (a), and (ii) the
first anniversary of the Closing Date or such later date as may be reasonably
requested by Buyer or the Partnership and approved by Seller, which approval
shall not be unreasonably withheld, Seller hereby covenants that Purchaser and
the Partnership shall have the exclusive right to use the names of the Dresser
Named Entities to the extent, and only to the extent, necessary to comply with
the legal requirements in the countries in which the Dresser Named Entities are
conducting business. Such right to use the names of the Dresser Named Entities
shall not extend to the right to use Dresser's name for purposes of marketing
products or services.
(c) During the Transition Period: (i) Seller shall hold, or cause
its Affiliates to hold, the Dresser Held Entities and the Dresser Branch Assets
in trust for the exclusive use by and benefit of the
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Partnership; and (ii) Purchaser shall cause the Partnership to indemnify Seller
or any of Seller's Affiliates, as the case may be, and hold it harmless for any
Damages resulting from the Partnership's operation of the Dresser Held Entities
or the Dresser Branch Assets.
(d) Seller shall be liable all costs and expenses (including
Purchaser's and the Partnership's reasonable out-of-pocket costs and expenses)
associated with name changes and transfers contemplated in Section 10.8(a).
(e) After the Closing, none of Purchaser, the Partnership nor any
of their Affiliates shall have any right or interest in, or right to use,
except as permitted under this Section 10.8, the name "Dresser Industries,
Inc." or "Dresser" or any other name, logo, abbreviation or word, or
combination thereof, that indicates, suggests or implies that Purchaser, the
Partnership or any of their Affiliates is affiliated with Seller.
10.9 Retention of Records. Seller agrees to comply with the record
retention requirements in the second sentence of Section 7.5 of the Partnership
Agreement.
10.10 Italian Branch Tax Liability. Seller hereby assumes all
liability and obligations with respect to, and agrees to indemnify and hold
harmless the Partnership, Purchaser and their Affiliates for any Damages or
Taxes arising out of, Seller's or its Affiliates' sale in 1988 of Dresser
Europe Italian Branch's business to M-I B.V. Italian Branch and the subsequent
sale by M-I B.V. Italian Branch of the Dresser Atlas business to Western Atlas
International Italy, which transactions resulted in a fiscal assessment by
Italian taxing authorities. Notwithstanding anything to the contrary contained
in this Agreement, Seller's obligations under this Section 10.10 shall not be
subject to Sections 11.4. 11.8 or 11.9 of this Agreement.
10.11 Consents and Conditions; Assignment of Assets. To the extent
the consents identified on Schedule 8.4 have not been obtained by Closing and
Purchaser waives such consents as a condition to Closing, Seller shall obtain
such consents and provide copies thereof to Purchaser as promptly as
practicable following the Closing.
10.12 The 75 Benefit. Seller hereby agrees that it shall not be
entitled to any payments under the third paragraph of Section 3.3.4(a) of the
Organization Agreement from the Partnership or any partner of the Partnership,
to the extent such payments relate to or based on the period after the Closing.
Purchaser hereby agrees that it shall cause the Partnership to terminate
Seller's obligation to provide the 75 Benefit, as defined in Section 3.3.4(a)
of the Organization Agreement, to the extent such benefit relates to or is
based on the period after the Closing.
10.13 Indonesian Tax Refund. To the extent the Partnership or any
Affiliated Entity receives a refund of Indonesian taxes relating
pre-Partnership years that is attributable to Seller's payment and subsequent
protest of proposed Indonesian assessments, Seller shall be entitled to those
refunds.
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ARTICLE XI
INDEMNIFICATION AND RELATED MATTERS
11.1 Indemnification by Seller. Subject to the provisions of this
Article XI and Article XII, Seller agrees to indemnify and hold Purchaser
harmless from and against the Damages resulting from or arising out of:
(a) any violation or noncompliance by Seller or any of
its Affiliates (other than the Partnership and the
Affiliated Entities) of any Law or Order; and
(b) any misrepresentation, breach of warranty or breach
or nonfulfillment of any covenant of Seller in this
Agreement, including the Schedules and Exhibits
hereto.
11.2 Indemnification by Purchaser. Subject to the provisions of
this Article XI, Purchaser agrees to indemnify and hold Seller harmless from
and against the Damages resulting from or arising out of:
(a) any violation or noncompliance by Purchaser or any of
its Affiliates of any Law or Order;
(b) any misrepresentation, breach of warranty or breach
or nonfulfillment of any covenant of Purchaser in
this Agreement, including the Schedules and Exhibits
hereto;
(c) the operation of the Business of the Partnership and
the Affiliated Entities or ownership of the
Partnership Interest and the Affiliated Interests
after the Closing;
(d) the Assumed Liabilities; and
(e) any Damages incurred by Seller in maintaining, paying
or performing any liability or obligation after the
Closing under any bond, guarantee or undertaking by
Seller, as described in Section 1.3, to the extent
such bond, guarantee or undertaking is not canceled
as of the Closing.
