Disclosure Letter Relating to Sale of Data Packaging Holdings Limited by RII, Managers, and Enterprise Ireland to Tintarent Limited

Summary

This Disclosure Letter is provided by RII Investment Corp, certain managers, and Enterprise Ireland (the Vendors) to Tintarent Limited (the Purchaser) in connection with the sale of all shares in Data Packaging Holdings Limited. The letter lists disclosures and exceptions to warranties in the related Share Purchase Agreement, including details on loans, charges, grants, and management fees. It clarifies that the Vendors are not liable for any warranty breaches regarding matters fully disclosed in this letter. The letter also outlines required consents and references supporting documents and agreements.

EX-10.25 5 0005.txt EXHIBIT 10.25 126 , 2000 To: Tintarent Limited, Deloitte & Touche House, Earlsfort Terrace, Dublin 2. DISCLOSURE LETTER RE: Sale of Data Packaging Holdings Limited Dear Sirs, 1 We refer to the Share Purchase Agreement of evendate herewith ("the Agreement") among Tintarent Limited, (the "Purchaser"), RII Investment Corp ("RII"), the individuals named in the First Schedule thereto (the "Managers"), Enterprise Ireland ("EI") and Reunion Industries, ("Reunion"). RII, the Managers and Enterprise Ireland are sometimes referred to collectively in this letter as the "Vendors". The Agreement provides for the acquisition by the Purchaser of the entire issued ordinary share capital of Data Packaging Holdings Limited (the "Company") from RII, the Managers and Enterprise Ireland. 2 This letter is the Disclosure Letter referred to in the Agreement. Expressions defined in the Agreement have the same meaning in this letter unless the context otherwise clearly requires. In the case of any ambiguity, conflict or inconsistency between this letter and the Agreement this letter shall prevail. 3 The disclosures contained in this letter are not to be taken as an admission by RII that all or any part of the matters contained herein call for disclosure. 4 The Warranties contained in the Agreement are made and given subject to the matters fully and fairly disclosed in this Disclosure Letter. RII shall not be or be deemed to be in breach of or not to have fulfilled any of the Warranties in respect of the matters fully and fairly disclosed in this Disclosure Letter and no claim shall lie in respect thereof. 5 All disclosures in this Disclosure Letter are to be taken as relating to the Warranties and each and every one thereof to which they relate and not solely to a specified warranty or representation. 6 General Disclosures ------------------- The following are hereby deemed to be disclosed:- (a) any matters or thing appearing on the files available to the public in respect of the Companies at the Companies Registration Office in Dublin as at the second last Business Day prior to the date hereof; (b) all matters, things or circumstances which are revealed by searches in the Land Registry, the Central Office of the High Court, the office of the Sheriff of the County of Westmeath; 127 (c) the Accounts for the 12 month period ending on 31st December 1999. (d) all matters contained in the documents in the annexes hereto. 7 Specific Disclosures -------------------- Subject to the above, and in particular, without prejudice to the generality of the foregoing paragraph 5 of this letter, the following specific disclosures are made and, for the sake of convenience only, references are in some instances made to specific paragraphs of Schedule 2 to the Agreement. ACCOUNTS 4(c) See disclosures below against taxation warranties. CHARGES, LOAN CAPITAL AND ENGAGEMENTS 9(a) (i) ICC - Data Packaging limited has entered into a loan agreement dated 5th November 1997 with ICC Bank Plc, for IR 1,506,000. A copy of the facility letter is attached in Annex 9 (a) (i). The security for this loan is as follows: (I) A first floating charge over all the assets of Data Packaging Limited. ICC Bank is agreeable to postpone its priority over Data Packaging Limited's