<PAGE>
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: December 29, 1999
SPIGADORO, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE
- --------------------------------------------------------------------------------
(State of other jurisdiction of incorporation)
0-22101 13-3920210
- ------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
70 East 55th Street, 24th Floor, New York, New York 10022
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: 212-754-4271
--------------
---------------------------------------------- ----------
(Former Address, if changed since Last Report) (Zip Code)
<PAGE>
ITEM 1 AND ITEM 2. CHANGE IN CONTROL OF REGISTRANT AND ACQUISITION OR
DISPOSITION OF ASSETS
On December 29, 1999, under a Stock Purchase Agreement dated as of
November 3, 1999 (the "Stock Purchase Agreement"), Spigadoro, Inc. f/k/a IAT
Multimedia, Inc. (the "Company") acquired all of the outstanding shares of
common stock of Petrini S.p.A. ("Petrini") from Gruppo Spigadoro, N.V. ("Gruppo
Spigadoro"). Petrini produces and sells animal feed and pasta and flour products
throughout Italy, the United States, Europe and Southeast Asia. As a result of
the transaction, the Company changed its name from IAT Multimedia, Inc. to
Spigadoro, Inc. In consideration for the Petrini shares, the Company (i) issued
an aggregate of 48,366,530 shares of its Common Stock, par value $.01 per share
(the "Common Stock"), of which 12,241,400 shares were issued at Gruppo
Spigadoro's request, to Carlo Petrini to satisfy part of Gruppo Spigadoro's
obligation to Mr. Petrini, and (ii) assumed approximately $20 million of short
term indebtedness of Gruppo Spigadoro. In assuming such debt, the Company
issued:
o a convertible promissory note to Gruppo Spigadoro in the principal amount of
approximately $6.3 million, which note accrues interest at a rate of 5% per
annum and matures upon the earlier of (i) the completion of a public
offering by the Company in which the Company realizes at least $20 million
of net proceeds or (ii) December 31, 2000. The note is convertible at any
time at the Company's option into shares of Common Stock at a conversion
price equal to the greater of $2.50 or 85% of the average closing price of
the Common Stock for the five trading days prior to the notice of
conversion. The Company repaid $1 million of the principal amount of such
note in December 1999;
o a non-interest bearing promissory note to Mr. Petrini in the principal
amount of $1.0 million, which note matures on March 31, 2000;
o a non-interest bearing promissory note to Mr. Petrini in the principal
amount of 12,050,000,000 Lire or approximately $6.4 million, which note
matures on June 30, 2000. The note will be repaid in Lire, but the maximum
amount payable under the note will not exceed the U.S. Dollar equivalent of
$7.0 million; and
o a non-interest bearing convertible promissory note to Mr. Petrini in the
principal amount of approximately $6.2 million, which note matures on
December 31, 2000. The note is convertible at any time at Mr. Petrini's
option into shares of Common Stock at a conversion price equal to the
greater of $2.50 or 85% of the average closing price of the Common Stock for
the five trading days prior to the notice of conversion.
Repayment of the $6.4 million and $6.2 million promissory notes by the
Company has been guaranteed by Gruppo Spigadoro and has been secured by
6,120,700 shares of Common Stock owned by Gruppo Spigadoro which have been
placed in escrow for the benefit of Mr. Petrini. If any of the these shares of
Common Stock are sold to satisfy the Company's obligations under these two
promissory notes, the Company will be required to
-2-
<PAGE>
compensate Gruppo Spigadoro for the loss of such shares by issuing an equal
number of shares of Common Stock to Gruppo Spigadoro.
Under the terms of the Stock Purchase Agreement, the Company agreed
that for so long as Gruppo Spigadoro (or its current shareholders), their
respective affiliates and Carlo Petrini collectively hold at least:
o 50% of the outstanding shares of Common Stock, Gruppo Spigadoro or its
assignees will have the right to nominate 50% of the members for election to
the Company's Board of Directors;
o 25% of the outstanding shares of Common Stock, Gruppo Spigadoro or its
assignees will have the right to nominate 25% of the members for election to
the Company's Board of Directors;
o 10% of the outstanding shares of Common Stock, Gruppo Spigadoro or its
assignees will have the right to nominate a single member for election to
the Company's Board of Directors.
As a result of the Petrini transaction, as of January 10, 2000, Gruppo
Spigadoro and Mr. Petrini beneficially owned approximately 59.3% and 20.1%,
respectively, of the outstanding Common Stock. Jacob Agam, the Company's
Chairman of the Board and Chief Executive Officer, is also Chairman of the Board
of Gruppo Spigadoro, Vertical Financial Holdings ("Vertical") and certain
affiliates of Vertical. Prior to the Petrini transaction, Vertical was the
largest beneficial owner of the Company's Common Stock. Entities affiliated with
Vertical Holdings have economic ownership of approximately 75% of the
outstanding common stock of Gruppo Spigadoro and have the power to vote
approximately 90% of the outstanding common stock of Gruppo Spigadoro and, as a
result, Vertical and entities affiliated with Vertical have the ability to vote
or direct the vote of approximately 54.9% of the Company's outstanding Common
Stock as of January 10, 2000.
Effective upon the closing of the Petrini transaction, the Company
added two new members to its Board of Directors, Mr. Petrini and Lucio De Luca,
both of whom are members of Petrini's management. In addition, Mr. De Luca was
appointed as the Chief Operating Officer of the Company, effective January 1,
2000.
The Company also entered into an Amended and Restated Employment
Agreement dated January 1, 2000 with Mr. Agam pursuant to which Mr. Agam will
serve as the Chief Executive Officer of the Company for an initial term of three
years with an annual base salary of $300,000, plus a bonus to be approved by the
Board of Directors. Under the agreement, Mr. Agam will be entitled to receive a
severance payment if his employment agreement is terminated without cause or for
constructive discharge equal to his base salary for the lesser of (i) the
remainder of the existing term of Mr. Agam's employment and (ii) one year from
the effective date of termination.
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<PAGE>
In addition, the Company entered into an Employment Agreement dated
January 1, 2000 with Mr. De Luca pursuant to which Mr. De Luca will serve as the
Chief Operating Officer of the Company for an initial term of three years with
an annual base salary of $55,000, housing expenses of up to $20,000 per year and
a bonus to be approved by the Board of Directors. Mr. De Luca also received a
one-time signing bonus of $75,000 and an initial grant of options to purchase
250,000 shares of Common Stock, which options vest over a period of three years.
Under the agreement, Mr. De Luca will be entitled to receive a severance payment
if his employment agreement is terminated without cause or for constructive
discharge equal to his base salary for the lesser of (i) the remainder of the
existing term of Mr. De Luca's employment and (ii) two years from the effective
date of termination. Mr. De Luca is also compensated by Petrini for services
rendered as the Chief Operating Officer of Petrini.
Each of the employment agreements provides for termination of the
executive's employment by the Company prior to the expiration of its term in the
event of the executive's death or disability or for cause. Each of the
executives has also agreed not to compete with the Company, solicit any of the
Company's customers or employees or disclose any confidential information or
trade secrets during the term of their employment agreement and for certain
periods of time following the termination of such employment agreement.
The Company intends to sell its computer business and has commenced
discussions relating to the sale of its computer business. However, no agreement
has been reached with any party regarding the terms of a potential transaction
and the Company cannot assure that it will be able to sell its computer business
on terms favorable to it or at all.
Statements in this report that are not descriptions of historical facts
are forward-looking statements that are subject to risks and uncertainties. Such
statements, including those regarding among other things, the Company's strategy
and future prospects, are dependent on any number of factors, including market
conditions, competition and the availability of financing, many of which are
outside of the Company's control. Actual results could differ materially from
those currently anticipated due to a number of factors, including those set
forth in the Company's Securities and Exchange Commission filings under "Risk
Factors", including the following: we are operating a new business; if we do not
successfully sell our computer business, the combined company may be adversely
affected; Vertical Financial Holdings and its affiliates have the power to
control Spigadoro; our strategy of acquiring other companies for growth may not
succeed and may adversely affect our financial condition and results of
operations; we are subject to numerous risks related to foreign operations; and
other risks.
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<PAGE>
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Financial Statements of the Business Acquired
PETRINI S.p.A.
Consolidated Balance Sheets Unaudited as of
September 30, 1999 and 1998 ................................ F-2
Consolidated Income Statements Unaudited for the Nine
Months Ended September 30, 1999 and 1998 ................... F-4
Consolidated Statements of Cash Flows Unaudited
for the Nine Months Ended September 30, 1999 and 1998 ...... F-5
Consolidated Statements of Shareholder's Equity Unaudited
for the Nine Months ended September 30, 1999 and 1998 ...... F-6
Notes to the Unaudited Consolidated Interim Financial
Statements as of September 30, 1999 and 1998 ............... F-7
Report of Independent Auditors ...............................F-11
Balance Sheets as of December 31, 1998 and 1997 ..............F-12
Statements of Income for the Years Ended December 31,
1998, 1997 and 1996 ........................................F-14
Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996 ........................................F-15
Statement of Shareholders' Equity for the Years Ended
December 31, 1998, 1997 and 1996 ...........................F-16
Notes to Financial Statements December 31, 1998, 1997
and 1996 ...................................................F-17
(b) Pro Forma Financial Information
SPIGADORO, INC. AND SUBSIDIARIES
Pro Forma Financial Information ..............................F-29
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 1999 .........................................F-30
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Nine Months Ended September 30, 1999 ....F-31
Unaudited Pro Forma Condensed Consolidated Statement of
Operations Year Ended December 31, 1998 ....................F-32
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements .......................................F-33
(c) Exhibits
2.1 Stock Purchase Agreement dated as of November 3, 1999 by and
between the Company and Gruppo Spigadoro, N.V.*
3.1(b) Certificate of Amendment of Amended and Restated
Certificate of Incorporation of the Company.
