PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(3) of
the Rules and Regulations Under the
(To Prospectus dated June 7, 1999, Securities Act of 1933
and to the Prospectus Supplements dated
July 22, 1999, August 11, 1999,
September 3, 1999, October 5, 1999, Registration Statement No. 333-65039
November 12, 1999, December
28, 1999, and February 24, 2000)
INSILCO HOLDING CO.
14% SENIOR DISCOUNT NOTES DUE 2008
---------------------------------
RECENT DEVELOPMENTS
Attached hereto and incorporated by reference herein are the Forms 8-K
of Insilco Holding Co. dated February 11, 2000, filed with the Securities and
Exchange Commission ("SEC") on February 25, 2000, and dated February 17, 2000,
filed with the SEC on March 1, 2000.
---------------------------------
This Prospectus Supplement, together with the Prospectus, is to be used
by Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC") in connection
with offers and sale of the above-referenced securities in market-making
transactions at negotiated prices related to prevailing market prices at the
time of the sale. DLJSC may act as principal or agent in such transactions.
March 3, 2000
<PAGE>
UNITED STATES
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
DATE OF REPORT: FEBRUARY 11, 2000
INSILCO HOLDING CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-24813 06-1158291
-------------- --------------------- ---------------------
(STATE OR OTHER (COMMISSION FILE NO.) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
425 Metro Place North
Fifth Floor
Dublin, Ohio 43017
(614) 792-0468
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE OF REGISTRANTS
PRINCIPAL EXECUTIVE OFFICES)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 11, 2000, Insilco Holding Co. through its wholly-owned
subsidiary Insilco Corporation, sold its publishing business, Taylor
Publishing company to TP Acquisition Corp., a newly created,
wholly-owned subsidiary of Castle Harlan Partners III, L.P., for
gross proceeds of approximately $93.5 million, less transaction costs
and subject to adjustment for working capital and other post closing
items. The net proceeds will be utilized to reduce the outstanding
principal of Insilco Corporation's Credit Facility and/or fund future
acquisitions.
This transaction was accomplished through arms length negotiations
between Insilco Corporation management and Castle Harlan Partners
III, L.P. management.
The Company's press release issued February 11, 2000 is attached as
an exhibit and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
-----------------------------------------
Not applicable.
(b) Pro Forma financial Information
-------------------------------
The following unaudited pro forma condensed consolidated financial
statements are filed with this report:
Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1999 Page F-1
Pro Forma Condensed Consolidated Statement
Of Operations
Nine months ended September 30, 1999 Page F-2
Year ended December 31, 1998 Page F-3
The following pro forma unaudited condensed balance sheet as of September
30, 1999 presents the estimated impact of the sale of the Taylor Publishing
Company as discussed in Item 2 on the Company's consolidated financial
position assuming such sale had occurred at September 30, 1999. The
following pro forma unaudited condensed consolidated statements of
operations for the nine months ended September 30, 1999 and the year ended
December 31, 1998 present the estimated impact of the sale of the Taylor
Publishing Company on the Company's historical consolidated statements of
operations as if such sale had occurred at the beginning of the applicable
period. The nonrecurring transactions related directly to the sale are
excluded from the pro forma statements of operations. The significant
assumptions utilized for the pro forma financial statements include: (i)
the net proceeds will be utilized to reduce the outstanding debt described
above; (ii) the interest rates for the outstanding debt are based upon the
weighted average rates during the applicable period and (iii) income tax
expense (benefit) attributable to the pro forma transactions is provided at
the statutory tax rate.
2
<PAGE>
The unaudited pro forma condensed consolidated financial statements have
been prepared by the Company based upon assumptions deemed proper. The
unaudited pro forma condensed consolidated financial statements presented
herein are shown for illustrative purposes only and are not necessarily
indicative of the future financial position or future results of operations
of the Company or of the financial position or results of operations that
would have actually occurred had the transaction been in effect as of the
date or for the periods presented.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the historical financial statements and related
notes of the Company.
(c) Exhibits.
---------
EXHIBIT NO. DESCRIPTION
2 (a) Merger agreement dated December 17, 1999 by and
among Insilco Corporation, Taylor Publishing
Company, and TP Acquisition Corp.
99 (a) Press release of the Company issued February 11, 2000.
3
<PAGE>
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 thereunto duly authorized.
INSILCO HOLDING CO.
----------------------------
Registrant
Date: February 11, 2000 By: /s/ MICHAEL R. ELIA
----------------------------
Michael R. Elia
Senior Vice President and Chief Financial
Officer, Treasurer and Secretary
4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2 (a) Merger agreement dated December 17, 1999 by and
among Insilco Corporation, Taylor Publishing
Company and TP Acquisition Corp.
99 (a) Press release of the Company issued February 11, 2000.
5
<PAGE>
INSILCO HOLDING CO. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 1999
(In thousands)
<TABLE><CAPTION>
a)
Adjustment
to Record Sale,
Net Proceeds Pro
Historical and Interest Forma
---------- ------------ ---------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 14,735 2 14,737
Trade receivables, net 95,188 (18,849) 76,339
Other receivables 11,570 (4,155) 7,415
Inventories 64,381 (8,577) 55,804
Deferred tax asset 1,965 (1,965) --
Prepaid expenses and other 4,563 (1,638) 2,925
--------- --------- ---------
Total current assets 192,402 (35,182) 157,220
Property, plant and equipment 125,048 (11,659) 113,389
Deferred tax asset 8,889 (6,647) 2,242
Other assets 49,485 (1,329) 48,156
--------- --------- ---------
Total assets $ 375,824 (54,817) 321,007
========= ========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities
Current portion of long-term debt $ 1,264 -- 1,264
Accounts payable 38,581 (2,912) 35,669
Accrued expenses and other 55,113 (21,925) 33,188
--------- --------- ---------
Total current liabilities 94,958 (24,837) 70,121
Long-term debt, excluding current portion 435,438 (89,113) 346,325
Other long-term obligations, excluding current portion 46,902 (720) 46,182
Stockholders' (deficit)
Minority Interest 100 -- 100
PIK Preferred Stock 38,525 -- 38,525
Stockholders' (deficit) (240,099) 59,853 (180,246)
--------- --------- ---------
Total liabilities and stockholders' (deficit) $ 375,824 (54,817) 321,007
========= ========= =========
</TABLE>
a) To reflect removal of Taylor Publishing Company's September 30,
1999 balance sheet and reflect paydown of debt with the net
proceeds of $89.1 million.
F-1
<PAGE>
INSILCO HOLDING CO. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Nine Months Ended September 30, 1999
(In thousands, except per share data)
<TABLE><CAPTION>
Net Proceeds
Taylor and Interest Pro
Historical Operations Adjustments Forma
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 449,590 (92,047) -- 357,543
Cost of goods sold 327,216 (50,550) -- 276,666
Depreciation and amortization 17,507 (3,003) -- 14,504
Selling, general and administrative 75,515 (29,648) (175)a) 45,692
Restructuring Charge 6,532 -- -- 6,532
--------- --------- --------- ---------
Operating income 22,820 (8,846) 175 14,149
Other Income (expense):
Interest expense (35,702) 505 5,352 b) (29,845)
Interest income 347 -- -- 347
Equity in net income of Thermalex 2,596 -- -- 2,596
Other income, net 10,142 297 -- 10,439
--------- --------- --------- ---------
Income from continuing
operations before income taxes 203 (8,044) 5,527 (2,314)
Income tax (expense) benefit 1,510 2,896 c) (1,990)c) 2,416
--------- --------- --------- ---------
Net income 1,713 (5,148) 3,537 102
Preferred stock dividend (4,431) -- -- (4,431)
--------- --------- --------- ---------
Net loss available to common $ (2,718) (5,148) 3,537 (4,329)
========= ========= ========= =========
Basic loss available per common share:
Loss per share available to common $ (1.87) (2.98)
Basic shares 1,455 1,455
Diluted loss available per common share:
Loss per share available to common $ (1.87) (2.98)
Diluted shares 1,455 1,455
</TABLE>
a) To remove legal fees related to the Jostens antitrust lawsuit.
b) To reflect decrease in interest expense resulting from the debt
paydown on Insilco's credit facility from the proceeds of the
sale. Interest is calculated on the net proceeds of $89.1 million
using an assumed interest rate of 8 percent. A change of 1/8
percent in the interest rate would result in a change in interest
expense and net income of $83,619 and $53,517 before and after
taxes, respectively.
c) To reflect the tax effect of Taylor operations and the pro forma
adjustments at a statutory rate, 34 percent for federal and 2
percent for state.
F-2
<PAGE>
INSILCO HOLDING CO. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 1998
(In thousands, except per share data)
<TABLE><CAPTION>
Net Proceeds
Taylor and Interest Pro
Historical Operations Adjustments Forma
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 535,629 (101,325) -- 434,304
Cost of goods sold 383,269 (61,167) -- 322,102
Depreciation and amortization 20,159 (3,319) -- 16,840
Selling, general and administrative 91,488 (33,296) (682)a) 57,510
Merger Expenses 25,529 -- -- 25,529
Severance and write-downs 2,542 -- -- 2,542
--------- --------- --------- ---------
Operating income 12,642 (3,543) 682 9,781
Other Income (expense):
Interest expense (32,894) 610 5,782 b) (26,502)
Interest income 979 -- -- 979
Equity in net income of Thermalex 2,850 -- -- 2,850
Other income, net 3,027 713 -- 3,740
--------- --------- --------- ---------
Income from continuing
operations before income taxes (13,396) (2,220) 6,464 (9,152)
Income tax (expense) benefit 1,253 799 c) (2,327)c) (275)
--------- --------- --------- ---------
Net income (loss) (12,143) (1,421) 4,137 (9,427)
Preferred stock dividend (2,044) -- -- (2,044)
--------- --------- --------- ---------
Net loss available to common $ (14,187) (1,421) 4,137 (11,471)
========= ========= ========= =========
Basic loss available per common share:
Loss per share available to common $ (4.49) (3.63)
Basic shares 3,161 3,161
Diluted loss available per common share:
Loss per share available to common $ (4.49) (3.63)
Diluted shares 3,161 3,161
</TABLE>
a) To remove legal fees related to the Jostens antitrust lawsuit.
b) To reflect decrease in interest expense resulting from the debt
paydown on Insilco's credit facility from the proceeds of the sale.
Interest is calculated on the weighted average proceeds of $82.6
million (adjusted for seasonal working capital fluctuations) using
a rate of 7 percent. A change of 1/8 percent in the interest rate
would result in a change in interest expense and net income of
$103,241 and $66,074 before and after taxes, respectively.
c) To reflect the tax effect of Taylor operations and the pro forma
adjustments at a statutory rate, 34 percent for federal and 2 percent
for state.
F-3
<PAGE>
EXHIBIT 2 (A)
-------------
EXECUTION COPY
PURCHASE AGREEMENT,
dated as of December 17, 1999,
among
INSILCO CORPORATION,
TAYLOR PUBLISHING COMPANY
AND
TP ACQUISITION CORP.
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS........................................................ 1
ARTICLE II CLOSING........................................................... 10
2.1 Closing.......................................................... 10
2.2 Proceedings at Closing........................................... 10
ARTICLE III CONSIDERATION.................................................... 11
3.1 Amount and Form of Consideration................................. 11
3.2 Payment of Consideration......................................... 11
3.3 Working Capital Purchase Price Adjustment........................ 11
ARTICLE IV................................................................... 13
4.1 Organization; Power and Authority................................ 13
4.2 Authorizations; Execution and Validity........................... 13
4.3 Capitalization................................................... 13
4.4 Financial Statements............................................. 14
4.5 Consents......................................................... 14
4.6 No Defaults or Covenants......................................... 14
4.7 Owned Real Property.............................................. 14
4.8 Leased Real Property............................................. 15
4.9 Condition and Sufficiency of Assets.............................. 15
4.10 Insurance........................................................ 15
4.11 Contracts........................................................ 16
4.12 Intentionally Left Blank......................................... 17
4.13 Litigation; Orders............................................... 18
4.14 Environmental Laws............................................... 18
4.15 Patents, Trademarks and Similar Rights........................... 18
4.16 Employees........................................................ 20
4.17 Company Plans.................................................... 20
4.18 Taxes............................................................ 22
4.19 Title to Shares and the Limited Partner Interest................. 23
4.20 Fees............................................................. 23
4.21 Absence of Certain Changes or Events............................. 23
4.22 Permits.......................................................... 25
4.23 Inventories...................................................... 25
4.24 Accounts Receivable.............................................. 26
4.25 Compliance with Laws............................................. 26
4.26 Transactions with Related Parties................................ 26
4.27 Undisclosed Liabilities.......................................... 26
4.28 Suppliers........................................................ 27
4.29 Year 2000........................................................ 27
4.30 Sales Representatives............................................ 27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYERS........................... 27
5.1 Organization and Good Standing................................... 27
5.2 Authorization of Agreement....................................... 27
5.3 Conflicts, Consents of Third Parties............................. 28
5.4 Litigation....................................................... 28
i
<PAGE>
5.5 Investment Intent; Sophisticated Buyer........................... 28
5.6 Financing........................................................ 28
5.7 Brokers.......................................................... 29
ARTICLE VI COVENANTS OF TPC AND SELLER....................................... 29
6.1 Access to Documents; Opportunity to Ask Questions................ 29
6.2 Conduct of Business.............................................. 29
6.3 Further Actions.................................................. 30
6.4 HSR Act Compliance............................................... 30
6.5 No Breach of Representations and Warranties...................... 30
6.6 Consents......................................................... 31
6.7 Notification of Certain Matters.................................. 31
6.8 No Solicitation.................................................. 31
6.9 Non-competition.................................................. 32
6.10 Release of Liens and Guaranty.................................... 32
6.11 Access to Insurance Coverage..................................... 32
ARTICLE VII COVENANTS OF BUYERS.............................................. 33
7.1 No Breach of Representations and Warranties...................... 33
7.2 Seller's Access to Documents; Preservation of Books and Records.. 33
7.3 HSR Act Compliance............................................... 33
7.4 Further Actions.................................................. 33
7.5 Release of Guarantees............................................ 34
7.6 Notification of Certain Matters.................................. 34
7.7 Return of Information............................................ 34
7.8 Consents......................................................... 34
7.9 Financing........................................................ 34
ARTICLE VIII CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS..................... 34
8.1 Accuracy of Representations and Warranties....................... 34
8.2 Performance of Covenants......................................... 35
8.3 Hart-Scott-Rodino................................................ 35
8.4 No Order......................................................... 35
8.5 Officers' Certificates........................................... 35
8.6 Delivery of Certificates......................................... 35
8.7 Certified Resolutions............................................ 35
8.8 Employment and Non-Competition Agreements........................ 35
8.9 Consents......................................................... 35
8.10 Opinion of Counsel for Seller and TPC............................ 36
8.11 Financing........................................................ 36
8.12 FIRPTA Affidavit................................................. 36
8.13 Indebtedness..................................................... 36
8.14 Release of Certain Liens......................................... 36
8.15 Material Adverse Change.......................................... 36
ARTICLE IX CONDITIONS PRECEDENT TO SELLER'S AND TPC'S OBLIGATIONS............ 37
9.1 Accuracy of Representations and Warranties....................... 37
9.2 Performance of Covenants......................................... 37
9.3 No Order......................................................... 37
9.4 Officer's Certificate............................................ 37
9.5 Certified Resolutions............................................ 37
ii
<PAGE>
9.6 Hart-Scott-Rodino................................................ 37
9.7 Delivery of Purchase Price....................................... 37
9.8 Consents......................................................... 37
9.9 Opinion of Counsel for Buyer..................................... 38
ARTICLE X DELIVERIES AT CLOSING.............................................. 38
10.1 Deliveries by Seller to Buyer.................................... 38
10.2 Deliveries by Buyer to Seller.................................... 38
ARTICLE XI COVENANTS REGARDING EMPLOYEES..................................... 39
11.1 Employment....................................................... 39
11.2 Benefit Plans.................................................... 39
11.3 Employee Liabilities............................................. 40
11.4 Severance........................................................ 40
11.5 401(k) Plan...................................................... 40
11.6 Insilco Pension Plan............................................. 40
ARTICLE XII TAXES AND LITIGATION............................................. 41
12.1 Tax Returns and Payments......................................... 41
12.2 Refunds.......................................................... 42
12.3 Cooperation...................................................... 43
12.4 Buyer's Taxes.................................................... 43
12.5 Miscellaneous.................................................... 43
12.6 Section 338(h)(10) Election Section 754 Election................. 43
12.7 Jostens Lawsuit.................................................. 44
ARTICLE XIII TERMINATION..................................................... 45
13.1 Termination of Agreement......................................... 45
13.2 Effect of Termination............................................ 45
ARTICLE XIV INDEMNIFICATION.................................................. 46
14.1 Seller Indemnification........................................... 46
14.2 Buyer Indemnification............................................ 46
14.3 Indemnification Procedures....................................... 46
14.4 Limits on Indemnification........................................ 48
14.5 Inapplicability to Taxes......................................... 48
14.6 Environmental Indemnification.................................... 48
ARTICLE XV GENERAL........................................................... 54
15.1 Amendments....................................................... 54
15.2 Waivers.......................................................... 54
15.3 Notices.......................................................... 54
15.4 Successors and Assigns; Parties in Interest...................... 55
15.5 Severability..................................................... 55
15.6 Entire Agreement................................................. 56
15.7 Governing Law.................................................... 56
15.8 Remedies......................................................... 56
15.9 Arbitration...................................................... 56
15.10 Expenses......................................................... 57
15.11 Release of Information; Confidentiality.......................... 57
15.12 Certain Construction Rules....................................... 57
15.13 Counterparts..................................................... 58
15.14 Survival......................................................... 58
iii
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, dated as of December 17, 1999 (this
"Agreement"), is entered into by and between TP Acquisition Corp., a Delaware
corporation ("Buyer"), Insilco Corporation, a Delaware corporation ("Seller")
and Taylor Publishing Company, a Delaware corporation ("TPC").
WHEREAS, Seller is the owner of all of the outstanding shares
of capital stock (collectively the "Shares") of TPC;
WHEREAS, TPC conducts substantially all of its production
business activities through Taylor Production Services Company, L.P., a Delaware
limited partnership (the "Partnership" and, collectively with TPC, the
"Company");
WHEREAS, TPC owns a 99% general partner interest in the
Partnership and Seller owns a 1% limited partner interest in the Partnership
(the "Limited Partner Interest");
WHEREAS, Castle Harlan Partners III, L.P., a Delaware limited
partnership ("Castle Harlan"), has delivered the Buyer Guaranty Agreement (as
defined herein); and
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, on the terms and subject to the conditions set forth
in this Agreement, all of the Shares and the Limited Partner Interest.
NOW, THEREFORE, in consideration of the mutual agreements,
representations and warranties contained herein, and subject to the conditions
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"338 Election" has the meaning specified in Section 12.6(a).
"Affiliate" means, as to any Person, (a) any subsidiary of
such Person and (b) any other Person which, directly or indirectly, controls, is
controlled by, or is under common control with, such Person and includes, in the
case of a Person other than an individual, each officer or director or general
partner or member of such Person, and each Person who is the beneficial owner of
10% or more of such Person's outstanding stock having ordinary voting power of
such Person. For the purposes of this definition, "control" means the possession
of the power to direct or cause the direction of management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Affiliated Group" has the meaning specified in Section
4.18(a).
<PAGE>
"Aggregate Threshold Amount" has the meaning specified in
Section 14.6(d).
"Agreement" has the meaning specified in the preamble hereof.
"Approved Environmental Consultant" has the meaning specified
in Section 14.6(b)(ii).
"Audited Financial Statements" has the meaning specified in
Section 4.4.
"Basket Amount" has the meaning specified in Section 14.4(a).
"Books and Records" has the meaning specified in Section
7.2(a).
"Business Intellectual Property" means the Owned Intellectual
Property and the Licensed Intellectual Property.
"Business Trade Secrets" has the meaning specified in Section
4.15(h).
"Buyer" has the meaning specified in the preamble hereof.
"Buyer Confidentiality Agreement" means the Confidentiality
Agreement, dated April 27, 1999, between Seller and Castle Harlan.
"Buyer Guaranty Agreement" means the Letter Agreement executed
by Castle Harlan and delivered simultaneous with the execution of this Agreement
whereby Castle Harlan is providing a guaranty of Buyer's obligations contained
in this Agreement or any Buyer Transaction Agreement to the limited extent set
forth in such Letter Agreement.
"Buyer Transaction Agreements" means this Agreement, the Buyer
Guaranty Agreement and the agreements, instruments, documents and certificates
to be executed at the Closing by Buyer pursuant to Section 10.2 of this
Agreement.
"Cash Management Practices" has the meaning specified in
Section 4.21.
"Castle Harlan" has the meaning specified in the preamble
hereof.
"Castle Harlan Letter" has the meaning specified in Section
5.6(b).
"Closing" has the meaning specified in Section 2.1.
"Closing Balance Sheet" means the balance sheet of the Company
as of the Closing Date, prepared pursuant to Section 3.3.
"Closing Date" has the meaning specified in Section 2.1.
"Closing Working Capital" means the Working Capital of the
Company as of the Closing Date as shown on the Closing Balance Sheet.
2
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $1.00 per
share, of TPC.
"Company" has the meaning specified in the preamble hereof.
"Company Business" has the meaning specified in Section
6.9(a).
"Company Plan" has the meaning specified in Section 4.17(a).
"Company's Knowledge" means the actual knowledge, without
specific inquiry, of Craig Van Pelt, Stephen Kreider, Bill Cheney, Keith Lewis
and George Olsen.
"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.
"Current Software" means that Software identified as Vision
2000 and Ultravision, including without limitation, all updates, upgrades,
versions or releases thereof.
"Debt Financing" has the meaning specified in Section 5.6(a).
"Dispute Notice" has the meaning specified in Section 3.3(c).
"Dispute Notification" has the meaning specified in Section
14.6(b)(iv).
"Disputed Item" has the meaning specified in Section 3.3(c).
"Employee(s)" means employees of the Company who are employed
by the Company, including any person on disability or leave of absence.
"Employee Benefit Plan" means any "employee benefit plan"
within the meaning of Section 3(3) of ERISA, which is sponsored, maintained or
contributed to by the Company, or which is sponsored, maintained or contributed
to by Seller for the benefit of Employees of the Company, other than a
"multiemployer plan", as defined in Sections 3(37) and 4001(a)(3) of ERISA.
"Environmental Claims" means any written complaint, summons,
citation, notice, directive, order or claim, or any litigation, investigation,
judicial or administrative proceeding or judgment, from or by any governmental
agency, department, bureau, office or other authority, or any third party
asserting or finding violations of Environmental Laws or Releases of Hazardous
Materials from (i) any assets, properties or businesses of the Company or any
corporate predecessor in interest for which the Company would be liable; (ii)
adjoining properties or businesses; or (iii) from or onto any facilities which
received Hazardous Materials generated by the Company or any corporate
predecessor in interest for which the Company would be liable.
3
<PAGE>
"Environmental Law" means any law concerning Releases into any
part of the indoor or outdoor environment, or activities that might result in
damage to the indoor or outdoor environment, or any law that is concerned in
whole or in part with the indoor or outdoor environment and with protecting or
improving the quality of the indoor or outdoor environment and protecting public
and employee health and safety and includes, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA")
(42 U.S.C.ss.9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C.ss. 1801 et seq.), the Resource Conversation and Recovery Act (42 U. S.
C.ss.6901 et seq.), the Clean Water Act (33 U. S. C.ss.7401 et seq.), the Toxic
Substances Control Act (15 U.S.C.ss.2601 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C.ss.136 et seq.), and the Occupational
Safety and Health Act (29 U.S.C.ss.651 et seq.) ("OSHA"), as such laws have been
amended or supplemented, and the regulations promulgated pursuant thereto, and
any and all analogous federal, state or local statutes, ordinances and
regulations imposing liability or establishing standards of conduct for the
protection of the environment.
"Environmental Permit" means any Permit, approval, variance or
permission required or exemption granted under any applicable Environmental Law
and all supporting documents associated therewith.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Final Allocation" has the meaning specified in Section
12.6(a).
"Financial Statements" has the meaning specified in Section
4.4.
"Four Digit Year Format" means a format that allows entry and
processing of a four-digit year date where the first two digits designate the
century and the second two digits designate the year within the century.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board.
"Governmental Authority" means any federal, state, local or
foreign government or governmental regulatory body and any of their respective
subdivisions, agencies, instrumentalities, authorities or tribunals.
"Guaranty" means any guaranty or other obligation or liability
of TPC or the Partnership pursuant to the Insilco Credit Agreement or the
Insilco 12% Notes.
"Guaranty Contracts" has the meaning specified in Section 7.5.
"Hazardous Materials" means (a) any element, compound or
chemical that is defined, listed or otherwise classified as a toxic or hazardous
substance, extremely hazardous substance or chemical, hazardous waste, medical
waste, biohazardous or infectious waste, or special waste, under Environmental
Laws; (b) petroleum, petroleum-based or petroleum-derived
4
<PAGE>
products; (c) polychlorinated biphenyls; (d) any substance exhibiting a
hazardous waste characteristic including but not limited to corrosivity,
ignitibility, toxicity or reactivity as well as any radioactive or explosive
materials; and (e) any raw materials, building components (including but not
limited to asbestos-containing materials) and manufactured products containing
Hazardous Materials.
"Hourly Pension Plan" has the meaning specified in Section
11.2.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" has the meaning specified in Section
14.3(a).
"Indemnifying Party" has the meaning specified in Section
14.3(a).
"Independent Accountant" means KPMG or such other independent
accounting firm of international standing jointly selected by Buyer and Seller
(it being agreed that the work to be performed shall, if performed by KPMG, be
performed by its Dallas office).
"Individual Threshold Amount" has the meaning specified in
Section 14.6(d).
"Insilco 12% Notes" means the 12% Series B Senior Subordinated
Notes of Seller due 2007 as well as financing, security and other agreements
related thereto.
"Insilco 401(k) Plan" has the meaning specified in Section
11.5.
"Insilco Credit Agreement" means that certain Credit
Agreement, dated as of October 21, 1994, by and among Seller, Citicorp USA, Inc.
and Pearl Street L.P. as Co-Agents, Citicorp USA, Inc. as Administrative Agent,
and the institutions from time to time a party thereto as lenders or issuing
banks, as well as all amendments thereto and all security agreements relating
thereto.
"Insilco Pension Plan" has the meaning specified in Section
11.6(a).
"Insilco Plan Participants" has the meaning specified in
Section 11.6(a).
"Intellectual Property" means all foreign and domestic (i)
trademarks, service marks, brand names, certification marks, collective marks,
d/b/a's, Internet domain names, logos, symbols, trade dress, assumed names,
fictitious names, trade names, and other indicia of origin, all applications and
registrations for the foregoing, and all goodwill associated therewith and
symbolized thereby, including all extensions, modifications and renewals of same
(collectively, "Trademarks"); (ii) inventions, discoveries and ideas, whether
patentable or not, and all patents, registrations, and applications therefor,
including divisions, continuations, continuations-in-part and renewal
applications, and including renewals, extensions and reissues (collectively,
"Patents"); (iii) confidential and proprietary information, trade secrets and
know-how, including processes, schematics, databases, formulae, drawings,
prototypes, models, designs and customer lists; (iv) published and unpublished
works of authorship, whether copyrightable or not,
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copyright rights therein and thereto, and registrations and applications
therefor, and all renewals, extensions, restorations and reversions thereof
(collectively, "Copyrights"); and (v) all other intellectual property or
proprietary rights, including, but not limited to, any Intellectual Property
rights in the Current Software and the Legacy Software.
"Intellectual Property Licenses" means all signed written
license agreements granting permission to use any of the Business Intellectual
Property, including without limitation agreements granting the Company rights to
use the Licensed Intellectual Property and the Technology Systems (or components
thereof), agreements granting rights to use the Owned Intellectual Property,
Trademark coexistence agreements, Trademark consent agreements and nonassertion
agreements.
"Jostens Lawsuit" has the meaning set forth in Section 12.7.
"Law" means any federal, state, local or foreign law, statute,
rule, ordinance, code or regulation.
"Leap Year" means a year during which an additional calendar
day is recognized in February (February 29th). A Leap Year occurs for each year
that is divisible without remainder by the number four (4), except that a year
that is divisible by the number 100 is not a Leap Year (unless it is also
divisible without remainder by the number 400). The year 2000 is a Leap Year.
"Legacy Software" means Software, other than the Current
Software, that was licensed or sold to third parties by the Company to aid in
the production of yearbooks.
"Legal Proceeding" means any judicial, administrative or
arbitral action, suit, proceeding (public or private), litigation, complaint,
claim or governmental proceeding.
"Lender Letter" has the meaning specified in Section 5.6(a).
"Licensed Intellectual Property" means the Intellectual
Property rights that the Company is licensed or otherwise permitted by other
Persons to use.
"Lien" means any lien, pledge, mortgage, deed of trust,
security interest, attachment, right of first refusal, option, claim, easement,
covenant, encroachment, title defect or any other encumbrance whatsoever.
"Limited Partner Interest" has the meaning specified in the
preamble hereof.
"Losses" has the meaning specified in Section 14.1.
"Lowest Cost Response" has the meaning specified in Section
14.3(c).
"Material Contract" has the meaning specified in Section
4.11(a).
"Material Sales Representatives" has the meaning specified in
Section 4.30.
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"Material Suppliers" has the meaning specified in Section
4.28.
"Modified Allocation" has the meaning specified in Section
12.6(a).
"Non-Competition Period" has the meaning specified in Section
6.9(a).
"Non-Responding Party" has the meaning specified in Section
14.6(b)(ii).
"Order" means any order, judgment, injunction, ruling, writ,
award or decree specifically identified by its terms as applicable to the
Company.
"Owned Intellectual Property" means Intellectual Property
owned by the Company.
"Owned Real Property" has the meaning specified in Section
4.7.
"Partnership" has the meaning specified in the preamble
hereof.
"PBGC" has the meaning specified in Section 4.17(d).
"Permit" means any permit, license, certificate (including a
certificate of occupancy) registration, authorization, application, filing,
notice, qualification, waiver of any of the foregoing or approval of a
Governmental Authority.
"Permitted Liens" means: (a) Liens for Taxes that are not yet
due and payable or that are being contested in good faith by appropriate
proceedings and as to which adequate reserves have been established in
accordance with GAAP, (b) workers', repairmen's, and similar Liens imposed by
Law that have been incurred in the ordinary course of business consistent with
past practices relating to obligations as to which there is no material default
on the part of the Company, (c) retention of title agreements with suppliers
entered into in the ordinary course of business, (d) the rights of customers to
customer deposits, (e) Liens securing indebtedness arising under the Insilco
Credit Agreement and other Liens that are to be released concurrently with or
prior to the Closing, and (f) Liens and other title defects that do not
materially impair the value or continued use as currently conducted of the
assets to which they relate.
"Person" means any natural person, corporation, partnership,
limited liability company, trust, unincorporated organization, Governmental
Authority, or other entity.
"Pre-Closing Taxes" has the meaning specified in Section
12.1(c)(i).
"Preliminary Closing Working Capital" has the meaning
specified in Section 3.3(a).
"Proposed Allocation" has the meaning specified in Section
12.6(a).
"Real Property Leases" has the meaning specified in Section
4.8(a).
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"Registered" means issued, registered, renewed or the subject
of a pending application.
"Related Party" means (i) any Affiliate of Seller, TPC or the
Partnership, or (ii) except for any non-natural equity holder of Seller, any
grandparent, parent, brother, sister, child or spouse of any such Affiliate.
"Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the indoor or outdoor environment, or into or out of any property
owned, operated or leased by the Company including, without limitation, the
movement of any Hazardous Material or other substance through or in the air,
soil, surface water, groundwater or property, but excluding any release,
emission or discharge authorized under any Environmental Permit or provision of
Environmental Law.
"Remedial Action" means all actions taken to (i) clean up,
remove, remediate, contain, treat, monitor, assess, or evaluate Hazardous
Materials in the environment; (ii) bring any Facility into compliance with
Environmental Law, including but not limited to installing any air emission
control equipment required by a Governmental Authority or Environmental Law;
(iii) perform pre-remedial studies and investigations and post-remedial
operation and maintenance activities; or (iv) prevent or minimize a Release or
threatened Release so they do not migrate, endanger or threaten to endanger
public health or welfare or the environment; (v) any other actions authorized by
42 U.S.C. ss.9601(24). Notwithstanding the foregoing, any surface or subsurface
assessment or investigation performed by Buyer prior to the identification of a
Seller Environmental Liability, unless an Environmental Law requires such
assessment or investigation or a Governmental Authority expressly requires such
assessment or investigation, shall not be considered "Remedial Action" and the
costs associated therewith shall not be "Losses" hereunder.
"Remedial Action Plan" has the meaning specified in Section
14.6(b)(ii).
"Representatives" has the meaning specified in Section 6.1.
"Resolution Period" has the meaning specified in Section
3.3(d).
"Responding Party" has the meaning specified in Section
14.6(b)(ii).
"Rules" has the meaning specified in Section 15.9.
"Schedule" means a disclosure schedule provided by Seller to
Buyer pursuant to this Agreement.
"Section 14.6 Environmental Claim" has the meaning specified
in Section 14.6(b)(i).
"Securities Act" has the meaning specified in Section 5.5.
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"Seller" has the meaning specified in the preamble hereof.