11.3 Determination of Damages and Related Matters. In calculating
any amount payable to Purchaser pursuant to Section 11.1 or payable to Seller
pursuant to Section 11.2, the Indemnitor shall receive credit for any insurance
recoveries by the Indemnitee. Furthermore, Seller shall receive credit for
Purchaser's proportionate share of Partnership or Affiliated Entity tax refunds
that are not reflected on the Financial Statements and that are not the result
of a timing item that will generate a future tax liability for the Partnership
(or its partners) or any Affiliated Entity. The foregoing sentence shall not
apply to tax refunds generated by carrying back post-Closing Date losses to
pre-Closing Date taxable periods.
11.4 Limitation on Indemnification Liabilities. The
indemnifications in favor of Purchaser contained in Sections 11.1 and 12.1
(a)(ii): (a) shall not be effective until the aggregate dollar amount of all
Damages indemnified against under such Sections, after giving effect to the
limitations in Sections
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11.10 and 12.9, exceeds $2,500,000 (the "Threshold Amount"), and then only to
the extent such aggregate amount exceeds the Threshold Amount and (b) shall
terminate once the dollar amount of Damages indemnified against under such
Section aggregates 50% of the Purchase Price; provided, however, that the
limitation set forth in clause (b) above shall not apply to: (i) Damages
arising as a result of the nonfulfillment of any covenant of Seller in this
Agreement, including the Schedules and Exhibits hereto; (ii) claims for
indemnification pursuant to Section 11.1(b) to the extent arising from
misrepresentations or breaches of warranties under Sections 4.2 (excluding
clause (ii) in the last sentence thereof), 4.3, 4.11, 4.13(a) (the third
sentence), 4.13(b) (the second sentence); and (iii) claims for indemnification
pursuant to Article XII.
11.5 Survival of Representations and Warranties. The parties
hereto agree that the representations and warranties made in this Agreement and
any indemnification with respect thereto shall survive for two years after the
Closing Date; provided, however, that (a) the representations and warranties of
Seller set forth in Sections 4.2 (excluding clause (ii) in the last sentence
thereof), 4.3, 4.11, 4.13(a) (the third sentence) and 4.13(b) (the second
sentence) shall survive indefinitely; and (b) the representations and
warranties set forth in Section 4.19 shall survive for the applicable
limitations period with respect to Taxes.
11.6 Notice of Indemnification. If any Legal Proceeding shall be
threatened or instituted or any claim or demand shall be asserted by any Person
in respect of which payment may be sought by one party hereto from the other
party under the provisions of this Article XI or for breach of any of the
representations and warranties set forth herein, the party seeking
indemnification (the "Indemnitee") shall promptly cause written notice of the
assertion of any such claim of which it has knowledge which is covered by this
indemnity to be forwarded to the other party (the "Indemnitor"), which notice
must be received by the Indemnitor prior to the expiration of two years after
the Closing Date (except for indemnification pertaining to covenants and
agreements referred to in Section 11.5, as to which such two year limitation
shall not be applicable). Any notice of a claim by reason of any of the
representations, warranties or covenants contained in this Agreement shall
state specifically the representation, warranty or covenant with respect to
which the claim is made, the facts giving rise to an alleged basis for the
claim, and the amount of the liability, if reasonably subject to calculation,
asserted against the Indemnitor by reason of the claim.
11.7 Indemnification Procedure for Third-Person Claims. Except as
otherwise provided herein, in the event of the initiation of any Legal
Proceeding against an Indemnitee by a third Person, the Indemnitor shall have
the absolute right after the receipt of notice, at its option and at its own
expense, to be represented by counsel of its choice, and to defend against,
negotiate, settle or otherwise deal with any Legal Proceeding which relates to
any Damage indemnified against hereunder; provided, however, that the
Indemnitee may participate in any such Legal Proceeding with counsel of its
choice and at its expense. The parties hereto agree to cooperate fully with
each other in connection with the defense, negotiation or settlement of any
such Legal Proceeding. To the extent the Indemnitor elects not to defend such
Legal Proceeding, and the Indemnitee defends against or otherwise deals with
any such Legal Proceeding, the Indemnitee may retain counsel, at the expense of
the Indemnitor, and control the defense of such Legal Proceeding. If the
Indemnitee shall settle any such Legal Proceeding without the consent of the
Indemnitor, the Indemnitee shall thereafter have no claim against the
Indemnitor under this Article with respect to any Damage occasioned by such
settlement; provided, however, that if Indemnitor fails to consent to any such
settlement it shall thereafter assume the expenses of continuing to litigate,
prosecute, defend or pursue such claim. The Indemnitor shall not settle any
indemnifiable claim without the prior written consent of the Indemnitee unless
such settlement involves only the payment of money
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and the claimant provides to the Indemnitee a release, in form and substance
satisfactory to the Indemnitee, from all liability in respect of such claim.