debtors for up to IR 350,000 in favour of Bank of Ireland Commercial Finance Limited. (II) A first specific charge over the freehold land and premises of Data Packaging Limited consisting of the properties including its 69,000 sq.ft. premises at Clonmore Industrial Estate, Mullingar, Co.Westmeath. See Mortgage Debenture attached in Annex 9 (a) (i). (III) A specific chattel mortgage over major items of plant and machinery. AIB - See also AIB finance and leasing agreements disclosed in Annex 9(a)(i). Outstanding AIB agreements attached in Annex 9(a)(i) are as follows: (I) Counter-Indemnity dated 1st October 1997 in favour of AIB plc by Data Packaging (Ireland) Limited (now known as Data Packaging Limited) and in relation to the VAT guarantee. (II) Novation agreement dated 29th September 1997 between AIB Leasing Limited, Data Packaging Limited, incorporated in Bermuda and Data Packaging (Ireland) Limited. This agreement novated the leasing facilities in place at that time, from the Bermudian company to the Irish company. (III) Facility Letter from AIB Capital Markets to Data Packaging Limited dated 9th December 1997, offering a facility of IR 15,000. This loan relates to the VAT guarantee and leasing facilities. 128 BES - Information relating to the ICC BES Fund and the BES Scheme is attached in Annex 9(a)(i). Enterprise Ireland - In addition the Company has entered into various Enterprise Ireland grant agreements details which are attached in Annex 9(a)(i). These are as follows: (I) Grant Agreement dated 10 April 1989 between IDA, Data Packaging Limited (Bermuda) and the parties defined therein as the Promoters. (II) Grant Agreement dated 31 October 1997 between Forbairt, Data Packaging (Ireland) Limited, Reunion Industries, Inc. and DPL Acquisition Corp. (III) Transfer Agreement dated 9 January 1998 between Forbairt, Data Packaging Limited and Barnmead Limited. (IV) Preference Shareholders Agreement dated 9th January 1998 between DPL Acquisition Corp, Data Packaging Holding Limited, Forbairt and Reunion Industries, Inc. (V) Copies of five Feasibility Grants granted by Forbairt/Enterprise Ireland as follows:- - letter dated 30th August 1995 from EI to Data Packaging Limited. - Letter dated 19th September 1996 from EI to Data Packaging Limited. - Letter dated 13th January 1997 from EI to Data Packaging Limited. - Letter dated 22nd July 1998 from EI to Data Packaging Limited. - Letter dated 17th November 1999 from EI to Data Packaging Limited. (ii) A Promissory Note dated 2nd December 1999 in the amount of IR 729,963 (plus interest) is owing to Data Packaging Limited by DPL Acquisition Corp and a Promissory Note dated 19th May 2000 in the amount of IR 440,000 (plus interest) is owing to Data Packaging Limited, by DPL Acquisition Corp both attached as Annex 9(a)(ii). 9(b) An AIB Finance lease dated 21st June 2000 was entered into subsequent to the Accounting Date. See Annex 9(a)(i) for details. 9(c) See disclosure 9(a)(ii) above. 9(d) See disclosure 9(a)(ii) above. A management fee is payable to ORC Plastics division of Reunion, which division, prior to its merger into Reunion, was known as Oneida Rostone Corp. See pages 12-13 of the attached Shareholders Agreement dated 24th April 1987 in Annex 9(d) in which the fee of US$100,000 was agreed. Subsequent to the 129 sale of the AIB shareholding in 1996 it was agreed (but not in writing) that a management fee of US$225,000 would be payable by the then Irish branch operation to Reunion Industries Inc. This fee was increased by Reunion Industries Inc., to US$325,000 in 1998 and again in 1999. Data Packaging Limited has paid a net of US$162,500 as the management fee for this year 2000. It has been agreed in principal by Reunion Industries Inc., that if the acquisition completes, then depending on the completion date, some of the prepaid management fee will need to be repaid to Data Packaging Limited. See Option Agreement dated 25th September 1997 between Paul Walsh, Donal Lawlor, Brendan Murtagh, DPL Acquisition Corp and DPHL attached as Annex 9(d). BANK AND OTHER BORROWINGS 10(b) (i) Copies of the companies bank account details and statements as at 31st July 2000 are attached as Annex 10(b)(i). 