"Seller Environmental Liabilities" means any Losses (including
all reasonable out-of-pocket fees, disbursements and expenses of counsel,
out-of-pocket expert and consulting fees and reasonable out-of-pocket costs for
environmental site assessments, remedial investigation, feasibility studies and
Remedial Actions), to the extent arising from (i) any Release or threatened
Release of a Hazardous Material to the surface or subsurface (including the
soils and groundwater) which occurred prior to the Closing Date at the Company's
facilities located at 1550 Mockingbird Lane, Dallas, Texas, 67 Great Valley
Parkway, Malvern, Pennsylvania, 2027 Industrial Drive, San Angelo, Texas, or
10365 Railroad Drive, El Paso, Texas (collectively, the "Current Facilities") or
3210 Dyer Street, El Paso, Texas; and (ii) any Release to the air from the
Company's operations at the Current Facilities that is in violation of any
Environmental Law which occurred (x) prior to the Closing Date, or (y) during
the 120 day period after the Closing Date, provided such Releases are not the
result of a material alteration in the Company's operations as those operations
existed during the twelve-month period prior to the Closing Date.
"Seller Refunds" has the meaning specified in Section 12.2.
"Seller Transaction Agreements" means this Agreement and the
other agreements, instruments, documents and certificates to be executed at the
Closing by Seller or TPC pursuant to Section 10.1 of this Agreement.
"Shares" has the meaning specified in the preamble hereof.
"Software" means (i) any and all computer software, including
all source and object code, (ii) machine readable databases and compilations,
including any and all data and collections of data, and (iii) all content
contained on the respective Internet site(s).
"Statement" has the meaning specified in Section 12.1(d).
"Straddle Period" has the meaning specified in Section
12.1(c)(ii).
"Tax" or "Taxes" means all income, profits, franchise, gross
receipts, capital, sales, use, withholding, value added, ad valorem, transfer,
employment, social security, disability, occupation, property, severance,
documentary, stamp, excise and other taxes, duties and similar governmental
charges or assessments imposed by or on behalf of any Governmental Authority and
any interest, fines, penalties or additions relating to any such tax, duty,
charge or assessment.
"Tax Return" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim or
refund, amended return and declaration of estimated Tax.
"Technology Systems" means the electronic data processing,
electronic information, electronic recordkeeping, electronic communications,
electronic telecommunications, and computer systems, computer firmware, computer
hardware (whether
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general or special purpose), Software and other similar or related items of
automated, computerized, and/or Software system(s) that are used internally by
the Company in the conduct of its business and are owned by or licensed to the
Company or that the Company otherwise possesses a contractual right to use.
"Technology Systems" does not mean third party systems such as the Internet, the
public telephone network, or any public utility.
"Third Party Consultant" has the meaning specified in Section
14.6(b)(v).
"TPC" has the meaning specified in the preamble hereof.
"Unaudited Financial Statements" has the meaning specified in
Section 4.4.
"Working Capital" means the current assets minus the current
liabilities of the Company determined in accordance with GAAP, applied in a
manner consistent with the preparation of the Audited Financial Statements.
"Year 2000 Compliant" means the ability of software, computer
systems, computer hardware and related electronic equipment, data, electronic
interfaces or computer processes in all material respects to accept (from a
system that is Year 2000 Compliant), calculate, process, maintain, output (to a
system that is Year 2000 Compliant), operate, store and produce data before, on
or after January 1, 2000 (including taking into account that such year is a Leap
Year), accurately and without corruption, interruption or error due to the fact
that the time at which and the date on which such items are operating is before,
on or after 00:00 on January 1, 2000 or due to the fact that such data
represents a time or date before, on or after 00:00 on January 1, 2000;
provided, however, that such compliance shall not be affected by any
inaccuracies, delays, corruption, interruptions or errors resulting from
receiving or transmitting data, software or other information from or to
software, computer systems, computer hardware and related electronic equipment,
data, electronic interfaces or computer processes (other than the Technology
Systems, Current Software or Legacy Software) that are not Year 2000 Compliant.
ARTICLE II
CLOSING
2.1 Closing. The Closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Schulte Roth & Zabel
LLP, 900 Third Avenue, New York, New York at 10 a.m., New York, New York time,
as soon as practicable following the satisfaction or waiver of the conditions
set forth in Article VIII and IX, or at such other time and place or on such
other date as the parties may agree (the "Closing Date").
2.2 Proceedings at Closing. All proceedings to be taken and
all documents to be executed and delivered by all parties at the Closing shall
be deemed to have been taken and executed simultaneously, and no proceedings
shall be deemed taken nor any documents executed or delivered until all have
been taken, executed and delivered.
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ARTICLE III
CONSIDERATION
3.1 Amount and Form of Consideration. The purchase price
to be paid by Buyer to Seller in consideration of the Shares (subject to the
purchase price adjustment provisions of Section 3.3) is $92,545,200 in United
States dollars. The purchase price to be paid by Buyer to Seller in
consideration of the Limited Partner Interest (subject to the purchase price
adjustment provisions of Section 3.3) is $934,800 in United States dollars.
Buyer and Seller will bear equally the cost of any documentary, stamp, sales and
excise or other Taxes (other than income Taxes, including without limitation,
Texas franchise tax, which shall be payable by Seller) payable in respect of the
transfer of the Shares or the Limited Partner Interest.
3.2 Payment of Consideration. At the Closing, Buyer will
pay the entire purchase price to Seller, by wire transfer of immediately
available funds, and Seller will deliver to Buyer (i) a certificate or
certificates representing all of the Shares, in appropriate form for transfer to
Buyer or accompanied by duly executed stock powers, and (ii) the Limited Partner
Interest, in appropriate form for transfer to Buyer.
3.3 Working Capital Purchase Price Adjustment.
(a) No later than five days prior to the Closing Date, Seller
shall prepare and the parties shall jointly agree on a statement setting forth
their estimate of the Working Capital of the Company as of the Closing Date (the
"Preliminary Closing Working Capital"), which shall reflect the estimates of the
parties, based on the information available to them at the time, of amounts to
be reflected on the Closing Balance Sheet. If the parties cannot timely agree on
the statement of Preliminary Closing Working Capital, the statement shall be
submitted to the Independent Accountant, who shall be jointly retained by the
parties, for the purpose of determining the Preliminary Closing Working Capital
as soon as reasonably possible and the Closing Date shall be postponed, if
necessary, pending such determination. Notwithstanding the foregoing, in no
event shall the Closing Date be postponed pursuant to this Section 3.3(a) if
either party is willing temporarily to waive (pending and subject to the
determination of the Closing Balance Sheet) its objection to the statement of
the Preliminary Closing Working Capital. To the extent the Independent
Accountant is retained pursuant to this Section 3.3(a), Seller and Buyer shall
each bear one-half of all the fees and expenses incurred in connection with the
engagement of the Independent Accountant. The determination of the Preliminary
Closing Working Capital (pending and subject to the determination of the Closing
Balance Sheet) shall be final, conclusive and binding on the parties hereto and
not subject to appeal, absent fraud or manifest error. If the Preliminary
Closing Working Capital is less than $9,947,000, the purchase price set forth in
Section 3.1 shall be decreased by an amount equal to such shortfall. If the
Preliminary Closing Working Capital is greater than $9,947,000, the purchase
price set forth in Section 3.1 shall be increased by an amount equal to such
excess. Any adjustment to the purchase price required by this Section 3.3 shall
be appropriately allocated between the purchase price paid for the Shares and
the purchase price paid for the Limited Partner Interest.
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(b) Within 45 days after the Closing Date, Buyer shall deliver
to Seller the Closing Balance Sheet, which shall be prepared in a manner
consistent with the preparation of the Audited Financial Statements, including
using the same methods, policies, practices, principles and procedures with
consistent classification, judgments and estimation that were used in the
preparation of the Audited Financial Statements except that the Closing Balance
Sheet shall be prepared on an interim basis, if applicable, and shall not take
into account the transactions contemplated by this Agreement or any changes in
circumstances or events occurring after the close of business on the Closing
Date. The Closing Balance Sheet shall contain or be accompanied by a schedule
setting forth the calculation of the Closing Working Capital.
(c) Seller shall have reasonable access to the books and
records of the Company during normal business hours, and reasonable access to
the management of Company, for the purpose of verifying the Closing Balance
Sheet. Seller may dispute any amounts reflected on the Closing Balance Sheet
(each, a "Disputed Item") within 30 days after delivery of the Closing Balance
Sheet if it submits to Buyer a written notice (a "Dispute Notice") identifying
each Disputed Item and the line items of the Closing Balance Sheet to which it
relates and setting forth the amount in dispute and a reasonably detailed
statement of the basis thereof.
(d) For a period of 20 days following the date of delivery of
a Dispute Notice by Seller pursuant to paragraph (c) above (the "Resolution
Period"), Buyer and Seller shall negotiate in good faith in an attempt to
resolve the Disputed Items. If, at the end of the Resolution Period, the parties
have not reached an agreement in writing as to all Disputed Items, all
unresolved Disputed Items shall be submitted to the Independent Accountant, who
shall be jointly engaged by Buyer and Seller within 10 days after the end of the
Resolution Period for the purpose of making a final determination with respect
to such items. The parties shall take all action reasonably required to cause
the Independent Accountant to make its determination within 30 days after the
date of its engagement, which determination shall be made in accordance with the
provisions of this Section 3.3. Upon making its determination, the Independent
Accountant shall deliver to Buyer and Seller (i) a report setting forth its
adjustments, if any, to the Disputed Items on the Closing Balance Sheet and the
calculations supporting such adjustments, and (ii) the Closing Balance Sheet
accompanied by a schedule setting forth the calculation of Closing Working
Capital. Such report, Closing Balance Sheet and calculation of Closing Working
Capital shall be final, conclusive and binding on the parties hereto and not
subject to appeal, absent fraud or manifest error. Seller and Buyer shall each
bear one-half of all the fees and expenses incurred in connection with the
engagement of the Independent Accountant.
(e) No later than five days after the expiration of the 30-day
period set forth in paragraph (c) above or after all Disputed Items have been
resolved in accordance with the provisions of this Section 3.3, if the Closing
Working Capital is less than the Preliminary Closing Working Capital, Seller
shall pay to Buyer an amount in cash equal to such shortfall. Likewise, if the
Closing Working Capital exceeds the Preliminary Working Capital, Buyer shall pay
to Seller an amount in cash equal to such excess. The amount payable pursuant to
this Section 3.3(e) shall be paid by wire transfer of immediately available
funds to such bank account as is designated by the party entitled to receive
such payment.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Each of TPC and Seller jointly and severally hereby represents
and warrants to Buyer as follows:
4.1 Organization; Power and Authority. TPC is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and is qualified and in good standing to transact business in
each jurisdiction in which such qualification is required by Law, except where
the failure to be so qualified would not be material. The Partnership is a
limited partnership duly formed, validly existing and in good standing under the
laws of the State of Delaware and is qualified and in good standing to transact
business in each jurisdiction in which such qualification is required by Law,
except where the failure to be so qualified would not be material. Each of
Seller and TPC has all requisite corporate or partnership power and authority,
as the case may be, to execute, deliver and perform its obligations under each
of the Seller Transaction Agreements and to consummate the transactions
contemplated hereby and thereby to be consummated by it. The Company has all
power needed to own or lease and operate its assets and to carry on its business
as it is now being conducted.
4.2 Authorizations; Execution and Validity. The execution and
delivery of the Seller Transaction Agreements by Seller, the performance of the
Seller Transaction Agreements by Seller and the consummation by Seller of the
transactions contemplated hereby and thereby to be consummated by it, have been
duly authorized by all necessary corporate action and no other corporate action
on the part of Seller is necessary with respect thereto. The execution and
delivery of the Seller Transaction Agreements by TPC, the performance of the
Seller Transaction Agreements by TPC and the consummation by TPC of the
transactions contemplated hereby and thereby to be consummated by it, have been
duly authorized by all necessary corporate action and no other corporate action
on the part of the TPC is necessary with respect thereto. Each of the Seller
Transaction Agreements has been duly and validly executed and delivered by each
of Seller and TPC and constitutes a valid and binding obligation of each of
Seller and TPC and is enforceable against each of Seller and TPC in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization and similar laws affecting creditors generally and by
the availability of equitable remedies.
4.3 Capitalization. The total authorized number of shares of
capital stock of TPC is 1,000 shares of Common Stock. There are an aggregate of
10 shares of Common Stock outstanding, all of which shares are owned, free and
clear of any Liens except for Liens resulting from the Insilco Credit Agreement,
by Seller, have been duly authorized and validly issued, and are fully paid and
non-assessable. There are no outstanding options, subscriptions, warrants,
calls, commitments or other rights obligating TPC to issue or sell any shares of
its capital stock or any securities convertible into or exercisable for any
shares of its capital stock. None of the outstanding shares of capital stock of
TPC were issued in violation of any preemptive rights. TPC is the sole general
partner of the Partnership and owns free and clear of any Lien, except for Liens
resulting from the Insilco Credit Agreement, a 99% general partner interest in
the Partnership. Seller is the sole limited partner of the Partnership and owns
free and clear of any
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Lien, except for Liens resulting from the Insilco Credit Agreement, the Limited
Partner Interest which represents the remaining equity interest in the
Partnership. There are no outstanding options, subscription, warrants, calls,
commitments or other rights obligating the Partnership to issue or sell any
additional interest in the Partnership or any securities convertible into or
exercisable for any interest of the Partnership. Excluding TPC's equity interest
in the Partnership, neither TPC nor the Partnership owns, directly or
indirectly, any capital of or other equity interest in any corporation,
partnership or other entity or organization.
4.4 Financial Statements. The Company has made available to
Buyer, (i) the unaudited statement of net assets of the Company as of December
31, 1998 and December 31, 1997, with the related statements of operations and
operating cash flows for the years ended on such dates and the accompanying
notes (the "Unaudited Financial Statements"), and (ii) audited financial
statements of the Company for the fiscal year ended August 31, 1999, including a
balance sheet of the Company at such date and the related statements of income
and cash flow for the period then ended and the accompanying notes (the "Audited
Financial Statements" and collectively with the Unaudited Financial Statements,
the "Financial Statements"). The Financial Statements have been prepared from
the books and records of the Company. The Financial Statements present fairly,
in all material respects, the financial position of the Company as of the dates
indicated, and the results of its operations and cash flows for the periods
presented in conformity with GAAP, except as described in the accompanying
notes.
4.5 Consents. Except as would not be material, neither the
execution and delivery by TPC or Seller of the Seller Transaction Agreements nor
consummation or performance by TPC or Seller of the transactions contemplated by
the Seller Transaction Agreements to be consummated or performed by it will
require prior to the Closing (on the part of TPC or Seller) any consent from,
authorization or approval or other action by, notice to or declaration filing or
a registration with, any Governmental Authority, except to comply with the HSR
Act.
4.6 No Defaults or Conflicts. Except as set forth in Schedule
4.6 neither the execution and delivery by TPC or Seller of the Seller
Transaction Agreements nor the consummation or performance by TPC or Seller of
the transactions contemplated by the Seller Transaction Agreements to be
consummated or performed by it (i) results or, on the Closing Date, will result
in any violation of the certificate of incorporation or by-laws of TPC; (ii)
results or, on the Closing Date, will result in any violation of the certificate
of limited partnership or agreement of limited partnership of the Partnership;
or (iii) conflicts with or, on the Closing Date, will conflict with, or
constitutes or, on the Closing Date, will constitute a breach of any of the
terms or provisions of or a default under, or results or, on the Closing Date,
will result in the creation or imposition of any Lien upon any property or asset
of the Company, the trigger of any charge or payment or requirement of consent,
or the acceleration of the maturity of any payment date under: (A) any Material
Contract, (B) any existing applicable Law or Order to which the Company or any
of its properties is subject, other than such conflicts, breaches and defaults
as would not be material, or would be waived or avoided by the consents,
approvals, authorizations, filings or notices described in Schedule 4.6.
4.7 Owned Real Property. Schedule 4.7 lists all the real
property owned in fee simple by the Company (the "Owned Real Property"). The
Company has good and marketable
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title to the Owned Real Property, free and clear of Liens other than Permitted
Liens. There are no leases on all or any portion thereof or any interest
therein. The Company has not received written notice of any eminent domain
proceedings affecting the Owned Real Property.
4.8 Leased Real Property.
(a) Schedule 4.8 contains a complete and correct list of all
real property leases and any and all amendments thereto relating to the leased
real property to which the Company is a party or is bound (the "Real Property
Leases"). The Company has made available to Buyer correct and complete copies of
the Real Property Leases. Except as disclosed in Schedule 4.8, (i) each of the
Real Property Leases is in full force and effect, and, to the Company's
Knowledge, is enforceable in all material respects against the landlord which is
party thereto in accordance with its terms, (ii) there are no subleases under
the Real Property Leases and none of the leases has been assigned, (iii) no
notices of default or notices of termination have been received by the Company
with respect to the Real Property Leases which have not been withdrawn or
canceled and (iv) the Company is not, and to the Company's Knowledge, no other
party is, in material default under any Real Property Lease, except in the case
of clause (i), as such enforceability may be limited by bankruptcy, insolvency,
reorganization and similar laws affecting creditors generally and by the
availability of equitable remedies.
(b) The Company has not received written notice of a
proceeding in eminent domain or other similar proceeding affecting property
listed on Schedule 4.8.
4.9 Condition and Sufficiency of Assets.
(a) The items of material tangible personal property owned or
leased by the Company and the material improvements and structures (and the
fixtures and appurtenances thereto) located on the Owned Real Property and the
real property subject to the Real Property Leases are (i) in good working order,
reasonable wear and tear excepted and (ii) reasonably suitable for the uses for
which they are intended. EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS
AGREEMENT, NO PARTY MAKES ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER WARRANTY AS TO THE CONDITION OR
OPERATION OF ANY ASSETS OF THE COMPANY.
(b) Since January 1, 1996, the business of the Company, as
currently being conducted, has been conducted solely by TPC and the Partnership
and not through any other subsidiary, Affiliate, joint venture or other Person.
The Company owns or has valid leasehold interests in all of the material
properties and assets which are used in the business of the Company, or are
necessary to conduct the business of the Company, in substantially the same
manner as currently conducted, except for the properties or assets owned or
leased by Seller and identified on Schedule 4.9(b) and except for assets or
services used by businesses generally such as the internet, the public telephone
network, and public utilities. Seller does not provide any material services to
the Company other than those identified in Schedule 4.9(b).
4.10 Insurance. Schedule 4.10 contains a true and complete
list of all insurance policies, and formal self-insurance programs, covering or
maintained by the Company and its
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owned or leased properties, employees or Employee Benefit Plan fiduciaries and
describing each pending claim thereunder for more than $50,000 per claim. All
insurance policies listed on Schedule 4.10 have been made available to Buyer,
are occurrence-based (except for the Company's Directors and Officers Liability
coverage) and are subject to the deductibles or retentions referenced on
Schedule 4.10. The Company maintains insurance, in coverages and amounts
believed by the Company to be customary in the industry and which are believed
adequate in the reasonable judgment of the Company. Except as would not be
material, all such insurance is in full force and effect. The Company has not
received any written notice of cancellation or nonrenewal of any such insurance
policy. The Company has not failed to give any notice or present any claim for
more than $50,000 under any of the policies in due and timely fashion. The
Company has not been refused any insurance with respect to its assets,
properties or businesses, nor has any coverage been materially limited by any
insurance carrier to which the Company has applied for any such insurance or
with which the Company has carried insurance during the last three years. No
further payments of premiums will be due following the Closing by the Company
with respect to insurance coverages prior to the Closing. Other than with
respect to related deductible and/or self-insurance amounts, the insurance
coverage currently applicable to the Company (or comparable coverage) has been
in effect for at least the last three years. To Seller's knowledge, neither this
Agreement, nor any of the transactions contemplated by this Agreement to occur
at the Closing, will adversely affect the Company's coverage with respect to
periods prior to the Closing under the terms of the insurance policies. To
Seller's knowledge, the Company will continue to enjoy the same coverage under
the policies after the Closing that it did prior to the Closing with respect to
periods prior to Closing.
4.11 Contracts.
(a) Material Contracts. Other than (i) Real Property Leases,
(ii) Company Plans, (iii) Contracts listed on Schedule 4.16(a) and 4.16(b) and
(iv) Intellectual Property Licenses, Schedule 4.11(a) lists, as of the date
hereof, all of the following executory contracts to which the Company is a party
or by which its assets are bound (the "Material Contracts"):
(1) individual Contracts with customers with respect
to which the Company billed more than $100,000 during 1999;
(2) any individual Contract which is an exclusive
dealing, requirements or take or pay agreement involving
expenditures in excess of $50,000 during 1998;
(3) Contracts not listed or required to be listed
pursuant to Section 4.11(a)(2) which provide for aggregate
future annual payments by the Company of more than $100,000,
except for purchase orders or sales orders arising in the
ordinary and usual course of business, in which case they are
listed only if any party thereto is obligated to make payments
pursuant thereto aggregating more than $200,000;
(4) Contracts which establish a partnership, joint
venture, material agency or other similar arrangement;
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(5) any Contract which relates to indebtedness for
borrowed money in excess of $50,000 or the deferred purchase
price of property (whether incurred, assumed, guaranteed or
secured by any asset);
(6) any Contract which provides for future payments
that are conditioned on or result from, in whole or in part, a
change of control of the Company or a change of management of
the Company;
(7) any Contract which relates to marketing, sales or
advertising and provides for aggregate future payments of more
than $100,000;
(8) any Contract under which the Company has
guaranteed the obligations of any Person, agreed to indemnify
any Person (other than in the ordinary course of business), or
agreed to share Tax liability with any Person;
(9) any Contract which relates to the acquisition by
the Company of any of the capital stock or substantially all
of the assets of another Person;
(10) any Contract which restricts the right of the
Company to compete in any way with any other Person, or which
contains covenants pursuant to which any non-natural Person
has agreed not to compete, or otherwise restricts a
non-natural Person's ability to engage freely, in any part of
the Company Business;
(11) any Contract not disclosed herein or not
otherwise required to be disclosed pursuant to this Schedule
4.11 which provides for annual payments in excess of $100,000
which extends more than a year from the date hereof and is not
cancelable by the Company on 30 days' written notice without
penalty;
(12) any Contract which provides for the sale or
lease after the date hereof of any of the assets of the
Company other than in the ordinary course of business; and
(13) any Contract which binds the Company to make
payments to any director or any former director of the
Company.
(b) Material Contract Exceptions. All Material Contracts are
valid, binding and in full force and effect, except to the extent enforceability
may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to creditors' rights generally and to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law) and except for such failures to be valid,
binding and enforceable which, individually or in the aggregate, would not be
material. Neither the Company nor, to the Company's Knowledge, any other party
to such Material Contracts, is in material default under any Material Contract.
4.12 [Intentionally Left Blank]
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4.13 Litigation; Orders. Schedule 4.13 lists all material
Legal Proceedings pending or, to the Company's Knowledge, threatened in writing
against or affecting the Company or any of its assets. Except as disclosed on
Schedule 4.13, the Company is not subject to any Order. There are no Legal
Proceedings pending against or, to the Company's Knowledge or the knowledge of
Seller, threatened in writing against, Seller or the Company that questions the
validity or legality of any of the Seller Transaction Agreements or any action
taken or to be taken by Seller or TPC in connection herewith or therewith.
4.14 Environmental Laws. Except as set forth on Schedule
4.14: (i) the Company is in material compliance with all Environmental Laws;
(ii) the Company is in material compliance with all Environmental Permits
required to operate the facilities, assets and business of the Company; (iii)
the Company is in material compliance with all Orders to which it is a party or
by which it is bound that relates to any Environmental Law; (iv) the Company is
not subject to any Environmental Claims and, to the Company's Knowledge, no
material unresolved Environmental Claims have been asserted or threatened in
writing against the Company or any predecessor in interest; (v) except where not
material, there has been no Release at any of the properties owned or operated
by the Company or, to the Company's Knowledge, a corporate predecessor in
interest for which the Company would be liable, or to the Company's Knowledge,
at any disposal or treatment facility which received Hazardous Materials
generated by the Company or any corporate predecessor in interest for which the
Company would be liable; (vi) except where not material, no Environmental Claims
have been asserted in writing against any facilities that may have received
Hazardous Materials generated by the Company or any corporate predecessor in
interest for which the Company would be liable; and (vii) Seller has delivered
to, or made available for review by, Buyer true and complete copies of all
material environmental reports, studies, investigations or correspondence
regarding any environmental liabilities of the Company or any environmental
conditions at any property operated by the Company or any corporate predecessor
in interest for which the Company would be liable which are in possession of
Seller, the Company or their agents.
4.15 Patents, Trademarks and Similar Rights.
(a) Schedule 4.15(a) sets forth a true and complete
list and summary description of all (i) Registered Patents, Trademarks and
Copyrights, and material trademarks, service marks and internet domain names
that are not Registered, comprising a part of the Owned Intellectual Property
and (ii) material Intellectual Property Licenses.
(b) Except as set forth on Schedule 4.15(b) and
except with respect to applications for Registered Patents, Trademarks and
Copyrights, to the Company's Knowledge, all Registered Patents, Trademarks, and
Copyrights comprising a part of the Owned Intellectual Property are valid,
subsisting and enforceable. Except where not material, all documentation
necessary to confirm the Company's ownership of the Registered Patents,
Trademarks, and Copyrights comprising a part of the Owned Intellectual Property
has been recorded in the United States Patent and Trademark Office.
(c) Except as set forth on Schedule 4.15(c), no
material Legal Proceeding is pending concerning any claim or position, and to
the Company's Knowledge no such claim has been threatened in writing or asserted
in writing, that the Company has violated
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any Intellectual Property rights, and, to the Company's Knowledge, no valid
basis for any such material Legal Proceeding exists which would result in a
successful claim against the Company.
(d) No material Legal Proceeding is pending, and to
the Company's Knowledge no claim has been threatened in writing or asserted in
writing, concerning any claim or position that the Company or another Person has
breached any of the Intellectual Property Licenses, and, to the Company's
Knowledge, no valid basis for any such material Legal Proceeding exists which
would result in a successful claim against the Company. No party to any of the
Intellectual Property Licenses has given the Company notice of its intention to
cancel, terminate or fail to renew any of the Intellectual Property Licenses.
(e) Except as set forth on Schedule 4.15(e), no
material Legal Proceeding is pending concerning the Owned Intellectual Property,
Current Software, or Legacy Software, including any Legal Proceeding concerning
a claim or position that the Business Intellectual Property has been violated or
is invalid, unenforceable, unpatentable, unregisterable, or cancelable, that the
Owned Intellectual Property, Current Software, or Legacy Software is not owned
or not owned exclusively by the Company and to the Company's Knowledge no such
claim has been threatened in writing or asserted in writing, and, to the
Company's Knowledge, no valid basis for any such material Legal Proceedings or
claims exists which would result in a successful claim against the Company.
(f) Except where not material or as set forth on
Schedule 4.15(f), to the Company's Knowledge in the Company's opinion, no Person
is infringing or misappropriating any of the Owned Intellectual Property.
(g) Except as set forth on Schedule 4.15(g) or as
would not be material, the Company exclusively owns all Owned Intellectual
Property, and owns or otherwise holds valid rights to use all Intellectual
Property, Current Software, and Technology Systems (and components thereof)
necessary for use in the operation of the business of the Company as currently
operated. Except where not material or as set forth on Schedule 4.15(g), all
such rights in the Owned Intellectual Property are free of all Liens (except
Permitted Liens) and are fully assignable by the Company to any Person, without
payment, consent of any Person or other assignment, condition or restriction.
(h) Except as set forth on Schedule 4.15(h), the
Company has taken commercially reasonable measures to protect the secrecy,
confidentiality and value of trade secrets and other confidential and
proprietary information owned by the Company which were worth protecting
(collectively, "Business Trade Secrets") (including without limitation, where
necessary, entering into appropriate confidentiality agreements with officers,
directors, consultants, employees, and other Persons with access to the Business
Trade Secrets). To the Company's Knowledge, the Business Trade Secrets have not
been disclosed to any Persons other than Company's employees, consultants or
contractors who use such Business Trade Secrets in the ordinary course of
employment or contract performance.
(i) Except as set forth on Schedule 4.15(i) or where
not material, all former and current employees, consultants and contractors of
the Company who worked on the development of the Current Software have executed
sufficient written instruments or agreements
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with the Company that assign to the Company all of their rights to any
improvements, discoveries, works, information or other Intellectual Property.
4.16 Employees.
(a) Employees. Schedule 4.16(a) sets forth a list, as
of the date hereof, of all written individual employment, consulting,
non-compete or severance agreements with Employees or former employees of the
Company that individually provide for annual payments after the date hereof in
excess of $50,000.
(b) Unions. Except as disclosed on Schedule 4.16(b),
there is no collective bargaining or other labor union agreement applicable to
any of the Employees of the Company. Except as set forth on Schedule 4.16(b), no
organized work stoppage or material labor dispute against the Company is pending
or, to the Company's Knowledge, threatened in writing. Except as disclosed on
Schedule 4.16(b), the Company has not received written notice of any unfair
labor practice and, to the Company's Knowledge, no such complaints are pending
before the National Labor Relations Board or other similar governmental
authority which, in each case, if adversely determined, would be material.
(c) The Company has not incurred any material
liability or obligation under the Workers Adjustment and Retraining Notification
Act or any similar laws, which remains unpaid or unsatisfied.
4.17 Company Plans.
(a) Company Plans. Schedule 4.17(a) lists, as of the
date hereof, all current Employee Benefit Plans, and all material bonus, stock
option, stock purchase, stock appreciation right, incentive, deferred
compensation, workers' compensation arrangements, supplemental retirement,
severance or material fringe benefit plan, program, policy or arrangements of
the Company (or such plans, programs, policies or arrangements of Seller in
which any employees of the Company participate) (together with the Employee
Benefit Plans, the "Company Plans").
(b) Employee Benefit Plan Exceptions. Except as
disclosed on Schedule 4.17(b), each Employee Benefit Plan has been administered
in all material respects in accordance with the applicable requirements of ERISA
and the Code. Except as disclosed on Schedule 4.17(b), each Company Plan has
been administered in all material respects in accordance with the documents and
instruments governing the plan. There have been no nonexempt material
"prohibited transactions" (as that term is defined in ERISA or the Code) with
respect to any Employee Benefit Plan. Each Employee Benefit Plan intended to
qualify under Section 401 of the Code has received a ruling or determination
letter from the Internal Revenue Service concluding that such Employee Benefit
Plan so qualifies. There has been no occurrence since the date of the most
recent determination letter for each such Employee Benefit Plan that would
adversely affect the qualified status of such Employee Benefit Plan, assuming
the proper amendment of the Employee Benefit Plan to comply with changes in
applicable law prior to the expiration of any applicable remedial amendment
period.
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(c) Records. Except as disclosed on Schedule 4.17(c),
the Company has made available to Buyer copies of each Company Plan and any
amendment thereto and any related trust agreement, funding agreement and
insurance contract relating thereto, and if applicable: (i) the most recent
actuarial valuation report, (ii) the last filed Form 5500 or 5500-C, (iii) the
summary plan description currently in effect for each Employee Benefit Plan and
all material modifications thereto, (iv) the last financial statement for each
Employee Benefit Plan and its related trust, if any, and (v) the most recent
determination letter issued with respect to each Employee Benefit Plan. Except
as provided on Schedule 4.17(c), all reports and returns with respect to any
Employee Benefit Plan required to be filed for 1996, 1997 or 1998 under ERISA or
the Code that must be filed prior to the Closing Date to be timely filed, have
been filed or will be filed before the Closing Date.
(d) Funding. All contributions required by applicable
law or the terms of a Company Plan to be made on or at any time prior to the
date hereof (or, with respect to the Closing Date, by the Closing Date) by the
Company to a Company Plan have been made or will have been made within the time
prescribed by the applicable Law or Company Plan. Except as set forth on
Schedule 4.17(d), the assets of each Employee Benefit Plan as of the Closing
Date, exceed the present value of the benefits liabilities (as defined in
Section 4001(a)(16) of ERISA) in the event of termination of the Employee
Benefit Plan as of the Closing Date. With respect to each Employee Benefit Plan
subject to Title IV of ERISA, there has not occurred, and the transactions
contemplated by this Agreement will not result in the occurrence of, a
"reportable event" within the meaning of Section 4043(b) of ERISA or the
regulations thereunder, excluding any reportable events with respect to which
the reporting requirement has been waived by the Pension Benefit Guaranty
Corporation ("PBGC"). The PBGC has not instituted or, to the Company's
Knowledge, threatened, a proceeding to terminate any Employee Benefit Plan
subject to Title IV of ERISA. All premiums due to the PBGC on or before the
Closing Date with respect to any Employee Benefit Plans subject to Title IV of
ERISA have been or will be paid in full, including late fees, interest and
penalties, if and to the extent applicable. The Company has not, within the 5
year period preceding the Closing Date, entered into any transaction the
principal purpose of which was to evade liability to which Seller or the Company
would otherwise be subject under Title IV of ERISA. The principal purpose of
Seller entering into the transactions contemplated by this Agreement is not to
evade liability to which Seller or the Company would otherwise be subject under
Title IV of ERISA.
(e) Multiemployer Plans. Except as disclosed on
Schedule 4.17(e), the Company has not (i) contributed to or is required to
contribute to a "Multiemployer Plan" as that term is defined in Sections 3(37)
and 4001(a)(3) of ERISA, or (ii) completely or partially withdrawn from a
Multiemployer Plan under Section 4201 of ERISA. With respect to any
Multiemployer Plan to which the Company is or was required to contribute, there
is no event or condition, including, without limitation, on account of or in
connection with the transactions contemplated by this Agreement, which would to
the Company's Knowledge be expected to cause the Company to incur any liability
under Section 4201 of ERISA.