11.8 Exclusive Remedy. The exclusive remedy available to a
party hereto in respect of the matters covered by Section 11.1 or Section 11.2
shall be to proceed in the manner and subject to the limitations contained in
this Article XI.
11.9 INDEMNIFICATION OF NEGLIGENCE OF INDEMNITEE. THE
INDEMNIFICATION PROVIDED IN THIS ARTICLE XI SHALL BE APPLICABLE EXCEPT TO THE
EXTENT (AND ONLY TO THE EXTENT) DAMAGES RESULT FROM NEGLIGENCE OF THE
INDEMNITEE THAT IS ALLEGED AND PROVEN (A COMPARATIVE NEGLIGENCE STANDARD).
11.10 Halliburton Obligations. Notwithstanding anything to the
contrary contained herein, (a) to the extent there is a breach of a
representation or warranty or breach or non-fulfillment of any covenant by
Seller which gives rise to Damages which are indemnifiable and such Damages are
sustained by the Partnership or both partners' interests in the Partnership,
Seller's indemnification obligation to Purchaser hereunder shall be limited to
64% of the amount of such Damages, and (b) Seller shall not be obligated to
indemnify Purchaser hereunder to the extent Halliburton or its Affiliates is
obligated to indemnify, reimburse, contribute to or otherwise pay Purchaser for
Damages for which Purchaser would otherwise be entitled to indemnification
hereunder, regardless of whether Purchaser actually receives any contribution
or indemnification from Halliburton.
ARTICLE XII
ENVIRONMENTAL MATTERS
12.1 Indemnification by Seller for Onsite Liabilities. Subject to
the provisions of this Article XII, Seller agrees to indemnify and hold
Purchaser harmless from and against all Environmental Damages:
(a) Current Environmental Laws.
(i) resulting or arising from (1) Environmental
Requirements arising under Current Environmental Laws and (2)
the operations of the Partnership, the Subsidiaries and the
Affiliated Entities related to the use or ownership of the
facilities set forth on Schedule 12.1, to the extent such
Environmental Damages are costs necessary, in the reasonable
opinion of Purchaser, to comply with any Environmental
Requirements to remediate a condition that could reasonably be
expected to give rise to Environmental Damages and are
associated with any condition or occurrence, or based on any
fact or circumstance that occurred or existed on or prior to
the Closing Date.
(ii) for a period of eight years after the Closing
Date, in excess of the Threshold Amount resulting or arising
from (1) Environmental Requirements arising under Current
Environmental Laws and (2) the operations of the Partnership,
the Subsidiaries and the Affiliated Entities or use or
ownership of the real property of the Partnership, the
Subsidiaries and the Affiliated Entities as of the Closing
Date (the "Partnership Real Property") other than the
facilities set forth on Schedule 12.1, to the
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extent such Environmental Damages are associated with any
condition or occurrence, or based on any fact or circumstance
that occurred or existed on or prior to the Closing Date.
(b) Future Environmental Laws.
(i) for a period of 15 years after the Closing
Date, in excess of the Environmental Damage Threshold
resulting or arising from (1) Environmental Requirements
arising under Future Environmental Laws and (2) the operations
of the Partnership, the Subsidiaries and the Affiliated
Entities or use or ownership of the Partnership Real Property,
to the extent such Environmental Damages are associated with
any condition or occurrence, or based on any fact or
circumstance that occurred or existed on or prior to the
Closing Date but after December 31, 1986.
(ii) in excess of the Environmental Damage
Threshold resulting or arising from (1) Environmental
Requirements arising under Future Environmental Laws and (2)
the operations of the Partnership, the Subsidiaries and the
Affiliated Entities or use or ownership of the Partnership
Real Property, to the extent such Environmental Damages are
associated with any condition or occurrence, or based on any
fact or circumstance that occurred or existed prior to January
1, 1987.
12.2 Indemnification by Seller for Offsite Liabilities. Subject to
the provisions of this Article XII, Seller agrees to indemnify and hold
Purchaser harmless from and against all Environmental Damages of the
Partnership in excess of the Environmental Damage Threshold resulting or
arising from:
(a) Current Environmental Laws.
(i) for a period of 15 years after the Closing
Date, (1) Environmental Requirements arising under Current
Environmental Laws and (2) the operations of the Partnership,
the Subsidiaries and the Affiliated Entities related to the
use or ownership of real property other than Partnership Real
Property (the "Offsite Property"), to the extent such
Environmental Damages are associated with any condition or
occurrence, or based on any fact or circumstance that occurred
or existed on or prior to the Closing Date but after December
31, 1986.
(ii) (1) Environmental Requirements arising under Current
Environmental Laws and (2) the operations of the Partnership,
the Subsidiaries and the Affiliated Entities or use or
ownership of the Offsite Property, to the extent such
Environmental Damages are associated with any condition or
occurrence, or based on any fact or circumstance that occurred
or existed prior to the January 1, 1987.