10(c) (i) See disclosure 9(a) above. (iv) The consent of the following is required for the transaction ICC Bank plc., the ICC BES Fund in relation to the BES Scheme, Enterprise Ireland, and also a short form Mergers Act notification has been submitted to the Department of Enterprise, Trade and Employment. (v) See disclosure 36 below. (vi) See disclosure 10(c)(iv) above. GRANTS NOT REPAYABLE 12 See letter dated 13th July 2000 from EI to Data packaging Limited re contingent liability clauses, attached in Annex 74(b) below. OWNERSHIP OF ASSETS, ETC 13 See disclosure 9(a)(i) above. See fixed asset depreciation list (1999) attached in Annex 13. There are two machines which are defunct. See details attached in Annex 13. See also list of leased motor vehicles attached in Annex 13. PLANT AND MACHINERY 14(a) (i) See disclosure 13 above. (v) See disclosure 13 above. RAW MATERIALS 15 See list of regrind materials and obsolete materials and amount of reserve against them as at end of June 2000 attached as Annex 15. RETENTION OF TITLE 17 In the normal course of business all stock, raw materials or the like are supplied on a retention of title basis until payment is made. 130 INSURANCE 18(a) See list of insurance policies attached as Annex 18(a). The Companies have no defamation liability, or insurance specifically relating to the environment. A letter from Toal Insurances dated 14th July Re: rebuilding costs is attached in Annex 18(a). 18(b) Details of 2 employees' liability claims (Patricia Moynihan and Melanie Hughes-Fox) and one motor insurance claim are attached as Annex 18(b). See also a schedule of claims as supplied by the Company's broker to Marsh Ireland and motor claims summary as of 18th July 2000, also attached as Annex 18(b). PATENT AND TRADE MARKS 20(a) None of the Companies own any patents or trademarks or registered designs. 20(b) the Companies have entered into various licensing agreements for software used by the Companies. 20(c) See disclosure 2(b) above. PROPERTIES 22(b) the Company does not have in its possession a copy of planning permission 106/80. The Architect has certified compliance with it and it may be impossible to get a copy from the Local Authority at this stage. The property is charged to the ICC Bank plc and therefore the titled deeds are with ICC Bank plc. It is in the name of Data Packaging Ltd, (the Bermuda Company) and has just been transferred to Data Packaging Limited. A small section of the factory is leased to Barnmead Limited. Term: 21 years from 4th November 1997. Rent: IR 5,000 to be reviewed in 2000 on the open market value basis. Repair: Data Packaging Limited is responsible for the exterior and interior. The lease should have been from Data Packaging Limited; a deed of Rectification may be necessary. 22(c) See disclosure 22(b) above. 23(a) See disclosure 22(b) above. 29(i) See disclosure 22(b) above. 29(i) See disclosure 22(b) above. ENVIRONMENT 30 A Licence pursuant to Section 16 of the Local Government (Water Pollution) Act 1977, to emit to a sewer may have to be obtained from the local authority. See letter to Westmeath County Council attached in Annex 30. 131 30(b) Details of waste disposal for both hazardous and non-hazardous wastes are attached in Annex 30. 30(j) See disclosure 30(b) above. 30(l) See disclosure 30(b) above. 30(j) (iii) Occupational health testing is carried out by Data Packaging Limited in relation to noise exposure. The most recent testing carried out on 12th June 2000 highlighted 2 areas of the plant with noise levels in excess of 85dB (i) granulation area - plan is being prepared to reduce the causes of noise levels, however, all persons working in ths area are provided with ear protection in the interim; (ii) the readings taken at m/c 19 are currently being repeated to verify the accuracy of the original result. 