(f) Pending Actions. There are no actions pending in
any court or, to the Company's Knowledge, asserted in writing to the Company
against the assets of any of the Company Plans or against the Company (that
would not be required to be referenced on Schedule 4.13) or against any
fiduciary of the Company Plans with respect to the Company
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Plans, except undisputed claims for benefits payable in the ordinary course of
operation of the Company Plans.
(g) Post Retirement Welfare Benefits. Except as
disclosed on Schedule 4.17(g), and except as required by Section 4980B of the
Code, no Company Plan or binding arrangement provides medical or death benefits
(whether or not insured) with respect to Employees or former employees of the
Company beyond their retirement or other termination of employment. Any
continuation coverage provided under any Employee Benefit Plan complies with
Section 4980B of the Code and the participant or beneficiary pays premiums at
costs computed pursuant to Section 4980B of the Code.
(h) Deal Payments. No Company Plan or any other
agreement, program, policy or other arrangement by or to which the Company is a
party provides for the payment of money, or transfer of other property or other
consideration as a result of the transactions contemplated by this Agreement,
except as disclosed on Schedule 4.17(h), whether or not any such payment would
constitute a "parachute payment" or "excess parachute payment" within the
meaning of Section 280G of the Code.
4.18 Taxes.
(a) Except as set forth on Schedule 4.18(a), (i) all
Tax Returns required to be filed as of the date hereof and on or before the
Closing Date (taking into account extensions of time within which to file) by or
on behalf of the Company, or any affiliated consolidated, combined or unitary
group of corporations (under federal, state or local tax law) of which the
Company or TPC is or has been a member (each, an "Affiliated Group") have been
(or, as of the Closing Date, will have been) filed, all such Tax Returns are (or
will be) true, correct and complete and all Taxes required to be paid by the
Company or any Affiliated Group for the periods to which such returns relate
have been (or will have been) paid, (ii) the Company is not the beneficiary of
any extension of time to file any Tax Return, and (iii) there are no pending
proposed deficiencies or other claims for unpaid Taxes received by or relating
to Taxes of the Company or any Affiliated Group (to the extent applicable to the
Company or TPC).
(b) All Taxes that the Company is required to
withhold or collect have been duly withheld or collected and have been paid
over, as required, to the appropriate taxing authority.
(c) Except as set forth on Schedule 4.18(c), there
are no audits or proceedings pending or, to the Company's Knowledge, threatened
with respect to Taxes of the Company. Except as set forth on Schedule 4.18(c),
no waivers of statutes of limitations have been given with respect to any Taxes
owed by the Company, which waivers are in effect as of the date hereof.
(d) Except as otherwise disclosed in Schedule
4.18(d), no notices of Tax liens have been filed with respect to any assets of
the Company. For any taxable period that remains open, TPC has been included
only in combined, consolidated or unitary groups for federal, state and local
income tax purposes that are described in Schedule 4.18(d). Neither TPC nor the
Partnership is a party to or bound by any agreement or understanding providing
for the
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allocation or sharing of Taxes other than with respect to each other and/or
Seller. Except as set forth on Schedule 4.18(d), neither TPC nor the Partnership
is required to include in income any adjustment pursuant to Section 481(a) of
the Code by reason of a voluntary change in accounting method and neither TPC
nor the Partnership has knowledge that the Internal Revenue Service has proposed
any such adjustment or change in accounting method. The acquisition of the stock
of TPC will not be a factor causing any payments to be made by TPC or the
Partnership to be nondeductible (in whole or in part) pursuant to Section 280G
of the Code. No disclosure statement pursuant to Section 6662 of the Code or any
comparable disclosure with respect to foreign, state and/or local tax statutes
has been filed with respect to any item relating to TPC or the Partnership. Set
forth on Schedule 4.18(d) is a list of all federal income tax audits relating to
TPC or the Partnership that have, within three years of the date of this
Agreement, been completed by the Internal Revenue Service. No consent or
election under Section 341 of the Code has been made for TPC or any of its
assets. No property of TPC or the Partnership is "tax exempt use property"
within the meaning of Section 168(h) of the Code, and neither TPC nor the
Partnership is a party to any lease made pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, except as set forth on Schedule 4.18.
4.19 Title to Shares and the Limited Partner Interest. The
delivery by Seller to Buyer at the Closing of the certificates representing the
Shares, duly endorsed in blank or accompanied by stock powers endorsed in blank
will vest Buyer on the Closing Date with good and marketable title to all of the
Shares, free and clear of all Liens. The transfer of the Limited Partner
Interest to Buyer at Closing will vest Buyer with good and marketable title to
the Limited Partner Interest, free and clear of all Liens. Except as set forth
on Schedule 4.19, Seller has the full power, right and authority to vote and
transfer the Shares and the Limited Partner Interest and, on the Closing Date,
Seller will have the full power, right and authority to vote and transfer the
Shares and the Limited Partner Interest.
4.20 Fees. Except for the fees payable to Donaldson,
Lufkin & Jenrette Securities Corporation, which are the responsibility of
Seller, neither Seller nor the Company has paid or become obligated to pay any
fee or commission to any broker, finder or intermediary in connection with the
transactions contemplated hereby.
4.21 Absence of Certain Changes or Events. Except for the
sweep of cash from the Company by Seller or the payment by Seller of accounts
payable on behalf of the Company (such cash sweeps and payment of accounts
payable sometimes collectively referred to herein as the "Cash Management
Practices"), or as expressly contemplated by this Agreement, since August 31,
1999, there has not been any transaction or occurrence in which the Company has:
(a) suffered any material adverse change nor has
there been any event which has had or may reasonably be expected to have a
material adverse effect on the Company;
(b) other than in relation to the Guaranty, incurred
any material obligations or liabilities of any nature other than items incurred
in the regular and ordinary course of business, or increased (or experienced any
change in the assumptions underlying or the methods of calculating) any bad
debt, contingency, or other reserve, other than in the ordinary course of
business;
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(c) paid, discharged, or satisfied any material
claim, lien, encumbrance, obligation or liability (whether absolute, accrued,
contingent, and whether due or to become due), other than the payment,
discharge, or satisfaction in the ordinary course of business of claims, liens,
encumbrances, obligations or liabilities of the type reflected or reserved
against in the Audited Financial Statements or which were incurred in the
ordinary course of business;
(d) permitted, allowed or suffered any of its
properties or assets (real, personal or mixed, tangible or intangible) to be
subject to any Lien, other than Permitted Liens;
(e) written down or written up the value of any
equipment, inventory (including write-downs by reason of shrinkage or
markdowns), determined as collectible any accounts receivable or any portion
thereof which were previously considered uncollectible, or written off as
uncollectible any accounts receivable or any portion thereof, except for
write-downs, write-ups and write-offs in the ordinary course of business, none
of which is material in amount;
(f) canceled any debts or waived any claims or rights
in excess of $50,000 individually or $100,000 in the aggregate;
(g) disposed of or permitted to lapse any right to
the use of any material patent, trademark, assumed name, service mark, trade
name, copyright, license or application therefor;
(h) except for commitments for capital expenditures
not exceeding $750,000 in the aggregate made in the ordinary course of business,
committed to make any capital expenditure not paid for or accrued prior to the
Closing Date for additions to property, plant, equipment, intangible or capital
assets or for any other purpose, other than for emergency repairs or
replacement;
(i) other than in relation to the Guaranty, incurred
any indebtedness for borrowed money;
(j) other than to independent sales representatives,
paid, loaned, distributed, or advanced any amounts to, sold or transferred any
properties or assets (real, personal or mixed, tangible or intangible) to,
purchased, licensed or otherwise acquired any properties or assets from or
entered into any other agreement or arrangement with any Affiliate of the
Company except for compensation not exceeding the rate of compensation as of
August 31, 1999 or as not required to be scheduled pursuant to Section 4.21(p)
and for routine travel advances to officers and employees;
(k) other than cash (in each case), declared, set
aside or paid any dividend or other distribution (whether in stock or property)
with respect to any of the outstanding Common Stock or partnership interests, or
made any redemption, purchase or other acquisition of any of its equity
securities;
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(l) issued, sold, split, combined or reclassified any
of the shares of Common Stock or interests in the Partnership, or issued,
committed to issue or authorized any issuance of any options, warrants or other
similar convertible securities;
(m) made any change in its accounting methods,
principles or practices, except insofar as may have been required by a change in
GAAP;
(n) entered into any collective bargaining or labor
agreement (oral and legally binding or written), or experienced any organized
slowdown, material work interruption, strike or work stoppage;
(o) sold, transferred, or otherwise disposed of any
of its material assets except in the ordinary course of business;
(p) granted or incurred any obligation for any
increase in the compensation of any of its officers or Employees (including,
without limitation, any increase pursuant to any bonus, pension, profit-sharing,
retirement, or other plan or commitment) except for raises to officers or
Employees in the ordinary course of business and not in excess of the Company's
1999 salary increase guidelines attached to Schedule 4.21(p);
(q) suffered any uninsured casualty loss or damage in
excess of $100,000 individually or $200,000 in the aggregate;
(r) made or agreed to make any charitable
contributions or incurred or agreed to incur any non-business expenses in excess
of $50,000 in the aggregate;
(s) amended any provisions of its Certificate of
Incorporation, bylaws or the Agreement of Limited Partnership of the Partnership
or changed any of its authorized capital stock or interests;
(t) taken any other material action except in the
ordinary course of business; or
(u) agreed, so as to legally bind them whether in
writing or otherwise, to take any of the actions set forth in this Section 4.21
and not otherwise permitted by this Agreement.
4.22 Permits. The Company has all material Permits that
are necessary for the Company Business. Except as would not be material, there
has occurred no default under any Permits. There are no pending Legal
Proceedings relating to the suspension, revocation or modification of any
Permit. The execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, do not and will not result
in any suspension, revocation, cancellation or invalidation of any material
Permit that is necessary for the Company Business.
4.23 Inventories. All inventory, whether reflected on the
Audited Financial Statements or subsequently acquired, (a) has been and on the
Closing Date will have been
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acquired by the Company only in bona fide transactions entered into in the
ordinary course of business, and (b) is of good and merchantable quality except
to the extent reserves have been taken consistent with past practices. Except as
described in Schedule 4.23, the Company has now and on the Closing Date will
have valid legal title to its inventory free and clear of any Liens other than
Permitted Liens. Since August 31, 1999, the Company has not established reserves
regarding obligations with respect to the return of inventory in a manner
inconsistent with past practice.
4.24 Accounts Receivable. All accounts receivable shown on
the Audited Financial Statements represent, and the accounts receivable of the
Company outstanding on the Closing Date will represent, sales actually made or
services actually performed in the ordinary course of business in bona fide
transactions completed in accordance with the terms and provisions contained in
any documents relating thereto.
4.25 Compliance with Laws. Except where not material, the
Company has not engaged and is not engaging in any activity and has not omitted
and is not omitting to take any action that was, is, created or creates a
violation of any law applicable to the Company, its business or its assets.
4.26 Transactions with Related Parties. Except for the Cash
Management Practices or as set forth in Schedule 4.26:
(a) No executory agreement or transaction between the
Company and any Related Party has been entered into which, if not existing,
would have resulted in a material adverse effect in the results of operations
reflected in the Audited Financial Statements or, irrespective of whether such
would result in a material adverse effect, will continue after the Closing Date;
(b) No Related Party is a director or officer of, or
has any direct or indirect interest in (other than the ownership of not more
than 5% of the publicly traded shares of), any person or entity which is a
supplier, vendor, landlord, sales representative or competitor of the Company;
(c) No Related Party owns or has any interest in,
directly or indirectly, in whole or in part, any tangible or intangible property
used in the conduct of the business of the Company;
(d) Other than amounts owed to Seller pursuant to any
intercompany debts, or expense advance reimbursements in the ordinary course of
business, no Affiliate of the Company owes any money to, nor is any such
Affiliate owed any money by, the Company; and
(e) The Company has not, directly or indirectly,
guaranteed or assumed any indebtedness for borrowed money or otherwise for the
benefit of any Related Party, other than the Guaranty.
4.27 Undisclosed Liabilities. Except as expressly
permitted hereby, the Company does not have any material liabilities or
obligations of a nature required by GAAP
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to be reflected on a balance sheet of the Company except for (i) liabilities and
obligations reflected or reserved for in the Audited Financial Statements, (ii)
liabilities or obligations incurred after August 31, 1999 in the ordinary course
of business consistent with past practice and (iii) liabilities and obligations
under or reflected on a Schedule for this Agreement.
4.28 Suppliers. Set forth in Schedule 4.28 is a list of
the five suppliers that accounted for the largest dollar volume of purchases by
the Company during each of the last three fiscal years (the "Material
Suppliers"). No Material Supplier has canceled or otherwise terminated, or
threatened in writing to cancel or otherwise terminate, its relationship with
the Company during the twelve months immediately preceding the date hereof (or
the Closing Date, as of the Closing Date) or has during such period materially
decreased, or threatened to materially decrease or materially limit, its
services, supplies or materials to the Company. The Company has not received any
notice during the twelve months immediately preceding the date hereof that any
Material Supplier intends to cancel or otherwise materially modify its
relationship with the Company or to materially decrease or materially limit its
services, supplies or materials to the Company.
4.29 Year 2000. The material Technology Systems and
Current Software are Year 2000 Compliant, and the Company has implemented a
compliance program and conducted reasonable tests sufficient to ensure such Year
2000 Compliance.
4.30 Sales Representatives. Set forth on Schedule 4.30 is
a list of all independent sales representatives who generated sales in excess of
$2,000,000 for the Company during 1998 (the "Material Sales Representatives").
The Company has a written contract with each of its independent sales
representatives. As of the date hereof, no Material Sales Representative has
canceled or otherwise terminated its relationship with the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization and Good Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
5.2 Authorization of Agreement. The execution and
delivery of the Buyer Transaction Agreements by Buyer (or Castle Harlan, if
applicable), the performance of the Buyer Transaction Agreements and the
consummation by Buyer (or Castle Harlan, if applicable) of the transactions
contemplated by the Buyer Transaction Agreements, have been duly authorized by
all necessary action and no other action on the part of Buyer (or Castle Harlan,
if applicable) is necessary with respect thereto. Each of the Buyer Transaction
Agreements has been duly and validly executed and delivered by Buyer (or Castle
Harlan, if applicable), constitutes a valid and binding obligation of Buyer (or
Castle Harlan, if applicable) and is enforceable against Buyer (or Castle
Harlan, if applicable) in accordance with its terms, except as such
enforceability may be
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limited by bankruptcy, insolvency, reorganization and similar laws affecting
creditors generally and by the availability of equitable remedies.
5.3 Conflicts, Consents of Third Parties. Neither the
execution and delivery by Buyer (or Castle Harlan, if applicable) of the Buyer
Transaction Agreements nor consummation or performance by Buyer (or Castle
Harlan, if applicable) of the transactions contemplated by the Buyer Transaction
Agreements to be consummated or performed by it will: (a) violate any Law, (b)
violate the certificate of incorporation or bylaws of Buyer, (c) violate any
Order to which Buyer is a party or by which it is bound or (d) require any
consent from, authorization or approval or other action by, and no notice to or
declaration, filing or registration with any Governmental Authority, except to
comply with the HSR Act.
5.4 Litigation. There are no Legal Proceedings pending
against Buyer or Castle Harlan or, to the best knowledge of Buyer, threatened in
writing against Buyer or Castle Harlan that question the validity or legality of
any Buyer Transaction Agreement or any action taken or to be taken by Buyer or
Castle Harlan in connection herewith or therewith, or which seeks to enjoin or
obtain monetary damages in respect of, the consummation of the transactions
contemplated hereby or thereby.
5.5 Investment Intent; Sophisticated Buyer. Buyer (a) is
an informed sophisticated entity with sufficient knowledge and experience in
investing so as to be able to evaluate the risks and merits of its purchase of
the Shares and the Limited Partner Interest, (b) is financially able to bear the
risks of purchasing the Shares and the Limited Partner Interest, (c) has had an
opportunity to discuss the business, management and financial affairs of the
Company with the Company's management, (d) is acquiring the securities relating
to this Agreement for its own account for the purpose of investment and not with
a view to or for sale in connection with any distribution thereof, (e)
understands that (i) such securities have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), (ii) such securities
must be held indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration, (f) has no present
need for liquidity in connection with its purchase of the Shares and the Limited
Partner Interest, (g) understands that the purchase of the Shares and Limited
Partner Interest involves a high degree of risk, and (h) acknowledges that the
purchase of such securities is consistent with its general investment
objectives.
5.6 Financing.
(a) Lenders. Buyer has obtained and furnished to
Seller a letter dated December 17, 1999, from Heller Financial, Inc. (the
"Lender Letter"), with respect to its financing (the "Debt Financing") a portion
of the transactions contemplated hereby. The Lender Letter is in full force and
effect on the date hereof and neither Buyer nor Castle Harlan has received any
notice from such lender that it intends to cancel such Lender Letter. If
delivered as contemplated by Section 13.1(d), on the date of delivery to Seller
the revised Lender Letter referred to in Section 13.1(d) will be in full force
and effect, and on such date neither Buyer nor Castle Harlan will have received
any notice from such lender that it intends to cancel such Lender Letter.
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(b) Castle Harlan. Pursuant to that certain letter
(the "Castle Harlan Letter") dated December 17, 1999 from Castle Harlan, Buyer
has obtained a commitment from Castle Harlan to supply the equity and
subordinated debt financing for the transactions contemplated hereby. Other than
having obtained the Debt Financing and satisfaction of the conditions in this
Agreement, Buyer has satisfied all conditions to the Castle Harlan Letter and it
is in full force and effect on the date hereof and is not subject to
cancellation.
(c) Upon funding of the Castle Harlan Letter and the
Lender Letter, Buyer will have sufficient cash to enable it to consummate the
transactions contemplated by this Agreement, including, without limitation,
paying all fees and expenses incurred by or on behalf of Buyer in connection
with the consummation of the transactions contemplated hereby.
5.7 Brokers. Buyer has not paid or become obligated to
pay any fee or commission to any broker, finder or intermediary in connection
with the transactions contemplated hereby.
ARTICLE VI
COVENANTS OF TPC AND SELLER
From and after the date hereof and until the Closing Date, each of TPC
and Seller hereby covenants and agrees, as applicable, that:
6.1 Access to Documents; Opportunity to Ask Questions.
Seller shall, and shall cause the Company to, make available for inspection by
Buyer and its directors, officers, employees, counsel, representatives,
financing sources, accountants and auditors (collectively, "Representatives"),
during normal business hours, corporate records, books of accounts, (including
accountants' work papers), Contracts and all other documents requested by Buyer,
and shall permit Buyer and its Representatives reasonable access to the
properties, facilities, suppliers, customers and employees of the Company
(provided that Buyer has identified, in the case of employees, the persons to
Seller and Seller has consented to such access, with such consent not to be
unreasonably withheld) so that Buyer and such Representatives may make
reasonable inspection and examination of the business, operations and affairs of
the Company and to facilitate the transactions contemplated by this Agreement.
All access and information is subject to the terms and conditions of Buyer
Confidentiality Agreement.
6.2 Conduct of Business. Until the Closing Date, Seller
shall cause the Company to (unless Buyer shall otherwise consent in writing, or
except as otherwise specifically contemplated by this Agreement):
(a) operate only in the usual, regular and ordinary
manner consistent with past practice, provided that Seller may (at its option)
sweep up to 100% of the cash of the Company as of the Closing Date
contemporaneous with or immediately prior to the Closing, and use its
commercially reasonable efforts to preserve its present business operations,
organization and goodwill and maintain to the extent appropriate its existing
relations with material customers and suppliers, key employees, material
creditors and business partners;
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(b) maintain all of its assets and properties in
their current condition, normal wear and tear excepted;
(c) maintain its books, accounts and records in the
usual, regular and ordinary manner, on a basis consistent with prior years, and
comply with all contractual and other obligations;
(d) maintain supplies of similar kind, amount and
quality as that maintained on the date hereof;
(e) comply in all material respects with all
applicable Laws to which it is subject;
(f) not adopt or enter into any plan of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or with any Person, and
not engage in any new business;
(g) not amend or modify TPC's certificate of
incorporation or by-laws and not amend or modify the Partnership's certificate
of limited partnership or agreement of limited partnership;
(h) not incur or agree to incur any obligations to,
directly or indirectly, sell, transfer, pledge or issue any securities nor
issue, sell, transfer or pledge its securities; and
(i) not take or suffer any action which, if taken or
suffered prior to the date hereof, would have required disclosure on Schedule
4.21; or
(j) not agree to take any action or actions
prohibited by any of the foregoing clauses (a) through (i) or to authorize,
recommend, propose or announce an intention to do any of the foregoing.
6.3 Further Actions. Seller shall, and shall cause the
Company to, execute and deliver such instruments and take such other actions as
may reasonably be required to (a) carry out the intent of this Agreement and (b)
consummate the transactions contemplated hereby.
6.4 HSR Act Compliance. Promptly after the execution of
this Agreement, TPC and Seller shall file any notification required to be filed
under the HSR Act to consummate the transactions contemplated hereby, and shall
request early termination of the waiting period thereunder. TPC and Seller shall
use commercially reasonable efforts to comply as promptly as practicable with
any request made pursuant to the HSR Act for additional information.
6.5 No Breach of Representations and Warranties. Each of
Seller and TPC will not take any action, and will use commercially reasonable
efforts not to permit any event to occur, which would result in any of the
representations and warranties of Seller or TPC contained in any Seller
Transaction Agreement not being true and correct on and as of the Closing Date
with the same force and effect as if such representations and warranties had
been made on and as of the Closing Date.
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6.6 Consents. Each of Seller and TPC shall obtain the
consents of the third parties to the Contracts listed on Schedule 6.6. The
Company will use good faith efforts, at Buyer's expense, to obtain the consent
of Lernout & Hauspie Speech Products N.V. (assignee of Inso Dallas Corporation)
to the transactions contemplated by this Agreement, as required by that certain
License Agreement between the Company and Lernout & Hauspie Speech Products
N.V., dated April 11, 1996 and amended on September 23, 1999.
6.7 Notification of Certain Matters. Seller and TPC shall
give prompt notice to Buyer of (i) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which is reasonably likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at the Closing Date and (ii) any material
failure of Seller, TPC or the Company to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 6.7
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
6.8 No Solicitation. None of Seller, TPC nor any of their
Affiliates shall (and Seller and TPC shall use commercially reasonable efforts
to cause its respective officers, directors, Employees, representatives and
agents, including, but not limited to, investment bankers, attorneys and
accountants, not to), directly or indirectly, encourage, solicit, participate in
or initiate discussions or negotiations with, or provide any information to, any
Person or group (other than Buyer, any of its Affiliates or Representatives)
concerning any merger, tender offer, exchange offer, sale of assets, sale of
shares of capital stock or debt securities or similar transactions involving the
Company or any division or operating or principal business unit of the Company.
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6.9 Non-Competition. Seller and its subsidiaries will not
for a period of five years following the Closing (the "Non-Competition Period"),
without the express written consent of the Company, directly or indirectly, in
any geographic area where the Company conducts business during the
Non-Competition Period, (i) engage or participate in the following businesses:
(1) scholastic yearbook publishing, (2) specialty publishing, featuring sports,
gardening, health and other special interests, or (3) reunion services providing
event planning services of school alumni (the "Company Business"); (ii) request,
induce, attempt to influence or have any other business contact with any Company
Business customers or potential customers which have been in contact with the
Company, to curtail or cancel any business they may transact with the Company;
(iii) solicit for employment or employ an officer, director, or employee earning
in excess of $75,000 of the Company, or any subsidiary thereof to become an
officer, director or employee of Seller or its Affiliates; (iv) request, induce,
attempt to influence or have any other business contact with any distributor or
supplier of goods or services to the Company, to curtail or cancel any business
they may transact with the Company; (v) request, induce, attempt to influence or
have any other business contact with any Governmental Authority to terminate,
revoke or materially and adversely alter or impair any Permit held, owned, used
or reserved for the Company or (vi) engage in or participate in, directly or
indirectly, any business conducted under any name that shall be the same as or
similar to the name of the Company or any trade name used by it. For purposes of
this Section 6.9, Seller shall be deemed to engage or participate in a business
if it, directly or indirectly, engages in, owns, manages, operates, controls or
substantially invests in any business engaged in the Company Business; provided,
however, that Seller or any subsidiary may invest in the securities of any
enterprise if (x) such securities are publicly traded and (y) Seller or any
subsidiary does not beneficially own (as defined in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934) in excess of 5%, in the aggregate, of the
outstanding equity of such enterprise. Seller is entering into the foregoing
covenant to induce Buyer to consummate the transactions contemplated by this
Agreement, including the transfer of the goodwill of the Company.
6.10 Release of Liens and Guaranty. Seller shall obtain on,
or prior to, the Closing the release of (i) Liens (other than Permitted Liens)
affecting the Company or its assets, and (ii) the Guaranty.
6.11 Access to Insurance Coverage. Prior to Closing, Seller
shall not cancel any of the existing insurance policies referred to on Schedule
4.10 (the "Insurance Policies"). Seller shall impose no obstacle following the
Closing to the Company's giving notice of or presenting any claim covered by the
occurrence-based Insurance Policies directly to the insurance carrier if the
Company is a named insured thereunder. If the Company is not a named insured of
any Insurance Policy, Seller shall give notice of or present all claims to the
insurance carrier on the Company's behalf as soon as is commercially reasonable
after its receipt of written notice from the Company requesting Seller to do so.
All proceeds from insurance claims made on behalf of the Company to insurance
carriers under this Section 6.11 will be tendered by Seller to the Company
promptly upon receipt and Seller will take all commercially reasonable actions
necessary to otherwise cooperate with the Company in pursuing such claims,
provided that the Company will bear all costs and expenses incurred by Seller in
fulfilling its obligations pursuant to this Section 6.11.
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ARTICLE VII
COVENANTS OF BUYER
From and after the date hereof and until the Closing (except
with respect to Section 7.2 and Section 7.5 which shall survive the Closing),
Buyer hereby covenants and agrees that:
7.1 No Breach of Representations and Warranties. Buyer will
not take any action, and will use its commercially reasonable efforts not to
permit any event to occur, which would result in any of the representations and
warranties of Buyer contained in any Buyer Transaction Agreement not being true
and correct on and as of the Closing Date with the same force and effect as if
such representations and warranties had been made on and as of the Closing Date.
7.2 Seller's Access to Documents; Preservation of Books and
Records.
(a) For a period of seven years from the Closing Date
(or such longer period as may be necessary with respect to any Tax period ended
on or prior to the Closing Date for which the statute of limitations has not
expired as of the end of such seven-year period), (i) Buyer shall cause the
Company not to dispose of or destroy any of the books and records of the Company
relating to periods prior to the Closing ("Books and Records") without first
offering to turn over possession thereof to Seller by written notice to Seller
at least 90 days prior to the proposed date of such disposition or destruction
and (ii) Buyer shall cause the Company to allow Seller and its agents access to
all Books and Records and any other documents, and information therefrom, to the
extent necessary to allow Seller to prepare its Tax Returns, and shall provide
reasonable assistance of Company personnel in making available such Books,
Records, documents and information; provided, however, that any such access or
copying shall be had or done in such a manner so as not to unduly interfere with
the normal conduct of the Company's business. Seller shall reimburse the Company
for the reasonable out-of-pocket expenses incurred by it in performing any of
the covenants contained in Section 7.2.
(b) The seven-year period referred to in Section
7.2(a) shall be extended in the event that Seller advises Buyer in writing that
any Legal Proceeding or investigation is pending or threatened in writing at the
termination of such seven-year period and such extension shall continue until
any such Legal Proceeding or investigation has been settled through judgment or
otherwise and/or is no longer pending or threatened.
7.3 HSR Act Compliance. Promptly after the execution of this
Agreement, Buyer shall file any notification required to be filed under the HSR
Act to consummate the transactions contemplated hereby, and shall request early
termination of the waiting period thereunder. Buyer shall use commercially
reasonable efforts to comply as promptly as practicable with any request made
pursuant to the HSR Act for additional information.
7.4 Further Actions. Buyer agrees to execute and deliver such
instruments and take such other actions as may reasonably be required to (a)
carry out the intent of this Agreement and (b) consummate the transactions
contemplated hereby.
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7.5 Release of Guarantees. Buyer shall from time to time
before or after the Closing Date provide to Seller and to the Company such
information with respect to Buyer as may be reasonably requested to assist the
Company and Seller in obtaining a valid and binding full release, in form
reasonably satisfactory to Seller, of all of Seller's obligations under any
Contract (however denominated) relating to the guarantee of any obligation or
liability of the Company (collectively, the "Guaranty Contracts"), including,
but not limited to, the agreements listed on Schedule 7.5. Buyer agrees to
indemnify and hold Seller, and each of its Affiliates and the officers,
directors, employees and agents thereof, harmless from and against all Losses
arising out of, based upon, attributable to or resulting from all of Seller's
obligations under the Guaranty Contracts. For purposes of this Section 7.5, the
indemnification procedures of Section 14.3 shall be applicable.
7.6 Notification of Certain Matters. Buyer shall give prompt
notice to Seller and TPC of (i) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which is reasonably likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at the Closing Date and (ii) any material
failure of Buyer to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 7.6 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
7.7 Return of Information. In the event of termination of this
Agreement, Buyer will return or cause to be returned to the Company all
documents and other materials obtained from, or on behalf of, the Company in
connection with the transactions contemplated hereby and will keep confidential
any such information, all in accordance with the provisions of the Buyer
Confidentiality Agreement.
7.8 [Intentionally Left Blank]
7.9 Financing. Buyer will take all commercially reasonable
actions necessary to satisfy all of its obligations contained in the Lender
Letter and the Castle Harlan Letter.
ARTICLE VIII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of Buyer to consummate the transactions
contemplated hereby on the Closing Date is subject to the satisfaction of the
following conditions at or prior to the Closing:
8.1 Accuracy of Representations and Warranties. Each of the
representations and warranties of Seller and TPC contained herein shall be true
and correct in each case at and as of the Closing Date as if made at and as of
the Closing Date (except for the representations and warranties that address
matters only as of a particular date or only with respect to a specific period
of time which need only be true
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and accurate as of such date or with respect to such period) except to the
extent that the failure of such representations and warranties to be true and
correct (in the aggregate) does not have or will not be reasonably likely to
have a material adverse effect on the Company or materially adversely affect the
consummation of the transactions contemplated hereby or Seller's or TPC's
ability to perform its obligations hereunder in a timely manner. Notwithstanding
anything contained herein to the contrary, in making the determination required
by the preceding sentence, deviations which result solely from actions or
inactions expressly requested or consented to in writing by Buyer shall not be
considered.
8.2 Performance of Covenants. Seller and TPC 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 them
between the date hereof and the Closing Date.
8.3 Hart-Scott-Rodino. All applicable waiting periods in
respect of the transactions contemplated by this Agreement under the HSR Act
shall have expired or been terminated.
8.4 No Order. No Order shall be in effect forbidding,
enjoining or restraining the consummation of the transactions contemplated in
this Agreement or which would limit or affect the ability of Buyer to own or
control the Company and there shall not have been threatened, nor shall there be
pending, any Legal Proceeding seeking to forbid, enjoin, refrain or delay,
challenge the validity of, or seek damages in respect of, the material
transactions contemplated by this Agreement which has a reasonable likelihood of
success.
8.5 Officers' Certificates. Buyer shall have received a
certificate from TPC and Seller to the effect set forth in Sections 8.1 and 8.2
hereof, dated the Closing Date, signed on behalf of TPC by a duly authorized
officer of TPC, and signed on behalf of Seller by a duly authorized officer of
Seller.
8.6 Delivery of Certificates. Seller shall have delivered
to Buyer, at the Closing, the certificates representing the Shares and the
Limited Partner Interest, duly endorsed in blank or accompanied by stock powers
duly endorsed in blank and such other instruments reasonably deemed to be
necessary or required to vest in Buyer all of Seller's right, title and interest
with respect to the Shares and the Limited Partnership Interest, free and clear
of all Liens.
8.7 Certified Resolutions. Buyer shall have received a
certificate of the Secretary or an Assistant Secretary of Seller, dated the
Closing Date, setting forth resolutions of the board of directors of Seller
authorizing the consummation of the transactions contemplated hereby, and
certifying that such resolutions were duly adopted and have not been rescinded
or amended as of the Closing Date.
8.8 Employment and Non-Competition Agreements. The employment
and non-competition agreements between the Company and Messrs. Van Pelt, Kreider
and Lewis entered into concurrently herewith shall be in effect (excluding any
failure of any such agreement to be in effect as a result of Buyer's actions,
omissions or fault) and Buyer shall not have received notice that such employees
are not ready and willing to perform under such agreements at Closing.
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8.9 Consents. All consents or waivers required pursuant to the
Insilco Credit Agreement and the Insilco 12% Notes shall have been obtained.
8.10 Opinion of Counsel for Seller and TPC. Buyer shall have
received an opinion from Baker & Botts, L.L.P., counsel for Seller and the
Company, in substantially the form attached hereto as Exhibit A.
8.11 Financing. Buyer shall have received financing
substantially as set forth in the Lender Letter.
8.12 FIRPTA Affidavit. Buyer shall have received an affidavit
from Seller in accordance with Section 1445(b)(2) of the Code wherein Seller
states that it is not a foreign person.
8.13 Indebtedness. The Company shall have no indebtedness for
borrowed money, other than any indebtedness included in the calculation of the
Closing Working Capital.