(b) Future Environmental Laws.
(i) for a period of 15 years after the Closing Date, (1)
Environmental Requirements arising under Future Environmental
Laws and (2) the operations of the Partnership, the
Subsidiaries and the Affiliated Entities or use or ownership
of the Offsite Property, to the extent such Environmental
Damages are associated with any condition or occurrence, or
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based on any fact or circumstance that occurred or existed
prior to the Closing Date but after December 31, 1986.
(ii) (1) Environmental Requirements arising under Future
Environmental Laws and (2) the operations of the Partnership,
the Subsidiaries and the Affiliated Entities or use or
ownership of the Offsite Property, to the extent such
Environmental Damages are associated with any condition or
occurrence, or based on any fact or circumstance that occurred
or existed prior to January 1, 1987.
12.3 Mining Reclamation Provisions. Notwithstanding Sections 12.1
or 12.2, if any mining reclamation is required by reason of any Environmental
Requirement, then Purchaser will first undertake to use any Partnership,
Subsidiary or Affiliated Entities reclamation reserve reflected in the
Financial Statements to pay the cost of Environmental Damages associated with
such mining reclamation. If no Partnership, Subsidiary and Affiliated Entities
reclamation funds are available or the costs of reclamation exceed applicable
reserves, then Seller will indemnify Purchaser for such additional
Environmental Damage in accordance with Section 12.1 or 12.2 as appropriate and
subject to Section 12.9.
12.4 Determination of Damages and Related Matters. In calculating
any amount payable to Purchaser pursuant to Sections 12.1 or 12.2, the
Indemnitor shall receive credit for any insurance, indemnification or
reimbursement obligation recoveries by the Indemnitee. Purchaser agrees to use
its reasonable commercial best efforts to pursue its available insurance,
indemnification or reimbursement rights to recover such amounts; provided,
however, that in no event shall Purchaser be obligated to pay any consideration
or institute any Legal Proceeding or release any right, benefit or claim
therefor.
12.5 Notice of Indemnification. If any Legal Proceeding shall be
threatened or instituted or any claim or demand shall be asserted by any Person
in respect of which payment may be sought by Purchaser from Seller under the
provisions of this Article XII, Purchaser shall promptly cause written notice
of the assertion of any such claim of which it has knowledge which is covered
by this indemnity to be forwarded to Seller, which notice must be received by
the Indemnitor prior to the expiration of (i) eight years in the case of
Section 12.1(a)(ii) and (ii) fifteen years in the case of Sections 12.1(b)(i),
12.2(a)(i) and 12.2(b)(i). Any notice of a claim by reason of any of the
indemnities contained in this Article shall state specifically the indemnity
with respect to which the claim is made, the facts giving rise to an alleged
basis for the claim, and the amount of the liability asserted against Seller by
reason of the claim.
12.6 Indemnification Procedure for Third-Party Claims. Except as
otherwise provided herein, in the event of the initiation of any Legal
Proceeding against Purchaser by a third Person the parties hereto shall comply
with Section 11.7.
12.7 Exclusive Remedy. The exclusive remedy available to a party
hereto in respect of the matters covered by Section 12.1 or Section 12.2 shall
be to proceed in the manner and subject to the limitations contained in this
Article XII.
12.8 INDEMNIFICATION OF NEGLIGENCE OF PURCHASER. THE
INDEMNIFICATION PROVIDED IN THIS ARTICLE XII SHALL BE APPLICABLE EXCEPT TO THE
EXTENT (AND ONLY TO THE EXTENT) DAMAGES RESULT FROM NEGLIGENCE OF INDEMNITEE
THAT IS ALLEGED AND PROVEN (A COMPARATIVE NEGLIGENCE STANDARD); PROVIDED,
HOWEVER, THAT THE INDEMNIFICATION PROVIDED IN THIS
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ARTICLE XII SHALL BE APPLICABLE WHETHER OR NOT NEGLIGENCE OF INDEMNITEE IS
ALLEGED OR PROVEN AS TO INDEMNITEE'S FAILURE TO DISCOVER, OR AS TO INDEMNITEE'S
SELECTION OF THE METHOD OF RESPONDING TO, MATTERS SUBJECT TO ENVIRONMENTAL
REQUIREMENTS ARISING UNDER CURRENT ENVIRONMENTAL LAWS OR FUTURE ENVIRONMENTAL
LAWS OR THE OPERATIONS OF THE PARTNERSHIP AND THE AFFILIATED ENTITIES OR USE OR
OWNERSHIP OF THE OFFSITE PROPERTY OR PARTNERSHIP REAL PROPERTY GIVING RISE TO
ENVIRONMENTAL DAMAGES.