10.72 Employment Agreement dated January 1, 2000 by and between
the Company and Lucio De Luca.
10.73 Amended and Restated Employment Agreement dated January 1,
2000 by and between the Company and Jacob Agam.
10.74 Promissory Note issued to Gruppo Spigadoro, N.V. in the
principal amount of $6,337,000.
10.75 Promissory Note issued to Carlo Petrini in the principal
amount of $1,000,000.
10.76 Promissory Note issued to Carlo Petrini in the principal
amount of ITL 12,050,000,000.
10.77 Promissory Note issued to Carlo Petrini in the principal
amount of $6,150,000.
23.1 Consent of Reconta Ernst & Young
- ---------------
* Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999.
-5-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPIGADORO, INC.
By: /s/ Klaus Grissemann
-------------------------------
Klaus Grissemann
Chief Financial Officer
Date: January 12, 2000
-6-
<PAGE>
Consolidated Financial Statements of Petrini S.p.A.
F-1
<PAGE>
PETRINI S.P.A. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
AS OF SEPTEMBER 30, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1999 1998
--------------- ------------ ------------
(THOUSANDS (MILLIONS OF LIRE)
OF DOLLARS)(1)
<S> <C> <C> <C>
CURRENT ASSETS
Cash ........................................................... $ 110 208 2,348
Accounts receivable trade, net of allowance for doubtful
accounts of Lire 3,533 millions in 1999 and Lire 3,316 millions
in 1998 ....................................................... 35,909 67,761 71,928
Taxes receivable, principally V.A.T. ........................... 7,207 13,600 12,482
Deferred income taxes .......................................... 532 1,003 996
Inventory (Note 2) ............................................. 12,495 23,579 22,567
Cash to be transferred to factor (Note 3) ...................... 4,422 8,344 --
Other current assets ........................................... 1,212 2,287 2,927
--------- ------ ------
Total current assets ........................................... 61,887 116,782 113,248
PROPERTY, PLANT AND EQUIPMENT
Land and buildings ............................................. 22,911 43,234 43,045
Machinery, equipment and other ................................. 48,040 90,651 90,476
--------- ------- -------
70,951 133,885 133,521
--------- ------- -------
Accumulated depreciation ....................................... (44,826) (84,587) (81,745)
--------- ------- -------
Property, plant and equipment, net ............................. 26,125 49,298 51,776
INTANGIBLE ASSETS, at amortized cost ........................... 4,253 8,026 8,542
DEFERRED INCOME TAXES .......................................... 3,095 5,841 6,020
OTHER ASSETS ................................................... 2,652 5,005 4,206
--------- ------- -------
TOTAL ASSETS ................................................... $ 98,012 184,952 183,792
========= ======= =======
</TABLE>
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(1) Exchange rate: Lire 1,887 = U.S.$1 as of November 23, 1999
See accompanying notes
F-2
<PAGE>
PETRINI S.P.A. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
AS OF SEPTEMBER 30, 1999 AND 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1999 1999 1998
--------------- ------------ ------------
(THOUSANDS (MILLIONS OF LIRE)
OF DOLLARS)(1)
<S> <C> <C> <C>
CURRENT LIABILITIES
Short-term borrowings .................................. $ 21,945 41,410 52,100
Current portion of long-term debt ...................... 2,473 4,666 4,333
Liability to factor (Note 3) ........................... 4,422 8,344 --
Accounts payable trade ................................. 17,545 33,111 31,637
Income taxes payable ................................... 1,377 2,598 2,283
Accrued payroll and social contributions ............... 2,873 5,422 6,623
Other current liabilities .............................. 1,369 2,585 3,067
--------- ------ ------
Total current liabilities ............................. 52,004 98,136 100,043
LONG-TERM DEBT, less current portion ................... 7,355 13,878 12,920
EMPLOYEES AND AGENTS
TERMINATION INDEMNITIES ............................... 8,333 15,724 16,336
DEFERRED INCOME, unearned portion of
Government grants ..................................... 1,199 2,263 2,448
SOCIAL CONTRIBUTIONS AND INCOME
TAXES PAYABLE, less current portion ................... 2,510 4,736 4,095
SHAREHOLDERS' EQUITY
Share capital 40.7 million ordinary shares,
authorized, issued and outstanding, par value
Lire one thousand per share ......................... 21,569 40,700 40,700
Additional paid-in capital ............................ 2,781 5,248 5,248
Less step-up applicable to predecessor owners ......... (11,751) (22,175) (22,175)
--------- ------- -------
12,599 23,773 23,773
Accumulated other comprehensive income ................. 30 57 --
Retained earnings ...................................... 13,982 26,385 24,177
--------- ------- -------
Total shareholders' equity ............................ 26,611 50,215 47,950
--------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY ................................................ $ 98,012 184,952 183,792
========= ======= =======
</TABLE>
- ----------
(1) Exchange rate: Lire 1,887 = U.S.$1 as of November 23, 1999
See accompanying notes
F-3
<PAGE>
PETRINI S.P.A. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1999 1998
-------------------- ------------------- ----------------
(THOUSANDS (MILLIONS OF LIRE)
OF DOLLARS)(1)
<S> <C> <C> <C>
NET SALES ................................... $ 103,224 194,783 200,356
COST OF SALES ............................... 74,214 140,042 148,964
------------- ------- -------
GROSS PROFIT ................................ 29,010 54,741 51,392
OPERATING COSTS AND EXPENSES
Selling expenses ............................ 19,332 36,480 36,579
General and administrative expenses ......... 5,768 10,884 8,658
------------- ------- -------
25,100 47,364 45,237
------------- ------- -------
INCOME FROM OPERATIONS ...................... 3,910 7,377 6,155
OTHER (INCOME) EXPENSES
Net interest expense ....................... 861 1,625 3,265
Other expenses, net ........................ 271 511 17
------------- ------- -------
1,132 2,136 3,282
------------- ------- -------
INCOME BEFORE INCOME TAXES .................. 2,778 5,241 2,873
INCOME TAXES (Note 8) ....................... 1,961 3,700 2,711
------------- ------- -------
NET INCOME .................................. $ 817 1,541 162
============= ======= =======
EARNINGS PER SHARE .......................... U.S.$0.02 Lire 38 Lire 4
============= ========= ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING ......................... 40.7 Million 40.7 Million 40.7 Million
============= =========== ============
</TABLE>
- ----------
(1) Exchange rate: Lire 1,887 = U.S.$1 as of November 23, 1999
See accompanying notes
F-4
<PAGE>
PETRINI S.P.A. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1999 1998
--------------- ----------- -----------
(THOUSANDS (MILLIONS OF LIRE)
OF DOLLARS)(1)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME ...................................................... $ 817 1,541 162
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation .................................................... 1,607 3,032 3,231
Amortization .................................................... 538 1,015 942
Provision for employees and agents termination indemnities ...... 896 1,690 1,599
Provision for doubtful accounts ................................. 797 1,503 671
Deferred income taxes ........................................... (179) (337) 5
Other non cash items ............................................ 498 938 (303)
Payment of employees and agents termination indemnities ......... (971) (1,832) (2,402)
Changes in operating assets and liabilities:
Accounts receivable trade ..................................... 2,557 4,825 269
Government grants ............................................. -- -- 3,244
Inventories ................................................... 813 1,534 4,209
Accounts payable trade ........................................ (1,330) (2,510) (1,611)
Accrued payrolland social contributions ....................... (293) (552) 1,978
Other -- net .................................................. 718 1,355 (2,027)
-------- ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES ........................ 5,472 10,326 9,967
CASH FLOWS FROM INVESTING ACTIVITIES
Disbursements for additions to property, plant and equipment..... (1,048) (1,977) (2,187)
Proceeds from disposal of property, plant and equipment ......... 224 423 38
Additions to intangible assets .................................. (490) (925) (384)
-------- ------ ------
NET CASH USED IN INVESTING ACTIVITIES ............................ (1,314) (2,479) (2,533)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt .................................... 5,285 9,972 314
Payments of long-term debt ...................................... (3,781) (7,135) (5,666)
Loan to Parent Company .......................................... (232) (437) --
Net change in short-term borrowings ............................. (5,791) (10,927) (1,022)
-------- ------- ------
NET CASH USED IN FINANCING ACTIVITIES ............................ (4,519) (8,527) (6,374)
EFFECT OF EXCHANGE RATE CHANGES ON CASH .......................... 10 19 --
-------- ------- ------
NET INCREASE (DECREASE) IN CASH .................................. (351) (661) 1,060
CASH AT BEGINNING OF PERIOD ...................................... 461 869 1,288
-------- ------- ------
CASH AT END OF PERIOD ............................................ $ 110 208 2,348
======== ======= ======
</TABLE>
- ----------
(1) Exchange rate: Lire 1,887 = U.S.$1 as of November 23, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Supplemental information:
-- Interest paid ............. $1,293 2,319 3,533
====== ===== =====
-- Income taxes paid ......... $1,499 2,687 828
====== ===== =====
</TABLE>
Cash disbursements for additions to fixed assets in the nine months ended
September 30, 1999 and 1998 were respectively Lire 673 and Lire 467 higher than
the additions of the period, due to the time delay between the recording of the
additions and the related payments.