30(n) The Companies have no specific insurance relating to "environmental matters" only. PRIOR TRANSACTIONS - SINCE THE ACCOUNTING DATE 32(e) A distribution of IR 12,300 was made to Enterprise Ireland in respect of the 3% preference share dividend in May 2000. 32(f) A Promissory Note dated 19th May 2000 has issued to Data Packaging Limited by DPL Acquisition Corp. for IR 440,000. See Annex 9(a)(ii) for details. An advance payment of the US management fee was paid since the Accounting Date. (See disclosure 9(d) above). 32(g) See disclosure 32(e) above. See disclosure 32(f) above. 32(i) See list of capital expenditure in excess of IR 25,000 attached as Annex 32(i). 32(j) A new lease for a car was entered into on 21st June 2000 by Data Packaging Limited with AIB Finance & Leasing. See Annex 9(a)(i) for details. Data Packaging Limited has made repayments to ICC in respect of its loan at an accelerated rate and in advance of its stated maturity. (n) Alterations to the Articles of Association of the Company will be required to proceed to redeem the preference shares held by EI. 32(p) On 1st January 2000 all salaries for staff (except the hourly paid) were reviewed. the Companies have made a general pay increase of 1% for the hourly paid employees under Partnership 2000 effective as of 1st March 2000. it is intended that the salary of Rory O'Connell will increase from 132 IR 25,000 to IR 27,000 on 1st August 2000. it is intended that the salary of Padraic Connaughton will increase from IR 21,735 to IR 23,500 on 1st August 2000. NO GUARANTEES OR CAPITAL COMMITMENTS ETC. 36 See copy of the Counter-Indemnity given by Data Packaging Limited in favour of AIB plc dated 10th October 1997 disclosed in Annex 9(a)(i) in the AIB documentation. The Promoters as defined in the IDA/Enterprise Ireland/Forbairt documentation disclosed in Annex 9(a)(i) above have given various guarantees in relation to the agreements entered into. PURCHASES AND SALES 39(a) See details on customers and suppliers attached in Annex 39(a). 39(b) In 1999, the Companies lost a principal customer, Dell Computers. Sales volumes to Pace have reduced in 2000 because of the transfer of a contract to a UK competitor of Data Packaging Limited. Sales volumes to 3Com have reduced in 2000 because of 3Com's decision to sell off their analogue division. NO LITIGATION OR DEFAULT IN OBLIGATION 40(a) See disclosure 18(b) above for details of insurance liability claims. NAME OF BUSINESS 43 The business name "Data Packaging" is used. PERMITS 45(a) See environmental disclosure above re : licence to emit to sewer. AGENTS AND DISTRIBUTORS AND JOINT VENTURES 46 There is an undisclosed Agency Agreement between Data Packaging Limited (Ireland) and Barnmead Limited. See details in Annex 9(a)(i) in the BES documentation. AGENCIES 50 See disclosure 46 above. EMPLOYEES 52 See employment contract with Paul Walsh dated November 1st 1997 attached in Annex 63. PENSIONS 53 All material details of Data Packaging Limited Pension Schemes are attached in Annex 53. 133 For the purposes of this Warranty, Data Packaging Holdings Limited is not a "Company". It does not participate in schemes and has no employees. Data Packaging Limited is the principal employer of the schemes and Barnmead Limited is an associated employer in both plans. 53(j) (iii) The Companies may terminate their respective liabilities to contribute to the Hourly Paid Plan with immediate effect by notice in writing to the Trustees. The Companies will remain liable for any contributions which have fallen due but have yet to be paid. As regards the Staff (Defined Benefit) Plan, the Companies must give six months notice in writing to the Trustees before discontinuing the Scheme in its entirety (see Rule 32). Again, the Companies would remain liable for any contributions which had fallen due prior to the discontinuance of the Scheme but which had yet to be paid. EMPLOYEE SHARE SCHEMES 58 The Option Agreement dated 25th September 1997 between Paul Walsh, Donal Lawlor, Brendan Murtagh, DPL Acquisition Corp. and Data Packaging