12.9 Halliburton Obligations. Notwithstanding anything to the
contrary contained herein, (a) to the extent there is a breach of a
representation or warranty or breach or non-fulfillment of any covenant by
Seller which gives rise to Damages which are indemnifiable and such Damages are
sustained by the Partnership or both partners' interests in the Partnership,
Seller's indemnification obligation to Purchaser hereunder shall be limited to
64% of the amount of such Damages, and (b) Seller shall not be obligated to
indemnify Purchaser hereunder to the extent Halliburton or its Affiliates is
obligated to indemnify, reimburse, contribute to or otherwise pay Purchaser for
Damages for which Purchaser would otherwise be entitled to indemnification
hereunder, regardless of whether Purchaser actually receives any contribution
or indemnification from Halliburton.
ARTICLE XIII
TERMINATION
13.1 Termination. This Agreement may be terminated:
(a) by the written agreement of Purchaser and Seller;
(b) upon written notice, by either Purchaser or Seller if
there shall be in effect a non-appealable order of a
court of competent jurisdiction permanently
prohibiting the consummation of the transactions
contemplated hereby;
(c) upon written notice, by either Purchaser or Seller if
the Closing shall not have occurred on or before
March 31, 1994, provided the failure of the Closing
to occur on or before such date did not result from
the failure by the party seeking termination of this
Agreement to fulfill any undertaking or commitment
provided for herein that is required to be fulfilled
by such party or its Affiliates at or before the
Closing;
(d) upon written notice, by Purchaser, if any of the
conditions set forth in Article VIII shall have
become incapable of fulfillment and shall not have
been waived by Purchaser; and
(e) upon written notice, by Seller, if any of the
conditions set forth in Article IX shall have become
incapable of fulfillment and shall not have been
waived by Seller.
13.2 Liabilities After Termination. Upon any termination of this
Agreement pursuant to Section 13.1, no party hereto shall thereafter have any
further liability or obligation hereunder, but no
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such termination shall relieve either party hereto of any liability to the
other party hereto for any breach of this Agreement prior to the date of such
termination; provided, however, that any liabilities arising under Sections
10.2 and 14.5 shall survive termination of this Agreement.
ARTICLE XIV
MISCELLANEOUS
14.1 Certain Definitions. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Affiliate" of a specified Person means a Person that (at the time
when the determination is to be made) directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the specified Person. As used in the foregoing sentence, the term
"control" (including, with correlative meaning, the terms "controlling",
"controlled by" and "under common control with") 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 the ownership of voting securities,
by Contract or otherwise.
"Affiliated Entities" has the meaning set forth in the recitals hereof.
"Affiliated Interests" has the meaning set forth in the recitals
hereof.
"Assignment and Assumption Agreement" has the meaning set forth in
Section 3.3.
"Assumed Liabilities" means the liabilities and obligations of Seller
assumed by Purchaser pursuant to Section 1.2.
"Business" has the meaning set forth in the recitals hereof.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Closing Date" has the meaning set forth in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" has the meaning set forth in Section 6.2.
"Consent Decree" means the Final Judgment of the United States
District Court for the District of Columbia, dated December 23, 1993, in the
form provided to Purchaser prior to the date hereof.
"Contract" means any contract, agreement, indenture, note, bond, loan,
instrument, lease, conditional sale contract, mortgage, license, franchise,
insurance policy, commitment or other arrangement or agreement, whether written
or oral.
"Controlled Subsidiaries" means the Subsidiaries that are controlled
by the Partnership.
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<PAGE> 43
"Current Environmental Laws" means any Environmental Requirement
effective on or prior to the Closing Date.
"Damages" means all costs, judgments, good faith settlements, claims
(whether or not such claims are ultimately defeated), damages, losses,
penalties, fines, liabilities (including strict liability), Liens, costs, and
expenses, of whatever kind or nature, contingent or otherwise, attorneys' fees,
costs and expenses incurred in enforcing this Agreement or collecting any sums
due hereunder
"Dresser Branch Assets" has the meaning set forth in Section 10.8(a).
"Dresser Held Entities" has the meaning set forth in Section 10.8(a).
"Dresser Named Entities" has the meaning set forth in Section 10.8(a).
"Environmental Damages" means any Damages which are incurred at any
time as a result of the presence before or as of the Closing Date of Hazardous
Materials upon, about, or beneath the Partnership Real Property or the Offsite
Property, or the existence of a violation of Environmental Requirements
pertaining to such Hazardous Materials upon, about or beneath Partnership Real
Property and Offsite Property and/or Partnership, the Subsidiaries and
Affiliated Entities operations, regardless of whether the existence of such
Hazardous Materials or the violation of Environmental Requirements arose prior
to the present ownership or operation of the Property or the operations of the
Partnership, the Subsidiaries and the Affiliated Entities.