8.14 Release of Certain Liens. Buyer, at its discretion,
shall have received Uniform Commercial Code searches (which searches shall be
made or caused to made by and at the expense of Buyer) of filings made pursuant
to Article 9 thereof in all jurisdictions where any of the Company's material
assets are located, in form, scope and substance reasonably satisfactory to
Buyer, which searches shall reflect the release or termination of all Liens
against any the Company's assets disclosed thereby that are not Permitted Liens,
or Buyer shall have received evidence satisfactory to it, that all such Liens
other than Permitted Liens or as set forth on Schedule 8.14 have been released
or terminated prior to Closing.
8.15 Material Adverse Change. There shall not have been any
material adverse change, nor any events that would reasonably be expected to
have a material adverse change to the Company, from the date hereof to the
Closing Date.
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ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S AND TPC'S OBLIGATIONS
9.1 Accuracy of Representations and Warranties. Each of the
representations and warranties of Buyer contained herein shall be true and
correct in all material respects in each case at and as of the Closing Date as
if made at and as of the Closing Date except for the representations and
warranties that address matters only as of a particular date or only with
respect to a specific period of time which need only be true and accurate as of
such date or with respect to such period except to the extent that the failure
of such representations and warranties to be true and correct does not have or
will not be reasonably likely to have a material adverse effect on the
consummation of the transactions contemplated hereby or Buyer's ability to
perform its obligations hereunder in a timely manner. Notwithstanding anything
contained herein to the contrary, in making the determination required by the
preceding sentence, deviations which result solely from actions or inactions
expressly requested or consented to in writing by Seller or TPC shall not be
considered.
9.2 Performance of Covenants. Buyer 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 between
the date hereof and the Closing Date.
9.3 No Order. No Order shall be in effect forbidding,
enjoining or restraining the consummation of the transactions contemplated in
this Agreement or which would limit or affect the ability of Buyer to own or
control the Company and there shall not have been threatened, nor shall there be
pending, any Legal Proceeding seeking to forbid, enjoin, refrain or delay,
challenge the validity of, or seek damages in respect of, the material
transactions contemplated by this Agreement upon which has a reasonable
likelihood of success.
9.4 Officer's Certificate. Seller shall have received a
certificate from Buyer to the effect set forth in Sections 9.1 and 9.2 hereof,
dated the Closing Date, signed by a duly authorized officer thereof.
9.5 Certified Resolutions. Seller shall have received a
certificate of a duly authorized officer of Buyer, dated the Closing Date,
setting forth the resolutions of the board of directors of Buyer authorizing the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and certifying that such resolutions were duly
adopted and have not been rescinded or amended as of the Closing Date.
9.6 Hart-Scott-Rodino. All applicable waiting periods in
respect of the transactions contemplated by this Agreement under the HSR Act
shall have expired or been terminated.
9.7 Delivery of Purchase Price. Seller shall have received
the purchase price payable pursuant to this Agreement.
9.8 [Intentionally Left Blank]
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9.9 Opinion of Counsel for Buyer. Seller shall have
received an opinion from Schulte Roth & Zabel, LLP, counsel for Buyer, in
substantially the form attached hereto as Exhibit B.
ARTICLE X
DELIVERIES AT CLOSING
10.1 Deliveries by Seller to Buyer. At the Closing, Seller
shall deliver, or shall cause to be delivered, to Buyer the following:
(a) the certificates evidencing the Shares, and such
instruments or documents evidencing the sale, assignment, transfer and
conveyance by Seller to Buyer of the Shares and the Limited Partner Interest in
accordance with the terms hereof;
(b) the certificates referred to in Section 8.5
hereof;
(c) the certified resolutions of the board of
directors of Seller referred to in Section 8.7 hereof;
(d) a certificate of the Secretary or an Assistant
Secretary of each of Seller and TPC attesting as to the incumbency and signature
of each officer of Seller and TPC, respectively, who shall execute this
Agreement and any other Seller Transaction Agreement and certifying as being
complete and correct the copies attached to such certificate of the certificate
of incorporation and bylaws of TPC and the certificate of limited partnership
and agreement of limited partnership of the Partnership, each as in effect on
such date;
(e) a certificate of the good standing of TPC and the
Partnership in the State of Delaware, and a certificate of qualification of TPC
and the Partnership as a foreign entity authorized to do business in each state
in which they are so qualified, in each case dated as of a date not earlier than
ten (10) days prior to the Closing Date;
(f) satisfactory evidence of the resignation of such
of the present directors and officers of TPC as Buyer may require;
(g) a release by Seller in favor of the Company in
the form contained at Exhibit C;
(h) an Assignment and Assumption Agreement executed
by Seller and the Company in the form contained at Exhibit D; and
(i) an Assignment of Partnership Interest executed by
Seller in the form contained at Exhibit E.
10.2 Deliveries by Buyer to Seller. At the Closing, Buyer
shall deliver to Seller the following:
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(a) confirmation of the wire transfer of immediately
available funds (to the account of Seller specified by Seller to Buyer within 24
hours prior to the required payment thereof) in the amount equal to $93,480,000;
(b) the certificate referred to in Section 9.4 hereof
signed by a duly authorized officer of Buyer;
(c) the certified resolutions of the board of
directors of Buyer referred to in Section 9.5 hereof;
(d) a certificate of the Secretary or an Assistant
Secretary of Buyer attesting as to the incumbency and signature of each officer
of Buyer who shall execute this Agreement or any other Buyer Transaction
Agreement;
(e) a release by the Company in favor of Seller in
the form contained at Exhibit C; and
(f) an Assignment and Assumption Agreement executed
by the Company and Seller in the form contained at Exhibit D.
ARTICLE XI
COVENANTS REGARDING EMPLOYEES
11.1 Employment. Following the Closing, all Employees shall
continue in the employment of the Company on substantially equivalent terms and
conditions of employment. Nothing in Section 11.1 shall be deemed to require,
however, that the employment of any Employee be continued for any specific
period of time after the Closing Date. Buyer acknowledges that, following the
Closing, neither the Employees nor the Company shall continue to participate in,
or be a member of, any Employee Benefit Plan which is not sponsored or
maintained by the Company (including, without limitation, the Employee Benefit
Plans maintained or sponsored by Seller which, prior to the Closing Date,
covered employees of Seller in addition to Employees of the Company).
11.2 Benefit Plans. To the extent that any employee benefit
plan or arrangement is made available by Buyer or the Company to any Employees
following the Closing Date, (i) Buyer shall, or shall cause the Company to,
grant all such Employees after the Closing Date credit for all service with the
Company and any predecessors prior to the Closing Date for all purposes for
which such service was recognized by Seller and its Affiliates; and (ii) with
respect to any "Employee Benefit Welfare Plan" (as that term is defined in
Section 3(1) of ERISA), Buyer shall, or shall cause the Company to, waive any
waiting periods, pre-existing condition exclusions and actively-at-work
requirements and provide that any expenses incurred on or before the Closing
Date by a covered Employee or a covered Employee's covered dependent shall be
taken into account for purposes of satisfying applicable deductible,
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coinsurance and maximum out-of-pocket provisions. Buyer expressly agrees that
the Company or Buyer shall continue to maintain the Taylor Publishing Company
Pension Plan For Hourly Paid Employees (the "Hourly Pension Plan") on
substantially the same terms as it was constituted on the Closing Date, except
as may otherwise be required by applicable Law and/or the terms of any
applicable collective bargaining agreement, with plan administrators and other
fiduciaries as shall be determined and selected by Buyer pursuant to the terms
of the Hourly Pension Plan. The Hourly Pension Plan shall not be terminated, and
accruals thereunder may not be halted or frozen, prior to the expiration of the
term (and any extensions thereof) of the collective bargaining agreement
covering participants in the Hourly Pension Plan who are active employees of the
Company on the Closing Date, or the first anniversary of the Closing Date,
whichever event last occurs. As soon as practicable after the Closing Date,
Seller shall cause, or use its best efforts to effectuate, the transfer of the
assets of the Hourly Pension Plan out of the Insilco Corporation Master Trust
and into a trust newly established by the Company as is necessary for the
purposes of holding the assets of the Hourly Pension Plan, provided that the
Company provides Seller with sufficient evidence of the tax-exempt status of the
newly established trust.
11.3 Employee Liabilities. On and after the Closing Date,
Seller shall retain liability for benefits arising under the Company Plans
listed in Schedule 11.3 in accordance with the terms of such Company Plans and
to the extent described in Schedule 11.3, but Employees of the Company shall
cease to be covered as active employee participants in the Company Plans listed
in Schedule 11.3 on and after the Closing Date. Except as provided in the
preceding sentence and in Sections 11.5 and 11.6, the Seller shall have no
liability, for benefits or otherwise, under any Company Plan, and the Company
and Buyer shall be responsible for all benefits under the Company Plans.
Notwithstanding the foregoing, Seller shall be responsible for, and Buyer and
the Company shall not be obligated to pay, that portion owed under the
agreements listed on Schedule 4.17(h) that is attributable to the "Sales
Incentive Program". Buyer and the Company shall retain liability for payments
attributable to the "Income Protection Program" under such agreements, in each
case as such programs are described in the agreements listed on Schedule
4.17(h).
11.4 Severance. If the employment of any Employee is
terminated on or within one year after the Closing Date or by reasons of the
transactions contemplated hereby, Buyer shall cause the Company to provide such
Employee severance pay and benefit entitlement in accordance with the severance
policy applicable to such Employee as in effect on the date hereof, if more
favorable than the severance policy of Buyer or the Company, as applicable, in
effect on or after the Closing.
11.5 401(k) Plan. On or prior to the Closing Date, Seller
shall take all action necessary to vest participating Employees in their account
balances in the Insilco Corporation Thrift Plan (the "Insilco 401(k) Plan").
There shall be no transfer of assets or liabilities of the Insilco 401(k) Plan
to any Employee Benefit Plan of Buyer or any of its Affiliates (including the
Company), and Buyer acknowledges that Buyer and its Affiliates (including the
Company) shall have no right, title or interest in any of the assets of the
Insilco 401(k) Plan.
11.6 Insilco Pension Plan.
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(a) As of the Closing Date, Seller shall take all
actions necessary to provide that the Insilco Corporation Retirement Plan for
Salaried Employees (the "Insilco Pension Plan") shall retain all liabilities
with respect to all benefits accrued by participating Employees (the "Insilco
Plan Participants") under the Insilco Pension Plan through the Closing Date, as
if all such Insilco Plan Participants had terminated employment in respect of
the Insilco Pension Plan on the Closing Date. Seller shall vest Insilco Plan
Participants in their accrued benefits as of the Closing Date. All Insilco Plan
Participants shall be treated as terminated vested employees or retired
employees, if they are then eligible for retirement and so elect to retire under
the Insilco Pension Plan for the purpose of determining benefit entitlement
thereunder.
(b) There shall be no transfer of assets or
liabilities of the Insilco Pension Plan to any Employee Benefit Plan of Buyer or
of any of its Affiliates (including the Company), and Buyer acknowledges that
Buyer and its Affiliates (including the Company) shall have no right, title or
interest in any of the assets of the Insilco Pension Plan.
ARTICLE XII
TAXES AND LITIGATION
12.1 Tax Returns and Payments.
(a) Buyer shall, at Seller's request, cause the
Company to consent to join, for all taxable periods of the Company ending on or
before the Closing Date for which the Company is eligible to do so, in any
consolidated or combined federal, state, local or foreign income Tax Returns
with Seller. Seller shall cause to be prepared and filed all such consolidated
or combined income Tax Returns. Buyer agrees to cooperate with Seller in the
preparation of the portions of such income Tax Returns pertaining to the
Company, and hereby agrees to take no position inconsistent with the Company's
being a member of the consolidated or combined group of which Seller is a member
for all such periods. Seller shall timely pay all income taxes to which such
income Tax Returns relate for all periods covered thereby.
(b) Seller shall cause to be prepared and Buyer shall
cause to be timely filed all required state, local and foreign Tax Returns of
the Company (other than those caused to be filed by Seller pursuant to Section
12.1(a)) for any period which ends on or before the Closing Date, for which Tax
Returns have not been filed as of the Closing Date. Buyer shall be responsible
for preparing and filing all Tax Returns required to be filed by or on behalf of
TPC or the Partnership for taxable periods ending after the Closing Date. All
such returns for periods ending on or prior to, or which include, the Closing
Date shall be prepared on a basis that is consistent with the manner in which
Seller prepared or filed such Tax Returns for prior periods.
(c)(i) Seller shall indemnify and hold harmless
Buyer, TPC, the Partnership and their respective Affiliates, successors and
assigns and the employees, directors, officers and agents of each with respect
to any and all Taxes that may be imposed on Buyer, TPC
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or the Partnership or in respect of their business or assets (A) with respect to
any taxable period of TPC, the Partnership or any Affiliated Group ending on or
prior to the Closing Date or allocated to Seller pursuant to subparagraph (ii)
of this Section 12.1(c) (the "Pre-Closing Taxes"), (B) to the extent such Taxes
arise as a result of a breach or inaccuracy of any representation contained in
Section 4.18, and (C) under Treasury Regulation ss.1.1502-6 or any comparable
state, local or foreign tax provision.
(ii) If, for any United States federal, state, local
or foreign tax purposes, the taxable period of the Company does not terminate on
the Closing Date, Taxes, if any, and partnership tax items attributable to any
taxable period of TPC or the Partnership that includes (but does not end on) the
Closing Date (each such period, a "Straddle Period") shall be allocated to (A)
Seller for the period up to and including the Closing Date, and (B) Buyer for
the period subsequent to the Closing Date. For purposes of the preceding
sentence, Taxes for the period up to and including the Closing Date and for the
period subsequent to the Closing Date shall be determined on the basis of an
interim closing of the books as of the close of business on the Closing Date as
if such taxable period consisted of one taxable period ending on and including
the Closing Date followed by a taxable period beginning on the day following the
Closing Date or under such other reasonable method as the parties may agree. For
purposes of this subparagraph (ii), exemptions, allowances or deductions that
are calculated on an annual basis, such as the deduction for depreciation, shall
be apportioned on a daily basis. In addition, the Texas franchise tax determined
with respect to capital or income of TPC, Seller or the Partnership (i) during
1999 shall be considered a tax with respect to the period from January 1, 1999,
to December 31, 1999, for purposes of this Agreement, and (ii) during 2000 shall
be considered a tax with respect to the period from January 1, 2000, to December
31, 2000, for the purposes of this Agreement.
(d) With respect to any Tax Return required to be
filed by Buyer pursuant to Section 12.1(b) for a Straddle Period, Buyer shall
provide Seller with copies of such completed Tax Return and a statement setting
forth the amount of Tax shown on such Tax Return that is allocable to Seller
pursuant to Section 12.1(c)(ii) (the "Statement") at least 15 business days
prior to the due date for the filing of such Tax Return. Not later than five
days before the due date for payment of Taxes with respect to such Tax Return,
Seller shall pay to Buyer an amount equal to the Taxes shown on the Statement as
being allocable to Seller. In addition, if the Pre-Closing Taxes with respect to
a Straddle Period, calculated in accordance with Section 12. 1(c), are less than
the Tax payments made on or before the Closing Date by the Company with respect
to such Straddle Period Buyer shall cause the Company to pay over to Seller the
excess of such Tax payments over such Pre-Closing Taxes concurrently with the
filing of the Tax Return for the Straddle Period.
12.2 Refunds. Any refunds or credits of federal, state,
local and foreign Taxes (including any interest thereon) received by or credited
to the Company or Seller attributable to periods ending on or prior to the
Closing Date, or attributable to periods which include the Closing Date that
were not borne by Buyer pursuant to Section 12.1(c) (collectively, "Seller
Refunds"), shall be for the benefit of Seller, and Buyer shall use reasonable
commercial efforts to obtain any Seller Refunds and shall cause the Company to
pay over to Seller any Seller Refunds within 15 business days after receipt or
credit thereof; provided, however, that Seller shall
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reimburse Buyer for any costs or expenses incurred in connection with obtaining
such Seller Refunds.
12.3 Cooperation. After the Closing Date, Buyer and Seller
shall each make available to the other, as reasonably requested, and to any
taxing authority, all information, records or documents relating to Tax
liabilities or potential Tax liabilities of the Company for all periods prior to
or including the Closing Date and shall preserve all such information, records
and documents until the expiration of any applicable statute of limitations or
extensions thereof. Buyer shall prepare and provide to Seller such federal,
state, local and foreign Tax information packages as Seller shall reasonably
request for use in preparing any Tax Return that relates to the Company. Such
information packages shall be completed by Buyer and provided to Seller within
60 days after a request therefor. Notwithstanding any other provisions hereof,
each party shall bear its own expenses in complying with the foregoing
provisions. The obligations of Buyer contained in this Section 12.3 shall be in
addition to Buyer's obligations contained in Section 7.2 of this Agreement.
12.4 Buyer's Taxes. Buyer shall pay, or cause to be paid,
and Buyer and the Company shall jointly and severally indemnify Seller and its
Affiliates against and hold them harmless from any liability for Taxes of Buyer,
TPC or the Partnership with respect to any taxable period after the Closing,
other than any such Taxes allocable to Seller, pursuant to Section 12.1(c)(ii).
12.5 Miscellaneous.
(a) Except as otherwise required by law, the parties
agree to treat all payments made pursuant to Section 12.1 to 12.4 as adjustments
to the purchase price for Tax purposes. The representations and warranties set
forth in Section 4.18 and the indemnities and covenants set forth in this
Article XII shall survive indefinitely.
(b) For purposes of Sections 12.1(c)(i) and 12.4, the
indemnification procedures of Section 14.3 shall be applicable.
12.6 Section 338(h)(10) Election: Section 754 Election.
(a) If requested by Buyer, Seller shall join Buyer in
an election to have the provisions of Section 338(h)(10) of the Code and any
analogous provision of state or local law (any such election, a "338 Election")
apply to the acquisition of the Shares of TPC. The allocation of the purchase
price (or, if applicable, the "modified aggregate deemed sale price") among
TPC's assets shall be made in accordance with Section 338 and the Treasury
Regulations thereunder and any comparable provisions of state or local law, as
applicable. Such allocation shall be determined by Buyer and delivered to Seller
at least 90 days prior to the date an IRS Form 8023 is required to be filed in
respect of the acquisition of the Shares (such allocation, the "Proposed
Allocation"). Seller shall accept the Proposed Allocation unless it would be
unreasonable to do so. If Seller believes that the Proposed Allocation is
unreasonable, it shall notify Buyer within 30 days of its receipt of the
Proposed Allocation and the manner in which Seller would modify the Proposed
Allocation to make it reasonable (such modified allocation, the "Modified
Allocation"). If Buyer and Seller are unable to resolve their differences within
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days, the matter shall be referred the Independent Accountant. The Independent
Accountant shall determine whether the Proposed Allocation was reasonable. If
the Independent Accountant determines that the Proposed Allocation was
reasonable, such allocation shall be the "Final Allocation." If the Independent
Accountant determines that the Proposed Allocation was not reasonable, the
Modified Allocation shall be the "Final Allocation." Buyer and Seller shall each
file Internal Revenue Service Form 8023 (and any applicable forms required under
state or local law) in respect of each 338 Election in a manner consistent with
the Final Allocation and shall not take any position on any Tax Return that is
inconsistent with the Final Allocation.
(b) Seller shall take any action reasonably requested
by Buyer in connection with making an election under Section 754 of the Code
(and any comparable provision of state or local law) with respect to the
Partnership for the taxable year of the Partnership that ends on or includes the
Closing Date.
12.7 Jostens Lawsuit. Regarding the Legal Proceeding styled
Taylor Publishing Co. v. Jostens, Inc. No. 4:97 CV 11 in the United States
District Court for the Eastern District of Texas and No. 99-40154 in the United
States Court of Appeals for the Fifth Circuit (collectively, the "Jostens
Lawsuit"), each of Buyer and TPC acknowledge that Seller is currently paying
expenses and fees associated with the proceeding of the Jostens Lawsuit before
the United States Court of Appeals for the Fifth Circuit. After the Closing
Date, Seller will continue to pay and be fully responsible for any fees and
expenses incurred after the Closing Date that are associated with the
prosecution of the Jostens Lawsuit and will indemnify and hold the Company
harmless from any Losses arising out of, based upon, attributable to or
resulting from the Jostens Lawsuit. Each of Buyer and TPC agree to make
available to Seller upon prior written request (i) any of the Company's
personnel whose assistance or participation is reasonably required by Seller and
(ii) those Books and Records which are reasonably required by Seller for the
prosecution of the Jostens Lawsuit and all future proceedings relating to the
Jostens Lawsuit, including providing documents, witnesses, reasonable access to
management and other assistance; provided, however, that any such assistance or
participation by such personnel or availability of such Books and Records does
not unduly interfere with the normal conduct of the Company's business. Seller
shall pay to Company a per diem charge at the rate of $500 per 8-hour day
(prorated for partial days to the nearest quarter of a day) for each of the
Company's personnel required to assist Seller pursuant to this Section 12.7 and
shall reimburse the Company for any reasonable documented out-of-pocket
expenses, including travel and other related expenses, as and when incurred by
the Company or such personnel pursuant to this Section 12.7 to the extent such
expenses are not paid directly by Seller. TPC hereby grants and assigns to
Seller an undivided interest in any proceeds actually collected from the Jostens
Lawsuit and each of Buyer, TPC and Seller agree that proceeds actually collected
in relation to the Jostens Lawsuit will be allocated as follows:
(i) TPC is entitled to an amount equal to 10% of the
amount actually collected pursuant to the Jostens Lawsuit (net of fees and
expenses of the Jostens Lawsuit that have been incurred directly by Seller,
including legal fees); provided, however, that TPC will receive at least
$100,000 (assuming the lawsuit results in a net amount in excess of $100,000)
and that the maximum amount the Company is entitled to receive pursuant to this
Section 12.7(i) is $2,500,000. If the Jostens Lawsuit results in an amount
actually collected that is less than $100,000, TPC is entitled to the entire
amount collected.
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(ii) Seller will be entitled to all remaining amounts
received as a result of the Jostens Lawsuit not allocated to TPC pursuant to
Section 12.7(i), including, but not limited to, all amounts received in excess
of $25,000,000.
Buyer and TPC each agree that they shall not have a right to offset any
liability Seller may have to Buyer or the Company against any amount Seller is
entitled to pursuant to this Section 12.7. TPC and Buyer acknowledge and agree
that Seller has complete discretion and authority regarding decisions and
strategy relating to the Jostens Lawsuit, including any decision to settle the
lawsuit, as well as any decision to instigate or terminate any Legal Proceeding
regarding the same. Notwithstanding anything to the contrary in this Agreement,
TPC acknowledges and agrees that it will remain solely responsible and liable
for the judgment dated January 4, 1999 granted by the District Court to Jostens,
Inc. requiring TPC to pay Jostens, Inc.'s costs, which were stipulated by the
parties of the lawsuit to be $50,000.
ARTICLE XIII
TERMINATION
13.1 Termination of Agreement. Anything herein to the
contrary notwithstanding, this Agreement and the transactions contemplated
hereby, may be terminated at any time before the Closing Date, as follows:
(a) Mutual Consent. By the mutual written consent of
Seller and Buyer.
(b) Expiration Date. By Seller, on the one hand, or
Buyer, on the other hand, if the Closing shall not have occurred by March 31,
2000 (which date may be extended by mutual agreement of Buyer and Seller)
provided that the terminating party is not then in default hereunder.
(c) Consummation Prohibited. By Seller, on the one
hand, or Buyer, on the other hand, if consummation of the transactions
contemplated hereby would violate any non-appealable final Order of a
Governmental Authority having competent jurisdiction.
(d) Failure of Heller Financial, Inc. ("Heller") to
Remove All Conditions Regarding Due Diligence and the Environmental Insurance
Policy Requirements in the Lender Letter. By Seller by notice given to Buyer on
or prior to January 7, 2000 if Seller has not received by 5:00 p.m., Texas time,
on December 23, 1999 from Buyer a revised Lender Letter executed and agreed to
by Buyer (i) eliminating from the Lender Letter (to the sole satisfaction of
Seller) all conditions to the commitment of Heller related to due diligence,
including without limitation legal and environmental due diligence, and all
conditions to the commitment of Heller related to the environmental insurance
policy referred to in the Lender Letter and (ii) containing no other changes not
acceptable to Seller in its sole discretion.
13.2 Effect of Termination. If this Agreement shall be
terminated pursuant to Section 13.1, all further obligations of the parties to
this Agreement shall terminate without
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further liability of any party to another and each party shall pay all costs and
expenses incident to its negotiation and preparation of this Agreement and to
its performance of and compliance with all agreements and conditions contained
herein on its part to be performed or complied with, including the fees,
expenses and disbursements of its counsel; provided, however, that (i) the
obligations of Buyer under the Buyer Confidentiality Agreement shall survive any
such termination and (ii) nothing herein shall relieve a breaching or defaulting
party for liability arising from any breach or default by it hereunder.
ARTICLE XIV
INDEMNIFICATION
14.1 Seller Indemnification. Subject to the limitations set
forth in Section 14.4 hereof, Seller hereby agrees to indemnify and hold Buyer
and each of its Affiliates, and the officers, directors, employees and agents
thereof, harmless from and against any and all claims, judgments, causes of
action, liabilities, obligations, damages, losses, deficiencies, costs,
penalties, interest and expenses, including without limitation, cost of
investigation and defense, and reasonable attorneys' fees and expenses
(collectively, "Losses") arising out of, based upon, attributable to or
resulting from any breach of any representation, warranty, agreement or covenant
on the part of Seller or TPC (excluding, however, in the case of TPC, any breach
of any agreement or covenant occurring following the Closing Date) contained in
or pursuant to this Agreement or any certificate delivered pursuant to Section
8.5 of this Agreement.
14.2 Buyer Indemnification. Buyer hereby agrees to indemnify
and hold Seller and each of its Affiliates, and the officers, directors,
employees and agents thereof, harmless from and against any and all Losses
arising out of, based upon, attributable to or resulting from any breach of any
representation, warranty, agreement or covenant on the part of Buyer contained
in or made pursuant to this Agreement or any certificate delivered pursuant to
Section 9.4 of this Agreement.
14.3 Indemnification Procedures
(a) If any third party asserts any claim against a
party to this Agreement which, if successful, would entitle the party to
indemnification under this Article XIV (the "Indemnified Party"), it shall give
notice of such claim to the party from whom it intends to seek indemnification
(the "Indemnifying Party") and, subject to Section 14.6, the Indemnifying Party
shall have the right to assume the defense and, further subject to Section
14.3(b), settlement of such claim at its expense by representatives of its own
choosing acceptable to the Indemnified Party (which acceptance shall not be
unreasonably withheld). The failure of the Indemnified Party to notify the
Indemnifying Party of such claim shall not relieve the Indemnifying Party of any
liability that the Indemnifying Party may have with respect to such claim,
except to the extent that the defense is materially prejudiced by such failure.
The Indemnified Party shall have the right to participate in the defense of such
claim at its expense, in which case the Indemnifying Party shall cooperate in
providing information to and consulting with the Indemnified Party about the
claim. If the Indemnifying Party fails or does not assume the defense of any
such claim within 15 days after written notice of such claim has been given by
the Indemnified Party to the Indemnifying Party, the Indemnified Party may
defend against or,
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subject to Section 14.3(b), settle such claim with counsel of its own choosing
at the expense (to the extent reasonable under the circumstances) of the
Indemnifying Party.
(b) If the Indemnifying Party does not assume the
defense of a claim involving the asserted liability of the Indemnified Party
under this Article XIV, no settlement of such claim shall be made by the
Indemnified Party without the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld or delayed. If the Indemnifying
Party assumes the defense of such a claim, (i) no settlement thereof may be
effected by the Indemnifying Party without the Indemnified Party's consent
unless (A) there is no finding or admission of any violation of Law or any
violation of the rights of any Person and no effect on any other claim that may
be made against the Indemnified Party, (B) the sole relief provided is monetary
damages that have been paid in full by the Indemnifying Party, and (C) the
settlement includes, as an unconditional term thereof, the giving by the
claimant or the plaintiff to the Indemnified Party of a release in form and
substance reasonably satisfactory to the Indemnified Party, from all liability
in respect of such claim, and (ii) the Indemnified Party shall have no liability
with respect to any compromise or settlement thereof effected without its
consent.
(c) The parties acknowledge and agree that the
Indemnifying Party's indemnity obligation relating to any Remedial Action shall
be satisfied by implementation or indemnification of the Lowest Cost Response.
"Lowest Cost Response" shall mean any Remedial Action that both meets the most
stringent of the following and is in compliance with Environmental Law: (a) the
least stringent corrective action or cleanup standards acceptable under
Environmental Laws or required by the Governmental Authority, in effect at the
time of the Remedial Action, based upon use of differential clean-up standards
based upon the nature of the land use of the affected property as of the Closing
Date, that will allow continued use and operation of the property for such
purpose without material interference; provided, however, in the event Lowest
Cost Response would require institutional controls, the institutional controls
shall not be considered "Lowest Cost Response" to the extent they would render
any portion of the property that the Company has a reasonable expectation of use
for industrial purpose at the time of implementation of the Remedial Action in
question, nonusable for such intended use it being further understood and agreed
that if Remedial Action with respect to air emissions is required and a permit
or other authorization covering the historical level of air emissions at a
facility that does not impose conditions requiring material adverse changes to
the operations of the facility can be obtained without the need for control
equipment, the installation of control equipment shall not be considered "Lowest
Cost Response;" (b) in the absence of cleanup standards or corrective action
required under Environmental Laws, the cleanup standard or corrective action
shall be deemed to be such specifications as reasonably determined by the
Approved Environmental Consultant in consultation with the Non-Responding Party;
(c) the corrective action or cleanup standard established in any applicable
lease in effect on or prior to the closing governing the Company's occupancy of
any of the real property that is subject to the Remedial Action; or (d) the
corrective action or cleanup standard required by any judicial or administrative
resolution or settlement agreement of a third party claim achieved or entered
into pursuant to the procedures set forth in this Article XIV. Except with
respect to post-Closing Releases to air for a period of up to 120 days expressly
included in clause (ii) of the definition of "Seller Environmental Liabilities,"
the Indemnifying Party shall not have any indemnity obligation in respect of
that portion of any environmental condition caused by the Indemnified
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Party, including, without limitation, any contribution made by the Indemnified
Party to an environmental condition for which the Indemnifying Party otherwise
has an indemnity obligation under this Section 14.6.
14.4 Limits on Indemnification. Notwithstanding anything to
the contrary contained in this Agreement:
(a) Seller shall not have any obligation to provide
indemnification for Losses pursuant to Section 14.1 arising out of or related to
breaches of representations and warranties (but not for any breach of any
covenant or agreement of Seller) except to the extent that the aggregate amount
of all such Losses pursuant to such Section exceeds $1,000,000, in which case
Seller shall be liable to Buyer only for such Losses in excess of $1,000,000
(the "Basket Amount"). Seller shall be obligated to provide indemnification for
all Losses arising out of or related to the breach of any covenant or agreement
of Seller. The maximum obligation of Seller to provide indemnification for all
Losses pursuant to (i) Section 14.1 arising out of or related to breaches of
representations and warranties (but not for any breach of any covenant or
agreement of Seller) and (ii) Section 14.6, shall be limited to $9,400,000 in
the aggregate.
(b) Buyer shall not have any obligation to provide
indemnification for Losses pursuant to Section 14.2 arising out of or related to
breaches of representations and warranties (but not for any breach of any
covenant or agreement of Buyer) except to the extent that the aggregate amount
of all such Losses pursuant to such Section exceeds the Basket Amount in which
case Buyer shall be liable to Seller only for such Losses in excess of Basket
Amount. Buyer shall be obligated to provide indemnification for all Losses
arising out of or related to the breach of any covenant or agreement of Buyer or
any post-Closing covenant or agreement of TPC. The maximum obligation of Buyer
to provide indemnification for Losses pursuant to Section 14.2 arising out of or
related to breaches of representations and warranties (but not for any breach of
any covenant or agreement of Buyer, or TPC if applicable) shall be limited to
$9,400,000 in the aggregate.
(c) The representations and warranties of TPC and
Seller on the one hand, and Buyer, on the other, contained in this Agreement
shall survive the Closing until the 13th month anniversary of the Closing Date;
provided, however, that (i) the representations contained in Section 4.14 shall
last for six years, (ii) the representations contained in Section 4.17 and
Section 4.18 shall continue until the expiration of the applicable statute of
limitations relating to the cause of action giving rise to Losses and (ii) the
representations contained in Sections 4.2 and 4.3 shall survive indefinitely.
14.5 Inapplicability to Taxes. Except for indemnification
procedures set forth in Section 14.3, this Article XIV shall not apply to Taxes,
liability for which is subject to Sections 12.1 through 12.5 hereof.
14.6 Environmental Indemnification.
(a) Subject to the limitations set forth in this
Section 14.6, in addition to the indemnification provided by Seller pursuant to
Section 14.1 above, Seller will defend, indemnify and hold harmless Buyer from
and against, subject to the cost sharing provisions of
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Section 14.6(g) below, any and all Seller Environmental Liabilities for which
notice of a Section 14.6 Environmental Claim (as defined below) is given during
the ten year period commencing on the Closing Date and which were discovered
prior to the end of such ten year period (whether before or after the Closing
Date).
(b) PROCEDURES WITH RESPECT TO SELLER ENVIRONMENTAL
LIABILITIES
(i) Any Section 14.6 Environmental Claim (as defined
below) that does not require Remedial Action shall be governed by the procedures
set forth in Section 14.3 of this Agreement. The term "Section 14.6
Environmental Claim" means any Environmental Claim all or a portion of which, if
successful, would entitle Buyer to indemnification under this Section 14.6.