See accompanying notes
F-5
<PAGE>
PETRINI S.P.A. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
UNAUDITED
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
(IN MILLIONS OF LIRE, EXCEPT AS OTHERWISE INDICATED)
<TABLE>
<CAPTION>
ELIMINATION
OF STEP-UP
ADDITIONAL APPLICABLE TO
SHARE PAID-IN PREDECESSOR
CAPITAL CAPITAL OWNERS SUBTOTAL
--------- ------------ --------------- ----------
<S> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31,
1997 ................ 40,700 5,248 (22,175) 23,773
NET INCOME NINE
MONTHS 1998 ......... ------ ----- -------- ------
BALANCE AT
SEPTEMBER 30,
1998 ................ 40,700 5,248 (22,175) 23,773
====== ===== ======= ======
BALANCE AT
DECEMBER 31,
1998 ................ 40,700 5,248 (22,175) 23,773
NET INCOME NINE
MONTHS 1999 .........
FOREIGN
CURRENCY
TRANSLATION
ADJUSTMENTS ......... ------ ----- -------- ------
BALANCE AT
SEPTEMBER 30,
1999 ................ 40,700 5,248 (22,175) 23,773
====== ===== ======= ======
BALANCE AT
SEPTEMBER 30,
1999 in thousands of
dollars (1) ......... $21,569 $2,781 $ (11,751) $12,599
======= ====== ========= =======
<CAPTION>
RETAINED EARNINGS
--------------------------------
ACCUMULATED OTHER
OTHER RETAINED TOTAL
COMPREHENSIVE LEGAL EARNINGS SHAREHOLDERS'
INCOME RESERVE (DEFICIT) SUBTOTAL EQUITY
-------------- --------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31,
1997 ................ 269 23,746 24,015 47,788
NET INCOME NINE
MONTHS 1998 ......... 162 162 162
------ --- ------ ------ ------
BALANCE AT
SEPTEMBER 30,
1998 ................ -- 269 23,908 24,177 47,950
== === ====== ====== ======
BALANCE AT
DECEMBER 31,
1998 ................ 269 24,575 24,844 48,617
NET INCOME NINE
MONTHS 1999 ......... 1,541 1,541 1,541
FOREIGN
CURRENCY
TRANSLATION
ADJUSTMENTS ......... 57 57
-- --- ------ ------ -------
BALANCE AT
SEPTEMBER 30,
1999 ................ 57 269 26,116 26,385 50,215
== === ====== ====== ======
BALANCE AT
SEPTEMBER 30,
1999 in thousands of
dollars (1) ......... $30 $143 $13,839 $13,982 $26,611
=== ==== ======= ======= =======
</TABLE>
- ----------
(1) Exchange rate: Lire 1,887 = U.S.$1 as of November 23, 1999
See accompanying notes
F-6
<PAGE>
PETRINI S.P.A. AND SUBSIDIARY
NOTES TO THE UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1999 AND 1998
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim consolidated financial statements include the
financial statements of Petrini S.p.A. (the "Company") and its wholly owned
subsidiary Petrini Foods International Inc. ("PFI").
The Company formed PFI for the purpose of acquiring from its former
distributor the business of distributing its Spigadoro products in the United
States. The acquisition was completed in the third quarter of 1998 but the
effects of the acquisition and the operations of PFI were immaterial in 1998.
The accompanying interim financial statements are presented in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP") for interim financial information. Accordingly, they do not
include all the information and footnotes required by U.S. GAAP.
The basis of presentation and the significant accounting policies are
reported in the notes to the audited financial statements presented for each of
the three years in the period ended December 31, 1998.
The consolidated interim financial statements have been prepared applying
the following principles of consolidation:
i) all significant intercompany transactions and balances are
eliminated; unrealized intercompany gains and losses are also eliminated;
ii) the financial statements of the U.S. subsidiary are translated into
Lire using the current exchange rate at the end of the period for balance
sheet items and the average exchange rates for the period for statement of
income items. The translation differences are recorded as accumulated other
comprehensive income in consolidated shareholders' equity.
The consolidated financial statements contain all adjustments consisting of
normal recurring adjustments, which are, in the opinion of management of the
Company, necessary to present fairly the consolidated financial position of the
Company and of its wholly owned subsidiary as of September 30, 1999 and 1998 and
the related consolidated results of operations and cash flows for the nine month
periods ended September 30, 1999 and 1998.
Results of operations for the periods presented are not necessarily
indicative of the results of operations for the full fiscal years. These
consolidated financial statements should be read in conjunction with the audited
financial statements presented for each of the three years in the period ended
December 31, 1998.
Information expressed in U.S. Dollars
The consolidated financial statements are stated in Italian Lire, the
currency of the country in which the Company, which represents 99% of total
consolidated revenue, is incorporated and operates. Translation of Lire amounts
into U.S. Dollar amounts is included solely for the convenience of the readers
and has been made at the rate of Lire 1,887 to U.S.$1, the Noon Buying Rate of
the Federal Reserve Bank of New York at November 23, 1999. Such translation
should not be construed as a representation that the Lire amounts could be
converted into U.S. Dollars at that or any other rate.
F-7
<PAGE>
PETRINI S.P.A. AND SUBSIDIARY
NOTES TO THE UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AS OF SEPTEMBER 30, 1999 AND 1998
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
2. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
--------------- --------------
<S> <C> <C>
Raw materials and consumables ......... 15,929 15,362
Work-in-process ....................... 1,681 1,866
Finished goods ........................ 5,969 5,339
------ ------
23,579 22,567
====== ======
</TABLE>
3. FACTORING OF RECEIVABLES
In June 1999 the Company executed a contract with a factoring agency for
the sale without recourse of trade receivables with a carrying value of Lire
27,900 for a price of Lire 27,600. Pursuant to the contract, the Company
continues to collect and account for the collection of the receivables sold to
the factoring agency. The amount of such collections are reported as a
restricted asset and a contra liability to the factoring agency in the balance
sheet as of September 30, 1999.
On November 12, 1999 the Company executed another contract with a
factoring agency for the sale of trade receivables with a carrying value of
Lire 9,700.
4. CONTINGENCIES
The Company provides for costs related to contingencies when a loss is
probable and the amount is reasonably determinable. No changes have occurred in
the matters described in the notes to the audited financial statements for 1998
with respect to:
a) the modifications to the general regulatory plan of the City Council
of Bastia Umbra that, applying a rezoning of the land on which the
Company's largest plant for the production of both pasta and animal feed is
located, could require the Company to terminate operations at this plant;
and to
b) the agreements with the workers of co-operatives to limit the risks
connected to the eventual future request of the workers to be recognized as
employees of the Company.
5. INFORMATION BY SEGMENT
The Company manages its business on a segment basis. The significant
segments operated by the Company consist of: i) pasta and other food products
and ii) animal feed and other activities. Information relative to significant
segments is reported below for the nine month periods ended September 30, 1999
and 1998. The Company evaluates performance of the segments based on EBITDA and
income from operations. The accounting policies of the segment are
substantially the same as those described in Note 1.
F-8
<PAGE>
PETRINI S.P.A. AND SUBSIDIARY
NOTES TO THE UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AS OF SEPTEMBER 30, 1999 AND 1998
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
5. INFORMATION BY SEGMENT (CONTINUED)
<TABLE>
<CAPTION>
ANIMAL
PASTA AND FEED AND
OTHER FOOD OTHER TOTAL
PRODUCTS ACTIVITIES GROUP
------------ ------------ ----------
<S> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30, 1999
Total revenue .............................................. 51,962 142,821 194,783
Depreciation and amortization .............................. 932 3,115 4,047
EBITDA ..................................................... 2,355 8,558 10,913
Income from operations ..................................... 1,561 5,816 7,377
Identifiable long-term assets (property, plant and equipment
and intangibles) .......................................... 12,188 45,136 57,324
Capital expenditures ....................................... 211 1,093 1,304
NINE MONTHS ENDED SEPTEMBER 30,1998
Total revenue .............................................. 52,727 147,629 200,356
Depreciation and amortization .............................. 919 3,254 4,173
EBITDA ..................................................... 307 10,021 10,328
Income (loss) from operations .............................. (612) 6,767 6,155
Identifiable long-term assets (property plant and equipment
and intangibles) .......................................... 15,703 44,615 60,318
Capital expenditures ....................................... 549 1,172 1,720
</TABLE>
6. DISCONTINUED LINE OF BUSINESS
In 1999 the Company decided to discontinue the pig and chicken breeding
activity. Reported operating data related to the discontinued line of business
follow:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------
1999 1998
---------------------------- ---------
(THOUSANDS OF
DOLLARS) (1)
<S> <C> <C> <C>
Net sales ...................................................... 2,295 4,331 2,553
Cost of sales .................................................. 2,791 5,266 2,878
----- ----- -----
(496) (935) (325)
Operating expenses ............................................. 119 224 117
----- ----- -----
Operating loss from discontinued breeding activity ............. (615) (1,159) (442)
Income taxes ................................................... (240) (452) (191)
----- ------ -----
Loss from discontinued breeding activity, net of taxes ......... (375) (707) (351)
===== ====== =====
</TABLE>
- ----------
(1) Exchange rate Lire 1,887 = U.S.$1 as of November 23, 1999
The discontinued line of business was operated directly and indirectly
through agreements with external breeders. Starting October 1, 1999 the plant
leased for such activity under an operating lease has been subleased to other
breeders. Terms of the lease (Lire 150 annual rent with a duration of two
years) have been applied to the sublease agreement. Starting the same date
October 1, 1999, own premises and
F-9
<PAGE>
PETRINI S.P.A. AND SUBSIDIARY
NOTES TO THE UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AS OF SEPTEMBER 30, 1999 AND 1998
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
6. DISCONTINUED LINE OF BUSINESS (CONTINUED)
plants, with a net book value at September 30, 1999 of Lire 2,571 have been
rented for an annual rent of Lire 200 for a period of five years. No decision
has been taken to date on the remaining own plants, with a net book value at
September 30, 1999 of Lire 2,295. Management believes that the book value of
such assets approximates its fair value and no material impairment will derive
from the disposition of such assets.