"Environmental Damages Threshold" means the aggregate of all
Environmental Damages incurred by the Partnership, the Subsidiaries and the
Affiliated Entities or Purchaser in respect of the Partnership, in each case in
respect of the matters set forth in Sections 12.1(b) and 12.2; provided,
however, such amount shall not exceed the following limits: (i) during the
period from the Closing Date to the fifth anniversary of the Closing Date,
$5,000,000; (ii) during the period from the Closing Date to the tenth
anniversary of the Closing Date, $10,000,000; (iii) during the period from the
Closing Date to the 15th anniversary of the Closing Date, $15,000,000; (iv)
during the period from the Closing Date to the 20th anniversary of the Closing
Date, $20,000,000; and (v) during the period from the Closing Date to any date
after the twentieth anniversary of the Closing Date, $25,000,000.
"Environmental Requirements" means, as to the Partnership, the
Subsidiaries and the Affiliated Entities, all applicable statutes, regulations,
rules, ordinances, codes, licenses, permits, orders, approvals, authorizations,
and similar items, of all Governmental Bodies and all applicable judicial,
administrative, and regulatory Orders relating to the protection of human
health, safety, or the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any corporation, trade or business under
common control with the Partnership as determined under Sections 414(b), (c) or
(m) of the Code.
"Financial Statements" has the meaning set forth in Section 4.5.
"Future Environmental Laws" means any Environmental Requirement that
becomes effective after the Closing Date.
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<PAGE> 44
"GAAP" means generally accepted accounting principles in the United
States, consistently applied (except as otherwise noted).
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, department, commission, board, bureau
or instrumentality thereof, or any court or arbitrator (public or private).
"Greenway Sub-Lease" means the sub-lease, by and between Seller and
the Partnership, of the office space the Partnership uses in connection with
the Business at Three Greenway Plaza, Houston, Texas, for the remainder of
Seller's present lease term of such space, at a market rate per square foot to
be determined by an independent third party consultant, substantially in the
form of Exhibit F.
"Halliburton" has the meaning set forth in the recitals hereof.
"Halliburton Consent" means a Consent to Assignment of Partnership
Interest and Estoppel Certificate substantially in the form of Exhibit H.
"Hazardous Materials" means any substance, pollutant, contaminant,
material, or waste, or combination thereof, whether solid, liquid or gaseous in
nature, the presence of which requires or may require investigation or
remediation under any Environmental Requirement, including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 et seq.) and the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 et seq.).
"Indemnitee" has the meaning set forth in Section 11.6.
"Indemnitor" has the meaning set forth in Section 11.6.
"Interim Statements" has the meaning set forth in Section 4.5.
"Law" means any applicable federal, state, local or foreign law
(including common law), statute, code, ordinance, rule, regulation or other
requirement.
"Legal Proceeding" means any judicial, administrative or arbitral
action, suit, proceeding (public or private), claim, demand or governmental
proceeding.
"Liabilities" has the meaning set forth in Section 1.2.
"Lien" means any lien, pledge, mortgage, deed of trust, security
interest, claim, lease, charge, option, right of first refusal, easement, or
other real estate declaration, covenant, condition, restriction or servitude,
transfer restriction under any shareholder or similar Contract, encumbrance or
any other restriction or limitation whatsoever.
"Material Adverse Effect" means any material adverse effect on, or any
effect that results in a material adverse change in, the business, condition
(financial or otherwise), results of operations or liabilities of the
Partnership, the Subsidiaries and the Affiliated Entities, taken as a whole.
"Offsite Property" has the meaning set forth in Section 12.2(a)(i).
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<PAGE> 45
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"Partnership" has the meaning set forth in the recitals hereof.
"Partnership Agreement" has the meaning set forth in the recitals
hereof.
"Partnership Interest" has the meaning set forth in the recitals
hereof.
"Partnership Real Property" has the meaning set forth in Section
12.1(a)(ii).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permit" means any written approval, authorization, consent,
franchise, license, permit or certificate by any Governmental Body.
"Permitted Liens" means (a) Liens for current taxes and assessments
not yet due and payable, including without limitation Liens for nondelinquent
ad valorem taxes, and nondelinquent statutory Liens arising other than by
reason of any default on the part of the Partnership; (b) such Liens on the
assets of the Partnership that do not materially detract from the value thereof
and do not unreasonably interfere with the present use of the property subject
thereto; and (c) mechanics and materialmen's liens with respect to liabilities
that are not in default.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint stock company, trust, unincorporated organization
or Governmental Body.
"Plan" has the meaning set forth in Section 4.20(a).
"Promissory Note" means Purchaser's promissory note in the principal
amount of $80 million, which shall be due and payable six months after the
Closing Date, bearing interest as determined in accordance with the Promissory
Note, substantially in the form of Exhibit I.
"Proprietary Rights" has the meaning set forth in Section 4.17.
"Purchase Price" has the meaning set forth in Section 2.1.
"Purchaser" has the meaning set forth in the recitals hereof.
"Purchaser Documents" has the meaning set forth in Section 5.2.