(ii) Unless otherwise agreed by Seller and Buyer,
Buyer shall take the lead in any Remedial Action. The party controlling a
Remedial Action shall be referred to as the "Responding Party" and the other
party shall be referred to as the "Non-Responding Party." The Responding Party
shall, subject to the reasonable approval of the Non-Responding Party, select
one or more environmental engineers or consultants (the "Approved Environmental
Consultant"), to plan, conduct, coordinate, and supervise the Remedial Action.
The Responding Party shall arrange for an Approved Environmental Consultant to
prepare as part of the Remedial Action and, in compliance with any applicable
Environmental Law, a remedial action plan, which shall describe in reasonable
detail the Remedial Action, the scope of the work to be performed (to the extent
then determinable), and the estimated schedule for and the estimated costs
associated with such activities (to the extent then estimable) ("Remedial Action
Plan") for each Remedial Action. The Remedial Action Plan shall be designed to
achieve compliance with the Lowest Cost Response, shall keep to a minimum the
disruption of operations at the affected property, and shall not interfere in
any material respect with such operations.
(iii) The Non-Responding Party shall have the right
to review the Remedial Action Plan in accordance with the review procedure set
forth in this Section 14.6, and to reasonably monitor any Remedial Action; the
Responding Party shall provide a reasonable opportunity to the Non-Responding
Party for review and comment in advance, subject to Section 14.6(b)(x) below, of
(x) the implementation of any material element of the Remedial Action or
finalization of a report thereof, and (y) any material filing relating to the
Remedial Action with an applicable Governmental Authority. The Responding Party
shall reasonably attempt to incorporate or respond to any comment received from
the Non-Responding Party. Each party shall timely provide to the other any
information concerning the Remedial Action reasonably requested in writing by
the other.
(iv) Upon receipt of a Remedial Action Plan from an
Approved Environmental Consultant, the Responding Party shall notify the
Non-Responding Party in writing of the action it proposes to take and submit a
copy of the Remedial Action Plan. In the event that the Non-Responding Party
objects to the Remedial Action Plan as being inconsistent (other than in a de
minimis respect) with the Lowest Cost Response or Seller's indemnity obligations
hereunder, in whole or in part, the Non-Responding Party shall notify the
Responding Party in writing of its specific disagreement (and its basis
therefor) regarding such Remedial Action Plan and shall provide an alternative
proposal describing in reasonable detail an
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alternative proposal ("Dispute Notification") within thirty (30) days of its
receipt of notice of the Remedial Action Plan. The parties shall thereafter
negotiate in good faith in an attempt to reach agreement as to the disputed
Remedial Action Plan. Although the Non-Responding Party may offer comments and
suggestions to the Responding Party on de minimis aspects of the Remedial Action
Plan, which the Responding Party will consider in good faith, the ultimate
resolution of comments regarding de minimis matters shall be within the
discretion of the Responding Party and shall not be included in any Dispute
Notification.
(v) In the event the parties are unable to resolve a
dispute within thirty (30) days after the Responding Party's receipt of a
Dispute Notification, the parties shall designate an independent environmental
engineer or consultant familiar with environmental remediation requirements and
practices in the area where the remediation activity is to be performed (the
"Third Party Consultant"), provided that if the parties are unable to agree upon
a Third Party Consultant, Seller shall select one environmental consultant or
engineer, Buyer shall select a second environmental consultant or engineer, and
such consultants or engineers shall choose the Third Party Consultant, within
fifteen (15) days after such 30-day period. If either party fails to select such
consultant or engineer, the consultant or engineer selected by the other party
shall be the Third Party Consultant. The Third Party Consultant shall review the
Remedial Action Plan and the Dispute Notification, may discuss the Remedial
Action Plan with Seller and Buyer and, within thirty (30) days after its
selection as the Third Party Consultant, shall make written findings as to the
fairness and appropriateness of, and any changes that it would recommend to, the
Remedial Action Plan, taking into account the requirements of the provisions of
this Section 14.6, including the concept of "Lowest Cost Response." The Third
Party Consultant may make findings that the Remedial Action Plan is consistent
with these requirements, that the Non-Responding Party's alternative proposal as
set forth in the Dispute Notification is consistent with these requirements, or
that different activities would be consistent with these requirements. Seller
and Buyer shall thereafter negotiate in good faith in an attempt to reach
agreement as to the disputed Remedial Action Plan considering the findings of
the Third Party Consultant; in the event the parties are unable to resolve the
dispute within fifteen (15) days after receipt of the Third Party Consultant's
findings, all such findings shall become part of and shall be deemed to amend
the Remedial Action Plan, Lowest Cost Response, and Remedial Action Plan. The
costs of the Third Party Consultant shall be borne one-half by Seller and
one-half by Buyer.
Notwithstanding the foregoing, it is not the intent of the
parties to refer disputes concerning matters of contract or lease interpretation
or disputes concerning matters not within the reasonable judgment or experience
of an environmental consultant to the Third Party Consultant for resolution; it
being understood and agreed that such disputes shall be resolved in accordance
with the provisions of Section 15.9 of this Agreement, and, if appropriate, the
Dispute Notification shall be modified prior to submission to the Third Party
consultant to delete references to such matters.
(vii) In the event the Responding Party reasonably
believes that the Remedial Action Plan warrants expedited review and resolution,
the Responding Party shall so notify the Non-Responding Party in writing
concurrently with delivery of the Remedial Action Plan and the parties will use
good faith efforts to minimize the time periods for reviewing
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proposals and resolving disputes established by this Section 14.6 and, in any
event, 30 day periods shall be reduced to 15 days and 15 day periods shall be
reduced to 7 days.
(viii) The Responding Party will consult with the
Non-Responding Party regarding material discussions with any Governmental
Authority concerning any Remedial Action. The Non-Responding Party may have a
representative present during any meeting with any Governmental Authority;
provided, however, that such representative will not actively participate in any
such meetings and the Non-Responding Party will not attempt to independently
contact or influence the Governmental Authority.
(ix) Buyer will notify Seller in writing promptly
after, and in any event within thirty (30) calendar days of, Buyer's receipt of
any written Section 14.6 Environmental Claim or gaining of any knowledge of a
Seller Environmental Liability that could require Remedial Action. Buyer also
hereby agrees to provide Seller written notice promptly after, and in any event
within thirty (30) calendar days of, the discovery of any Release or threatened
Release of a Hazardous Material that may give rise to a Seller Environmental
Liability and is reportable under Environmental Law to a Governmental Authority
at any Facility after the Closing Date. Failure to provide such notice on a
timely basis will not result in the Losses relating thereto being excluded as
Seller Environmental Liabilities, except to the extent Seller has been
prejudiced thereby.
(x) Notwithstanding the preparation and review of the
Remedial Action Plan provisions in Section 14.6(b), the "no-hunt" provisions in
Section 14.6(f) and the notice provisions in this Section 14.6, Buyer may take
any necessary Remedial Action to respond to an emergency condition for which
Seller may have an indemnification obligation (i) in the event Buyer has a good
faith belief that such conditions require an immediate response to protect human
health or the environment, (ii) such action is expressly directed by a
Governmental Authority to respond to the emergency condition, or (iii) such
action is required by applicable Environmental Law to respond to the emergency
condition. Buyer shall promptly notify Seller of the emergency condition, which
notice shall in any event be given within forty-eight (48) hours of completion
of the Remedial Action responding to the emergency condition. The taking of such
action shall not have any impact on a determination of whether the Remedial
Action is properly within Seller's indemnity obligation contained in this
Section 14.6.
(xi) Unless Seller otherwise expressly agrees in
writing to the contrary, the parties acknowledge and agree that Seller's
indemnity obligation relating to any Remedial Action shall be satisfied by the
Lowest Cost Response. Unless Seller otherwise expressly agrees in writing to the
contrary, to the extent Buyer requests or implements any changes to any Remedial
Action which exceed Lowest Cost Response, Buyer will be solely responsible for
any increased costs attributable to such changes.
(xii) The Non-Responding Party will have the right to
assist in the settlement or defense of any administrative enforcement action
relating to a Section 14.6 Environmental Claim, with its own counsel and at its
own expense, so long as it does not interfere with or delay in any manner the
Responding Party's resolution of any such Section 14.6 Environmental Claim. In
the event the Section 14.6 Environmental Claim involves third party litigation,
this right to assist in settlement or defense, shall be governed by Section
14.3(a).
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(xiii) Seller hereby agrees prior to Closing to
initiate at its cost an air emissions inventory and evaluate whether each of the
Company's four current facilities is required to have any air permit or
authorization that it currently does not have. For purposes of Section 14.6(e)
below, all third-party out-of-pocket costs and expenses incurred in connection
with such inventory and evaluation shall be deemed to be Losses for which Seller
was obligated to pay pursuant to this Section 14.6 (but not subject to the
Individual or Aggregate Threshold Amounts). Buyer has the independent right, at
Buyer's cost (unless required of Buyer after Closing as part of a Remedial
Action), to conduct its own air emissions survey and evaluation regarding the
Current Facilities' (defined below) compliance with Environmental Law. Upon
completion of such inventory and evaluation, Seller and Buyer shall consult in
good faith to determine whether any Remedial Action is required. Any dispute
with respect thereto and any related Remedial Action shall be handled in
accordance with the procedures set forth in this Section 14.6. To the extent any
Releases to the air are identified or discovered to be violations of
Environmental Law prior to the Closing Date, or during the 120 day period after
the Closing Date (provided such Releases are not the result of a material
alteration in the Company's operations as those operations existed during the
twelve-month period prior to the Closing Date), by Seller as the result of its
air emissions inventory, or by Buyer as the result of any air emission survey or
inventory, such Releases are deemed to be a Seller Environmental Liability and
deemed to be a Section 14.6 Environmental Claim subject to all of the procedures
with respect to Seller Environmental Liabilities set forth in Section 14.6(b),
including the notice provisions set forth in Section 14.6(b)(ix).
(xiv) To the extent access to any area requiring
Remedial Action is within the control of the Non-Responding Party or its
Affiliates, Non-Responding Party shall provide Responding Party, its
environmental consultants and Governmental Authority with reasonable access to
the areas affected in order for Responding Party to carry out its obligations
under this Agreement. During the implementation of any Remedial Action, the
parties shall use commercially reasonable best efforts to cooperate in good
faith to ensure compliance with all applicable Environmental Laws, to minimize
the costs of the Remedial Action and to minimize business disruptions related to
the implementation of the Remedial Action. The parties acknowledge and agree
that it may be in the parties' interest to conduct the Remedial Action under a
state voluntary cleanup program and agree to reasonably cooperate with each
other in taking such steps as may be necessary or desirable to facilitate such
participation.
(c) All obligations contained in this Section 14.6 shall
expire on the tenth anniversary of the Closing Date, except with respect to
matters for which a notice of a Section 14.6 Environmental Claim has been
received by Seller on or before said tenth anniversary.
(d) Regarding each environmental condition, Seller shall not
have any obligation to provide indemnification for Losses pursuant to this
Section 14.6 arising out of or related to Seller Environmental Liabilities of
such environmental condition except to the extent that the amount of Losses
relating to such condition exceeds $100,000 (the "Individual Threshold Amount")
or the cumulative amount of Losses that have been incurred by Buyer and applied
against Individual Threshold Amounts for environmental conditions exceeds
$750,000 (the "Aggregate Threshold Amount"), in which case Seller shall be
liable to Buyer only for
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Losses for such environmental condition in excess of the Threshold Amount or
Aggregate Threshold Amount, as applicable.
(e) The maximum obligation of Seller to provide
indemnification for all Losses pursuant to (i) this Section 14.6 and (ii)
Section 14.1 (arising out of or related to breaches of representations and
warranties) hereof, shall be limited to $9,400,000 in the aggregate.
(f) Unless and except to the extent required to do so
under any Environmental Law or in fulfillment of the express requirement of a
Governmental Authority that is not required as a result of intentional actions
or inactions of Buyer or its Affiliates designed in whole or in part to effect
such a requirement and, then, only with prior notice to Seller and after
providing Seller with an opportunity to be present at any surface or subsurface
investigation and an ability to split any samples taken at Seller's cost, in the
event Buyer initiates, conducts, or authorizes any surface or subsurface
investigation of an environmental condition at any facility which may constitute
a Seller Environmental Liability, without the express written consent of Seller,
any Losses incurred or matters discovered as a result of such investigation
shall be excluded from Seller Environmental Liabilities and Seller shall not
have any indemnification or obligation with respect thereto. Activities
conducted by Buyer or its Affiliates in the ordinary course of business, such as
improvements or repairs, will not be considered a surface or subsurface
investigation, provided Buyer and its Affiliates do not intend in connection
with such activity to identify environmental liabilities.
(g) COST-SHARING
(i) During the first year of the environmental
indemnity set forth in this Section 14.6 (i.e., the twelve month period
commencing on the Closing Date), Seller will be responsible for eighty-five
percent (85%) of the Losses above the Threshold Amount or Aggregate Threshold
Amount, as the case may be, that constitute Seller Environmental Liabilities;
(ii) During the second, third and fourth years of the
environmental indemnity set forth in this Section 14.6, Seller will be
responsible for seventy-five percent (75%) of the Losses above the Threshold
Amount or the Aggregate Threshold Amount, as the case may be, that constitute
Seller Environmental Liabilities;
(iii) During the fifth year of the environmental
indemnity set forth in this Section 14.6, Seller will be responsible for sixty
percent (60%) of the Losses above the Threshold Amount or the Aggregate
Threshold Amount, as the case may be, that constitute Seller Environmental
Liabilities;
(iv) During the sixth year of the environmental
indemnity set forth in this Section 14.6, Seller will be responsible for fifty
percent (50%) of the Losses above the Threshold Amount or the Aggregate
Threshold Amount, as the case may be, that constitute Seller Environmental
Liabilities;
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(v) During the last four years of the environmental
indemnity set forth in this Section 14.6, Seller will be responsible for
twenty-five percent (25%) of the Losses above the Threshold Amount or the
Aggregate Threshold Amount, as the case may be, that constitute Seller
Environmental Liabilities; and
(vi) It is understood that the cost sharing ratio for
an environmental condition shall be established based on the date Buyer notifies
Seller in writing of the Section 14.6 Environmental Claim.
(h) Seller will provide Buyer a one year Letter of
Credit, renewable to Buyer for two additional consecutive one year terms, in the
amount of $1,000,000.00, issued by a financial institution and in a form
reasonably acceptable to Buyer on the Closing Date as security for its indemnity
obligations contained in this Section 14.6. The amount of the Letter of Credit
will be reduced by the actual amounts paid by Seller to cover any Losses related
to Seller Environmental Liabilities (excluding Section 14.6(b)(xiii)) or by any
amounts drawn against the Letter of Credit to cover any Losses that constitute
Seller Environmental Liabilities. Further, once Seller has fulfilled the maximum
obligation for Losses set forth in Section 14.6(e) above, Seller may terminate
the Letter of Credit.
(i) The duty and obligation of Seller to provide
indemnification hereunder will be limited to the net amount of any Losses
actually sustained and/or paid. In determining the net amount of Losses, the
actual amount of Losses will be reduced by the aggregate value of any assets,
properties and rights, including without limitation, proceeds of insurance,
claims, cross-claims, counterclaims and the like which are either received
directly by Buyer, or by Seller on behalf of Buyer and remitted to Buyer. In
such connection, Buyer will fully cooperate with Seller in pursuing and
realizing all amounts which may be available from third persons (without being
obligated to incur any additional non-reimbursable expense, or liability in
respect of specious or unfounded lawsuits filed in its name).
GENERAL
15.1 Amendments. This Agreement may only be amended by an
instrument in writing executed by Buyer and Seller.
15.2 Waivers. The observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party entitled to enforce such term, but
such waiver shall be effective only if it is in a writing signed by the party
entitled to enforce such term and against which such waiver is to be asserted.
Unless otherwise expressly provided in this Agreement, no delay or omission on
the part of any party in exercising any right or privilege under this Agreement
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right or privilege under this Agreement operate as a waiver of any other
right or privilege under this Agreement nor shall any single or partial exercise
of any right or privilege preclude any other or further exercise thereof or the
exercise of any other right or privilege under this Agreement.
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15.3 Notices. Any notices or other communications required
or permitted hereunder shall be in writing and shall be sufficiently given (and
shall be deemed to have been duly given upon receipt) if sent by overnight mail,
registered mail or certified mail, postage prepaid, or by hand, to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) If to Seller, to:
Insilco Corporation
425 Metro Place North
Fifth Floor
Dublin, Ohio 43017
Attn: Chief Executive Officer
With a copy (which shall not constitute effective notice) to:
Andrew M. Baker
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
(b) If to TPC, to:
Taylor Publishing Company
1550 W. Mockingbird Lane
Dallas, Texas 75235
Attn: President
(b) If to Buyer to:
c/o Castle Harlan Partners III, L.P.
150 East 58th Street
New York, New York 10155
Attention: David B. Pittaway
With a copy (which shall not constitute effective notice) to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Marc Weingarten
15.4 Successors and Assigns; Parties in Interest. This
Agreement shall be binding upon and shall inure solely to the benefit of the
parties hereto and their respective successors, legal representatives and
permitted assigns. Neither this Agreement nor any rights or obligations
hereunder may be assigned without the written consent of the other parties
except that Buyer may assign any or all of its rights, interest and obligations
hereunder to any of its
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Affiliates and/or its financing sources (provided that no such assignment shall
discharge Buyer from any such obligations). Nothing in this Agreement, express
or implied, is intended to or shall confer upon any Person, other than the
parties hereto and their respective successors, legal representatives and
permitted assigns, any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement, and no Person shall be deemed a third
party beneficiary under or by reason of this Agreement.
15.5 Severability. If any provision of this Agreement or
the application of any such provision to any Person or circumstance, shall be
declared judicially to be invalid, unenforceable or void, such decision shall
not have the effect of invalidating or voiding the remainder of this Agreement,
it being the intent and agreement of the parties that this Agreement shall be
deemed amended by modifying such provision to the extent necessary to render it
valid, legal and enforceable while preserving its intent or, if such
modification is not possible, by substituting therefor another provision that is
valid, legal and enforceable and that achieves the same objective.
15.6 Entire Agreement. This Agreement (including the
exhibits and Schedules hereto, and the documents and instruments executed and
delivered in connection herewith) constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, whether written or oral, among
the parties or any of them with respect to the subject matter hereof, and there
are no representations, understandings or agreements relating to the subject
matter hereof that are not fully expressed in this Agreement and the documents
and instruments executed and delivered in connection herewith; provided,
however, that the Buyer Confidentiality Agreement shall remain in full force and
effect according to its terms and shall survive and remain in full force and
effect in the event this Agreement is terminated. All exhibits and Schedules
attached to this Agreement are expressly made a part of, and incorporated by
reference into, this Agreement.
15.7 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to any choice-of-law rules that may require the application of the
laws of another jurisdiction.
15.8 Remedies. Each of the parties hereto acknowledges and
agrees that (i) the provisions of this Agreement are reasonable and necessary to
protect the proper and legitimate interests of the other parties hereto, and
(ii) the other parties hereto would be irreparably damaged in the event any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties hereto shall be entitled to preliminary and permanent injunctive relief
to prevent breaches of the provisions of this Agreement by other parties hereto
without the necessity of proving actual damages or of posting any bond, and to
enforce specifically the terms and provisions hereof and thereof, which rights
shall be cumulative and in addition to any other remedy to which the parties
hereto may be entitled hereunder or at law or equity.
15.9 Arbitration. Except as set forth in Section 14.6 of
this Agreement, Seller, TPC and Buyer agree that all disputes, controversies or
claims that may arise out of the transactions contemplated by this Agreement, or
the breach, termination or invalidity thereof, shall be submitted to, and
determined by, binding arbitration. Such arbitration shall be conducted
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pursuant to the Commercial Arbitration Rules (the "Rules") then in effect of the
American Arbitration Association, except to the extent such Rules are
inconsistent with this Section 15.9. If the amount in controversy in the
arbitration exceeds $100,000, exclusive of interest, attorneys' fees and costs,
the arbitration shall be conducted by a panel of three (3) neutral arbitrators.
Otherwise, the arbitration shall be conducted by a single neutral arbitrator.
The arbitrator(s) shall be selected pursuant to the Rules. Exclusive venue for
such arbitration shall be in Wilmington, Delaware. The arbitrator(s) shall apply
the internal laws of the State of Delaware (without regard to conflict of law
rules) in determining the substance of the dispute, controversy or claim and
shall decide the same in accordance with the applicable usages and terms of
trade. Evidentiary questions shall be governed by the Federal Rules of Evidence.
The arbitrator(s)' award shall be in writing and shall set forth the findings
and conclusions upon which the arbitrator(s) based the award. The prevailing
party in any such arbitration shall be entitled to recover its reasonable
attorneys' fees, costs and expenses incurred in connection with the arbitration.
Any award pursuant to such arbitration shall be final and binding upon the
parties hereto, and judgment on the award may be entered in any federal or state
court sitting or located in the State of Ohio or in any other court having
jurisdiction. The provisions of this Section 15.9 shall survive the termination
of this Agreement. A party hereto may seek and obtain from a court of competent
jurisdiction a temporary restraining order, temporary injunction or other
temporary emergency relief without first having to submit such dispute to
arbitration.
15.10 Expenses. Seller and Buyer shall each bear its own
expenses (including, without limitation, 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 it being understood that if the Closing is
consummated, Seller shall bear any transaction expenses incurred by the Company
(except any costs or expenses specifically associated with the audit of the
Company conducted for the purpose of the transactions contemplated by this
Agreement which under any circumstances are the obligation of Buyer) and Buyer
may cause the Company (but not Seller) to bear the transaction costs incurred by
Buyer. Notwithstanding the foregoing, Buyer will pay all filing fees required by
the HSR Act.
15.11 Release of Information; Confidentiality. The parties
shall cooperate with each other in releasing information concerning this
Agreement and the transactions contemplated hereby. No press releases or other
public announcements concerning the transactions contemplated by this Agreement
shall be made by any party without prior consultation with, and agreement of,
the other parties, except for any legally required communication by any party
and then only with prior consultation and as much advance notice as is
practicable under the circumstances requiring any announcement, together with
copies of all drafts of the proposed text. The provisions of the Buyer
Confidentiality Agreement shall remain in full force and effect.
15.12 Certain Construction Rules. The article and section
headings and the table of contents contained in this Agreement are for
convenience of reference only and shall in no way define, limit, extend or
describe the scope or intent of any provisions of this Agreement. Whenever the
context may require, any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns, pronouns and verbs shall include the plural and vice versa. In addition,
as used in this Agreement, unless
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otherwise provided to the contrary, (a) all references to days, months or years
shall be deemed references to calendar days, months or years and (b) any
reference to a "Section," "Article," or "Schedule" shall be deemed to refer to a
section or article of this Agreement or an exhibit or schedule attached to this
Agreement. The words "hereof", "herein", and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Unless otherwise specifically
provided for herein, the term "or" shall not be deemed to be exclusive.
15.13 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original and all of
which taken together shall constitute one instrument binding on all the parties,
notwithstanding that all the parties are not signatories to the original or the
same counterpart.
15.14 Survival. Except as otherwise set forth in this
Agreement, the representations and warranties made in this Agreement or in any
agreement, certificate or other document executed in connection herewith and the
covenants and agreements contained herein to be performed or complied with prior
to the Closing shall not survive the Closing.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first above written.
SELLER:
Insilco Corporation, a Delaware corporation
By: /s/ David A. Kauer
-----------------------
Name: David A. Kauer
-----------------
Title: President
----------------
TPC:
Taylor Publishing Company, a
Delaware corporation
By: /s/ Michael R. Elia
-----------------------
Name: Michael R. Elia
-----------------
Title: Vice President
-----------------
BUYER:
TP Acquisition Corp., a Delaware corporation
By: /s/ David B. Pittaway
-----------------------
Name: David B. Pittaway
-----------------
Title: President
----------------
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<PAGE>
EXHIBIT 99(A)
-------------
Excellence in Telecommunications, Electronics, Automotive
================================================================================
NEWS RELEASE
================================================================================
FOR IMMEDIATE RELEASE
INVESTORS: MICHAEL R. ELIA MEDIA: MELODYE DEMASTUS
SR. VICE PRESIDENT & CFO MELROSE CONSULTING
(614) 791-3117 (614) 771-0860
INSILCO HOLDING CO. COMPLETES SALE OF SPECIALTY PUBLISHING UNIT
COLUMBUS, OHIO, FEBRUARY 11, 2000 - INSILCO HOLDING CO. (OTC BULLETIN
BOARD: INSL) reported today that it has completed the previously announced sale
of Taylor Publishing, its Dallas-based specialty publishing business unit, to a
newly formed company owned by Castle Harlan Partners III, L.P. for proceeds of
$93.48 million before adjustments for working capital and transaction-related
costs.
David A. Kauer, Insilco President and CEO, reiterated, "Taylor is a
fine business with solid prospects, however it does not fit with our long-term
strategy of pursuing growth in our core technology and heat exchanger
businesses." Kauer concluded, "We have benefited from our long association with
Taylor Publishing and wish them much success in the future."
The statements made in this press release that are not historical facts
are forward looking statements, including statements with respect the Company's
ability reduce its debt and invest in its core businesses and complete
acquisitions, and as such, are subject to certain risks and uncertainties. It is
important to note that results could differ materially from those projected in
such forward-looking statements. Factors which could cause results to differ
materially include, but are not limited to: the inability to obtain bank
approval for potential acquisitions, changes in demand for the Company's
products, changes in market trends, general competitive pressures from existing
and new competitors, adverse changes in operating performance, and adverse
economic conditions. Further information concerning factors that could cause
actual results to differ materially from those in the forward-looking statements
are contained from time to time in the Company's SEC filings, including but not
limited to the Company's report on Form 10-K for the year ended December 31,
1998 and reports on 10-Q for the quarters ended March 31, June 30 and September
30, 1999. Copies of these filings may be obtained by contacting the Company or
the SEC.
Insilco Holding Co., based in suburban Columbus, Ohio, is a diversified
manufacturer of industrial components. The Company's business units serve the
telecommunications, electronics, automotive and other industrial markets. It had
revenues in 1999 of $580 million.
Investor Relations Contact: Michael Elia (614) 792-0468 or write to Insilco
Holding Co., Investor Relations, 425 Metro Place North, Box 7196, Dublin, OH
43017 or call Melodye Demastus, Melrose Consulting (614) 771-0860. You may also
visit our web site at http://www.investor-access.com/insilco.html.
# # #
<PAGE>
UNITED STATES
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
DATE OF REPORT: FEBRUARY 17, 2000
INSILCO HOLDING CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-24813 06-1158291
-------- ------- ----------
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NO.) (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
425 Metro Place North
Fifth Floor
Dublin, Ohio 43017
(614) 792-0468
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE OF REGISTRANTS
PRINCIPAL EXECUTIVE OFFICES)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 17, 2000, Insilco Holding Co. through its wholly-owned
subsidiary Insilco Corporation and two newly created wholly-owned
subsidiaries of Insilco Corporation, Insilco Technology (Canada)
Corporation and 9087-3498 Quebec Inc., executed a definitive
agreement to purchase 9011-7243 Quebec Inc., known as T.A.T.
Technologies. 9087-3498 Quebec Inc. purchased 9011-7243 Quebec Inc.
The surviving entity, T.A.T. Technologies, is a wholly-owned
subsidiary of Insilco Technology (Canada) Corporation and is a
Montreal-based provider of cable and wire assemblies. The gross
purchase price paid by Insilco Holding Company was $91.2 million and
is subject to certain post closing adjustments. The entire purchase
price was financed with borrowings under Insilco Corporation's Term
Loan Facility.
This transaction was accomplished through arms length negotiations
between Insilco Corporation management and T.A.T management.
The Company's press release issued February 21, 2000 is attached as
an exhibit and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
-----------------------------------------
Immediately following the signature page of this Form 8-K are the
audited Balance Sheets of 9011-7243 Quebec Inc. for the period ended
October 31, 1999 and 1998, and the related Statements of Income and
Retained Earnings and the Statements of Cash Flows for the years
ended October 31, 1999 and 1998. These statements are denominated in
Canadian Dollars.
(b) Pro Forma financial Information
-------------------------------
Immediately following the 9011-7243 Quebec Inc. Financial Statements,
are the unaudited pro forma condensed consolidated financial
statements as follows:
Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1999 Page F-1
Pro Forma Condensed Consolidated Statement
Of Operations
Nine months ended September 30, 1999 Page F-2
Year ended December 31, 1998 Page F-3
The pro forma unaudited condensed balance sheet as of September 30,
1999 presents the estimated impact of the purchase of T.A.T.
Technologies, as discussed in Item 2, on the Company's consolidated
financial position assuming the purchase had occurred at September
30, 1999. The pro forma unaudited condensed consolidated statements
of operations for the nine months ended September 30, 1999 and the
year ended December 31, 1998 present the estimated impact of the
purchase of T.A.T. Technologies on the Company's historical
consolidated statements of operations as if such purchase had
occurred at the beginning of the applicable period. The nonrecurring
2
<PAGE>
transactions related directly to the purchase are excluded from the
pro forma statements of operations. The significant assumptions
utilized for the pro forma financial statements include: (i) the
purchase price increased the outstanding debt described above; (ii)
the interest rates for the outstanding debt are based upon the
weighted average rates during the applicable period; (iii) income tax
expense (benefit) attributable to the pro forma transactions is
provided at the statutory tax rate; (iv) the September 30, 1999
Balance Sheet is translated using the September 30, 1999 translation
rate; (v) the nine months ended September 30, 1999 Statement of
Operations is translated using the average translation rate for the
period January 1, 1999 to September 30, 1999 and (vi) the year ended
December 31, 1998 Statement of Operations is translated using the
average translation rate for the period January 1, 1998 to December
31, 1998.
Also reflected in the pro forma financial statements is the impact of
the sale of Taylor Publishing Company as disclosed in the Insilco
Holding Co. 8-K issued February 25, 2000. The significant assumptions
utilized for the pro forma financial statements reflecting the sale
include: (i) the net proceeds will be utilized to reduce the
outstanding debt described above; (ii) the interest rates for the
outstanding debt are based upon the weighted average rates during the
applicable period and (iii) income tax expense (benefit) attributable
to the pro forma transactions is provided at the statutory tax rate.
The unaudited pro forma condensed consolidated financial statements
have been prepared by the Company based upon assumptions deemed
proper. The unaudited pro forma condensed consolidated financial
statements presented herein are shown for illustrative purposes only
and are not necessarily indicative of the future financial position
or future results of operations of the Company or of the financial
position or results of operations that would have actually occurred
had the transaction been in effect as of the date or for the periods
presented.
The unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the historical financial
statements and related notes of the Company.
(c) Exhibits.
EXHIBIT NO. DESCRIPTION
2 (a) Purchase agreement dated December 22, 1999 by and
among Insilco Corporation, David Mesri and Nahid Salim.
23 (a) Consent of Wasserman Stotland Bratt Grossbaum.
99 (a) Press release of the Company issued February 21, 2000.
3
<PAGE>
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 thereunto duly authorized.
INSILCO HOLDING CO.
-------------------------------------
Registrant
Date: February 17, 2000 By: /s/ MICHAEL R. ELIA
-------------------------------------
Michael R. Elia
Senior Vice President and Chief Financial
Officer, Treasurer and Secretary
4
<PAGE>
9011-7243 QUEBEC INC.
FINANCIAL STATEMENTS
AT OCTOBER 31, 1999 AND 1998
<PAGE>
AUDITORS' REPORT
To the Shareholder of,
9011-7243 QUEBEC INC.
We have audited the balance sheets of 9011-7243 QUEBEC INC. as at
October 31, 1999 and October 31, 1998 and the statements of income and retained
earnings, and cash flows for the years then ended. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of the corporation as at October 31,
1999 and October 31, 1998 and the results of its operations and its cash flows
for the years then ended in accordance with generally accepted accounting
principles.
/s/ Wasserman Stotland Bratt Grossbaum
--------------------------------------
CHARTERED ACCOUNTANTS.
Montreal, Quebec.
November 12, 1999.
<PAGE>
9011-7243 QUEBEC INC.
(INCORPORATED UNDER PART 1A OF THE QUEBEC COMPANIES ACT)
BALANCE SHEETS
AT OCTOBER 31
1999 1998
---------- ----------
$ $
ASSETS
CURRENT
Cash and cash equivalents 11,583,612 1,827,849
Trade accounts receivable 18,703,464 6,058,133
Inventories (Note 3) 8,655,581 3,549,477
Prepaid expenses 43,113 12,751
---------- ----------
38,985,770 11,448,210
PROPERTY, PLANT AND EQUIPMENT, NET (Note 4) 2,119,122 1,449,509
---------- ----------
41,104,892 12,897,719
========== ==========
LIABILITIES
CURRENT
Accounts payable 7,290,861 1,760,840
Accrued liabilities 158,678 62,487
Cheques in transit 1,574,679 1,498,381
Sales taxes payable 750,317 301,970
Accrued compensation 16,143,139 2,170,380
Income taxes payable 2,187,118 1,050,383
---------- ----------
28,104,792 6,844,441
---------- ----------
SHAREHOLDER'S EQUITY
CAPITAL STOCK (Note 5) 100 100
RETAINED EARNINGS 13,000,000 6,053,178
---------- ----------
13,000,100 6,053,278
---------- ----------
41,104,892 12,897,719
========== ==========
APPROVED ON BEHALF OF THE BOARD
/s/ Nahid Salim Director
- ---------------------------------
See accompanying notes to financial statements.