7. COMPREHENSIVE INCOME AND RELATED COMPONENTS
The only addition to net income for the disclosure of comprehensive income
for the nine month period ended September 30, 1999 is solely with respect to
foreign currency translation adjustments of Lire 57. Accordingly, comprehensive
income for this period amounts to Lire 1,598. No components of comprehensive
income was present for the corresponding period of 1998.
8. INCOME TAXES
The decrease of 23 percentage points in the tax rate (from 94% for the
nine month period ended September 30, 1998 to 71% for the nine month period
ended September 30, 1999) is substantially due to the higher level of taxable
income in the current period compared with the corresponding period in 1998,
while the two major items of permanent differences (consisting of salaries and
interest costs which are undeductible for purposes of the Regional income tax,
IRAP), did not vary substantially in the two comparative periods (for further
details, see reconciliation of the statutory tax rate to the effective tax
rate, reported in Note 3 to the audited financial statements at December 31,
1998 and 1997 and for each of the three years in the period ended December 31,
1998).
F-10
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of Petrini S.p.A.
We have audited the accompanying balance sheets of Petrini S.p.A. as of
December 31, 1998 and 1997 and the related statements of income, cash flows and
shareholders' equity for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Petrini S.p.A. as of December
31, 1998 and 1997 and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
accounting principles generally accepted in the United States of America.
Reconta Ernst & Young S.p.A.
Perugia, Italy
October 14, 1999, except for the convenience translation of the financial
statements into U.S. Dollars as to which the date is November 23, 1999.
F-11
<PAGE>
PETRINI S.P.A
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1998 1997
--------------- ------------ ------------
(THOUSANDS (MILLIONS OF LIRE)
OF DOLLARS)(1)
<S> <C> <C> <C>
CURRENT ASSETS
Cash ................................................... $ 461 869 1,288
Accounts receivable trade, net of allowance for doubtful
accounts of Lire 2,686 millions in 1998 and Lire 2,646
millions in 1997 ..................................... 38,916 73,435 72,868
Taxes receivable (Note 3) .............................. 6,958 13,129 11,278
Inventories (Note 4) ................................... 13,313 25,121 26,776
Deferred income taxes (Note 3) ......................... 275 518 402
Government grant (Note 5) .............................. -- -- 3,244
Other current assets ................................... 1,104 2,084 1,447
--------- ------ ------
Total current assets ................................. 61,027 115,156 117,303
PROPERTY, PLANT AND EQUIPMENT
Land and buildings ..................................... 22,907 43,226 42,870
Machinery, equipment and other ......................... 48,070 90,708 88,367
--------- ------- -------
70,977 133,934 131,237
Accumulated depreciation ............................... (43,626) (82,322) (78,579)
--------- ------- -------
Property, plant and equipment, net ..................... 27,351 51,612 52,658
INTANGIBLE ASSETS, at amortized cost (Note 6) ........... 4,445 8,388 9,100
DEFERRED INCOME TAXES (Note 3) .......................... 3,174 5,989 6,112
OTHER ASSETS (Note 7) ................................... 2,939 5,545 2,552
--------- ------- -------
TOTAL ASSETS ......................................... $ 98,936 186,690 187,725
========= ======= =======
</TABLE>
- ----------
(1) Exchange rate: Lire 1,887 = U.S. $1 as of November 23, 1999
See accompanying notes
F-12
<PAGE>
PETRINI S.P.A
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998 1998 1997
--------------- ------------ ------------
(THOUSANDS (MILLIONS OF LIRE)
OF DOLLARS)(1)
<S> <C> <C> <C>
CURRENT LIABILITIES
Short-term borrowings (Note 8) ................................. $ 27,736 52,337 53,122
Current portion of long-term debt (Note 9) ..................... 2,261 4,266 8,107
Accounts payable trade ......................................... 19,234 36,295 33,715
Income taxes payable ........................................... 610 1,151 748
Accrued payroll and social contributions ....................... 3,166 5,974 4,645
Other current liabilites ....................................... 1,449 2,735 2,600
--------- ------ ------
Total current liabilities .................................... 54,456 102,758 102,937
LONG-TERM DEBT, less current portion (Note 9): .................. 6,064 11,442 14,498
EMPLOYEES AND AGENTS TERMINATION
INDEMNITIES (Note 10) .......................................... 8,868 16,735 17,442
DEFERRED INCOME, unearned portion of Government
grant (Note 5) ................................................. 1,273 2,402 2,587
SOCIAL CONTRIBUTIONS AND INCOME TAXES
PAYABLE (Note 11) .............................................. 2,510 4,736 2,473
SHAREHOLDERS' EQUITY (Note 12):
Share capital 40.7 million ordinary shares, authorized,
issued and outstanding, par value
Lire one thousand per share .................................. 21,569 40,700 40,700
Additional paid-in capital ..................................... 2,781 5,248 5,248
Less step-up applicable to predecessor owners (Note 1) ......... (11,751) (22,175) (22,175)
--------- ------- -------
12,599 23,773 23,773
Retained earnings .............................................. 13,166 24,844 24,015
--------- ------- -------
Total shareholders' equity ................................... 25,765 48,617 47,788
--------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY ...................................................... $ 98,936 186,690 187,725
========= ======= =======
</TABLE>
- ----------
(1) Exchange rate: Lire 1,887 = U.S. $1 as of November 23, 1999
See accompanying notes
F-13
<PAGE>
PETRINI S.P.A
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1998 1997 1996
--------------- -------------- ------------------- -------------
(THOUSANDS (MILLIONS OF LIRE)
OF DOLLARS)(1)
<S> <C> <C> <C> <C>
NET SALES (Note 16) .......................... $141,127 266,307 294,859 320,292
COST OF SALES ................................ 104,347 196,902 224,216 244,490
-------- ------- ------- -------
GROSS PROFIT ................................. 36,780 69,405 70,643 75,802
OPERATING COSTS AND EXPENSES
Sellling expenses ........................... 24,480 46,194 47,633 48,638
General and administrative expenses ......... 7,800 14,719 16,079 15,717
-------- ------- ------- -------
32,280 60,913 63,712 64,355
-------- ------- ------- -------
INCOME FROM OPERATIONS ....................... 4,500 8,492 6,931 11,447
OTHER INCOME (EXPENSES)
Net interest expense ........................ 2,111 3,984 5,618 7,124
Other (income) expenses, net ................ 49 92 598 (72)
-------- ------- ------- -------
2,160 4,076 6,216 7,052
-------- ------- ------- -------
INCOME BEFORE INCOME TAXES ................... 2,340 4,416 715 4,395
INCOME TAXES (Note 3) ........................ 1,901 3,587 437 2,313
-------- ------- ------- -------
NET INCOME ................................... $ 439 829 278 2,082
======== ======= ======= =======
EARNINGS PER SHARE ........................... U.S. $0.01 Lire 20 Lire 7 Lire 51
=============== ============ ============== ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING .......................... 40.7 Million 40.7 Million 40.7 Million 40.7 Million
=============== ============ ============== ============
</TABLE>
- ----------
(1) Exchange rate: Lire 1,793 = U.S. $1 as of October 14, 1999
See accompanying notes
F-14
<PAGE>
PETRINI S.P.A
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1998 1997 1996
--------------- ----------- ----------- -----------
(THOUSANDS (MILLIONS OF LIRE)
OF DOLLARS)(1)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME ........................................................... $ 439 829 278 2,082
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ....................................................... 2,301 4,342 4,111 3,980
Amortization ....................................................... 676 1,276 1,207 1,072
Provision for employees and agents termination indemnities
(Note 10) ......................................................... 1,148 2,167 2,550 2,374
Provision for doubtful accounts (Note 17) .......................... 737 1,391 982 1,178
Deferred income taxes (Note 3) ..................................... 4 7 (39) 1,094
Other non cash items, net .......................................... 122 230 637 (61)
Payment of employees and agents termination indemnities ............ (1,270) (2,397) (2,332) (1,832)
Changes in operating assets and liabilities:
Accounts receivable trade ......................................... (1,038) (1,958) (1,862) 471
Inventories (Note 4) .............................................. 877 1,655 1,286 3,191
Accounts payable trade ............................................ 1,104 2,084 (3,611) (4,313)
Accrued payroll and social contributions .......................... 704 1,329 (1,947) 476
Other, net ........................................................ (125) (236) (3,051) (1,412)
-------- ------ ------ ------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES ........................................................... 5,679 10,719 (1,791) 8,300
CASH FLOWS FROM INVESTING ACTIVITIES
Disbursements for additions to property, plant and equipment ......... (1,625) (3,067) (6,876) (6,741)
Proceeds from disposal of property, plant and equipment .............. 135 255 866 306
Additions to intangible assets ....................................... (341) (644) (812) (50)
-------- ------ ------ ------
NET CASH USED IN INVESTING ACTIVITIES ................................. (1,831) (3,456) (6,822) (6,485)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt (Note 9) ................................ 641 1,210 7,549 3,766
Payments of long-term debt (Note 9) .................................. (4,296) (8,107) (6,118) (5,476)
Net change in short-term borrowings (Note 8) ......................... (416) (785) 6,856 (1,296)
-------- ------ ------ ------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES ........................................................... (4,071) (7,682) 8,287 (3,006)
-------- ------ ------ ------
NET DECREASE IN CASH .................................................. (223) (419) (326) (1,191)
CASH AT BEGINNING OF YEAR ............................................. 684 1,288 1,614 2,805
-------- ------ ------ ------
CASH AT END OF YEAR ................................................... $ 461 869 1,288 1,614
======== ====== ====== ======
- ------------
(1) Exchange rate: Lire 1,887 = U.S. $1 as of November 23, 1999
Supplemental information:
- -- Interest paid ...................................................... $ 2,427 4,580 5,801 7,462
======== ====== ====== ======
- -- Income taxes paid .................................................. $ 2,328 4,393 1,371 --
======== ====== ====== ======
</TABLE>
Cash disbursements for additions to fixed assets in 1998 were Lire 496 lower
than the additions of the period, in 1997 were Lire 2,126 higher and in 1996
were Lire 1,963 lower than the additions, due to the time delay between the
recording of the addition and the related payment.