"Purchaser Representatives" has the meaning set forth in Section 6.2.
"Report" has the meaning set forth in Section 6.6.
"Resignations" means the resignation of each of Seller's
representatives on the Management Committee of the Partnership and each of
Seller's designees on the Boards of Directors of the Affiliated Entities, which
shall be effective as of the Closing.
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<PAGE> 46
"Seller" has the meaning set forth in the recitals hereof.
"Seller Documents" has the meaning set forth in Section 4.2.
"Subsidiaries" has the meaning set forth Section 4.3(c).
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means any
net income, alternative or add-on minimum tax, gross income, gross receipts,
estimated, sales, use, ad valorem, personal property, franchise, profits,
license, withholding on amounts paid to or by the Partnership, any Affiliated
Entity or any of their subsidiaries, payroll, employment, social security,
unemployment, disability, excise, severance, stamp, occupation, capital stock,
transfer, registration, value added, premium, property, environmental or
windfall profit tax, custom, import, license, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with
any interest or any penalty, addition to tax or additional amount imposed by
any domestic or foreign governmental authority (a "Taxing Authority")
responsible for the imposition of any such tax (federal, state, and local,
foreign or domestic), liability of the Partnership or any Affiliated Entity for
the payment of any amounts for the type described in (A) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any period
during the pre-Closing period, and liability of the Partnership or any
Affiliated Entity for the payment of any amounts of the type described in as a
result of any express or implied obligation to indemnify any other person.
"Taxing Authority" has the meaning set forth in the definition of
"Tax".
"Tax Return" means any return, declaration, report, claim for refund,
estimated return or statement, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
"Title IV Plan" has the meaning set forth in Section 4.20(a).
"Threshold Amount" has the meaning set forth in Section 11.4.
"Trade Secrets" means documented proprietary or confidential
information of the Partnership, the Subsidiaries and the Affiliated Entities,
including but not limited to the following: trade secret information, ideas,
concepts, software, designs, drawings, techniques, models, data, documentation,
research, development, processes, procedures, business acquisition or
disposition plans, "know how," marketing techniques and materials, marketing
and development plans, customer names and other information related to
customers, price lists, pricing policies, details of customer, distributor,
agency or consultant contracts, financial information and any other information
relating to the business, customers, trade, trade secrets or industrial
practices of the Partnership, the Subsidiaries and the Affiliated Entities, of
or to which Seller or any of its Affiliates has obtained knowledge through
Seller's or its Affiliates' affiliation with the Partnership or any Controlled
Subsidiary or Affiliated Entity; provided that, "Trade Secrets" shall not
include information that was: (i) in the public domain, (ii) was rightfully
communicated to Seller free of any obligation of confidence, or (iii) was
developed by Seller or its Affiliates', employees or agents independently of
and without reference to any Trade Secret of the Partnership or its Affiliates.
"Transfer Taxes" means all sales, use, transfer, real property
transfer, recording, documentary, value added, customs duties and similar taxes
or charges that become due and payable prior to, on or
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<PAGE> 47
after the Closing Date as the result of (a) the conveyance to Purchaser of the
Partnership Interest or the Affiliated Interests by Seller, the Partnership or
any of Seller's Affiliates or (b) the expiration of any time period on or prior
to the Closing Date that results in customs duties or similar charges, or an
increase in customs duties or similar charges, on or with respect to the
Partnership Interest or the Affiliated Interests.
"Transition Agreement" means the Transition Agreement substantially in
the form ofExhibit I.
"Transition Period" has the meaning set forth in Section 6.7(d).
14.2 Entire Agreement. This Agreement (with its Schedules and
Exhibits) and the Confidentiality Agreement contain, and are intended as, a
complete statement of all of the terms and the arrangements between the parties
hereto with respect to the matters provided for herein and therein and
supersede any and all previous agreements and understandings between the
parties hereto with respect to those matters.
14.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Texas.
14.4 Transfer Taxes. Seller and Purchaser shall each pay one-half
of the cost of: (a) all Transfer Taxes imposed with respect to instruments of
conveyance in the transaction contemplated hereby and (b) all Transfer Taxes on
the transfer of the Partnership Interest and the Affiliated Interests
contemplated hereunder. Purchaser or Seller, as the case may be, shall execute
and deliver to the other at the Closing any certificates or other documents as
the other may reasonably request to perfect any exemption from any such
Transfer Tax.
14.5 Expenses. Each of the parties hereto shall bear its own
expenses (including, without limitation, brokerage fees and fees and
disbursements of its counsel, accountants, and other experts), incurred by it
in connection with the preparation, negotiation, execution, delivery and
performance of this Agreement, each of the other documents and instruments
executed in connection with or contemplated by this Agreement and the
consummation of the transactions contemplated hereby and thereby.
14.6 Table of Contents and Headings. The table of contents and
section headings of this Agreement are for reference purposes only and are to
be given no effect in the construction or interpretation of this Agreement.