<PAGE>
9011-7243 QUEBEC INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED OCTOBER 31
1999 1998
----------- -----------
$ $
SALES 69,135,420 29,672,392
----------- -----------
COST OF GOODS SOLD
Inventories - beginning of year 3,549,477 3,035,801
Material costs 40,902,656 15,498,851
Direct labour and fringe benefits 8,267,114 3,871,113
----------- -----------
52,719,247 22,405,765
Inventories - end of year 8,655,581 3,549,477
----------- -----------
44,063,666 18,856,288
----------- -----------
GROSS MARGIN 25,071,754 10,816,104
----------- -----------
EXPENSES
Selling and administrative (Schedule 1) 14,548,576 5,354,194
Depreciation 149,026 117,707
----------- -----------
14,697,602 5,471,901
----------- -----------
INCOME FROM OPERATIONS BEFORE INTEREST
INCOME AND INCOME TAXES 10,374,152 5,344,203
Interest income 242,710 50,225
----------- -----------
INCOME BEFORE INCOME TAXES 10,616,862 5,394,428
Provision for income taxes 3,668,552 1,789,199
----------- -----------
NET INCOME 6,948,310 3,605,229
RETAINED EARNINGS - BEGINNING OF YEAR 6,053,178 2,447,949
----------- -----------
13,001,488 6,053,178
Less: Dividends (1,488) --
----------- -----------
RETAINED EARNINGS - END OF YEAR 13,000,000 6,053,178
=========== ===========
See accompanying notes to financial statements.
<PAGE>
9011-7243 QUEBEC INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31
<TABLE>
<CAPTION>
1999 1998
----------- -----------
$ $
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
<S> <C> <C>
Net income 6,948,310 3,605,229
Item not affecting the cash position:
Depreciation 149,026 117,707
Changes in non-cash working capital:
Increase in accounts receivable (12,645,331) (2,058,651)
Increase in inventories (5,106,104) (513,676)
Increase in prepaid expenses (30,362) (3,814)
Increase (decrease) in accounts payable 5,530,021 (970,981)
liabilities
Increase in accrued liabilities 96,191 42,490
Increase in cheques in transit 76,298 1,498,381
Increase in sales taxes payable 448,347 97,819
Increase (decrease) in accrued compensation 13,972,759 (1,086,241)
Increase in income taxes payable 1,136,735 630,822
----------- -----------
Cash flows from operating activities 10,575,890 1,359,085
CASH FLOWS USED IN INVESTING ACTIVITY
Acquisition of property, plant and equipment (Note 6) (818,639) (492,087)
CASH FLOWS USED IN FINANCING ACTIVITY
Dividends (1,488) --
----------- -----------
NET INCREASE IN CASH FLOWS 9,755,763 866,998
Cash and cash equivalents - beginning of year 1,827,849 960,851
----------- -----------
CASH AND CASH EQUIVALENTS - END OF YEAR
(Note 6) 11,583,612 1,827,849
=========== ===========
</TABLE>
See accompanying notes to financial statements. SCHEDULE 1
<PAGE>
9011-7243 QUEBEC INC.
SCHEDULE OF SELLING AND ADMINISTRATIVE EXPENSES
FOR THE YEARS ENDED OCTOBER 31
1999 1998
---------- ----------
$ $
Rent and occupancy costs 39,091 206,388
Rental of equipment 7,973 10,795
Light, heat and power 58,084 52,139
Entertainment and promotion 50,591 50,714
Travel, auto and delivery 58,878 49,858
Administrative and selling salaries 13,208,692 4,245,483
Wage levies 822,463 555,769
Taxes and licenses 119,831 82,577
Insurance 17,920 18,565
Professional fees 54,662 25,032
Office and general 66,254 25,249
Telephone 15,343 15,222
Donations 2,519 10,100
Interest and bank charges 26,275 6,303
---------- ----------
14,548,576 5,354,194
========== ==========
See accompanying notes to financial statements.
<PAGE>
9011-7243 QUEBEC INC.
NOTES TO FINANCIAL STATEMENTS
AT OCTOBER 31, 1999 AND 1998
1. NATURE OF BUSINESS
The company operates under the name, T.A.T. Technologies and manufacturers
and assembles cables and connectivity products for the telecommunications
industry both in Canada and United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS -
Cash equivalents include term deposits and highly liquid investments with
original maturities of three months of less. Cash equivalents are carried
at cost, which approximates fair value.
INVENTORIES -
Raw materials are valued at lower of cost and replacement cost, the cost
being determined using the first-in, first-out method.
Work-in-process includes material cost, direct labour and an allocation of
manufacturing overhead.
Finished goods are valued at lower of cost and net realizable value.
PROPERTY, PLANT AND EQUIPMENT -
Property, plant and equipment are recorded at cost and depreciation has
been provided as follows:
ON THE DECLINING BALANCE METHOD -
Building 4%
Furniture and fixtures 20%
Equipment 30%
Computer hardware 30%
Computer software 100%
Rolling stock 30%
<PAGE>
9011-7243 QUEBEC INC.
NOTES TO FINANCIAL STATEMENTS
AT OCTOBER 31, 1999 AND 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION -
Accounts in foreign currency have been translated as follows:
Monetary items - at exchange rates in effect at the balance
sheet date;
Non-monetary items - at exchange rates in effect on the dates of
the transactions;
Revenue and expenses - at average exchange rates prevailing during
the period, except for inventories which are
translated at rates prevailing when the
related inventories were acquired.
Gains and losses arising from foreign currency translation are included in
income.
INCOME TAXES -
There are no material differences between income tax expense computed by
applying the statutory federal and provincial tax rates and income tax
expense in the financial statements.
USE OF ESTIMATES -
In preparing the corporation's financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts
of revenues and expenses during the period. Actual results may differ from
these estimates.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF -
Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceed the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
<PAGE>
9011-7243 QUEBEC INC.
NOTES TO FINANCIAL STATEMENTS
AT OCTOBER 31, 1999 AND 1998
3. INVENTORIES
Inventories consists of the following at October 31
1999 1998
----------- -----------
$ $
Raw materials 5,930,280 2,579,088
Work-in-process 162,473 -
Finished goods 2,562,828 970,389
----------- -----------
8,655,581 3,549,477
=========== ===========
4. PROPERTY, PLANT AND EQUIPMENT
1 9 9 9
-----------------------------------------------
Net
Accumulated Carrying
Cost Amortization Amount
--------- --------- ---------
$ $ $
Land 435,500 -- 435,500
Building 1,450,470 98,193 1,352,277
Furniture and fixtures 44,634 17,076 27,558
Equipment 375,444 143,683 231,761
Computer hardware 106,932 42,061 64,871
Computer software 12,375 9,562 2,813
Rolling stock 21,274 16,932 4,342
--------- --------- ---------
2,446,629 327,507 2,119,122
========= ========= =========
<PAGE>
9011-7243 QUEBEC INC.
NOTES TO FINANCIAL STATEMENTS
AT OCTOBER 31, 1999 AND 1998
4. PROPERTY, PLANT AND EQUIPMENT (CONT'D.)
1 9 9 8
-----------------------------------------------
Net
Accumulated Carrying
Cost Amortization Amount
--------- --------- ---------
$ $ $
Land 170,000 -- 170,000
Building 1,106,500 52,538 1,053,962
Furniture and fixtures 40,708 6,106 34,602
Equipment 213,237 79,116 134,121
Computer hardware 69,521 22,275 47,246
Computer software 6,750 3,375 3,375
Rolling stock 21,274 15,071 6,203
Leasehold improvements 21,737 21,737 --
--------- --------- ---------
1,649,727 200,218 1,449,509
========= ========= =========
5. CAPITAL STOCK
AUTHORIZED: Unlimited number of shares of no par value classified as
follows:
Class "A" shares, voting, participating
Class "B" shares, non-voting, participating
Class "C' shares, voting, non-participating, redeemable at
the amount paid thereon
Class "D" shares, non-voting, non-participating, entitled to
a fixed non-cumulative dividend of 1% per month, convertible
to Class "A" shares, redeemable at the amount paid thereon
<PAGE>
9011-7243 QUEBEC INC.
NOTES TO FINANCIAL STATEMENTS
AT OCTOBER 31, 1999 AND 1998
5. CAPITAL STOCK (CONT'D.)
Class "F" shares, non-voting, non-participating, entitled to
a fixed non-cumulative dividend of $1.00 per annum,
redeemable and retractable at the amount paid thereon
Class "G" shares, non-voting, non-participating, entitled to
a fixed non-cumulative dividend of $1.00 per annum,
redeemable at the amount paid thereon
ISSUED AND FULLY PAID:
1999 1998
------- -------
$ $
100 Class "A" shares 100 100
======= =======
6. STATEMENTS OF CASH FLOWS
The company has adopted the new recommendations of Section 1540 of the
Canadian Institute of Chartered Accountants Handbook with respect to
the presentation of information about a company's cash flows. The
change has been applied retroactively.
Additional flow information is as follows:
(a) For the years ended October 31, 1999 and October 31, 1998,
property, plant and equipment with an aggregate cost of $818,639
and $492,087 respectively were acquired by means of a cash
payment.
<PAGE>
9011-7243 QUEBEC INC.
NOTES TO FINANCIAL STATEMENTS
AT OCTOBER 31, 1999 AND 1998
6. STATEMENTS OF CASH FLOWS (CONT'D.)
(b) Cash and Cash Equivalents -
Cash and cash equivalents consist of cash on hand, balances with
banks and term deposits. Cash and cash equivalents included in the
cash flows statements comprise of the following balance sheet
amounts:
1999 1998
---------- ----------
$ $
Cash on hand and balances with banks 83,612 1,827,849
Term deposits 11,500,000 --
---------- ----------
11,583,612 1,827,849
========== ==========
(c) Income Taxes Paid -
1999 1998
---------- ----------
$ $
Income taxes paid 3,668,552 1,789,199
========== ==========
<PAGE>
9011-7243 QUEBEC INC.
NOTES TO FINANCIAL STATEMENTS
AT OCTOBER 31, 1999 AND 1998
7. FINANCIAL INSTRUMENTS
(a) FAIR VALUE -
Cash and cash equivalents, accounts receivable, cheques in
transit, accounts payable and accrued liabilities, and sales tax
payable and accrued compensation are all short-term in nature and
as such, their carrying values approximate fair values.
(b) CREDIT RISK -
The corporation provides credit to its clients in the normal
course of its operations. The corporation reviews a new customer's
credit history before extending credit and conducts regular
reviews of its existing customers' credit performance. It
maintains provisions for contingent credit losses which once they
materialize are consistent with management's forecasts.
(c) CURRENCY RISK -
The company realized approximately 20% of its sales and a
significant portion of its purchases in foreign currency.
Consequently, some assets, revenues and expenses are exposed to
foreign exchange fluctuations. As at October 31, 1999 and 1998 all
accounts are translated into Canadian dollars.
8. ECONOMIC DEPENDENCE
During the year, the corporation had sales of approximately $57,221,000
(1998 - $19,575,000), representing 82% (1998 - 66%), to one customer.
<PAGE>
9011-7243 QUEBEC INC.
NOTES TO FINANCIAL STATEMENTS
AT OCTOBER 31, 1999 AND 1998
9. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") in Canada. The principles adopted
in these financial statements conform in all material respects to those
generally accepted in the United States and the rules and regulations
promulgated by the Securities and Exchange Commission ("SEC").
10. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date.
The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems
failure, which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the Year
2000 Issue affecting the entity, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
<PAGE>
1.
9011-7243 QUEBEC INC.
SUPPLEMENTARY INFORMATION
AT OCTOBER 31
1999 1998
----------------- -----------------
$ $
1. ACCOUNTS PAYABLE
Trade - CND. 3,137,855 990,175
Trade - USD. 4,153,006 770,665
----------------- -----------------
7,290,861 1,760,840
CSST 18,684 -
Purchase accrual 19,109 16,359
Professional fees 33,531 6,000
Tax on capital 83,200 40,000
Other 4,154 128
----------------- -----------------
7,449,539 1,823,327
================= =================
<PAGE>
INSILCO HOLDING CO. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 1999
(In thousands)
<TABLE>
<CAPTION>
a)
Taylor
Publishing
Company
Sale Taylor T.A.T. Purchase T.A.T.
Historical Adjustments Pro Forma Technologies Adjustments Pro Forma
--------- --------- --------- --------- --------- ---------
Assets
Current assets
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 14,735 2 14,737 7,895 -- 22,632
Trade receivables, net 95,188 (18,849) 76,339 12,748 -- 89,087
Other receivables 11,570 (4,155) 7,415 -- -- 7,415
Inventories 64,381 (8,577) 55,804 5,900 -- 61,704
Deferred tax asset 1,965 (1,965) -- -- -- --
Prepaid expenses and other 4,563 (1,638) 2,925 29 -- 2,954
--------- --------- --------- --------- --------- ---------
Total current assets 192,402 (35,182) 157,220 26,572 -- 183,792
Property, plant and equipment 125,048 (11,659) 113,389 1,444 -- 114,833
Deferred tax asset 8,889 (6,647) 2,242 -- -- 2,242
Other assets 49,485 (1,329) 48,156 -- 82,308 b) 130,464
--------- --------- --------- --------- --------- ---------
Total assets $ 375,824 (54,817) 321,007 28,016 82,308 431,331
========= ========= ========= ========= ========= =========
Liabilities and Stockholders' (Deficit)
Current liabilities
Current portion of long-term debt $ 1,264 -- 1,264 -- -- 1,264
Accounts payable 38,581 (2,912) 35,669 6,043 -- 41,712
Accrued expenses and other 55,113 (21,925) 33,188 13,113 -- 46,301
--------- --------- --------- --------- --------- ---------
Total current liabilities 94,958 (24,837) 70,121 19,156 -- 89,277
Long-term debt, excluding current portion 435,438 (89,113) 346,325 -- 91,168 c) 437,493
Other long-term obligations, excluding current portion 46,902 (720) 46,182 -- -- 46,182
Stockholders' (deficit)
Minority Interest 100 -- 100 -- -- 100
PIK Preferred Stock 38,525 -- 38,525 -- -- 38,525
Stockholders' (deficit) (240,099) 59,853 (180,246) 8,860 (8,860)d) (180,246)
--------- --------- --------- --------- --------- ---------
Total liabilities and stockholders' (deficit) $ 375,824 (54,817) 321,007 28,016 82,308 431,331
========= ========= ========= ========= ========= =========
</TABLE>
a) To reflect removal of Taylor Publishing Company's September 30, 1999 balance
sheet and reflect paydown of debt with the net proceeds of $89.1 million.
b) To reflect the excess of acquisition cost over the net assets of the
acquired company.
c) To reflect borrowings from Insilco Corporation's Credit Facility to finance
the acquisition.
d) To reflect the write off of equity accounts of the acquired company.
F-1
<PAGE>
INSILCO HOLDING CO. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Nine Months Ended September 30, 1999
(In thousands, except per share data)
<TABLE>
<CAPTION>
Net Proceeds Net Purchase
Taylor and Interest Taylor T.A.T. and Interest T.A.T
Historical Operations Adjustments Pro Forma Operations Adjustments Pro Forma
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 449,590 (92,047) -- 357,543 34,804 -- 392,347
Cost of goods sold 327,216 (50,550) -- 276,666 22,183 -- 298,849
Depreciation and amortization 17,507 (3,003) -- 14,504 75 3,086 d) 17,665
Selling, general and administrative 75,515 (29,648) (175)a) 45,692 7,324 -- 53,016
Restructuring Charge 6,532 -- -- 6,532 -- -- 6,532
--------- --------- --------- --------- --------- --------- ---------
Operating income 22,820 (8,846) 175 14,149 5,222 (3,086) 16,285
Other Income (expense): --
Interest expense (35,702) 505 5,352 b) (29,845) -- (5,001)e) (34,846)
Interest income 347 -- -- 347 122 -- 469
Equity in net income of Thermalex 2,596 -- -- 2,596 -- -- 2,596
Other income, net 10,142 297 -- 10,439 -- -- 10,439
--------- --------- --------- --------- --------- --------- ---------
Income from continuing
operations before income taxes 203 (8,044) 5,527 (2,314) 5,344 (8,087) (5,057)
Income tax (expense) benefit 1,510 2,896 c) (1,990)c) 2,416 (1,847) 1,800 f) 2,369
--------- --------- --------- --------- --------- --------- ---------
Net income 1,713 (5,148) 3,537 102 3,497 (6,287) (2,688)
Preferred stock dividend (4,431) -- -- (4,431) -- -- (4,431)
--------- --------- --------- --------- --------- --------- ---------
Net loss available to common $ (2,718) (5,148) 3,537 (4,329) 3,497 (6,287) (7,119)
========= ========= ========= ========= ========= ========= =========
Basic loss available per common share:
Loss per share available to common $ (1.87) (2.98) (4.89)
Basic shares 1,455 1,455 1,455
Diluted loss available per common share:
Loss per share available to common $ (1.87) (2.98) (4.89)
Diluted shares 1,455 1,455 1,455
a) To remove legal fees related to the Jostens antitrust lawsuit.
b) To reflect decrease in interest expense resulting from the debt paydown on Insilco's credit facility from the proceeds of the
sale. Interest is calculated on the net proceeds of $89.1 million using an assumed interest rate of 8 percent. A change of 1/8
percent in the interest rate would result in a change in interest expense and net income of $83,619 and $53,517 before and
after taxes, respectively.
c) To reflect the tax effect of Taylor operations and the pro forma adjustments at a stautory rate, 34 percent for federal and 2
percent for state.
d) To reflect the increase in amortization due to the amortization of goodwill on a straight-line basis over 20 years.
e) To reflect increase in interest expense resulting from the borrowings under Insilco's credit facility to finance the
acquisition. Interest is calculated on the new debt of $91.1 million less the cash acquired of $7.9 million using an assumed
interest rate of 8 percent. A change of 1/8 percent in the interest rate would result in a change in interest expense and net
income of $78,140 and $50,010 before and after taxes, respectively.
f) To reflect the tax effect of the deductible pro forma adjustments at a stautory rate, 34 percent for federal and 2 percent for
state. The amortization of the goodwill is not tax deductible.
</TABLE>
F-2
<PAGE>
INSILCO HOLDING CO. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Net Proceeds Net Purchase
Taylor and Interest Taylor T.A.T. and Interest T.A.T
Historical Operations Adjustments Pro Forma Operations Adjustments Pro Forma
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 535,629 (101,325) -- 434,304 20,001 -- 454,305
Cost of goods sold 383,269 (61,167) -- 322,102 12,710 -- 334,812
Depreciation and amortization 20,159 (3,319) -- 16,840 80 4,115 d) 21,035
Selling, general and administrative 91,488 (33,296) (682)a) 57,510 3,609 -- 61,119
Merger Expenses 25,529 -- -- 25,529 -- -- 25,529
Severance and write-downs 2,542 -- -- 2,542 -- -- 2,542
--------- --------- --------- --------- --------- --------- ---------
Operating income 12,642 (3,543) 682 9,781 3,602 (4,115) 9,268
Other Income (expense):
Interest expense (32,894) 610 5,782 b) (26,502) -- (5,829)e) (32,331)
Interest income 979 -- -- 979 34 -- 1,013
Equity in net income of Thermalex 2,850 -- -- 2,850 -- -- 2,850
Other income, net 3,027 713 -- 3,740 -- -- 3,740
--------- --------- --------- --------- --------- --------- ---------
Income from continuing
operations before income taxes (13,396) (2,220) 6,464 (9,152) 3,636 (9,944) (15,460)
Income tax (expense) benefit 1,253 799 c) (2,327)c) (275) (1,206) 2,098 f) 617
--------- --------- --------- --------- --------- --------- ---------
Net loss (12,143) (1,421) 4,137 (9,427) 2,430 (7,846) (14,843)
Preferred stock dividend (2,044) -- -- (2,044) -- -- (2,044)
--------- --------- --------- --------- --------- --------- ---------
Net loss available to common $ (14,187) (1,421) 4,137 (11,471) 2,430 (7,846) (16,887)
========= ========= ========= ========= ========= ========= =========
Basic loss available per common share:
Loss per share available to common $ (4.49) (3.63) (5.34)
Basic shares 3,161 3,161 3,161
Diluted loss available per common share:
Loss per share available to common $ (4.49) (3.63) (5.34)
Diluted shares 3,161 3,161 3,161
a) To remove legal fees related to the Jostens antitrust lawsuit.
b) To reflect decrease in interest expense resulting from the debt paydown on Insilco's credit facility from the proceeds of the
sale. Interest is calculated on the weighted average proceeds of $82.6 million (adjusted for seasonal working capital
fluctuations) using a rate of 7 percent. A change of 1/8 percent in the interest rate would result in a change in interest
expense and net income of $103,241 and $66,074 before and after taxes, respectively.
c) To reflect the tax effect of Taylor operations and the pro forma adjustments at a stautory rate, 34 percent for federal and 2
percent for state.
d) To reflect the increase in amortization due to the amortization of goodwill on a straight-line basis over 20 years.
e) To reflect increase in interest expense resulting from the borrowings under Insilco's credit facility to finance the
acquisition. Interest is calculated on the new debt of $91.1 million less the cash acquired of $7.9 million using an assumed
interest rate of 7 percent. A change of 1/8 percent in the interest rate would result in a change in interest expense and net
income of $104,091 and $66,618 before and after taxes, respectively.
f) To reflect the tax effect of the deductible pro forma adjustments at a stautory rate, 34 percent for federal and 2 percent for
state. The amortization of the goodwill is not tax deductible.
</TABLE>
F-3
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2 (a) Purchase agreement dated December 22, 1999 by and
among Insilco Corporation, David Mesri and Nahid Salim.
23 (a) Consent of Wasserman Stotland Bratt Grossbaum.
99 (a) Press release of the Company issued February 21, 2000.
<PAGE>
EXHIBIT 2 (A)
THIS AGREEMENT OF PURCHASE AND SALE made on the 22 day of December, 1999
BETWEEN: NAHID SALIM, an executive domiciled and residing
at 4105 Jean-Brillant, Montreal, Quebec, H3T
1P2;
(hereinafter referred to as the "VENDOR")
AND: DAVID MESRI, an executive domiciled and residing
at 4105 Jean-Brillant, Montreal, Quebec, H3T
1P2;
(hereinafter referred to as "DAVID")
AND: INSILCO CORPORATION, a corporation incorporated
under the laws of Delaware, having its head
office at Columbus, Ohio, herein acting and
represented by Michael R. Elia, its duly
authorized representative;
(hereinafter referred to as the "PURCHASER")
THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants
and agreements herein set out and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
covenant and agree as follows:
1. DEFINED TERMS
-------------
Where used herein, except where the context otherwise requires, the
following terms shall have the following meanings respectively:
"BREAK-UP FEE" has the meaning attributed to such term in Section 9.4.
"BUSINESS" means the business currently conducted by the Company as
described in Section 4.4.1.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day
on which the principal banks located in Montreal (Quebec) are not open
for business during normal banking hours.
"C$" mean the lawful money of Canada.
"CLOSING" means the consummation and completion of the sale and
purchase of the Purchased Shares as provided for herein.
<PAGE>
-2-
"CLOSING DATE" means 5:00PM February 17, 2000, or such other date
mutually agreed to by the parties, at the offices of Ogilvy Renault
1981 McGill College Avenue, Suite 1100, Montreal, Quebec, Canada H3A
3C1.
"CLOSING STATEMENTS" has the meaning ascribed thereto in Section 3.3.
"COMPANY" means 9011-7243 Quebec Inc. also doing business as T.A.T.
Technology and T.A.T. Technologie.
"COMPUTER EQUIPMENT" means the computer equipment and embedded systems
currently owned or used by the Company, including, without limitation,
all ancillary and communication equipment connected to it.
"COMPUTER SOFTWARE" means all computer software owned or used by the
Company including, without limitation, all operating systems software
comprised in the Computer Equipment and all applications software and
all other software owned or used by the Company or which the Company is
entitled to have or to use by virtue of its interest in the Computer
Equipment or in software owned or used by it.
"CONFIDENTIAL INFORMATION" means all information, belonging or relating
to the Company which is not generally known to the public, including
without limitation business or trade secrets, price lists, methods,
formulas, know-how, customer lists, manufacturing processes, products
costs, marketing plans, research and development and financial
information.
"DISCLOSURE SCHEDULE" means the schedule so entitled which is appended
to this Agreement as Schedule A and which forms an integral part of
this Agreement.
"EBITDA" means, for any applicable period, the sum of
1. Earnings before Income Taxes ("EBIT") as determined in accordance
with United States Generally Accepted Accounting Principals
(GAAP), plus
2. The amount deducted in determining EBIT representing interest
expense, minus
3. The amount deducted in determining EBIT representing interest
income, plus
4. The amount deducted in determining EBIT representing depreciation
and amortization, plus
5. The amount deducted in determining EBIT representing bonuses for
Vendor or David for the twelve month period ending October 31,
1999 or pursuant to the Employment Agreement, plus
6. The amount deducted in determining EBIT representing reasonable
non-arm's length or related party charges from the Purchaser or
its affiliates, including, without limitation, administrative
fees, arrangements fees, consulting fees or other reasonable
charges, except to the extent such charges benefit the Company
<PAGE>
-3-
including, without limitation, that portion of corporate wide
insurance, annual audit fees, and other similar fees and expenses
that relate to the Company and are provided by the Purchaser.
"EMPLOYMENT AGREEMENT" has the meaning attributed to such term in
Section 7.
"FINAL DETERMINATION" means any judgment rendered by a court of
competent jurisdiction provided that all available rights of appeal
have failed or the delays to submit such judgment to appeal have
expired and any settlement entered into with respect to a claim by the
parties thereto.
"FINANCIAL STATEMENTS" means the financial statements of the Company
prepared in accordance with U.S. GAAP by Wasserman, Stotland, Bratt,
Grossbaum, Chartered Accountants, for the financial years ended October
31, 1998 and 1999, respectively, as reviewed and confirmed by the
auditors of the Purchaser.
"LAWS" means any federal, provincial or municipal law, by-law,
regulation, rule, policy, directive, protocol, order, decree or code
which applies to the Purchased Shares, the Business or the Company.
"LIEN" means any prior claim, hypothec, mortgage, pledge, lien, charge,
encumbrance, security interest, security granted under the BANK ACT
(Canada), ownership or title retention agreements, conditional sale
agreements, leasing, sale and lease back or any other agreement that in
substance secures payment or performance of an obligation or any
option, claim or right of another.
"LOSS" means any loss, liability, damage, cost or expense, including,
without limitation, reasonable legal fees on a solicitor-and-client
basis, disbursements, court and litigation costs, interest and
penalties.
"MATERIAL ADVERSE CHANGE" means any change, condition or event which,
when considered individually or together with other changes,
conditions, events or occurrences, has or could reasonably be expected
to have a material adverse effect on the Business, operations, results
of operations, assets, liabilities or financial condition of the
Company.
"PERSON" means an individual, partnership, joint venture, association,
corporation, legal person, trust, or a government or any department or
agency thereof or any other entity howsoever designated or constituted.
"PROPRIETARY INTANGIBLES" means all rights held by virtue of any
copyright, design, trade mark, trade name, trade secret, patent, logos,
computer software or other intellectual property or any application
therefor.
"PURCHASE PRICE" has the meaning ascribed hereto in Section 3.
"PURCHASED SHARES"has the meaning attributed to such term in Section 2.
<PAGE>
-4-
"SUBSIDIARY" of any Person means any corporation more than 50% of whose
shares of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors, managers
or trustees of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is owned or
controlled directly or indirectly by such Person or by any other
Subsidiary of such Person.
"TAXES" means all taxes, charges, fees, levies, imposts and other
assessments, including, without limitation, all income, sales, retail,
use, goods and services, value added, corporation, capital, capital
gains, alternative, net worth, transfer, profits, withholding, payroll,
employer health, excise, franchise, real property and personal property
taxes, and any other taxes, customs duties, fees, assessments,
reassessments or similar charges in the nature of a tax including,
without limitation, Canada Pension Plan and provincial pension plan
contributions, unemployment insurance payments and workers'
compensation premiums, together with any instalments with respect
thereto, and any interest, costs of any nature, fines and penalties
imposed, levied or assessed by any governmental authority (including
federal, state, provincial, municipal, local and foreign governmental
authorities), and whether disputed or not.
"THIRD PARTY CLAIM" means any demand or statement or any notice thereof
which has been made on or communicated to the Vendor, the Purchaser,
the Company by or on behalf of any Person other than the foregoing and
which, if maintained or enforced, will or might result in a Loss of the
nature described in either Sections 6.2 or 6.3.
"THIS AGREEMENT", "THESE PRESENTS", "HEREIN", "HEREBY", "HEREUNDER" and
similar expressions refer to this Agreement of Purchase and Sale and
the accompanying schedules and exhibits.
"US$ means the lawful money of the United States of America.
2. PURCHASED SHARES
----------------
The Vendor covenants and agrees to sell, assign and transfer to the
Purchaser and the Purchaser agrees to acquire from the Vendor on the
Closing Date, all of the issued and outstanding shares in the capital
of the Company (the "PURCHASED SHARES"), owned beneficially and of
record by the Vendor, for the Purchase Price and upon and subject to
the terms and conditions herein provided. It is agreed that, at the
time of Closing, the Company will not have any liability for borrowed
money (either to financial institutions, shareholders or any third
parties), mortgage loans or capital leases.
3. PURCHASE PRICE
--------------
3.1 The purchase price payable by the Purchaser to the Vendor or to
her order for the Purchased Shares is C$132,941,015, which equals
five (5) timesC$26,588,203, the EBITDA for the 12 month period
ended October 31, 1999, (the "PURCHASE PRICE").
<PAGE>
-5-
3.2 The Purchase Price shall be payable in US dollars by certified
cheque, banker's draft or by bank wire transfer on the Closing
Date.
3.3 The Purchaser and the Vendor shall cause a balance sheet and
income statement of the Business as of close of business of the
day immediately preceding the Closing Date to be prepared in a
manner consistent with U.S. GAAP and the Financial Statements
("CLOSING STATEMENTS"). For purposes of the Closing Statements,
the closing inventory as of October 31, 1999 will constitute the
opening inventory. The closing inventory for the Closing
Statements will be based on the Company's computer print-out of
inventory for the last day of the period covered by the Closing
statements. There will not be a physical inventory. The finished
goods, work-in-process and raw materials will be valued using the
same methods used to determine the October 31, 1999 inventory as
disclosed in the Financial Statements. The Closing Statements
will be subject to the reasonable approval of Vendor's auditors.
Any disputes between the parties will be resolved in accordance
with Section 3.7. The cost of the preparation of the Closing
Statements shall be assumed by the Company.
3.4 The Purchase Price shall be adjusted upward or downward by an
amount by which the retained earnings exceeds or is less than
C$13,000,000 net of all accrued tax liabilities as determined in
the Closing Statements. The payment of such adjustment shall be
made by the Purchaser (in the event of an upward adjustment) or
the Vendor (in the event of a downward adjustment) in the manner
provided in Section 3.2 within 60 days of the Closing Date.
3.5 The conversion rate for the conversion of the Purchase Price in
US$ will be the rate prevailing as of the close of business on
the Business Day immediately preceding the Closing Date as
established by the Bank of Canada.
3.6 The costs for the preparation of the 1998 Financial Statements
and the review by the auditors of the Purchaser of the 1998 and
1999 Financial Statements will be borne by the Purchaser.
3.7 Any dispute between the parties as regards the finalization of
the Closing Statements will be submitted before Norman Daitchman,
Partner of the firm of Ernst & Young in Montreal (Norman
Daitchman or any replacement is herein referred to as
"ARBITRATOR"). In the absence of Norman Daitchman, the parties
will mutually agree upon a replacement within five (5) business
days of being notified by either party. Should they fail to agree
upon a replacement within such delay, the president of the Quebec
Institution of Charter Accountants may be requested by either
party to designate a replacement. The decision of the Arbitrator
shall be final and binding upon the parties hereto. The
Arbitrator will also have the power to determine how the costs of
the arbitration are to be borne.
<PAGE>
-6-
4. REPRESENTATIONS AND WARRANTIES OF EACH OF THE VENDOR AND DAVID
--------------------------------------------------------------
Each of the Vendor and David represents and warrants to the Purchaser
as follows:
4.1 Enforceability of the Agreement
4.1.1 The Vendor is the sole and absolute owner (beneficially
or of record) of the Purchased Shares with a good and
marketable title thereto free and clear of all Liens and
with full power and authority to sell, assign and
transfer such Purchased Shares as herein provided.
4.1.2 Each of the Vendor and David has the power, capacity and
authority to execute and become a party to this Agreement
and to consummate the transactions herein provided,
without any restriction whatsoever, whether pursuant to
his matrimonial regime or otherwise. This Agreement
constitutes a valid and binding obligation of each of the
Vendor and David, enforceable against the Vendor and
David in accordance with its terms.
4.1.3 Except as provided for or reflected in the DISCLOSURE
SCHEDULE, neither the entering into of this Agreement nor
the consummation of any of the transactions contemplated
hereby will:
4.1.3.1 result in the violation of or conflict with
(i) any of the terms or provisions of the
respective constating documents or by-laws of
any of the Company; (ii) any agreement,
written or oral, to which any of the Vendor or
the Company is a party or subject, including,
any grant, subvention or other benefit in
favour of either of the Vendor or the Company;
(iii) any license, permit, authorization,
qualification or registration held by or in
respect of the Company; or (iv) any law,
regulation or administrative or judicial order
of any jurisdiction to which the Company is
subject;
4.1.3.2 subject the Company to any penalty or
liability; or
4.1.3.3 require any consent or approval from any
Person.