See accompanying notes
F-15
<PAGE>
PETRINI S.P.A
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF LIRE, EXCEPT AS OTHERWISE INDICATED)
<TABLE>
<CAPTION>
ELIMINATION
OF STEP-UP
APPLICABLE TO
ADDITIONAL PREDECESSOR
SHARE PAID-IN OWNERS
CAPITAL CAPITAL (NOTE 1) SUB-TOTAL
--------- ------------ -------------- ----------
<S> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1995 .............. 40,700 5,248 (22,175) 23,773
TRANSFER ........................
NET INCOME 1996 ................. ------ ----- -------- ------
BALANCE AT
DECEMBER 31, 1996 .............. 40,700 5,248 (22,175) 23,773
TRANSFER ........................
NET INCOME 1997 ................. ------ ----- -------- ------
BALANCE AT
DECEMBER 31, 1997 .............. 40,700 5,248 (22,175) 23,773
TRANSFER ........................
NET INCOME 1998 ................. ------ ----- -------- ------
BALANCE AT
DECEMBER 31, 1998 .............. 40,700 5,248 (22,175) 23,773
====== ===== ======= ======
BALANCE AT
DECEMBER 31, 1998
in thousands of dollars (1)..... $21,569 $2,927 $ (12,368) $13,259
======= ====== ========= =======
<CAPTION>
RETAINED EARNINGS
-------------------------------------
OTHER
RETAINED TOTAL
LEGAL EARNINGS SHAREHOLDERS'
RESERVE (DEFICIT) SUB-TOTAL EQUITY
--------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1995 .............. 255 21,400 21,655 45,428
TRANSFER ........................ 8 (8) -- --
NET INCOME 1996 ................. 2,082 2,082 2,082
--- -------- ------ ------
BALANCE AT
DECEMBER 31, 1996 .............. 263 23,474 23,737 47,510
TRANSFER ........................ 6 (6) -- --
NET INCOME 1997 ................. 278 278 278
--- -------- ------ ------
BALANCE AT
DECEMBER 31, 1997 .............. 269 23,746 24,015 47,788
TRANSFER ........................ -- --
NET INCOME 1998 ................. 829 829 829
--- -------- ------ ------
BALANCE AT
DECEMBER 31, 1998 .............. 269 24,575 24,844 48,617
=== ======== ====== ======
BALANCE AT
DECEMBER 31, 1998
in thousands of dollars (1)..... $150 $13,706 $13,856 $27,115
==== ======== ======= =======
</TABLE>
- ----------
(1) Exchange rate: Lire 1,887 = U.S. $1 as of November 23, 1999
See accompanying notes
F-16
<PAGE>
PETRINI S.P.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Petrini S.p.A (the "Company") principally produces and sells pasta, flour
and animal feed. The production is located in Italy in seven factories.
Financial data by segment are included in Note 16.
The Company was established in 1988 through a leveraged buy-out by members
of management who then owned 37% of the predecessor company. Upon completion of
the leveraged buy-out, the members of management who had also been predecessor
owners owned 76% of the Company. As of September 6, 1998, before the sale of the
shares to Gruppo Spigadoro N.V., the members of management owned a 67% interest
in the Company, while the remaining 33% interest was owned by a third party. For
Italian accounting purposes the purchase of the predecessor company by the
Company was accounted for as a purchase by new controlling investors for which
there was a complete change in the basis of accounting for net assets acquired
based on the fair value of the transaction at the date of the transaction.
On August 6, 1998 Vertical Capital Limited ("VCL") Channel Islands a
subsidiary of the Vertical Group underwrote a stock purchase agreement with
Carlo and Giorgio Petrini for the purchase of their 67% interest in the Company.
Subsequently, such purchase agreement was transferred to Gruppo Spigadoro by its
parent company to which the contract had been transferred by VCL. Also, at
December 31, 1998 Gruppo Spigadoro held an option to purchase from a third party
the remaining 33% interest of the Company.
The Company is a legal entity incorporated under the laws of Italy and its
books and records are maintained in conformity with Italian statutory and tax
requirements, applying generally accepted accounting principles in Italy
("Italian GAAP"). To comply with the accounting principles generally accepted
in the United States of America ("U.S. GAAP"), the accompanying financial
statements include adjustments to reduce the step-up in the basis of assets (as
a result of the management leveraged buy-out mentioned above) related to the
37% interest owned by the controlling shareholder in the predecessor company,
to eliminate revaluations of fixed assets recorded after the leveraged buy-out,
to recognize the equity tax as a cost of the period, to write-off certain
expenses which were capitalized or deferred and to recognize deferred tax
assets on all significant temporary differences between the book value and tax
basis of assets and liabilities, in addition to certain other minor
adjustments.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and the accompanying notes. Actual results could differ from those
estimates.
INVENTORIES -- Inventories are carried at the lower of cost or market
value, using the weighted average cost method.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment is stated
at cost.
DEPRECIATION -- Depreciation is computed on the cost of the assets using
the straight line method over the estimated useful lives of the assets, as
follows:
<TABLE>
<S> <C>
Buildings ................................. 1.8%-10%
Machinery and equipment and other ......... 4.5%-25%
</TABLE>
LONG-LIVED ASSETS -- Impairments on long lived assets are recorded when
indicators of an other than temporary impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. Long-lived assets to be disposed of are recorded at
the lower of cost and net realizable value.
F-17
<PAGE>
PETRINI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS -- Goodwill arose from the 1988 leverage buy-out. It
represents the excess of the purchase price over the fair values of tangible and
intangible assets. Amortization is computed on a straight-line basis over 20
years, the estimated future period to be benefited. Trademarks represent the
amount of the purchase price allocated to the "Supermangimi Petrini" tradename
as determined by independent appraisers. Amortization is provided on a straight
line basis over 17 years. Other intangible assets represent primarily patents
and software costs and are amortized over their respective lives, not longer
than five years.
GOVERNMENT GRANTS -- Government grants on new property, plant and equipment
acquired in accordance with Government's plans are recorded when authorized.
Such grants are deferred and are recognized to income on the basis of the
depreciation of the related assets.
REVENUE RECOGNITION -- Revenue from sale of products is recorded when
ownership is transferred to the customers, which is when shipment is made. It is
not Company's policy to accept returns; in specific cases returns are accepted,
however the Company has not experienced any significant amounts of such returns.
Revenue is presented net of returns and net of quantity, cash and other
discounts.
INCOME TAXES -- Income taxes are accounted for under the liability method
and reflect the tax effect of significant temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. A valuation allowance against deferred tax assets is recognized if,
based on the weight of the evidence available, it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
STATEMENTS OF CASH FLOWS -- The Company's short-term borrowings arise
primarily through short-term credit facilities. The short-term borrowings are
normally payable on demand. The cash flows from these items are included under
the caption "Net change in short-term borrowings" in the Statements of Cash
Flows.
INFORMATION EXPRESSED IN U.S. DOLLARS -- The financial statements are
stated in Italian Lire, the currency of the country in which the Company is
incorporated and operates. Translation of Lire amounts into U.S. Dollar amounts
is included solely for the convenience of the readers and has been made at the
rate of Lire 1,887 to U.S.$1, the Noon Buying Rate of the Federal Reserve Bank
of New York at November 23, 1999. Such translation should not be construed as a
representation that the Lire amounts could be converted into U.S. Dollars at
that or any other rate.
EARNINGS PER SHARE ("EPS") -- The EPS for each of the three years in the
period ended December 31, 1998 have been calculated on the basis of the weighted
average number of shares outstanding during the year in accordance with SFAS No.
128 "Earnings per Share".
3. TAXES
V.A.T. Taxes
Taxes receivable of Lire 13,129 at December 31, 1998 and Lire 11,278 at
December 31, 1997 relate principally to V.A.T. taxes for which the Company
periodically receives reimbursement from the V.A.T. office. The V.A.T.
receivable position derives from the fact that the V.A.T. rate applicable to the
products sold by the Company is lower than the average rate applied to its
purchases, costs and expenses.
F-18
<PAGE>
PETRINI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
3. TAXES (CONTINUED)
Income Taxes
Income before income taxes and the provision for income taxes consisted of
the following for the years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------- --------- -----------
<S> <C> <C> <C>
Income before income taxes .......... 4,416 715 4,395
Provision for income taxes:
Current ............................ (3,580) (476) (1,219)
Deferred ........................... (7) 39 (1,094)
--------- ---- ------
(3,587) (437) (2,313)
-------- ---- ------
Net income .......................... 829 278 2,082
======== ==== ======
</TABLE>
A reconciliation between the Italian statutory tax rate and the effective
tax rate is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------- -------------------- --------------------
AMOUNT % AMOUNT % AMOUNT %
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Tax provision applying the Italian
statutory rate of 41.25% in 1998 and
of 53.2% in 1997 and 1996 ................... 1,822 41.2 380 53.2 2,338 53.2
Permanent differences for non
deductible expenses:
-- for IRPEG -- ILOR ........................ 349 7.9 814 113.8 696 15.8
-- for IRAP (primarily on salaries
and interest) ............................. 1,416 32.1 -- -- -- --
Tax savings resulting from tax
exemptions for ILOR tax purposes ............ -- -- (404) (56.5) (721) (16.4)
Tax legislation to introduce the IRAP
tax and eliminate the ILOR tax .............. -- -- (353) (49.4) -- --
----- ---- ---- ------ ----- ------
Tax provision and effective tax rate ......... 3,587 81.2 437 61.1 2,313 52.6
===== ==== ==== ====== ===== ======
</TABLE>
The Italian statutory tax rate for 1997 and 1996 was 53.2% comprised of a
37% national tax ("IRPEG") and 16.2% local tax ("ILOR"). Because a significant
portion of the Company's operations were exempt from ILOR taxes, it has
effectively paid taxes at the 37% tax rate rather than at the statutory rate of
53.2%. A valuation allowance has been recorded at December 31, 1996 and in prior
years to reduce the deferred tax assets, which were calculated on the basis of
the statutory tax rate of 53.2%, to an amount estimated to be recovered at the
rate of 37%, and the deferred tax liabilities for those years have been provided
at the IRPEG tax rate of 37%, the estimated rate at which the taxes would be
paid when the temporary differences reverse.