14.7 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally or four days after being mailed by registered mail, return receipt
requested, to a party at the following address (or to such other address as
such party may have specified by notice given to the other party pursuant to
this provision):
If to Seller, to: Dresser Industries, Inc.
2001 Ross Avenue
Dallas, Texas 75201
Attention: C. E. Ables, Vice President and
General Counsel
Telephone: (214) 740-6723
Facsimile: (214) 740-6904
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<PAGE> 48
with a copies to: Weil, Gotshal & Manges
767 Fifth Avenue
New York, NY 10153
Attention: Dennis J. Block
Telephone: (212) 310-8574
Facsimile: (212) 310-8007
and
Thomas R. Hunter
Counsel-Corporate Ventures
2001 Ross Avenue
Dallas, Texas 75201
Telephone: (214) 740-6914
Facsimile: (214) 740-6009
If to Purchaser, to: Smith International Acquisition Corp.
16740 Hardy Street
Houston, Texas 77032
Attention: Chief Counsel
Telephone: (713) 443-3370
Facsimile: (713) 233-5996
with a copy to: Gardere & Wynne, L.L.P.
Texas Commerce Tower
Houston, Texas 77002
Attention: Douglas Y. Bech
Telephone: (713) 547-3500
Facsimile: (713) 547-3535
14.8 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validly or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
14.9 Binding Effect; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns. Nothing in this Agreement shall create or be deemed to
create any third party beneficiary rights in any person or entity not party to
this Agreement. No assignment of this Agreement or of any rights or
obligations hereunder may be made by any party (by operation of law or
otherwise) without the prior written consent of each of the other parties
hereto and any attempted assignment without such required consents shall be
void.
14.10 Amendments. This Agreement may be amended, supplemented or
modified, and any provision hereof may be waived, only pursuant to a written
instrument making specific reference to this Agreement signed by each of the
parties hereto.
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14.11 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.
14.12 Investigation by Purchaser. Notwithstanding any investigation
by Purchaser or any of its representatives, or any information obtained
pursuant to this Agreement or any such investigation, including but not limited
to any review of the Financial Statements, Purchaser shall be entitled to rely
in full upon the accuracy of the representations and warranties of Seller
contained in this Agreement or the Schedules hereto in any other agreement,
instrument or certificate executed or to be executed in connection with this
Agreement or the transactions contemplated hereby. Purchaser shall have no
obligation to investigate any such matters and, if any such matters are
investigated, shall have no obligation to Seller or the Company with respect to
information hereby or thereby obtained other than the obligation to in good
faith use its reasonable efforts to notify Seller of any inaccuracies it
discovers in Seller's representations and warranties before the Closing.
14.13 Reduction in Purchase Price Upon Payment of Indemnification
Obligation. To the extent either Purchaser on the one hand, and Seller on the
other shall pay any amounts to the other in accordance with Articles XI or XII,
the Purchase Price shall be deemed to be adjusted by the amount of such
payments. Except as may be otherwise required by Law, all Tax Returns and
reports filed Seller and Purchaser shall be prepared consistent with the
preceding sentence.
{NEXT PAGE IS SIGNATURE PAGE}
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<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have executed this
instrument as of the date and year first above written.
DRESSER INDUSTRIES, INC.
By: /s/ CLINT ABLES
Name: Clint E. Ables
Title: Vice President - General Counsel
SMITH INTERNATIONAL ACQUISITION CORP.
By: /s/ NEAL S. SUTTON
Name: Neal S. Sutton
Title: Vice President - Administration,
General Counsel and Secretary
<PAGE> 51
GUARANTY
WHEREAS, Smith International Acquisition Corp. is the wholly-owned
subsidiary of Smith International, Inc., a Delaware corporation ("Parent"); and
WHEREAS, Parent is directly and indirectly benefitting from the
consummation of the transactions contemplated in the Purchase and Sale
Agreement, dated as of February 28, 1994, by and between Purchaser and Dresser
Industries, Inc. ("Seller") and any amendments or supplements thereto (the
"Purchase Agreement");
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Parent hereby unconditionally, absolutely and continuously
guarantees Purchaser's, its successor's or assigns' payment and performance of
its liabilities and obligations under the Promissory Note (as defined in the
Purchase Agreement) and the Purchase Agreement and the transactions therein
provided. Parent hereby waives any right to require Seller to (a) proceed
against Purchaser, its successor or assigns, (b) have Parent joined with
Purchaser, its successor or assigns in any suit or proceeding arising out of
this guaranty, or (c) pursue any other remedy in Seller's power whatsoever.
IN WITNESS WHEREOF, Parent has caused this guaranty to be duly
executed as of February 28, 1994.
SMITH INTERNATIONAL, INC.
By: /s/ NEAL S. SUTTON
Name: Neal S. Sutton
Title: Vice President - Administration,
General Counsel and Secretary