4.1.4 Except as provided for or reflected in the DISCLOSURE
SCHEDULE, the Vendor and David are not aware of any legal
or administrative proceedings pending or threatened or of
any circumstances which may reasonably be expected to
give rise to such proceedings which in any way might
interfere with the sale or delivery of the Purchased
Shares or the consummation of any of the transactions
herein contemplated.
4.1.5 Relying upon the representation and warranty of the
Purchaser set out in Section 5.6 and except as provided
in the DISCLOSURE SCHEDULE, there is
<PAGE>
-7-
not any notice to, filing with, or authorization,
consent, permit or approval from, any Person, including,
without limitation, any government, governmental agency
or other contracting party of the Company, required in
connection with the transactions contemplated by this
Agreement.
4.1.6 The transfer of the Purchased Shares contemplated herein
will, as at the Closing Date, have been duly authorized
by all corporate actions of the Company.
4.2 Corporate Status
4.2.1 The Company:
4.2.1.1 has been duly incorporated and organized and
is validly subsisting and in good standing
under the laws of the jurisdiction in which it
was incorporated;
4.2.1.2 has the power to own, lease, occupy or
otherwise hold the properties and rights now
owned, leased, occupied or otherwise held by
it and to conduct the business now being
conducted by it.
4.3 Capital Stock and Records
4.3.1 No Person has any agreement or option or any right or
privilege (whether by law or by contract) capable of
becoming an agreement or option
4.3.1.1 to acquire any of the Purchased Shares or any
of the issued shares of the Company;
4.3.1.2 to subscribe for or otherwise acquire any of
the unissued shares of the capital stock of
the Company.
4.3.2 There is no shareholders' agreement in force with respect
to the Purchased Shares.
4.3.3 The Company does not exist as a result or incident of any
amalgamation or merger between the Company and any other
Person or Persons or between other Persons pursuant to
which the properties or rights of the Company became or
remained subject to the rights of the creditors of such
previously existing Person or Persons.
4.3.4 The Purchased Shares constitute all of the issued and
outstanding securities of the Company. There exists no
Lien affecting the Purchased Shares.
<PAGE>
-8-
4.4 Business and Goodwill
4.4.1 The Business of the Company consists principally of wire,
cable and electromechanical assembly. The Company has
conducted the Business substantially as so described
continuously since its incorporation and during said
period the Company has not conducted any other business.
4.4.2 The Company presently conducts and has, since its date of
incorporation, conducted its business in the Province of
Quebec and the Company has not conducted business from
any other jurisdiction.
4.4.3 The Company is, in all material respects, conducting its
business in compliance with all applicable laws, rules
and regulations of the jurisdiction in which such
business is being carried on. The Company is not in
breach of any laws, rules or regulations, except for
breaches which in the aggregate are immaterial. The
Company is duly licensed, registered or qualified in the
jurisdiction in which it owns or leases property or
conducts its business to enable such businesses to be
conducted as now conducted, and its properties and assets
to be owned, leased and operated, and all such licences,
registrations and qualifications are valid, subsisting
and in good standing, and none of the same contains any
burdensome term, provision, condition or limitation which
has or reasonably may be expected to have an adverse
effect on the operation of such business. The DISCLOSURE
SCHEDULE contains a list of all licences, registrations
or qualifications held by the Company.
4.4.4 The Company is not conducting nor has ever conducted its
business under any name other than its existing corporate
name and the names "T.A.T. Technology" and "T.A.T.
Technologie".
4.5 Assets and Liabilities
4.5.1 The balance sheets included in the Financial Statements
fairly present the financial position of the Company as
at the respective dates specified therein and the related
statements of earnings, retained earnings and changes in
financial position for each of the period then ended,
fairly present the results of the individual operations
and the changes in financial position for the periods
then ended of the Company and have been prepared in
accordance with U.S. generally accepted accounting
principles applied on a consistent basis throughout the
periods specified therein. Since October 31, 1999, there
has been no Material Adverse Change in the condition
(financial or otherwise), liabilities, licences, permits,
businesses (including relationships with suppliers,
customers, governmental authorities or others),
operations or prospects of the Company.
4.5.2 Except as disclosed or reflected in the Disclosure
Schedule and except to the extent reflected or reserved
against in the balance sheets of the
<PAGE>
-9-
Company included in the Financial Statements and except
for liabilities incurred in the ordinary course of
business since October 31, 1999, the Company does not
have any liabilities or obligations (except for
liabilities and obligations which in the aggregate are
immaterial) whether accrued, absolute, contingent or
otherwise (including without limitation product liability
as manufacturer, supplier or otherwise, warranty
liabilities, environmental liabilities, liabilities as
guarantor or otherwise with respect to obligations of
others or lease liabilities or liabilities for Taxes) and
whether due or to become due.
4.5.3 Except as disclosed or reflected in the DISCLOSURE
SCHEDULE, the Company has good and marketable title to
all its properties and assets, including, without
limitation, all those referred to in the most recent
balance sheet included in the Financial Statements (other
than any thereof which have been disposed of in the
ordinary course of business).
4.5.4 All properties, equipment and machinery and all other
tangible movable property either owned or leased by the
Company are in good operating condition and repair,
except for normal wear and tear and normal usage and are
in each case adequate for the conduct of the Business in
the ordinary course.
4.5.5 The Company has valid leasehold interests in all the
properties, equipment and machinery shown in the
DISCLOSURE SCHEDULE or reflected in the Financial
Statements as being leased by it, free and clear of any
Liens. All such leases (complete and correct copies of
which have been provided to the Purchaser) are valid,
subsisting and in effect in accordance with their
respective terms and are in good standing and no event or
condition exists which constitutes or after notice or
lapse of time or both would constitute a default
thereunder.
4.5.6 The Company does not own or possess any property right or
other asset which is not so owned or possessed solely for
the purpose of conducting the Business as such Business
is now being conducted, except for certain consignment
inventory belonging to suppliers of the Company. The
Company owns or otherwise has the right to use all of the
assets required to carry on the Business.
4.5.7 To the best knowledge and belief of the Vendor and David,
there is not :
4.5.7.1 any suit, action or other proceeding or
governmental investigation pending or
threatened against the Company in or before or
by any court, board, commission administrative
agency or administrative or other tribunal and
neither the Vendor nor David has knowledge of
nor has any reason to believe that there
exists any basis for a suit, action or other
proceedings or governmental investigation
against the Company;
<PAGE>
-9-
4.5.7.2 any order, decree, injunction or judgment of
any court, administrative agency or board or
administrative or other tribunal against or
affecting the Company;
4.5.7.3 any legal impediment to the continued
operation in the ordinary course of the
properties of the Company and of the Business;
or
4.5.7.4 any violation by the Company of any law,
by-law, regulation, rule, policy, directive or
protocol of any competent authority.
4.5.8 Except as disclosed or reflected in the DISCLOSURE
SCHEDULE, the Company does not hold any loan or advance
due by, or any stock, obligation or securities of, or any
other interest in, any Person. The Company does not have
the right to receive any sum from the Vendor or David,
whether as shareholder, director, officer or otherwise.
4.5.9 The Company has no Subsidiary nor any other investment in
any other Person.
4.6 Inventories and Accounts Receivable
4.6.1 The inventories of supplies, raw materials, work in
process and finished goods owned or used by the Company
as of the date hereof and as reflected in the balance
sheet of the Company included in the Financial Statements
were owned or held by the Company at the date specified
in the Financial Statements, and all such inventories so
held on such dates and on the date hereof were and are
normal and adequate for the Business, are of good and
marketable quality and condition.
4.6.2 The accounts receivable of the Company reflected in the
balance sheets of the Company included in the Financial
Statements are bona fide, have been properly recorded and
represent amounts due for goods or services duly sold or
rendered in the ordinary course of business, and no claim
has been made or threatened with respect to the quality
or warranty of such goods and services which has not been
disposed of, and the said accounts receivable are good
and collectible, free from any claim or right of set off
or counterclaim, except to the extent of any reserves for
bad debts reflected in said balance sheet, and all
accounts receivable which have accrued to the Company up
to the date hereof subsequent to the date of the
Financial Statements comply with the foregoing in all
respects except to the extent of reserves for bad debts
maintained at the same respective rates as reflected in
the said balance sheet.
4.7 Conduct of Business
The Company has been conducting its Business since October 31,
1999, in the ordinary course, and since such date the Company
has not entered into any transaction other than in the ordinary
course of its Business and, in particular,
<PAGE>
-11-
without limiting the generality of the foregoing, the Company has
not, since October 31, 1999,
4.7.1 purchased or redeemed directly or indirectly any
securities issued by it;
4.7.2 issued or sold or agreed to issue or sell any shares of
its capital stock or any option, warrant, conversion or
other right to acquire any such share or any securities
convertible into or exchangeable for such shares, or
amended its charter or by-laws;
4.7.3 declared or paid any dividend or declared or made any
other distribution on any of the shares of any class of
its capital stock or on any of its securities;
4.7.4 suffered or incurred any damage, destruction, loss or
liability (whether or not covered by any insurance), any
strike or other labour trouble, or any loss of employees
or customers;
4.7.5 except as regards the authorization or payment of bonuses
to the Vendor and/or David of the net profit of the
Company for the period comprised between November 1, 1999
and the Closing Date, made or authorized any payment to
an officer, director, former director, shareholder or
employee of the Company, otherwise than at the regular
rates payable to them, by way of salary, pension, bonus,
rent or other remuneration;
4.7.6 authorized or made any capital expenditure other than
expenditures which in the aggregate do not exceed
C$1,000,000;
4.7.7 incurred any indebtedness or extended any credit, except
in the ordinary course of business;
4.7.8 agreed to take any of the actions described in Sections
4.7.1 through 4.7.7.
4.8 Contracts
4.8.1 Except as reflected or disclosed in the DISCLOSURE
SCHEDULE, the Company is not a party to any contract or
agreement, either written or oral, express or implied,
either (i) involving a commitment, whether contingent or
otherwise, by the Company or by any other Person, in
excess of C$100,000 (the aggregate value of all contracts
not requiring disclosure hereunder not exceeding
C$500,000), other than any purchase order received or
issued in the ordinary course of business by or in favour
of the Company or (ii) being otherwise material to the
assets or liabilities of the Company other than any
purchase order received or issued in the ordinary course
of business by or in favour of the Company (referred to
for the purposes of Sections 4.8.1, 4.8.2 and 4.8.3 as
the "CONTRACTS"), except for any contract or agreement
which is terminable at the option of the Company without
penalty upon not more than 60 days notice.
<PAGE>
-12-
4.8.2 The Contracts are valid and binding obligations of the
parties thereto, enforceable against such parties in
accordance with their terms, are in full force and effect
and have not been the subject of a notice of termination,
cancellation or non-renewal.
4.8.3 Neither the Company nor, to the best of the Vendor's
knowledge, any other party to any of the Contracts is in
default or in breach of any such contracts, nor does
there exist any state of facts which, after notice or
lapse of time or both, would constitute such a breach or
default.
4.8.4 Except as regards such consignment inventory from
suppliers of the Company referred to in Section 4.5.6,
the Company does not, pursuant to any contract,
agreement, franchise, licence or permit hold, possess,
use or have access to, or have the right to hold,
possess, use or have access to, any property or right of
any nature belonging to any other Person which is
necessary, desirable or useful in the conduct of the
Business.
4.8.5 Except as disclosed or reflected in the DISCLOSURE
SCHEDULE, the Company is not bound by any contract or
agreement which constrains or limits the Company in the
conduct of its business and affairs, or purports to do
so, including, without limitation, any agreement
concerning confidentiality, non-competition or
exclusivity.
4.8.6 The DISCLOSURE SCHEDULE sets out all grants, subventions
and other benefits which the Company is entitled to
receive from, or under the terms of which a future
payment may be made to the Company by, any government or
municipality or any department, board or other
instrumentality thereof, other than any such grants,
subventions or other benefits which accrue or become
available by operation of the law generally to Persons
conducting businesses similar to the Business, and the
Company is not in default with the terms and conditions
upon which it is or may become entitled to receive any
such grant, subvention or other benefit.
4.8.7 Except as set out in the DISCLOSURE SCHEDULE, the Company
is not a party to or bound by (i) any collective
bargaining agreement or any other agreement with any
union of employees, (ii) any agreement, written or oral,
for the benefit of or with its employees, directors,
officers or shareholders, including any written
employment contract, (iii) any pension, bonus, profit
sharing, compensation, retirement, deferred compensation,
illness or other plan, agreement, trust, fund, or
arrangement for the benefit of or with its employees,
directors, officers or shareholders, or (iv) any agency,
consultation or representation contract, whether written
or oral.
4.8.8 All outstanding contracts and other agreements binding
upon the Company has been entered into on an arm's length
basis.
<PAGE>
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4.8.9 The DISCLOSURE SCHEDULE sets out a true and accurate list
of all of the customers of the Company as of the date
hereof and, at Closing as of the Closing Date as
identified by their account numbers.
4.8.10 The Vendor and David hereby confirm that the commercial
relations between the Company and Nortel Networks are
very good and they have no reason to believe that such
relations could materially adversely deteriorate in the
foreseeable future. The Purchaser acknowledges that
Nortel has and may sell facilities to non-related third
parties which could impact the Company's future
relationships.
4.9 Insurance
4.9.1 The Company, its properties and the Business are insured
with financially sound and reputable insurers against
claims and Losses from all such liabilities, hazards and
risks, to such extent and in such amounts and with such
deductible amounts therefrom as is customary for Persons
operating like businesses and owning like properties, all
as provided for in and by the policies and contracts of
insurance described in the DISCLOSURE SCHEDULE (which
describes types of coverage, amount and policy numbers).
Complete and correct copies of all such policies and
contracts have been made available to the Purchaser.
4.9.2 All such policies and contracts of insurance are in full
force and effect, and the Company is in good standing
with respect to each such policy or contract to which it
is a party.
4.9.3 The Company has not received a notice of a claim against
the Company or its properties which would not be entirely
covered (subject, as the case may be, to a deductible) by
the insurances it holds and the Vendor is not aware of
any fact or circumstance which could give rise to such a
claim.
4.10 Taxes
4.10.1 Except as regards potential assessments from Revenue
Quebec and Revenue Canada relating to the years 1996 and
1997 regarding certain expenses which in the aggregate
should not exceed, to the best knowledge of the Vendor
and David, the sum of approximately C$10,000, the Company
has duly filed, on a timely basis, all tax returns
required to be filed by it and has paid or accrued in the
Financial Statements all Taxes which are due and payable
as at the date hereof in respect of transactions or other
occurrences prior to the date hereof (whether or not
shown on any tax return) and each of David and the Vendor
will be able to confirm same as at the Closing Date.
Adequate provision has been made in the books and records
of the Company for all Taxes payable for the current
taxation year for which tax returns are not yet required
to be filed and for all Taxes relating to taxation years
ending on or before the Closing Date. There are
<PAGE>
-14-
no agreements, waivers, or other arrangements providing
for an extension of time with respect to the filing of
any tax return or the payment of any Taxes by the
Company. There are no actions, suits, proceedings,
investigations or claims, threatened or pending against
the Company in respect of Taxes nor are there any matters
under discussion with any governmental, municipal or
local authority relating to Taxes by any such authority.
The Company has duly collected and remitted all Taxes it
was required to collect and remit, respectively. To the
best of the Vendor's and David's knowledge and belief,
the Company has not received a refund or credit for taxes
to which it was not entitled.
4.10.2 The Company has withheld from each payment made to any of
their officers, directors, employees, shareholders or
creditors or any non-residents within the meaning of that
term as used in the INCOME TAX ACT (Canada), all Taxes
and other amounts which it is required by the laws to
which it is subject to withhold or deduct and has duly
remitted all Taxes and amounts so withheld or deducted to
the proper recipients thereof within the delays and in
the manner required by such laws.
4.11 Patents, Trade Marks and Copyright
4.11.1 No Proprietary Intangibles are owned by the Company or
are used or required to be used in the Business.
4.11.2 No Person has made or threatened to make a claim to the
right to use any of the names "T.A.T. Technologie" and
"T.A.T. Technology".
4.12 Environmental Matters
4.12.1 To the best of the Vendor's and David's knowledge and
belief and except as disclosed and reflected in the
DISCLOSURE SCHEDULE, the emission, deposit, issuance,
discharge, transportation or disposal of any contaminant,
waste material (including waste water and waste oil) or
other substance in the environment, by or allowed by the
Company, or occurring on or from any of the Facilities
(as defined hereinbelow), at any time up to the Closing
Date, has been or will have been effected in compliance
with all applicable statutes, laws, by-laws, regulations,
rules, policies, guidelines, directives and protocols of
any competent authority (collectively "LAWS"), and all
required filings and approvals in respect thereof, as the
case may be, have been made with or obtained from the
appropriate authorities, and the operations and
activities of the Company and the use of the properties
presently or previously used or leased by the Company
(collectively the "FACILITIES") and the use of the
structures thereon have been effected and continues to be
in compliance with all applicable Laws, and there are no
pending or threatened suits, actions or claims, nor
notices, orders or demands in relation to any breach by
the Company of any applicable Laws and approvals. More
particularly, but without limiting the generality of
<PAGE>
-15-
the foregoing and except as disclosed in the Disclosure
Schedule, the Facilities and the assets of the Company do
not contain polychlorinated biphenyls (PCBs), asbestos,
radioactive substances or urea formaldehyde foam
insulation and there are no underground or surface tanks
on any of the Facilities and none of the Facilities is
contaminated so as to require remediation action under
applicable Laws.
4.12.2 Without limiting the generality of the terms set forth in
Section 6.2 hereof, each of David and the Vendor shall be
liable to the Purchaser and the Company and shall
indemnify and hold harmless the Purchaser and the Company
against any and all Losses arising out of any suit,
action, claim, order or demand against the Purchaser or
the Company with respect to environmental matters
affecting any properties now or previously owned or
occupied, beneficially or otherwise, by the Company
except to the extent that such matters have been
disclosed or reflected in the Disclosure Schedule.
4.13 Labour Relations
Without restricting the provisions of Sections 4.7.5, 4.8.7
and 4.10.2:
4.13.1 no union has been certified in respect of the employees
of the Company, nor is any proceeding in process for
obtaining a union certification; to the best of the
David's and Vendor's knowledge, there is no current
campaign or attempt by any trade union or other
organization to organize the employees of the Company;
4.13.2 the Company has paid all sums due to its employees and
has observed in all respects the provisions of (i) all
agreements binding upon it, written or oral, for the
benefit of or with its employees, directors, officers or
shareholders or (ii) any pension, bonus, profit sharing,
compensation, retirement, deferred compensation, illness
or other plan, agreement, trust, fund or arrangement for
the benefit of or with its employees, directors, officers
or shareholders and (iii) all applicable laws and
regulations respecting employment, labour relations, work
place health and safety and benefit plans, including, but
not limited to, labour standards and employment equity,
legislation and regulations and legislation and
regulations prohibiting discrimination, pertaining to
human rights, collective bargaining and workers'
compensation; and there is no complaint, civil action or
other proceeding in process or threatened alleging a
violation of any such agreement, plan, trust, fund,
arrangement, laws or regulations and to the best of
David's and the Vendor's knowledge, there are no facts
which may give rise to a claim for which the Company
might be held liable under the provisions of any of the
said laws and regulations;
<PAGE>
-16-
4.13.3 except as disclosed and reflected in the DISCLOSURE
SCHEDULE, the Company has not received any remedial
order, notice of offence or notice of investigation under
(i) the ACT Respecting OCCUPATIONAL HEALTH AND SAFETY
(Quebec) R.S.Q., c. S-2.1, (ii) the WORKMEN'S
COMPENSATION ACT (Quebec) R.S.Q., c. A-3 or (iii) the ACT
RESPECTING INDUSTRIAL ACCIDENTS AND OCCUPATIONAL DISEASES
(Quebec) R.S.Q., c. A-3.001 or under equivalent statutes
or regulations in other jurisdictions, except in respect
of matters which have been settled or remedied since the
issuance of such order, notice or notice of
investigation, and the Company has performed all its
financial or monetary obligations under such statutes or
regulations and, to the best of David and the Vendor's
knowledge, there are no facts which may give rise to a
claim for which the Company might be held liable under
the provisions of the said statutes or regulations; to
the extent such claims have arisen in the past, the
Company has made all necessary remedies, financial or
otherwise;
4.13.4 there is no unfunded liability under any employee
retirement plan or other plan of the Company which may
exist;
4.13.5 there is no strike, lockout or labour troubles in respect
of the employees of the Company nor do David and the
Vendor have knowledge of any fact which may give rise
thereto; and
4.13.6 the DISCLOSURE SCHEDULE sets out truly and correctly the
names of all employees of the Company and reflects
accurately the salary, seniority, vacation entitlement
and benefits (including, any bonus, RRSP contribution,
general expense or travel expense account) of each of
such employees.
4.14 Bank Accounts, Financing and Security, Etc.
The DISCLOSURE SCHEDULE sets out:
4.14.1 the name of each bank, trust company or other Person with
which the Company has an account or safekeeping
arrangement or safety deposit box, the account numbers
and the names of each Person authorized to operate or
have access to such account, arrangement or box on behalf
of the Company;
4.14.2 a list of all outstanding guarantees, indemnifications,
financing agreements or security documents to which
either of the Company is a party or which is binding upon
any of the Company; and
4.14.3 the name of each Person holding a general or special
power of attorney from the Company with a summary of the
terms thereof.
<PAGE>
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4.15 Conflicting Interests
Neither the Vendor nor any officer or director of the Company nor
any member of their respective families owns, or during the last
three (3) years has owned, directly or indirectly, or has, or
during the last three (3) years has had, a substantial ownership
interest in any business, corporate or otherwise, which is
directly or indirectly competitive with the Business.
4.16 No Finder's or Broker's Fee
No Person has, or as a result of any of the transactions
contemplated hereby will have, as a result of any commitment of
David, the Vendor or the Company towards such Person, any right,
interest or valid claim against or upon the Purchaser, the
Company or any of its properties for any commission, fee or other
compensation as broker or finder or for services in any similar
capacity.
4.17 Vendor's Residence
The Vendor is not a non-resident within the meaning of that term
as used in the INCOME TAX ACT (Canada).
4.18 Millennium Compliance
To the best of David's and the Vendor's knowledge and belief and
based on certification received from the Company's suppliers, the
Computer Systems are Millennium Compliant. For the purposes of
this Agreement, "Millennium Compliant" means that the Computer
Equipment and Computer Software (collectively, the "Computer
Systems") are capable of the following functions before, during
and after 1 January 2000:
4.18.1 handling date information involving all and any dates
before, during and after 1 January 2000, including,
accepting date input (either from an internal or external
source), providing date output and performing date
calculations in whole or part and any date format (i.e.
julian, gregorian, international or any other format);
4.18.2 operating accurately without interruption on and in
respect of any and all dates before, during and after 1
January 2000 and without any change in performance;
4.18.3 responding to and processing any digit year input (either
from an internal or external source) without creating any
ambiguity as to the century; and
4.18.4 receiving, storing, providing and communicating date
output information without creating any ambiguity as to
the century.
Without limiting the rights otherwise conferred upon the
Purchaser, in the unlikely event there are any "Millennium
Compliant" issues with the Company's
<PAGE>
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computers or software before the Closing Date, they will be
repaired or replaced at Vendor's cost.
4.19 Full Disclosure
4.19.1 Each of David and the Vendor has made or caused to be
made due enquiry with respect to each of the
representations, warranties and statements contained in
this Agreement and in each of the schedules,
certificates, documents and, except as disclosed in the
DISCLOSURE SCHEDULE, other writings referred to herein or
furnished to the Purchaser hereunder, and none of the
same contains any untrue statement of a material fact or
omits to state a material fact necessary to make the
statements contained herein and therein not misleading.
4.19.2 Except as disclosed in the DISCLOSURE SCHEDULE or as
generally known to the public, there is no fact or
circumstance known to David and the Vendor
4.19.2.1 which materially adversely or in the future
may (so far as he can now reasonably foresee)
materially adversely affect the condition
(financial or otherwise), property, assets,
liabilities, Business, operations, or
prospects of the Company or the ability of
David and the Vendor to perform his
obligations hereunder, or
4.19.2.2 relating to the Company or the Business which,
if known to the Purchaser, might reasonably be
expected to deter the Purchaser from
consummating the transactions hereby
contemplated.
4.20 Indebtedness and Guarantees
There is no outstanding indebtedness, liability and obligations
(whether accrued, absolute, contingent or otherwise) as at the
date hereof between the Company and David or the Vendor other
than as otherwise provided hereunder and other than bonus
accruals to David and/or the Vendor or other than as provided for
hereunder.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
The Purchaser represents and warrants to David and the Vendor as
follows:
5.1 Enforceability of the Agreement
The Purchaser has full power and authority to purchase and
acquire the Purchased Shares as herein provided.
<PAGE>
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5.2 No Violation
Neither the entering into of this Agreement nor the consummation
of any of the transactions contemplated hereby will result in the
violation of or conflict with any of the terms or provisions of
the constating documents or by-laws of the Purchaser or any law,
regulation or administrative or judicial order of any
jurisdiction to which the Purchaser is subject.
5.3 No Legal Proceedings
The Purchaser is not aware of any legal proceedings pending or
threatened against it or of any circumstances relating to it
which may reasonably be expected to give rise to such proceedings
which in any way might interfere with the purchase of or payment
for the Purchased Shares or the consummation of any of the
transactions herein contemplated.
5.4 No Finder's or Broker's Fee
No Person has, or as a result of any of the transactions
contemplated hereby will have, by reason of any commitment of the
Purchaser towards such Person, any right, interest, or valid
claim against or upon the Vendor or any property of the Vendor
for any commission, fee, or other compensation as broker or
finder or for services in any similar capacity.
5.5 Due Authorization
The agreement has been validly authorized, executed and delivered
by the Purchaser and constitutes valid and binding obligations of
the Purchaser duly enforceable against it in accordance with its
terms.
5.6 Investment Canada and Competition
The acquisition of the Purchased Shares by the Purchaser does not
violate the provisions of the INVESTMENT CANADA ACT or the
COMPETITION ACT nor are any approvals, consents, filings,
registrations or notices required thereunder in order to
consummate the transactions herein contemplated except as for
such notification to be made within 30 days following the Closing
Date pursuant to INVESTMENT CANADA ACT.
6. SURVIVAL AND RELIANCE ON REPRESENTATIONS AND WARRANTIES AND
-----------------------------------------------------------
INDEMNIFICATION
---------------
6.1 Survival Notwithstanding Investigation
Notwithstanding any investigation conducted before or after the
Closing Date and notwithstanding any actual or implied knowledge
or notice of any fact or circumstance which any Person may have
as a result of such investigation or
<PAGE>
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otherwise, the parties hereto shall be entitled to rely upon the
representations and warranties set forth herein and the
obligations of the parties hereto with respect thereto shall
survive the Closing Date and shall continue in full force and
effect in accordance with the terms of this Section 6.
6.2 Indemnification by Vendor and David
The Vendor and David, acting jointly and severally and hereby
waiving the benefit of division and discussion, shall be liable
to the Purchaser and the Company and shall indemnify and hold
harmless the Purchaser and the Company against any and all Losses
provided such losses have been confirmed by Final Determination
arising out of
6.2.1 the breach of any agreement, covenant, representation or
warranty of the Vendor or David contained in this
Agreement;
6.2.2 the non-fulfillment of any agreement, covenant or
obligation of the Vendor or David contained in this
Agreement, to the extent not waived in writing by the
Purchaser.
The obligations of the Vendor and David under this Section 6.2
shall only apply and shall continue thereafter to the extent that
claims in respect of which they are required to indemnify, in the
aggregate, exceed C$600,000.
6.3 Indemnification by Purchaser
The Purchaser shall be liable to the Vendor and shall indemnify
and hold harmless the Vendor against any and all Losses provided
such losses have been confirmed by Final Determination arising
out of
6.3.1 the breach of any agreement, covenant, representation or
warranty of the Purchaser contained in this Agreement;
and
6.3.2 the non-fulfillment of any agreement, covenant or
obligation of the Purchaser contained in this Agreement,
to the extent not waived in writing by the Vendor or
David.
6.4 Expiry of Liability
6.4.1 Except as set out in Sections 6.4.2 and 6.4.3, the
representations and warranties of the Vendor, David and
the Purchaser herein shall terminate upon the expiry of
the period which is eighteen (18) months following the
Closing Date, except (i) in the case of fraud, in which
case they shall survive indefinitely or (ii) to the
extent that, during such period, a claim in respect of
any such representation or warranty is made, in which
case such representation and warranty shall continue in
full force and effect until the Final Determination of
such claim.
<PAGE>
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6.4.2 The representations and warranties herein of the Vendor
and David relating to any liability of the Purchaser or
of the Company for the payment of Taxes and environmental
liabilities arising out of this Agreement or arising from
the business and assets of the Company as conducted or
held up to and including the Closing Date shall terminate
upon the expiration of 60 days after the limitation or
prescription periods under the relevant statutes after
which an assessment, reassessment or a claim or a penalty
cannot be issued to the Company, unless during such
period, a claim in respect of any such representation or
warranty is made, in which case such representation and
warranty shall continue in full force and effect until
the Final Determination of such claim, but the Purchaser
covenants that, from and after the Closing Date, it will
exercise all reasonable efforts to ensure that neither it
nor the Company, without the prior consent of the Vendor
(which consent shall not be unreasonably withheld),
enters into any agreement, waiver or other arrangement
which provides for an extension of time with respect to
the filing of any tax return or the payment or assessment
of any Taxes dealt with by any such representation or
warranty.
Subject to Section 6.5, the Purchaser agrees not to amend
tax returns with respect to any periods up to the date of
Closing which would result in a liability to the Vendor
and David under the provisions of Article 6.
6.4.3 The representations and warranties contained in Section
4.1, 4.2 and 4.3, shall survive the Closing Date
indefinitely.
6.5 Claims involving Taxes
In the event of an assessment of tax liabilities or a Third Party
Claim from a competent authority in relation to Taxes, for which
the Purchaser is entitled to indemnification from David and the
Vendor, the Purchaser shall give notice to David and the Vendor
who shall immediately pay all Taxes, if and when required to do
so by law. David and the Vendor shall give notice to the
Purchaser no later than ten (10) days after receipt of the
Purchaser's notice mentioned hereinabove, of their desire to
contest said assessment or Third Party Claim and their right to
so contest shall be subject to the fulfilment of the following
conditions, to the Purchaser's satisfaction, (i) David and the
Vendor shall have paid the Taxes as required above in this
Section 6.5; (ii) such contestation shall, be at the entire cost
of David and the Vendor; (iii) David and the Vendor shall at the
Purchaser's request furnish it with reasonable security against
any costs or other liabilities to which any of the Purchaser or
the Company may be or become exposed by reason of such
contestation or any settlement thereof; (iv) David and the Vendor
may not take any measures which, in the reasonable opinion of the
Purchaser, could be prejudicial or unfavourable to the Purchaser
or the Company; (v) David and the Vendor must diligently proceed
with the defence and contestation of such assessment or Third
Party Claim; and (vi) David and the Vendor shall keep the
<PAGE>
-22-
Purchaser fully advised with respect to their contestation
including supplying copies of all relevant documentation promptly
upon request from the Purchaser.
The Purchaser shall cause the Company to cooperate with David and
the Vendor for such purposes but shall be entitled to
reimbursement for any out of pocket expenses incurred by
Purchaser, in doing so. David and the Vendor shall not be
entitled to enter into any settlement or any other final
determination of any such assessment or Third Party Claim without
the prior written consent of the Purchaser which shall not be
unreasonably withheld or delayed. Provided the foregoing
conditions are met, David and the Vendor shall be entitled to any
refund made by the appropriate authority of the Taxes paid by the
Vendor pursuant to this Section 6.5.
7. COVENANTS OF DAVID AND THE VENDOR
---------------------------------
Each of David and the Vendor covenants and agrees with the Purchaser as
follows:
7.1 Best Efforts to Maintain and Preserve
David and the Vendor will exercise their reasonable commercial
efforts with due diligence to ensure that from the date hereof
until the Closing Date,
7.1.1 the Business will be conducted, except as otherwise
herein provided or approved in writing by the Purchaser,
only in the ordinary course in substantially the same
manner as heretofore and in such manner that each of the
representations and warranties made by David and the
Vendor herein as of the date hereof will, on the Closing
Date, be true and correct;
7.1.2 the business organization of the Company will be
maintained intact, the services of its competent officers
and employees will be retained, key employees will not be
hired, pay or salary adjustments will not be made,
bonuses will not be paid nor cash distributed to the
Company's shareholders other than by way of salaries
presently being paid and its relationship with and the
goodwill of its customers, suppliers and others having
business relations with it will be preserved, the whole
so as to maintain the goodwill and Business of the
Company;
7.1.3 except as provided for in this agreement, no shares of
the Company will be repurchased or redeemed, no dividends
will be declared or paid on the shares of the Company and
the Company will not make any distribution of its shares
or any payment out of the ordinary course of business to
an officer, director or shareholder and, generally, no
transaction will be undertaken by the Vendor or the
Company which would result in a reduction of the
shareholder's equity of the Company; and
7.1.4 the Company will not agree to acquire the business
carried on by another Person or any part thereof, whether
by way of an acquisition of assets,
<PAGE>
-23-
shares or any other form of interest in such business or
Person, without the prior written consent of the
Purchaser.
7.2 Notice of Cessation in Ordinary Course
David and the Vendor shall promptly notify the Purchaser of the
happening or existence or apprehended happening or existence of
any event or circumstance, on or prior to the Closing Date, by
reason of which the Business has ceased or may cease to be
conducted in the ordinary course or by reason of which the
representations and warranties made by David and the Vendor
herein may cease to be true and correct.