Holdings Limited is disclosed. EMPLOYEE RELATIONS 60 The Companies have received no notices of the termination of any employees' contract of employment. FULL TIME EMPLOYEES 61 Two employees who are paid more than IR 15,000 p.a. have left the Company since the Accounting Date. They are - Noel Davey (maintenance technician) who left on 18th May 2000 and - Marie Lavin (customer services rep.) who left on 16th March 2000. CHANGES IN TERMS 62 See disclosure 32(p) above for details on salary increases. PARTICULARS 63 See employee details list dated 28/6/00 attached as Annex 63. A list of employees who have joined or left since 28/6/00 up to 27/7/00 is also attached in Annex 63. See employment contract for Paul Walsh in Annex 63. See sample standard form employment contract for all employees dated 29th May 2000 and sample offer letter dated 26th November 1998 for all hourly paid staff attached in Annex 63. See also details of Plan B VHI Options Policy regarding health insurance of employees attached in Annex 63 to include a list of members as of June 2000. 134 NO CONTRACTUAL OBLIGATIONS 64 The Companies have an obligation under the National Programme for Prosperity and Fairness to increase the rate of remuneration for the hourly paid employees. The first increase under this agreement will take place on 1st September 2000. See attached details in Annex 64. The Company is also obliged to review the salaries of all salary paid employees on 1st January in each year. RECOGNITION OF UNIONS 65 It is a condition of employment for the hourly paid employees that they join a Trade Union. Details of Trade Union agreements are attached as Annex 65. DOCUMENTS 68 All of the original property title deeds are in the possession of ICC Bank plc. ASSOCIATED COMPANIES 69 Barnmead Limited is an associated company. On 12th of November 1997 Data Packaging Limited acquired an interest in Barnmead Limited by subscribing for 111, 011, "B" ordinary shares (non voting) for a consideration of IR 150,000. Data Packaging Limited and Data Packaging Limited registered in Bermuda, are wholly owned subsidiaries of the Company. BRANCHES 70 The registered office of Data Packaging Limited (Bermuda) is Clarendon House, Church Street, Hamilton,HM 12, Bermuda. NO ISSUES OR OPTIONS 71 See Option Agreement disclosed below at 74(b) below. EFFECT OF AGREEMENT 74(b) The Agreement dated 9th January 1998 between DPL Acquisition Corp, DPHL Forbairt, and Reunion Industries Inc re: 410,000 3% redeemable preference shares attached with the Enterprise Ireland documentation in Annex 9(a)(i) may be terminated/varied, if the shares can be redeemed. The Option Agreement dated 25th September 1997 with the Managers and attached in Annex 9(d) will be terminated. - See also Letter dated 13th July 2000 from Michael O'Boyle EI to Data Packaging Limited re: Contingent liability clauses, attached in Annex 74(b). 74(c) An amendment to the Preference Shareholders Agreement dated 9th January 1998 attached in Annex 9(a)(i) with the EI documentation is proposed to be entered into in relation to the redemption of the Enterprise Ireland shares. 135 74(d) See disclosure 10(c)(iv). 74(e) See disclosure 10(c)(iv). RETURNS UP TO DATE 75(a) The process has commenced to wind up Data Packaging Limited (Bermuda) as a members voluntary liquidation. The Bermudian company will not be fully liquidated by completion. COMPLIANCE WITH 1990 ACT 82(g) A strike off notice was received in November 1999 for DPHL, and Data Packaging Limited, which was dealt with and resolved in early December. TITLE 84 RII Investment Corp. has mortgaged its shares to Bank of America. The mortgage will be released on closing. The Option Agreement dated 25th September 1997 referred to at disclosure 74(b) above is disclosed. TAXATION [PwC to revert]. EMPLOYEE SHARE SCHEMES 88(a) The Option Agreement dated 25th September 1997 referred to at 74(b) above is disclosed. 