A tax law to introduce the Regional Tax on Productive Activities ("IRAP")
was enacted in December 1997 which eliminated the ILOR tax (at a statutory rate
of 16.2%) and other indirect taxes and replaced them with IRAP, at a statutory
rate of 4.25%, on a higher taxable income (principally excluding labour costs
and interest), starting on January 1, 1998. The Italian statutory rate for 1998
was 41.25% comprised of 37% IRPEG and 4.25% IRAP. Accordingly, at December 31,
1997, after the new tax law to introduce the IRAP tax and eliminate the ILOR tax
was enacted, existing deferred ILOR tax assets,
F-19
<PAGE>
PETRINI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
3. TAXES (CONTINUED)
valuation allowances provided against those deferred tax assets, and liabilities
have been eliminated and deferred tax assets and liabilities have been recorded
based on the estimated IRAP tax rate of 4.25% on temporary differences that will
be included in the computation of IRAP taxes when they reverse in future years.
The tax exemptions granted for the ILOR taxes in prior years will not be
applicable to the computation of the IRAP taxes. The resulting effect of
accounting for the change to introduce IRAP tax in accordance with the new tax
law at December 31, 1997 was to decrease the deferred tax charge to income for
the year then ended by Lire 353. A valuation allowance of Lire 201 and Lire 203
has been provided against the deferred tax assets at December 31, 1998 and 1997
based on estimates made by management assuming that it is more likely than not
that certain deferred tax assets will not be recovered for both IRPEG and IRAP
tax purposes. Principal items comprising net deferred income tax assets as at
December 31, 1998 and 1997 consist of:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- -------------
<S> <C> <C>
ASSETS
Step-up and revaluation of property, plant and equipment ............. 5,524 5,680
Step-up of trademark, net ............................................ 1,686 1,656
Goodwill ............................................................. 710 781
Agents' termination indemnity ........................................ 120 119
Allowance for doubtful accounts ...................................... 849 838
Other ................................................................ 349 333
----- -----
Total assets ......................................................... 9,238 9,407
Less valuation allowance ............................................. (201) (203)
----- -----
Net assets ........................................................... 9,037 9,204
LIABILITIES
Gains on sale of assets which for tax purposes, are deferred ......... (467) (627)
Accelerated amortization of trademarks ............................... (2,063) (2,063)
------ ------
Total liabilities .................................................... (2,530) (2,690)
------ ------
Net deferred tax assets .............................................. 6,507 6,514
====== ======
</TABLE>
Tax years for the Companies are open from 1993 and are subject to review
pursuant to Italian law. The Company has been subjected to tax reviews in
previous years. Management believes, based on the advice of its tax consultants,
that the final outcome of the tax assessments deriving from such reviews, if
any, will not determine any significant additional liabilities.
As more fully described in Note 11, the payment of a portion of the current
taxes payable have been postponed on the basis of Government decrees.
F-20
<PAGE>
PETRINI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
4. INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- -------------
<S> <C> <C>
Raw materials and consumables ......... 17,397 19,502
Work-in-process ....................... 2,255 1,432
Finished goods ........................ 5,469 5,842
------ ------
25,121 26,776
====== ======
</TABLE>
5. GOVERNMENT GRANTS
Government grants receivable of Lire 3,244 at December 31, 1997 have been
received in June 1998 principally from the Ministry of Agriculture for an amount
of Lire 2,825 and from the Ministry of Industry for an amount of Lire 346 for
property, plant and equipment acquired in prior years in accordance with the
enacted Government programs.
At December 31, 1998 and 1997 the portion of the grants amounting to Lire
2,402 and Lire 2,587 was deferred and will be recognized to income in future
years, upon depreciation of the related property, plant and equipment.
6. INTANGIBLE ASSETS
Intangible assets consisted of:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- -------------
<S> <C> <C>
Goodwill ........................................... 6,560 6,560
Less: accumulated amortization ..................... (3,281) (2,953)
------ ------
3,279 3,607
------ ------
Trademark "Supermangimi" ........................... 9,721 9,721
Less: accumulated amortization ..................... (5,719) (5,198)
------ ------
4,002 4,583
Other intangible assets, at amortized cost ......... 1,107 910
------ ------
Total .............................................. 8,388 9,100
====== ======
</TABLE>
7. OTHER ASSETS
Other assets consisted of:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- -------------
<S> <C> <C>
Investments ......................................... 1,136 104
Receivable from a subsidiary in liquidation ......... 1,397 681
Advances on employees leaving indemnities ........... 1,543 925
Other ............................................... 1,469 842
----- -----
Total ............................................... 5,545 2,552
===== =====
</TABLE>
F-21
<PAGE>
PETRINI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
8. SHORT-TERM BORROWINGS
At December 31, 1998 and 1997, Petrini had unsecured short-term lines of
credit aggregating approximately Lire 92,000 and Lire 86,000, respectively, from
banks, of which approximately Lire 40,000 and Lire 33,000, respectively, were
available for further borrowing. At December 31, 1998 and 1997 the weighted
average interest rates for these lines of credit were 4.4% and 6.8%,
respectively. Amounts outstanding under these lines of credits are normally
payable upon demand. Bank borrowings are represented by overdrafts for Lire
49,837 and Lire 49,622, respectively, at December 31, 1998 and 1997 and by lines
of credit for the discounting of "agriculture" drafts (a technical form of
borrowing applicable to the sector in which the Company operates, which is based
on the discounting of drafts) for Lire 2,500 and Lire 3,500, respectively, at
December 31, 1998 and 1997.
F-22
<PAGE>
PETRINI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
9. LONG-TERM DEBT
Long-term debt consisted of :
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- -------------
<S> <C> <C>
Mortgage loans granted from financial institutions and
guaranteed by mortgages on the Company's properties for a
total of Lire 54,000 and Lire 59,000, respectively, at
December 31, 1998 and 1997:
-- Lire 2,150, due March 31, 1998, fixed annual interest rate
of 9.9% .................................................... -- 181
-- Lire 2,340, due November 10, 2000, fixed annual interest
rate of 12.2% .............................................. 789 1,123
-- Lire 2,000 due November 5, 2003, fixed annual interest rate
of 9.3% .................................................... 1,397 1,615
-- Lire 12,000, due June 30, 2000, variable interest 50% based
on State bonds average rate and 50% on three months
LIBOR plus 1.2 (6.2% and 8.3% at December 31, 1998 and
1997, respectively) ........................................ 3,273 5,455
-- Lire 1,000, due June 15, 2004, variable interest based on
the European Bank's discount rate (4.2% and 7.0% at
December 31, 1998 and 1997, respectively) .................. 688 813
-- Lire 5,000, due September 30, 2002, variable interest 50%
based on semiannual Italian Treasury Bonds average rate
and 50% listed bonds average rate plus 1.0 (annual rate of
5.0% and 6.9% at December 31, 1998 and 1997,
respectively) .............................................. 3,077 3,846
-- Various subsidized loans, fixed annual interest, rates
varying from 3.4% to 5.1% .................................. 784 1,026
-- Lire 3,300, due March 31, 2007, variable interest based on
6 months RIBOR plus 1 (5.3% and 7.2% at December 31,
1998 and 1997, respectively) ............................... 3,067 3,300
-- Lire 3,000, due March 31, 1999, variable interest based on
6 months RIBOR plus 0.7 (5.0% and 7.0% at December 31,
1998 and 1997, respectively) ............................... 175 3,000
-- Variable interest rate loans, interest from 4.1% to 5.5% at
December 31, 1998 and from 7.0% to 7.5% at December
31, 1997 ................................................... 2,458 1,249
------ ------
Subtotal ...................................................... 15,708 21,605
Other loans personally guaranteed by one shareholder:
-- Lire 3,000 due March 31, 1998, variable interest based on
the 3 months LIBOR plus 0.5 (6.9% at December 31, 1997) -- 1,000
------ ------
Total long-term debt .......................................... 15,708 22,605
Less current portion .......................................... (4,266) (8,107)
------ ------
Long-term debt, long-term portion ............................. 11,442 14,498
====== ======
</TABLE>
F-23
<PAGE>
PETRINI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
9. LONG-TERM DEBT (CONTINUED)
The loans that are subsidized by the Italian Government were obtained under
a Government program for new investments. The interest paid by Italian
Government, amounted to Lire 65 in 1998, Lire 85 in 1997 and Lire 79 in 1996,
respectively. These subsidies reduced the effective interest rates applicable to
these loans from 12.7% to 4.1% in 1998, from 11.6% to 3.4% in 1997 and from
14.6% to 4.2% in 1996. The dates of payment of certain loan installments due to
Medio Credito dell'Umbria in the period June 1997 -- June 1998, following the
earthquake of September 1997, have been postponed The amount of the postponed
payments amount to Lire 2,458 at December 31, 1998 and are to be reimbursed
three years after the original due dates.
