Senior Unsecured Term Loan Agreement Dated 03/01/2004

EXHIBIT 10.23


U.S.$125,000,000

SENIOR UNSECURED TERM LOAN AGREEMENT

Dated as of March 1, 2004

Among


DRESSER, INC.


as Borrower


and

THE INITIAL LENDERS NAMED HEREIN

as Initial Lenders

and


MORGAN STANLEY SENIOR FUNDING, INC.


as Administrative Agent

and


CREDIT SUISSE FIRST BOSTON


as Syndication Agent


and


MORGAN STANLEY SENIOR FUNDING, INC.


and

CREDIT SUISSE FIRST BOSTON

as Joint Lead Arrangers and Joint Bookrunners

T A B L E O F C O N T E N T S Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms 5 SECTION 1.02. Computation of Time Periods; Other Definitional Provisions 38 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES AND THE LETTERS OF CREDIT SECTION 2.01. The Advances 39 SECTION 2.02. Making the Advances 39 SECTION 2.03. Repayment of Advances 40 SECTION 2.04. Termination or Reduction of the Commitments 40 SECTION 2.05. Prepayments 41 SECTION 2.06. Interest 41 SECTION 2.07. Agents' Fees 42 SECTION 2.08. Conversion of Advances 42 SECTION 2.09. Increased Costs, Etc. 43 SECTION 2.10. Payments and Computations 44 SECTION 2.11. Taxes 45 SECTION 2.12. Sharing of Payments, Etc. 48 SECTION 2.13. Use of Proceeds 49 SECTION 2.14. Evidence of Debt 49 SECTION 2.15. Offer to Prepay by Application of Prepayment Offer Amount 49 SECTION 2.16. Increase in the Commitments 51 ARTICLE III CONDITIONS OF LENDING SECTION 3.01. Conditions Precedent to Initial Borrowing 52 SECTION 3.02. Conditions Precedent to Commitment Increase 54 SECTION 3.03. Determinations Under Section 3.01 55 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower 55 ARTICLE V COVENANTS SECTION 5.01. Covenants of the Borrower and Restricted Subsidiaries 60 SECTION 5.02. Successors 74 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default 76 SECTION 6.02. Acceleration 77 SECTION 6.03. Other Remedies 78 SECTION 6.04. Waiver of Past Defaults 78 SECTION 6.05. Control by Majority 79 SECTION 6.06. Limitation on Suits 79 SECTION 6.07. Rights of Lenders to Receive Payment 79 SECTION 6.08. Collection Suit by Administrative Agent 79 SECTION 6.09. Administrative Agent May File Proofs of Claim 80 SECTION 6.10. Priorities 80 SECTION 6.11. Undertaking for Costs 81 SECTION 6.12. Restoration of Rights and Remedies 81 ARTICLE VII THE AGENTS SECTION 7.01. Authorization and Action 81 SECTION 7.02. Agents' Reliance, Etc. 81 SECTION 7.03. MSSF, CSFB and Affiliates 82 SECTION 7.04. Lender Credit Decision 82 SECTION 7.05. Indemnification 82 SECTION 7.06. Successor Agents 83 SECTION 7.07. The Syndication Agent 84 ARTICLE VIII GUARANTY SECTION 8.01. Guaranty; Limitation of Liability 84 SECTION 8.02. Guaranty Absolute 85 SECTION 8.03. Waivers and Acknowledgments 86 SECTION 8.04. Subrogation 86 SECTION 8.05. Guaranty Supplements 87 SECTION 8.06. Continuing Guaranty; Assignments 87 SECTION 8.07. Release of Guarantor 88


2 SECTION 8.08. Payment 88 ARTICLE IX MISCELLANEOUS SECTION 9.01. Amendments, Etc. 88 SECTION 9.02. Notices, Etc. 89 SECTION 9.03. No Waiver; Remedies 89 SECTION 9.04. Costs and Expenses 89 SECTION 9.05. Right of Set-off 91 SECTION 9.06. Binding Effect 91 SECTION 9.07. Assignments and Participations 91 SECTION 9.08. Execution in Counterparts 95 SECTION 9.09. Confidentiality 95 SECTION 9.10. Jurisdiction, Etc. 95 SECTION 9.11. Governing Law 96 SECTION 9.12. Waiver of Jury Trial 96

SCHEDULES Schedule I - Commitments and Applicable Lending Offices Schedule II - Guarantors Schedule 4.01(c) - Authorizations, Approvals, Actions, Notices and Filings Schedule 4.01(m) - Environmental Disclosure EXHIBITS Exhibit A - Form of Term Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Assignment and Acceptance Exhibit D - Form of Solvency Certificate Exhibit E - Form of Opinion of United States Counsel to the Loan Parties Exhibit F - Form of Guaranty Supplement