136 ANNEXES TO DATA PACKAGING HOLDINGS LIMITED DISCLOSURE LETTER Tab No. Annex No. Description of Documents - ------- --------- ------------------------ 1 9(a)(i) ICC Bank plc Loan Agreement dated 5th November 1997 2 9(a)(i) Mortgage Debenture dated 5th November 1997 between Data Packaging Limited and ICC Bank plc 3 9(a)(i) AIB Finance And Leasing Agreements 4 9(a)(i) Counter Indemnity dated 1st October 1997 in favour of AIB plc by Data Packaging (Ireland) Limited 5 9(a)(i) Novation Agreement dated 29th September 1997 between AIB Leasing Limited, Data Packaging Limited and Data Packaging (Ireland) Limited. 6 9(a)(i) Facility Letter from AIB Capital Markets to Data Packaging Limited dated 9th December 1997. 7 9(a)(i) BES Information relating to the ICC BES Fund and the BES Scheme 8 9(a)(i) Grant Agreement dated 10th April 1989 between IDA, Data Packaging Limited (Bermuda) and the parties defined therein as the Promoters. 9 9(a)(i) Grant Agreement dated 31st October 1997 between Forbairt, Data Packaging (Ireland) Limited, Reunion Industries, Inc. and DPL Acquisition Corp. 10 9(a)(i) Transfer Agreement dated 9th January 1998 between Forbairt, Data Packaging Limited and Barnmead Limited. 11 9(a)(i) Preference Shareholders Agreement dated 9th January 1998 between DPL Acquisition Corp., Data Packaging Holdings Limited, Forbairt and Reunion Industries, Inc. 12 9(a)(i) Copies of five Feasibility Grants granted by Forbairt/Enterprise Ireland 13 9(a)(ii) Promissary Note dated 2nd December 1999 in the amount of IR 729,963.00 and Promissary Note dated 19th May 2000 in the amount of IR 440,000.00 14 9(d) See pages 12 to 13 of the attached Shareholders Agreement dated 24th April 1987. 15 9(d) Option Agreement dated 25th September 1997 between Paul Walsh, Donal Lawlor, Brendan Murtagh, DPL Acquisition Corp. and Data Packaging Holdings Limited. 137 16 10(b)(i) Bank account details and statements as at31st July 2000. 17 13 Fix Asset Depreciation List (1999). 18 13 Details of Machines. 19 13 List of leased motor vehicles. 20 15 List of regrind materials and amount of reserve against them as at end June 2000. 21 15 List of obsolete materials and amount of reserve against them as at end of June 2000. 22 18(a) Insurance details. 23 18(a) Letter from Toal Insurances dated 14th July 2000 re. re-building costs. 24 18(b) Details of two employee liability claims (Patricia Moynihan and Melanie Hughes Fox) and one motor insurance claim. 25 18(b) Schedule of claims as supplied by the Company's broker to Marsh Ireland and motor claims summary as of 18th July 2000. 26 [30] Letter to Westmeath County Council dated 19th July 2000 re. licence to emit to a sewer. 27 [30] Details of waste disposal for both hazardous and non hazardous wastes. 28 [30] Intentionally blank 29 32(i) List of capital expenditure in excess of IR 25,000. 30 39(a) Details on Customers and Suppliers. 31 63 Employee details list as of 28/6/00 and a list of those who have left or joined since 28/6/00 to 27/7/00. 32 63 Employment contract for Paul Walsh. 33 63 Sample standard form employment contract for all employees dated 29th May 2000. 34 63 Sample Offer Letter dated 26th November 1998 for all hourly paid staff. 35 63 Details of Plan B VHI Options Policy including a list of members as of June 2000. 36 64 Extract from the National Programme for Prosperity and Fairness, Agreement on pay and conditions. 138 37 65 Details of trade union agreements. 38 74(b) Letter dated 13th July 2000 from Michael O'Boyle, Enterprise Ireland to Data Packaging Limited re. contingent liability clauses Please acknowledge receipt of this Disclosure Letter and the Annexes hereto and your acceptance of the disclosures made or referred to above by signing the acknowledgement at the end of the attached duplicate of this letter and returning it to the undersigned. Yours faithfully, Signed: ______________________________ Director For and on behalf of RII INVESTMENT CORP. Dated the day of 2000. Acknowledgement I hereby acknowledge receipt of the above Disclosure Letter and the Annexes thereto. Signed:__________________________ DIRECTOR, For and on behalf of Tintarent Limited Date: 2000