7.3 Access and information for Purchaser
David and the Vendor will cause the Company to give the
representatives of the Purchaser, subject to their executing
non-disclosure agreements, access during reasonable business
hours, to books, records, accounts, statements and other data
which are required solely for the facilitation of this
transaction. David and the Vendor will inform the Purchaser of
any material development in the business and financial condition
of the Company between the date hereof and the Closing Date,
including with respect to any facts or circumstances, whether
existing or threatened, that in the reasonable judgment of David
and the Vendor could impact on the business or financial
condition of the Company.
7.4 Maintain Insurance
David and the Vendor will cause the Company to continue to
maintain in full force and effect all policies of insurance now
in effect or duly renew the same upon substantially the same
terms and conditions up to the Closing Date.
7.5 Corporate Proceedings for Transfer
David and the Vendor will cause the Company to take all necessary
steps and proceedings as may be considered appropriate by counsel
for the Purchaser in order that the Purchased Shares may be duly
and regularly transferred to the Purchaser as of the Closing
Date.
7.6 Resignation of Officers and Directors
The Vendor will cause the directors of the Company to resign at
the Closing Date.
7.7 Further Assurances
David and the Vendor shall, upon the request of the Purchaser,
whether before, at or after the Closing, do, execute, acknowledge
and deliver or cause to be done, executed, acknowledged or
delivered all such further acts, deeds, assignments, transfers,
conveyances, agreements or other documents as in the opinion of
<PAGE>
-24-
counsel for the Purchaser may be reasonably necessary or
desirable to effect complete consummation of the transactions
contemplated by this Agreement.
7.8 Exclusivity
David and the Vendor will not (and will not cause or permit the
Company to) (i) solicit, initiate or encourage the submission of
any proposal or offer from any Person (other than the Purchaser)
relating to the acquisition of any capital stock or other voting
securities or any substantial portion of the assets of the
Company (including any acquisition structured as a merger,
consolidation or share exchange); or (ii) participate in any
discussions or negotiations regarding, furnish any information
with respect to, assist or participate in, or facilitate in any
other manner, any effort or attempt by any person to do or seek
any of the foregoing. The Vendor will not vote the Purchased
Shares in favour of any such acquisition. David and the Vendor
will notify the Purchaser immediately if any Person makes any
proposal, offer, inquiry or contact with respect to any of the
foregoing.
7.9 Compliance with conditions
Each of David and the Vendor shall use his best efforts to ensure
the fulfillment and performance of the conditions set forth in
Section 8.
8. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
-------------------------------------------------------
The purchase and sale of the Purchased Shares is subject to the
following terms and conditions for the exclusive benefit of the
Purchaser to be fulfilled and performed on or prior to the Closing
Date:
8.1 Representations and Warranties remain correct
Each of the representations and warranties of David and the
Vendor contained in this Agreement or in any certificate or other
document delivered to the Purchaser pursuant hereto shall be true
and correct on and as of the Closing Date with the same force and
effect as though such representations and warranties had been
made on and as of such date and the Purchaser shall have received
on the Closing Date a certificate dated the Closing Date, in form
and substance satisfactory to counsel for the Purchaser, signed
by the Vendor to the effect that his representations and
warranties referred to above are true and correct on and as of
the Closing Date with the same force and effect as though made on
such date. For greater certainty, there shall have occurred no
Material Adverse Change since October 31, 1998 as of the Closing
Date.
8.2 Compliance with Covenants
The Vendor shall have complied with all covenants and agreements
herein agreed to be performed or caused to be performed by him on
or prior to the Closing Date.
<PAGE>
-25-
8.3 No Actions or Proceedings
No action or proceeding at law or in equity shall be pending or
threatened by any Person, including without limiting the
generality of the foregoing, any governmental authority,
regulatory body or agency to enjoin or prohibit:
8.3.1 the purchase and sale of the Purchased Shares
contemplated hereby or the right of the Purchaser to own
the Purchased Shares; and
8.3.2 the right of the Company to conduct its operations and
carry on its business in the normal course.
8.4 Consents, Approvals, Waivers, etc.
There shall have been given to or obtained from, as the case may
be, all appropriate Persons, including, without limitation, all
federal, provincial, municipal, local or governmental or
administrative bodies, all such notices, permits, approvals and
consents, in form and terms satisfactory to counsel for the
Purchaser, as may be required in order to permit the change of
ownership of the Purchased Shares and the consummation of the
transactions contemplated herein. without affecting or resulting
in the cancellation or the termination of any material license,
permit, franchise, contract or other right held by the Company,
and without thereby imposing on the Purchaser or the Company any
material additional expense, liability, constraint, penalty or
other liability, which notices, permits, approvals and consents
shall include, without limitation, those set out in the
DISCLOSURE SCHEDULE.
8.5 Corporate and Other Proceedings
All corporate and other proceedings of the Company in connection
with the transactions contemplated hereby, and all documents and
instruments incidental hereto, shall have been duly authorized
and executed, shall be in form and substance satisfactory to the
Purchaser and counsel for the Purchaser, and the Purchaser and
counsel for the Purchaser shall have received all such documents
and instruments, or duly certified copies thereof, as may be
reasonably requested.
8.6 Employment Agreement
The Purchaser and David shall have entered into an employment
agreement (the "EMPLOYMENT AGREEMENT") with the Company on terms
and conditions substantially as set forth in the Employment
Agreement appended in Schedule B hereto.
8.7 Opinion of Counsel
The Purchaser shall have received from counsel for the Vendor and
the Company, a favourable opinion addressed to the Purchaser and
to counsel for the Purchaser,
<PAGE>
-26-
dated the Closing Date, on terms and conditions acceptable to the
Purchaser, acting reasonably.
8.8 Rescission on Failure to Fulfill
In case any of the foregoing conditions shall not be fulfilled
and performed at or before the Closing Date to the reasonable
satisfaction of the Purchaser and counsel for the Purchaser, the
Purchaser may rescind this Agreement by notice to the Vendor and
in such event, the Purchaser shall be released from all
obligations hereunder, the whole without prejudice to any right
of the Purchaser to claim for damages arising out of such
non-fulfillment or non-performance.
9. CONDITIONS PRECEDENT TO VENDOR'S OBLIGATION TO CLOSE
----------------------------------------------------
The purchase and sale of the Purchased Shares is subject to the
following terms and conditions for the exclusive benefit of the Vendor
to be fulfilled and performed on or prior to the Closing Date:
9.1 Representations and Warranties remain correct
Each of the representations and warranties of the Purchaser
contained in this Agreement or in any certificate or other
document delivered to the Vendor pursuant hereto shall be true
and correct on and as of the Closing Date with the same force and
effect as though such representations and warranties had been
made on and as of such date and the Vendor shall have received on
the Closing Date a certificate dated the Closing Date, in form
and substance satisfactory to counsel for the Vendor, signed by a
duly authorized officer of the Purchaser to the effect that such
representations and warranties referred to above are true and
correct on and as of the Closing Date with the same force and
effect as though made on such date.
9.2 Employment Agreement
The Purchaser and David shall have entered into the Employment
Agreement.
9.3 Rescission on Failure to Fulfill
In case any of the foregoing conditions shall not be fulfilled
and performed at or before the Closing Date to the reasonable
satisfaction of the Vendor and counsel for the Vendor, the Vendor
may rescind this Agreement by notice to the Purchaser and in such
event, the Vendor shall be released from all obligations
hereunder, the whole without prejudice to any right of the Vendor
to claim for damages arising out of such non-fulfillment or
non-performance.
<PAGE>
-27-
9.4 Break-up Fees
In the event the transaction contemplated in this Purchase
Agreement is not consummated for reason of a breach by the
Purchaser of its obligations hereunder, the Purchaser shall pay
the sum of US$7.0 (seven) million to the Vendor under reserve of
and without prejudice to all other rights and recourses of the
Vendor. Upon the execution of the agreement, the Purchaser has
delivered to the Vendor an irrevocable stand-by letter of credit
of the Huntington National Bank in the amount of US$7,000,000 as
from Schedule C (hereinafter "LETTER OF CREDIT") which the Vendor
may draw upon in accordance with the terms of the Letter of
Credit. The Vendor shall surrender to the Purchaser the Letter of
Credit upon receipt of the Purchase Price.
9.5 Guarantees
David shall be released from all guarantees given to the Bank of
Montreal on behalf of the Company.
9.6 Purchase Price
The Vendor shall have received payment of the Purchase Price.
10. CLOSING
-------
The sale and purchase of the Purchased Shares herein provided for shall
be consummated and completed on the Closing Date at the Closing Place,
as follows:
10.1 At the Closing, the Vendor shall deliver or cause to be delivered
to the Purchaser free and clear of all Liens
10.1.1 duly executed and endorsed certificates representing the
Purchased Shares, and
10.1.2 all such other agreements, contracts, certificates,
opinions, consents, approvals and other documents which
are herein required to be delivered by the Vendor at or
prior to the Closing Date and not theretofore received by
the Purchaser or which the Purchaser, acting reasonably,
may require the Vendor to deliver, the whole for the
purposes of completing the transfer of the Purchased
Shares or setting it up against third parties and
completing the other transactions provided for herein.
10.2 The Purchaser shall deliver or cause to be delivered to or to the
order of the Vendor the sums payable pursuant to Section 3 in the
manner permitted therein.
<PAGE>
-28-
11. COVENANTS AFTER CLOSING
-----------------------
11.1 Non-competition
11.1.1 For a period of three (3) years after the date hereof,
David and the Vendor will not, directly or indirectly,
(through a relative, affiliate or otherwise) in any part
of the world (i) engage in any activity competitive with
the Business or the Company, (ii) design, develop,
manufacture, assemble, process, distribute, market or
sell any products that are the same as or similar to
those products sold in the Business, (iii) solicit orders
from or seek or propose to do business with any customer,
former customer, supplier or former supplier of the
Company in the same line of business of the Business, or
(iv) influence or attempt to influence any employee,
representative or advisor of the Company to terminate
their employment or relationship with the Company.
11.1.2 The Purchaser shall be entitled to injunctive relief for
the violation of any covenant of this Section 11 and
shall have all other rights and remedies allowed by law
to prevent further violations. The Purchaser may also
seek damages resulting from any violation. Each of David
and the Vendor has reviewed the scope, duration and
geographical scope of the covenants made in this Section
and agrees that it is reasonable and necessary to protect
the Purchaser, its subsidiaries and its affiliates.
However, the parties agree that if this Section is found
to be unenforceable due to restrictions unreasonable in
scope, duration or geographical area, then the
appropriate court may reform this Section so that the
restrictions in it are reasonable and enforceable.
11.2 Name
Each of David and the Vendor undertakes, as of the Closing Date,
to cease using, and to cause any other corporation in which the
Vendor may hold an interest, to cease using, directly or
indirectly, alone or with any other expression, the corporate
names of the Company and any other names, trade-mark or
trade-name used or owned by the Company.
11.3 Tax Returns
The Company shall prepare or have prepared and shall file within
the prescribed delays, at the cost of the Company, the tax
returns of the Company for the fiscal year ended on the Closing
Date. It is understood that the Vendor shall give the Purchaser
and the Company access to all relevant information and shall
collaborate with the Purchaser in connection with the preparation
and filing of said tax returns.
<PAGE>
-29-
12. MISCELLANEOUS
-------------
12.1 Notices, Etc.
Any notice, consent or other communication (a "NOTICE") given
pursuant to or in connection with this Agreement shall be in
writing in the English language and shall be sufficiently given
to the Person to whom it is addressed if transmitted by
facsimile, delivered in person or sent by prepaid registered mail
to or for such Person at the address of such Person indicated
below or at such other address as such Person shall have
theretofore notified to the other party or parties hereto in
accordance herewith. Any Notice so addressed and transmitted,
delivered or mailed as aforesaid shall be deemed to have been
sufficiently given or made on the date on which it was so
transmitted by facsimile or delivered (provided that if such day
is not a Business Day, the Notice shall be deemed given or made
on the Business Day following transmission or delivery) or five
(5) Business Days following the date of mailing, as the case may
be. Notwithstanding the foregoing, in case of strike, lock-out or
other event, real or apprehended, which causes or would cause the
interruption of the postal service, the Notice shall be delivered
in person or transmitted by facsimile.
To the Vendor:
-------------
David Mesri
4105 Jean Brillant
Montreal, Quebec H3T 1P2
With a copy to:
--------------
Robinson, Sheppard & Shapiro
Stock Exchange Tower
800 Place Victoria, Suite 4700
Montreal, Quebec H4Z 1H6
Attention: Barry H. Shapiro
To the Purchaser:
----------------
David Kauer
President and Chief Executive Officer
Insilco Corporation
425 Metro Place N., Fifth Floor
Dublin, Ohio 43017
<PAGE>
-30-
With a copy to:
---------------
Ogilvy Renault
1981 McGill College Avenue
Montreal, Quebec
H3A 3C1
Attention: Renaud Coulombe
12.2 Interpretation
12.2.1 The article, section and paragraph headings contained
herein are included for convenience of reference only,
are not intended to be full or accurate descriptions of
the content thereof and shall not affect or be utilized
in the construction or interpretation of this Agreement.
12.2.2 Words importing the singular include the plural and vice
versa; and words importing gender include all genders.
12.2.3 Unless otherwise specified, all references herein to
articles, sections, paragraphs, Exhibits or Schedules
shall be to articles, sections, paragraphs, Exhibits or
Schedules of this Agreement.
12.2.4 This Agreement shall in all respects be governed by and
construed in accordance with the laws in force in the
Province of Quebec, including all matters of
construction, validity and performance.
12.2.5 The parties hereto submit to the non-exclusive
jurisdiction of the Courts of the Province of Quebec in
determining matters arising hereunder.
12.3 Time of the Essence
Time shall be of the essence of this Agreement. The mere lapse of
time for performing an obligation shall constitute the debtor of
said obligation in default. Whenever any payment is to be made or
any action is to be taken hereunder on a day other than a
Business Day, such payment shall be made or such action shall be
taken on the next succeeding Business Day.
12.4 Expenses
Each party shall pay its own expenses incurred in connection with
the authorization, preparation, execution and performance of this
Agreement, including, without limitation, all fees and expenses
of its counsel, employees, agents and representatives, it being
understood that, in the case of David and the Vendor, all such
costs incurred prior to Closing, may be paid by the Company
provided that the Company pays any such costs prior to Closing.
<PAGE>
-31-
12.5 Successors and Assigns
This Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective successors, heirs,
representatives and permitted assigns, provided that neither this
Agreement nor any rights or obligations hereunder shall be
assigned by any party without the prior consent of the other
parties except that the Purchaser shall have the right to assign
this Agreement and its rights and obligations hereunder to a
Subsidiary thereof, without obtaining the consent of the Vendor.
12.6 References to Disclosure Schedule
Any matter declared in any numbered section of this Agreement to
be set out, stated, described or reflected in the DISCLOSURE
SCHEDULE shall be deemed to have been sufficiently disclosed to
the parties hereto for all purposes of this Agreement if, in a
section of the DISCLOSURE SCHEDULE bearing the same number, such
matter has been fully and plainly described or there is a cross
reference to another section of the DISCLOSURE SCHEDULE
containing such full and plain description.
12.7 Severability
If any provision of this Agreement shall be held illegal, invalid
or unenforceable by any competent court in any relevant
jurisdiction, such illegality, invalidity or unenforceability
shall attach only to such provision in such jurisdiction and such
provision shall be severed herefrom and be ineffective to the
extent of such illegality, invalidity or unenforceability and
shall not affect or impair or render illegal, invalid or
unenforceable such provision in any other jurisdiction or any
other provision of this Agreement in any jurisdiction.
12.8 Entire Agreement
This Agreement and the Employment Agreement embody the entire
agreement and understanding among the parties hereto and
supersedes all prior agreements between such parties with respect
to the subject matter hereof, including, without limitation, the
letter of intent dated July 21, 1999 as accepted by the Vendor on
July 26, 1999 with the exception, however, of the Confidentiality
Agreement between David and the Purchaser which shall survive in
accordance with its terms. Neither this Agreement nor any of the
terms hereof may be changed, waived, discharged or terminated
otherwise than by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or
termination is sought. Any waiver of any term or condition or any
breach of any covenant of this Agreement shall not operate as a
waiver of any other such term or condition or breach, nor shall
any failure to enforce any provision hereof operate as a waiver
of such provision or of any other provision hereof.
<PAGE>
-32-
12.9 Counterparts
This Agreement may be executed by the parties hereto in several
counterparts, each of which when so executed and delivered shall
be an original and all such counterparts shall together
constitute one and the same instrument.
12.10 Liability of Vendor
David Mesri shall be solidarily and jointly and severally liable
for the obligations of the Vendor (including the representations
and warranties) set out in this Agreement or arising herefrom.
12.11 Language
The parties hereto confirm having requested that this Agreement
and all notices or other communications relating thereto be
drawn-up in the English language only. Les parties aux presentes
confirment avoir requis que cette convention ainsi que tous les
avis et autres communications s'y rapportant soient rediges en
langue anglaise seulement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first herein before written.
/s/ David Mesri
---------------------------
DAVID MESRI
/s/ Nahid Salim
---------------------------
NAHID SALIM
INSILCO CORPORATION
per: /s/ Michael R. Elia
---------------------
Michael R. Elia
Senior Vice-President and
Chief Financial Officer
per:
---------------------
<PAGE>
EXHIBIT 23(A)
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
THE BOARD OF DIRECTORS
INSILCO HOLDING CO.:
We consent to incorporation by reference in the registration statements (No.'s
333-61809 and 333-61811) on Form S-8 of INSILCO HOLDING CO. of our report dated
November 12, 1999, relating to the balance sheets of 9011-7243 Quebec Inc. as of
October 31, 1999 and 1998, and the related statements of income and retained
earnings and cash flows for the years then ended, which report appears in the
February 17, 2000, Form 8-K of INSILCO HOLDING CO.
WASSERMAN STOTLAND BRATT GROSSBAUM
MONTREAL, QUEBEC.
FEBRUARY 17, 2000.
<PAGE>
EXHIBIT 99(A)
INSILCO [LOGO]
Excellence in Electronics, Telecommunications and Automotive Components
NEWS RELEASE
FOR IMMEDIATE RELEASE INVESTORS: MICHAEL R. ELIA
SR. VICE PRESIDENT & CFO
(614) 791-3117
MEDIA: MELODYE DEMASTUS
MELROSE CONSULTING
(614) 771-0860
INSILCO HOLDING CO. REPORTS IMPROVED FOURTH QUARTER AND FULL YEAR
1999 RESULTS
Completes Acquisition of TAT Technologies
COLUMBUS, OHIO, FEBRUARY 21, 2000 -- INSILCO HOLDING CO. (OTC BULLETIN
BOARD: INSL) today reported sales and operating results for the fourth quarter
and full year ended December 31, 1999. The Company said that results for its
Taylor Publishing business unit, which was divested in February 2000, are being
reported as discontinued operations and are therefore not included in
consolidated sales and adjusted EBITDA (earnings before interest, taxes,
depreciation, amortization and non-operating items plus regular cash dividends
from Thermalex, the Company's 50% owned joint venture). The Company is also
providing comparative results including and excluding Romac Metals and McKenica,
which were divested in mid-1999.
Sales from the Company's core automotive and technologies businesses
increased 24% in the 1999 fourth quarter to $118.8 million from $96.0 million a
year ago. The increase was a result of stronger demand from telecommunications,
electronics and industrial OEMs, as well as the benefit of $18.3 million in new
sales from acquisitions completed in late 1998 and 1999. Consolidated sales for
the 1999 fourth quarter, including $7.8 million in 1998 fourth quarter sales
from divestitures, increased 14% to $118.8 million, compared to $103.8 million
recorded in the 1998 fourth quarter.
For the full year 1999 sales from the Company's core automotive and
technologies businesses increased 14% to $458.3 million from $402.7 million last
year. Full year 1999 sales benefited from $54.4 million in sales from
acquisitions completed in late 1998 and 1999. Consolidated sales for 1999
increased 10% to $476.4 million from $434.3 million recorded in the comparable
period in 1998. Full year 1999 and 1998 consolidated sales included $18.1
million and $31.6 million, respectively, from divestitures completed in the last
half of 1999.
Adjusted EBITDA from ongoing operations for the fourth quarter 1999
increased 23% to $14.2 million from $11.5 million for the fourth quarter 1998.
The Company reported that consolidated adjusted EBITDA for the 1999 fourth
quarter increased 17% to $14.2 million, compared to $12.1 million recorded in
the 1998 fourth quarter, which included $0.6 million in 1998 from the Company's
divested operations.
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<PAGE>
Full year 1999 adjusted EBITDA from ongoing operations increased 6% to
$57.6 million from $54.1 million for 1998. For the twelve months ended December
31, 1999 and 1998, the Company reported consolidated adjusted EBITDA of $58.7
million compared to $56.4 million, respectively. Consolidated adjusted EBITDA
for 1999 and 1998 included $1.1 million and $2.3 million, respectively, from
divested operations.
ACQUISITION
In a separate action, the Company said that it completed the previously
announced acquisition of T.A.T. Technology ("TAT"), a Montreal-based provider of
cable and wire assemblies. TAT serves original equipment manufacturers (OEMs) in
the rapidly growing Optical Networking and Dense-Wavelength Division
Multiplexing ("DWDM") segments of the telecommunications industry. TAT had 1999
revenues of approximately $58 million. Financial terms of the transaction were
not disclosed.
BUSINESS DISCUSSION
The Company's Automotive Components Group reported sales of $59.0
million for the 1999 fourth quarter, compared to $51.0 million reported in the
year earlier fourth quarter. Fourth quarter sales included $6.4 million from the
Company's third quarter acquisition of Thermal Transfer Products, Ltd. Adjusted
EBITDA was $9.3 million and $7.4 million for the fourth quarters of 1999 and
1998, respectively. The improved performance for the Group reflects higher
margins on worldwide tubing sales and the positive contribution from Thermal
Transfer.
The Company also reported that its 50/50 joint venture with Mitsubishi
Aluminum, Thermalex, paid a special dividend of $5.2 million in the 1999 fourth
quarter, bringing total regular and special cash dividends paid in 1999 to $10.4
million. The Company said that demand remained strong in 1999 for Thermalex'
micro-extruded tubing with the JV posting 20% sales growth in 1999. The Company
also recorded $0.4 million and $3.0 million of equity income for the 1999 fourth
quarter and full year, which is reported separately after operating income in
its consolidated financial statements.
The Company's Technologies Group reported sales of $59.8 million in the
1999 fourth quarter compared to $45.0 million recorded in the 1998 fourth
quarter. Sales increased across most product categories and the 1999 fourth
quarter benefited from $11.8 million in sales from acquisitions completed during
or after the 1998 fourth quarter. Adjusted EBITDA for the Group was $5.9 million
in the 1999 fourth quarter, compared to $5.7 million recorded in the year ago
fourth quarter. Adjusted EBITDA was negatively impacted by a $0.6 million
litigation settlement relating to a 1994 claim at the Company's stamping
operations. Excluding this settlement, adjusted EBITDA for the 1999 fourth
quarter increased 14% to $6.5 million from $5.7 million recorded in the year
earlier fourth quarter. The Group's operating performance was positively
impacted by substantially improved power transformer margins, offset largely by
a sales mix shift towards lower margin data grade connectors and temporary
production inefficiencies at certain wire and cable assembly facilities.
CEO COMMENTS
David A. Kauer, Insilco President and CEO, said, "1999 marked a year of
significant change for Insilco. Several key acquisitions and divestitures were
completed to redeploy our resources to faster growing technology and heat
exchanger markets. With the majority of our acquisition integration activities
behind us, we expect even greater contributions from these acquisitions in
2000."
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<PAGE>
"Equally important, we have positioned our core businesses to
capitalize on key market trends, such as the expanded use of outsourcing and
preference for large global suppliers by major OEMs and an increasing demand for
aluminum tubing. In addition, we intensified our efforts to reduce our cost
structure, including a mid-year corporate restructuring, which is expected to
reduce annualized corporate overhead by $3.2 million."
"We will continue our aggressive focus on enhancing our core
businesses' competitive positions and maximizing operating efficiencies in 2000.
This is evidenced by the recent sale of our non-core specialty publishing unit,
Taylor Publishing. The proceeds from this sale have been used to acquire TAT,
which improves our competitive position in the rapidly growing
telecommunications industry. We see numerous growth opportunities for the
markets in which we have chosen to participate and believe we are well
positioned for higher growth in sales and earnings in 2000 and beyond," Kauer
concluded.
REPORTED RESULTS
The Company reported net income of $0.2 million for its fourth quarter
ended December 31, 1999, compared to a net loss of ($8.0) million recorded a
year ago in the fourth quarter. The loss available to common shareholders for
the fourth quarter of 1999 and 1998 was ($0.94) and ($5.93) per diluted share,
respectively.
For the full year 1999, the Company recorded net income of $2.0 million
compared to a net loss of ($18.1) million recorded in the year ago twelve
months. The loss available to common shareholders for the full year 1999 and
1998 was ($2.81) and ($6.35) per diluted share, respectively.
Insilco Holding Co., based in suburban Columbus, Ohio, is a diversified
manufacturer of industrial components. The Company's business units serve the
telecommunications, electronics, automotive and other industrial markets. The
Company had 1999 consolidated revenues in excess of $476 million.
The statements made in this press release which are not historical
facts may be deemed forward looking statements, and, as such, are subject to
certain risks and uncertainties, including statements with respect to the
Company's long-term outlook; growth prospects; the ability to improve operating
efficiencies and to further reduce expenses. It is important to note that
results could differ materially from those projected in such forward-looking
statements. Factors which could cause results to differ materially include, but
are not limited to the following: delays in new product introductions, lack of
market acceptance for new products, changes in demand for the Company's
products, changes in market trends, general competitive pressures from existing
and new competitors, adverse changes in operating performance, changes in
interest rates, and adverse economic conditions which could affect the amount of
cash available for debt servicing and capital investments. Further information
concerning factors that could cause actual results to differ materially from
those in the forward-looking statements are contained from time to time in the
Company's SEC filings, including but not limited to the Company's report on Form
10-KA for the year ended December 31, 1998 and the Company's reports on Form
10-Q for March 31, June 30, and September 30, 1999. Copies of these filings may
be obtained by contacting the Company or the SEC.
Investor Relations Contact: Michael R. Elia, (614) 791-3117 or write to Insilco
Holding Co., Investor Relations, 425 Metro Place North, Box 7196, Dublin, OH
43017 or call Melodye Demastus, Melrose Consulting (614) 771-0860. You may also
visit our web site at http://www.insilco.com.
----------------------
TABLES TO FOLLOW
<PAGE>
INSILCO HOLDING CO.
Condensed Consolidated Statements of Operations
(Unaudited)
(Amounts in millions except per share data)
FOR THE QUARTER ENDED
<TABLE>
<CAPTION>
Actual
December 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Sales $ 118.8 $ 103.8
Cost of sales, excluding depreciation 90.4 78.0
Selling, general and administrative expenses, excluding depreciation 14.2 13.7
Depreciation and amortization expense 5.0 4.3
Significant legal, professional and merger fees 0.2 0.3
Severance, writedown & other 1.0 0.6
Restructuring charge (0.1) --
--------- ---------
Operating income 8.1 6.9
Interest expense, net (12.1) (10.9)
Equity in net income of Thermalex 0.4 0.7
Other income, net (0.3) 1.5
--------- ---------
Loss before income taxes, discontinued
operations and extraordinary item (3.9) (1.8)
Income tax benefit 3.8 1.1
--------- ---------
Net loss before discontinued operations
and extraordinary item (0.1) (0.7)
Extraordinary item, net of tax -- (5.9)
--------- ---------
Net loss before discontinued operations (0.1) (6.6)
Income (loss) from discontinued operations, net of tax 0.3 (1.4)
--------- ---------
Net income (loss) 0.2 (8.0)
Preferred stock dividend (1.6) (1.4)
--------- ---------
Net loss available to common $ (1.4) $ (9.4)
========= =========
Regular cash dividend from Thermalex $ -- $ --
========= =========
Earnings before other income, interest, taxes, depreciation,
amortization, and one-time items plus regular cash dividend from
Thermalex $ 14.2 $ 12.1
========= =========
Capital expenditures $ (5.1) $ (3.9)
========= =========
Loss per share available to common $ (0.94) $ (5.93)
========= =========
</TABLE>
<PAGE>
INSILCO HOLDING CO.
Condensed Consolidated Statements of Operations
(Unaudited)
(Amounts in millions except per share data)
FOR YEAR TO DATE
<TABLE>
<CAPTION>
Actual
December 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Sales $ 476.4 $ 434.3
Cost of sales, excluding depreciation (1999 includes $3.2 of
restructuring expenses) 363.7 321.6
Selling, general and administrative expenses, excluding
depreciation (1999 includes $056.8f restructuring expenses) 56.8 57.6
Depreciation and amortization expense 19.5 16.8
Significant legal, professional and merger fees 2.7 26.8
Severance, writedown & other 5.2 2.4
Restructuring charge 6.4 --
--------- ---------
Operating income 22.1 9.1
Interest expense, net (47.3) (32.3)
Equity in net income of Thermalex 3.0 2.9
Other income, net 10.5 4.7
--------- ---------
Loss before income taxes (11.7) (15.6)
Income tax benefit 6.5 1.9
--------- ---------
Net loss before discontinued operations
and extraordinary item (5.2) (13.7)
Extraordinary item, net of tax -- (5.9)
--------- ---------
Net loss before discontinued operations (5.2) (19.6)
Income from discontinued operations, net of tax 7.1 1.5
--------- ---------
Net income (loss) 1.9 (18.1)
Preferred stock dividend (6.0) (2.0)
--------- ---------
Net loss available to common $ (4.1) $ (20.1)
========= =========
Regular cash dividend from Thermalex $ 2.8 $ 1.3
========= =========
Earnings before other income, interest, taxes, depreciation,
amortization, and one-time items, plus regular cash dividend
from Thermalex $ 58.7 $ 56.4
========= =========
Capital expenditures $ (15.1) $ (18.0)
========= =========
Loss per share available to common $ (2.81) $ (6.35)
========= =========
</TABLE>
<PAGE>
INSILCO HOLDING CO.
(Unaudited)
(Amounts in millions)
SUPPLEMENTAL SEGMENT DATA
<TABLE>
<CAPTION>
Quarter Ended Year to Date
December 31, December 31,
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SALES
- -----
Industrial Businesses:
Technologies Group $ 59.8 $ 45.0 $ 230.0 $ 189.8
Automotive Components 59.0 51.0 228.3 212.9
-------- -------- -------- --------
Total Industrial Businesses 118.8 96.0 458.3 402.7
Other -- 7.8 18.1 31.6
-------- -------- -------- --------
Total Sales $ 118.8 $ 103.8 $ 476.4 $ 434.3
======== ======== ======== ========
EBITDA
- ------
Industrial Businesses:
Technologies Group $ 5.9 $ 5.7 $ 28.2 $ 28.4
Automotive Components 9.3 7.4 32.5 32.1
-------- -------- -------- --------
Total Industrial Businesses 15.2 13.1 60.7 60.5
Other -- 0.6 1.1 2.3
Unallocated Corporate (1.0) (1.6) (5.9) (7.7)
Regular Thermalex Cash Dividend -- -- 2.8 1.3
-------- -------- -------- --------
Total EBITDA $ 14.2 $ 12.1 $ 58.7 $ 56.4
======== ======== ======== ========
SALES GROWTH VS. PRIOR YEAR
- ---------------------------
Industrial Businesses:
Technologies Group 32.9% 21.2%
Automotive Components 15.7% 7.2%
-------- --------
Total Industrial Businesses 23.8% 13.8%
-100.0% -42.7%
-------- --------
Total Sales 14.5% 9.7%
======== ========
EBITDA % OF SALES
- -----------------
Industrial Businesses:
Technologies Group 9.9% 12.7% 12.3% 15.0%
Automotive Components 15.8% 14.5% 14.2% 15.1%
-------- -------- -------- --------
Total Industrial Businesses 12.8% 13.6% 13.2% 15.0%
Other 7.7% 6.1% 7.3%
-------- -------- -------- --------
Total EBITDA 12.0% 11.7% 12.3% 13.0%
======== ======== ======== ========
</TABLE>
<PAGE>
INSILCO HOLDING CO.
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in millions)
December 31, December 31,
1999 1998
-------- --------
ASSETS
------
Current assets:
Cash and cash equivalents $ 6.6 $ 7.5
Receivables, net 79.5 71.4
Inventories, net 58.3 53.0
Current portion of deferred taxes 9.6 6.1
Net assets of Discontinued Operations 0.2 6.0
Prepaid expenses 2.7 2.5
-------- --------
Total current assets 156.9 146.5
Property, plant and equipment, net 109.6 101.3
Goodwill, net 25.7 14.5
Deferred taxes 7.3 1.9
Investment in unconsolidated subsidiaries 4.5 9.0
Other assets and deferred charges 18.0 18.0
-------- --------
Total assets $ 322.0 $ 291.2
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Accounts payable $ 39.2 $ 30.5
Accrued expenses and other 24.7 25.4
Accrued interest payable 7.5 4.2
Current portion of deferred taxes 1.3 1.6
Current portion of long-term debt 1.3 1.3
Current portion of long-term obligations 0.9 1.9
-------- --------
Total current liabilities 74.9 64.9
Long-term debt 400.6 383.1
Other long-term obligations 45.8 45.4
Deferred taxes 1.6 --
Minority interest 0.1 --
Preferred stock 40.1 34.1
Stockholders' deficit (241.1) (236.3)
-------- --------
Total liabilities and stockholders' deficit $ 322.0 $ 291.2
======== ========