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SENIOR UNSECURED TERM LOAN AGREEMENT


SENIOR UNSECURED TERM LOAN AGREEMENT dated as of March 1, 2004 among DRESSER, INC., a Delaware corporation (the " Borrower" ), the banks, financial institutions and other institutional lenders listed on the signature pages hereof as the Initial Lenders (the " Initial Lenders" ), MORGAN STANLEY SENIOR FUNDING, INC. (" MSSF" ), as administrative agent (together with any successor administrative agent appointed pursuant to Article VII, the " Administrative Agent" ) for the Lenders (as hereinafter defined), CREDIT SUISSE FIRST BOSTON (" CSFB" ), as syndication agent (in such capacity, the " Syndication Agent" ; together with the Administrative Agent, the " Agents" ), and MSSF and CSFB, as joint lead arrangers (the " Joint Lead Arrangers" ) and joint bookrunners (the " Joint Bookrunners" ).

PRELIMINARY STATEMENTS:

(1) The Borrower has entered into a Credit Agreement dated as of April 10, 2001, as amended by Amendment No. 1 thereto dated as of March 13, 2002, Amendment No. 2 thereto dated as of June 17, 2002, Amendment No. 3 thereto dated as of December 11, 2002, Amendment No. 4 and Waiver thereto dated as of March 31, 2003, Amendment No. 5 thereto dated as of June 30, 2003, and Amendment No. 6 and Waiver thereto dated as of August 5, 2003 and Amendment No. 7 thereto dated as of March 1, 2004, with the lenders party thereto, MSSF, as administrative agent for such lenders, and others (such Credit Agreement, as so amended and as hereafter amended, restated, supplemented or otherwise modified from time to time, the " Existing Credit Agreement" ).

(2) The Borrower has requested that the Lenders lend to the Borrower term loans of up to U.S.$125,000,000, the proceeds of which will be used, together with the proceeds of a new class of Tranche C Term Advances to be borrowed under Amendment No. 7 to the Existing Credit Agreement dated as of the date hereof (" Amendment No. 7" ), solely to refinance in full the Tranche B Term Advances outstanding under the Existing Credit Agreement as of the date hereof and, at the Borrower' s election, to pay transaction fees and costs. The Lenders have indicated their willingness to agree to lend such amount on the terms and conditions of this Agreement.


NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:


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ARTICLE I


DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01. Certain Defined Terms . As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):


" Accepting Lender" has the meaning specified in Section 2.15.

" Acquired Debt" means Debt of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Borrower or at the time it merges or consolidates with or into the Borrower or any of its Restricted Subsidiaries or that is assumed in connection with the acquisition of assets from such Person and in each case not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Borrower or such acquisition, merger or consolidation.

" Adjusted EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of such Person' s:


(a) Consolidated Net Income, and


(b) to the extent Consolidated Net Income has been reduced thereby:

(i) all income taxes and foreign withholding taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period;


(ii) Consolidated Interest Expense;


(iii) Consolidated Non-cash Charges less any non-cash items increasing Consolidated Net Income for such period (other than normal accruals in the ordinary course of business);

(iv) any cash charges resulting from the Transactions (as defined in the Indenture) and the related financings that, in each case, are incurred prior to October 10, 2001; and


(v) any non-capitalized transactions costs incurred in connection with actual, proposed or abandoned financings, acquisitions or divestitures, including, but not limited to, financing and refinancing fees and costs incurred in connection with the Transactions (as defined in the Indenture) and fees payable and expenses incurred in connection with any amendments or waivers of the Existing Credit Agreement (including the expenses and fees relating to this Agreement);

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(vi) fees and expenses related to or resulting from the re-audit and restatement of financial statements of the Borrower and its Subsidiaries (including, without limitation, the fees of accountants, legal counsel and other engaged to perform services in connection therewith); and

(vii) fees payable in an aggregate amount reasonably approved by the Administrative Agent and expenses incurred in connection with the consent solicitation relating to Section 4.03 of the Indenture.

all as determined on a consolidated basis for such Person and its Restricted Subsidiaries in accordance with GAAP.

" Administrative Agent" has the meaning specified in the recital of parties to this Agreement.


" Administrative Agent' s Account" means the account of the Administrative Agent maintained by the Administrative Agent as the Administrative Agent shall specify in writing to the Lenders.


" Advance" means an advance made by any Lender to the Borrower pursuant to Section 2.01 or Section 2.16.

" Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term " control" (including the terms " controlling" , " controlled by" and " under common control with" ) of a Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. Notwithstanding the foregoing, no Person (other than the Borrower or any Subsidiary of the Borrower) in whom a Securitization Entity makes an Investment in connection with a Qualified Securitization Transaction shall be deemed to be an Affiliate of the Borrower or any of its Subsidiaries solely by reason of such Investment.


" Affiliate Transaction" has the meaning specified in Section 5.01(j).

" Agents" has the meaning specified in the recital of parties to this Agreement.

" Amendment No. 7" has the meaning specified in the Preliminary Statements.


" Applicable Lending Office" means, with respect to each Lender, (a) such Lender' s Domestic Lending Office in the case of a Base Rate Advance, and (b) such Lender' s Eurodollar Lending Office in the case of a Eurodollar Rate Advance.


" Applicable Margin" means a percentage per annum equal to (a) 3.50% in the case of Eurodollar Rate Advances and (b) 2.50% in the case of Base Rate Advances.

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" Approved Fund" means, with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

" Asset Acquisition" means (a) an Investment by the Borrower or any Restricted Subsidiary of the Borrower in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Borrower, or shall be merged with or into or consolidated with the Borrower or any Restricted Subsidiary of the Borrower, or (b) the acquisition by the Borrower or any Restricted Subsidiary of the Borrower of the assets of any Person (other than a Restricted Subsidiary of the Borrower) which constitute all or substantially all of the assets of such Person or comprises any division or line of business of such Person or any other properties or assets of such Person, other than in the ordinary course of business.

" Asset Sales" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than leases entered into in the ordinary course of business), assignment or other transfer for value by the Borrower or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Borrower or a Restricted Subsidiary of the Borrower of:

(b) any Capital Stock of any Restricted Subsidiary of the Borrower, or


(c) any other property or assets of the Borrower or any Restricted Subsidiary of the Borrower other than in the ordinary course of business;


provided, however, that Asset Sales shall not include:


(i) a transaction or series of related transactions for which the Borrower or its Restricted Subsidiaries receive aggregate consideration of less than $5,000,000;

(ii) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Borrower as permitted under Section 5.02(a) or any disposition that constitutes a Change of Control;

(iii) the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof;


(iv) disposals or replacements of obsolete equipment in the ordinary course of business;

(v) the sale, lease, conveyance, disposition or other transfer by the Borrower or any Restricted Subsidiary of the Borrower of assets or property to one or more Restricted Subsidiaries of the Borrower in connection with Investments permitted under Section 5.01(f) or pursuant to any Permitted Investment; and


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(vi) sales of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of Qualified Securitization Transaction to a Securitization Entity for the fair market value thereof, including cash in an amount at least equal to 75% of the fair market value thereof as determined in accordance with GAAP. For the purposes of this clause (vi), Purchase Money Notes shall be deemed to be cash;

(vii) dispositions in the ordinary course of business;


(viii) foreclosures on assets;


(ix) any exchange of like property pursuant to Section 1031 of the Internal Revenue Code, for use in a Permitted Business;


(x) a Permitted Investment or a Restricted Payment that is permitted by Section 5.01(f);


(xi) the sale of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are reasonably promptly applied to the purchase price of similar replacement equipment; and


(xii) in the ordinary course of business, the license of patents, trademarks, copyrights and know-how to third Persons.

" Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in accordance with Section 9.07 and in substantially the form of Exhibit C hereto.

" Assuming Lender" has the meaning specified in Section 2.16(d).

" Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.


" Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of:

(c) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.' s base rate; and

(d) 1/2 of 1% per annum above the Federal Funds Rate.


" Base Rate Advance" means an Advance that bears interest as provided in Section 2.06(a)(i).


" Borrower" has the meaning specified in the recital of parties to this Agreement.


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" Borrower' s Account" means the account of the Borrower maintained by the Borrower with Wells Fargo Bank N.A., 420 Montgomery Street, San Francisco, CA 94104, SWIFT: WFBIUS6S, ABA 121000248, Account Number: 4496875212, Beneficiary: Dresser Inc., Currency: USD, or such other account as the Borrower shall specify in writing to the Administrative Agent.


" Borrowing" means a borrowing consisting of simultaneous Advances of the same Type made by the Lenders.

" Business Day" means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, a day on which dealings are carried on in the London interbank market.

" Capital Stock" means:

(a) with respect to any Person that is a corporation, any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person or options to purchase the same; and

(b) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person.


" Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP. For purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP.


" Cash Equivalents" means:


(a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof;


(b) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody' s;


(c) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-2 from S&P or at least P-2 from Moody' s;


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(d) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $250,000,000;


(e) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any bank meeting the qualifications specified in clause (d) above;

(f) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (a) through (e) above; and

(g) in the case of any Subsidiary organized or having its principal place of business outside the United States, investments denominated in the currency of the jurisdiction in which that Subsidiary is organized or has its principal place of business which are similar to the items specified in clauses (a), (b), (c), (e) and (f) above.

" CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time.

" CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.


" Change of Control" means the occurrence of one or more of the following events:

(d) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Borrower to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a " Group" ), other than to the Permitted Investors or their Related Parties or any Permitted Group;


(e) the approval by the holders of Capital Stock of the Borrower of any plan or proposal for the liquidation or dissolution of the Borrower (whether or not otherwise in compliance with the provisions of this Agreement);


(f) any Person or Group (other than the Permitted Investors or their Related Parties or any Permitted Group) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Borrower; or

(d) the first day on which a majority of the members of the Board of Directors of the Borrower are not Continuing Directors.


" Change of Control Offer" has the meaning specified in Section 5.01(m).


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" Change of Control Prepayment Date" has the meaning specified in Section 5.01(m).


" Closing Date" means the first date on which the conditions set forth in Article III are satisfied.

" Commitment" means, with respect to any Lender at any time, the amount set forth opposite such Lender' s name on Schedule I hereto under the caption " Commitment" or, if such Lender has entered into one or more Assignment and Acceptances, the amount set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender' s " Commitment" , as such amount may be reduced at or prior to such time pursuant to Section 2.04.

" Commitment Date" has the meaning specified in Section 2.16(b).

" Commitment Increase" has the meaning specified in Section 2.16(a).


" Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person' s common stock, whether outstanding on the Closing Date or issued after the Closing Date, and includes, without limitation, all series and classes of such common stock.

" Confidential Information" means information that any Loan Party furnishes to any Agent or any Lender on a confidential basis, but does not include any such information that is or becomes generally available to the public or that is or becomes available to such Agent or such Lender from a source other than the Loan Parties.

" Consolidated Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio of (x) Adjusted EBITDA of such Person during the four full fiscal quarters (the " Four-Quarter Period" ) ending prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio for which financial statements are available (the " Transaction Date" ) to (y) Consolidated Fixed Charges of such Person for the Four-Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, " Adjusted EBITDA" and " Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such calculation to:


(a) the incurrence or repayment of any Debt or the issuance of any Designated Preferred Stock of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Debt or the issuance or redemption of other Preferred Stock (and the application of the proceeds thereof), other than the incurrence or repayment of Debt in the ordinary course of business for working capital purposes pursuant to revolving credit facilities, occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment or issuance or redemption, as the case may be (and the application of the proceeds thereof), had occurred on the first day of the Four-Quarter Period; and


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(b) Asset Sales or other dispositions or Asset Acquisitions (including, without limitation, (A) any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Debt, and (B) any Adjusted EBITDA (including any pro forma expense and cost reductions and other operating improvements that have occurred or are reasonably expected to occur, in the reasonable judgment of the chief financial officer of the Borrower (regardless of whether those cost savings or operating improvements could then be reflected in pro forma financial statements in accordance with GAAP, Regulation S-X promulgated under the Securities Act or any other regulation or policy of the SEC related thereto) attributable to the assets which are the subject of the Asset Acquisition or Asset Sale or other disposition and without regard to clause (4) of the definition of Consolidated Net Income) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or other disposition or Asset Acquisition (including the incurrence or assumption of any such Acquired Debt) occurred on the first day of the Four-Quarter Period. If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Debt of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Debt as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such other Debt that was so guaranteed.

Furthermore, in calculating " Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this " Consolidated Fixed Charge Coverage Ratio" :

(a) interest on outstanding Debt determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Debt in effect on the Transaction Date; and

(b) notwithstanding clause (a) of this paragraph, interest on Debt determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements.


" Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of:


(a) Consolidated Interest Expense; plus


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(b) the product of (x) the amount of all cash dividend payments on any series of Preferred Stock of such Person times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local income tax rate of such Person, expressed as a decimal; provided that with respect to any series of Preferred Stock that was not paid cash dividends during such period but that is eligible to be paid cash dividends during any period prior to the maturity date of the Senior Unsecured Obligations, cash dividends shall be deemed to have been paid with respect to such series of Preferred Stock during such period for purposes of this clause (b).

" Consolidated Interest Expense" means, with respect to any Person for any period, the sum of, without duplication:

(a) the aggregate of all cash and non-cash interest expense with respect to all outstanding Debt of such Person and its Restricted Subsidiaries, including the net costs associated with Interest Swap Obligations, for such period determined on a consolidated basis in conformity with GAAP, but excluding amortization or write-off of debt issuance costs;


(b) the consolidated interest expense of such Person and its Restricted Subsidiaries tha ...