Maturities of long-term debt are as follows:
YEAR AMOUNT
- ---- ---------
1999 .................. 4,266
2000 .................. 4,239
2001 .................. 2,744
2002 .................. 1,588
2003 .................. 877
Thereafter ............ 1,994
-----
Total ................. 15,708
======
10. EMPLOYEES AND AGENTS TERMINATION INDEMNITIES
The liability for termination indemnities relates principally to the
Company's employees. In accordance with Italian severance pay statutes, an
employee benefit is accrued for service to date and is payable immediately upon
separation. The termination indemnity liability is calculated in accordance with
local civil and labour laws based on each employee's length of service,
employment category and remuneration. The termination liability is adjusted
annually by a cost-of-living index provided by the Italian Government. There is
no vesting period or funding requirement associated with the liability.
The liability recorded in the balance sheet is the amount to which the
employee would be entitled if the employee separates immediately. The liability
for termination indemnities includes also the liability to the sales agents,
which is recognized to the agent if unilaterally dismissed by an employer or
when he reaches retirement age.
The provision for termination indemnities charged to operations amount to
Lire 2,167, Lire 2,550 and Lire 2,374 in the years 1998, 1997 and 1996
respectively.
F-24
<PAGE>
PETRINI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
11. SOCIAL CONTRIBUTIONS AND INCOME TAXES PAYABLE
These non current liabilities consist of social contribution and income
taxes due by the Company whose payment has been postponed beyond 1999 in
application of the Government decrees enacted after the earthquake that hit the
area where the headquarters and the major production activities of the Company
are located. The components of these liabilities are:
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- -------------
Income taxes ................. 958 817
Social contributions ......... 3,778 1,656
----- -----
Total ........................ 4,736 2,473
===== =====
12. SHAREHOLDERS' EQUITY
Italian law requires that 5% of a company's net income be retained as a
legal reserve, until such reserve equals 20% of the share capital. This reserve
is not available for distribution.
Retained earnings or other equity accounts are available for distribution
only if recorded in the Italian official books. At December 31, 1998 balances
distributable to the shareholders amount to approximately Lire 10,000 and are
principally represented by surplus arising from revaluations of fixed assets and
from Government grants both of which are taxable upon distribution. No deferred
taxes of Lire 4,121 have been provided for on such accounts because it is not
management's intent to distribute such amounts and because the revaluations were
effected and the grants were received all prior to December 15, 1992, the
effective date for applying existing U.S. accounting standards with respects to
accounting for income taxes.
13. COMMITMENTS AND CONTINGENCIES
Commitments
Commitments of Lire 2,633 and Lire 3,215 at December 31, 1998 and 1997,
respectively, include principally guarantees given to banks for discounting of
customers' drafts.
Contingencies
The Company provides for costs related to contingencies when a loss is
probable and the amount is reasonably determinable. The amount provided for at
December 31, 1998 and 1997 is Lire 100. It is the opinion of management that the
ultimate resolution of these matters, to the extent not currently provided for,
will not have a material effect on the financial statements of the Company.
Modifications to General Regulatory Plan ("GRP") of the City Council of Bastia
Umbra
The City Council of Bastia Umbra on December 21, 1996 approved a
modification to its GRP, changing the purpose of use of the areas currently
utilized by Petrini for its production activities preventing the continuation of
such activities in Bastia. Petrini presented to the City Council its
observations and comments on such proposed modifications asking to continue its
production activities in the area currently occupied by its factory or,
alternatively, asking for the authorization to transfer its production
facilities to another own area in Ospedalicchio. On September 4, 1999 the City
Council published its decision of May 17, 1999 to reject the request of Petrini
to maintain its production activities in Bastia, while approved the change of
the purpose of use of the area in Ospedalicchio (from agricultural to
industrial) in order to make possible the transfer of the factory. The decision
of the City Council has to be approved by Regione Umbria.
F-25
<PAGE>
PETRINI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In the event the modification be definitely approved by the Region, without
changes, and no legal actions could be initiated by Petrini, the entire factory
of Bastia must be tranferred and the Company will be indemnified. Although the
Directors believe that the modification will not be approved without changes,
and accordingly such transfer will not be necessary, they have initiated to
study and evaluate the possible alternatives, which include the construction or
the acquisition of another factory. The Company has already started the
procedures to obtain subsidies of Law 488. The Directors estimate that, due to
the time frame required by the public entities to make effective their
decisions, the actual transfer will take place at least after two years from the
date on which the final decision will be taken. The Directors believe that the
transfer of the production activities will not have a significant impact on the
Company's financial statements.
14. CONCENTRATION OF CREDIT RISK
Concentration of credit risk and the risk of accounting loss with respect
to trade accounts receivable is generally limited due to the number and
diversity of the Company's end customer base and the areas and the markets in
which the customers are located. The Company performs frequent credit
evaluations of its customers' financial condition and normally does not require
collateral from its customers. Net direct sales to any one customer did not
exceed 5% of total direct sales in each of the three years in the period ended
December 31, 1998. As of December 31, 1998, accounts receivable from the largest
customer does not exceed 10% of total accounts receivable.
Cash deposits are maintained with major banks in Italy.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
-- Cash, accounts receivable and accounts payable: the carrying amount
reported in the balance sheet approximates its fair value.
-- Long-term debt and short-term borrowings: the carrying amount of the
Company's borrowing under its short-term revolving credit arrangements
approximates their fair value. The fair values of the Company's
long-term debt are estimated using cash flow analysis, based on the
Company's current borrowing rates for similar types of borrowing
arrangements.
The carrying amounts of the Company's financial instruments at December 31,
1998 and 1997 approximate their fair value.
F-26
<PAGE>
PETRINI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
16. INFORMATION BY SEGMENT
The Company manages its business on a segment basis. The significant
segments operated by the Company consist of: i) pasta and other food products
and ii) animal feed and other activities. Information relative to significant
segments is reported below for the years 1998, 1997 and 1996. The Company
evaluates performance of the segments based on EBITDA and income from
operations. The accounting policies of the segment are substantially the same as
those described in Note 2 Significant Accounting Policies.
<TABLE>
<CAPTION>
ANIMAL
PASTA AND FEED AND
OTHER FOOD OTHER TOTAL
PRODUCTS ACTIVITIES COMPANY
------------ ------------ ----------
<S> <C> <C> <C>
1998
Total revenue .................................... 71,163 195,144 266,307
Depreciation and amortization .................... 1,251 4,367 5,618
EBITDA ........................................... 2,309 11,801 14,110
Income from operations ........................... 1,058 7,434 8,492
Identifiable long-term assets (property, plant and
equipment and intangibles) ...................... 12,073 47,927 60,000
Capital expenditures ............................ 850 2,713 3,563
1997
Total revenue .................................... 73,125 221,734 294,859
Depreciation and amortization .................... 1,199 4,119 5,318
EBITDA ........................................... 2,458 9,791 12,249
Income from operations ........................... 1,259 5,672 6,931
Identifiable long-term assets (property, plant and
equipment and intangibles) ...................... 12,983 48,775 61,758
Capital expenditures ............................. 1,060 3,690 4,750
1996
Total revenue .................................... 75,854 244,438 320,292
Depreciation and amortization .................... 1,160 3,892 5,052
EBITDA ........................................... 3,410 13,089 16,499
Income from operations ........................... 2,250 9,197 11,447
Identifiable long-term assets (property, plant and
equipment and intangibles) ...................... 12,957 49,568 62,525
Capital expenditures ............................. 1,560 7,144 8,704
</TABLE>
Export sales by the Company from Italy, all related to pasta and other
food products were as follows:
<TABLE>
<CAPTION>
COUNTRY -- REGION 1998 1997 1996
- ------------------ -------- -------- --------
<S> <C> <C> <C>
Europe ........................................... 3,256 3,238 2,054
U.S.A. ........................................... 1,442 2,219 2,739
Japan ............................................ 4,948 5,311 5,562
Rest of the world ................................ 5,532 5,235 5,420
----- ----- -----
Total ............................................ 15,178 16,003 15,775
====== ====== ======
</TABLE>
F-27
<PAGE>
PETRINI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998, 1997 AND 1996
(IN MILLIONS OF ITALIAN LIRE UNLESS OTHERWISE SPECIFIED)
17. VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT
PERIOD EXPENSES DEDUCTIONS END OF PERIOD
-------------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Allowance for doubtful accounts ......... 2,646 1,391 1,351 2,686
===== ===== ===== =====
Year ended December 31, 1997:
Allowance for doubtful accounts ......... 2,633 982 969 2,646
===== ===== ===== =====
Year ended December 31, 1996:
Allowance for doubtful accounts ......... 2,561 1,178 1,105 2,633
===== ===== ===== =====
</TABLE>
18. SUBSEQUENT EVENTS
In the Company's factories the activities of loading, unloading and
cleaning are performed by personnel belonging to workers' co-operatives. Such
independent legal entities provide their services to the Company on the basis of
specific contracts. In 1999, to limit the risks connected to the eventual future
request of the workers to be recognized as employees of the Company, management,
under a conservative approach, has underwritten agreements with such personnel,
approved by the trade unions, where it is declared that the workers renounce to
the request to be recognized as employees for all prior years of service.
F-28
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements are based on the historical financial statements of Spigadoro and
Petrini included elsewhere in this proxy statement/prospectus which give effect
to the following:
o the acquisition of 100% of the outstanding common stock of Petrini by
Spigadoro;
o the discontinuance of the computer businesses of Spigadoro; and
o the push-down accounting adjustments relating to the acquisition of
100% of the outstanding common stock of Petrini by Gruppo
Spigadoro.
The transaction will be accounted for as a reverse acquisition whereby
Spigadoro will be the legal acquirer and Petrini will be the accounting
acquirer. The allocation of the push-down accounting adjustments for Petrini and
the purchase accounting adjustments for Spigadoro are preliminary. However,
Spigadoro does not expect that the final allocations will materially differ from
the preliminary allocations set forth herein. The unaudited pro forma condensed
consolidated statements of operations give effect to the events described above
as if they occurred as of January 1, 1998, and the unaudited pro forma condensed
consolidated balance sheet gives effect to the events described above as if they
occurred as of September 30, 1999. The events described above and the related
adjustments are described in the accompanying notes. The pro forma adjustments
are based upon available information and certain assumptions that management
believes are reasonable. The Pro Forma Financial Statements do not purport to
represent what Spigadoro's results of operations or financial condition would
actually have been had the events described above in fact occurred on such dates
or to project Spigadoro's results of operations or financial condition for any
future period or date. The Pro Forma Financial Statements should be read in
conjunction with the historical financial statements of Spigadoro and Petrini
included elsewhere in this proxy statement/prospectus and "--Management's
Discussion and Analysis of Financial Condition and Results of Operations."
F-29
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999 (IN THOUSANDS)
<TABLE>
<CAPTION>
SPIGADORO SPIGADORO SPIGADORO
HISTORICAL ADJUSTMENTS AS ADJUSTED
------------ ---------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .......................... $ 5,102 $ (373)(A) $ 4,729
Marketable securities .............................. 746 746
Securities held for sale ........................... 2,940 2,940
Accounts receivable, net ........................... 1,965 (1,965)(A)
Taxes receivable ...................................
Deferred income taxes ..............................
Inventories ........................................ 1,713 (1,713)(A)
Cash to factor .....................................
Other current assets ............................... 176 (126)(A) 50
---------- ---------- ----------
Total current assets ............................... 12,642 (4,177) 8,465
---------- ---------- ----------
Equipment and improvements, net ..................... 391 (391)(A)
---------- ---------- ----------
Other assets:
Intangible assets ..................................
Excess of cost over net assets acquired ............ 3,437 (3,437)(A)
Deferred income taxes ..............................
Other assets ....................................... 1,126 (1,067)(A) 59
Assets held for disposition ........................ 3,000 (A) 3,000
---------- ---------- ----------
Total other assets ................................. 4,563 (1,504) 3,059
---------- ---------- ----------
Total assets ....................................... $ 17,596 $ (6,072) $ 11,524
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings .............................. $ 356 $ (356)(A)
Current portion of long-term debt ..................
Liability to factor ................................
Accounts payable and other current liabilities ..... 2,861 (2,465)(A) $ 396
---------- ---------- ----------
Total current liabilities .......................... 3,217 (2,821) 396
---------- ---------- ----------
Long-term debt, net of current portion ..............
Employee termination indemnities ....................
Other liabilities ................................... 27 (27)(A)
---------- ---------- ----------
Total long-term liabilities ........................ 27 (27)
---------- ---------- ----------
Total liabilities .................................. 3,244 (2,848)(A) 396
---------- ---------- ----------
Convertible debentures .............................. 2,848 2,848
---------- ---------- ----------
Stockholders' Equity
Preferred stock ....................................
Common stock ....................................... 101 101
Capital in excess of par ........................... 32,595 32,595
Step up adjustments ................................
Accumulated other comprehensive income ............. 404 404
Treasury stock ..................................... (2,204) (2,204)
Retained earnings (accumulated deficit) ............ (19,392) (3,224)(A) (22,616)
---------- ---------- ----------
Total stockholders' equity ......................... 11,504 (3,224) 8,280
---------- ---------- ----------
Total liabilities and stockholders' equity ......... $ 17,596 $ (6,072) $ 11,524
========== ========== ==========
<CAPTION>
PETRINI ADJUSTMENTS PRO FORMA
------------ ------------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .......................... $ 110 $ 4,839
Marketable securities .............................. 746
Securities held for sale ........................... 2,940
Accounts receivable, net ........................... 35,909 35,909
Taxes receivable ................................... 7,207 7,207
Deferred income taxes .............................. 532 $ (532)(B)
Inventories ........................................ 12,495 12,495
Cash to factor ..................................... 4,422 4,422
Other current assets ............................... 1,212 1,262
---------- ----------- --------
Total current assets ............................... 61,887 (532) 69,820
---------- ----------- --------
Equipment and improvements, net ..................... 26,125 15,380 (B) 41,505
---------- ----------- --------
Other assets:
Intangible assets .................................. 4,253 606 (B) 4,859
Excess of cost over net assets acquired ............ 5,923 (B) 5,923
Deferred income taxes .............................. 3,095 (3,095)(B)
Other assets ....................................... 2,652 2,711
Assets held for disposition ........................ 3,000
---------- ----------- --------
Total other assets ................................. 10,000 3,434 16,493
---------- ----------- --------
Total assets ....................................... $ 98,012 $ 18,282 $127,818
========== =========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings .............................. $ 21,945 $ 21,945
Current portion of long-term debt .................. 2,473 $ 7,388(D) 9,861
Liability to factor ................................ 4,422 4,422
(183)(E)
Accounts payable and other current liabilities ..... 23,164 600 (E) 23,977
---------- ----------- --------
Total current liabilities .......................... 52,004 7,805 60,205
---------- ----------- --------
Long-term debt, net of current portion .............. 7,355 12,115 (D) 19,470
Employee termination indemnities .................... 8,333 8,333
Other liabilities ................................... 3,709 3,022 (B) 6,731
---------- ----------- --------
Total long-term liabilities ........................ 19,397 15,137 34,534
---------- ----------- --------
Total liabilities .................................. 71,401 22,942 94,739
---------- ----------- --------
Convertible debentures .............................. (2,848)(E)
---------- ----------- --------
Stockholders' Equity
Preferred stock ....................................
(21,085)(C)
Common stock ....................................... 21,569 25 (E) 610
15,260 (B)
(12,878)(C)
(19,503)(D)
Capital in excess of par ........................... 2,781 2,406 (E) 20,661
Step up adjustments ................................ (11,751) 11,751 (C)
Accumulated other comprehensive income ............. 30 (404)(C) 30
Treasury stock ..................................... (2,204)
Retained earnings (accumulated deficit) ............ 13,982 22,616 (C) 13,982
---------- ----------- --------
Total stockholders' equity ......................... 26,611 (1,812) 33,079
---------- ----------- --------
Total liabilities and stockholders' equity ......... $ 98,012 $ 18,282 $127,818
========== =========== ========
</TABLE>
F-30
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SPIGADORO SPIGADORO SPIGADORO
HISTORICAL ADJUSTMENTS AS ADJUSTED PETRINI ADJUSTMENTS PRO FORMA
------------ ------------------- ------------- ----------- ----------------- ------------
(IN THOUSANDS EXCEPT FOR PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C>
Net sales ......................... $ 31,164 $ (31,143)(A) $ 21 $103,224 $103,245
Cost of sales ..................... 29,445 (29,445)(A) 74,214 668 (F) 74,882
-------- ---------- ------- -------- --------- --------
Gross profit ...................... 1,719 (1,698) 21 29,010 (668) 28,363
-------- ---------- ------- -------- --------- --------
Operating expenses:
Selling expenses ................. 1,825 (1,825)(A) 19,332 19,332
General & administrative
expenses ....................... 1,897 (1,114)(A) 783 5,768 245 (F) 6,796
-------- ---------- ------- -------- --------- --------
Total operating expenses ......... 3,722 (2,939) 783 25,100 245 26,128
-------- ---------- ------- -------- --------- --------
Operating income (loss) ........... (2,003) 1,241 (762) 3,910 (913) 2,235
(3,440)(E)
110 (E)
Other income (expense) ............ 3,593 (83)(A) 3,510 (1,132) (728)(G) (1,680)
-------- ---------- ------- -------- --------- --------
Income (loss) before
income taxes ..................... 1,590 1,158 2,748 2,778 (1,531) 555
Income taxes (benefit) ............ 1,961 (285)(H) 1,676
-------- ---------- ------- -------- --------- --------
Income (loss) from
continuing operations ............ $ 1,590 $ 1,158 $ 2,748 $ 817 $ (1,246) $ (1,121)
======== ========== ======= ======== ========= ========
Income per common share --
basic .......................... $ 0.17 $ 0.29 $ (0.02)
======== ======= ========
diluted ...................... $ 0.16 $ 0.27 $ (0.02)
======== ======= ========
Weighted average number of
common shares
outstanding -- basic ............. 9,332 9,332 60,150
======== ======= ========
diluted .................... 10,614 10,614 60,150
======== ======= ========
</TABLE>
F-31
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31,1998
<TABLE>
<CAPTION>
SPIGADORO SPIGADORO SPIGADORO
HISTORICAL ADJUSTMENTS AS ADJUSTED PETRINI ADJUSTMENTS PRO FORMA
------------ ------------------- ------------- ----------- ---------------- ------------
(IN THOUSANDS EXCEPT FOR PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C>
Net sales ......................... $ 38,340 $ (38,315)(A) $ 25 $141,127 $141,152
Cost of sales ..................... 35,465 (35,465)(A) 104,347 891 (F) 105,238
-------- ---------- -------- -------- ---- --------
Gross profit ...................... 2,875 (2,850) 25 36,780 (891) 35,914
-------- ---------- -------- -------- ---- --------
Operating expenses:
Selling expenses ................. 2,821 (2,821)(A) 24,480 24,480
General & administrative
expenses ....................... 2,112 (972)(A) $ 1,140 7,800 326 (F) 9,266
-------- ---------- -------- -------- ---- --------
Total operating expenses ......... 4,933 (3,793) 1,140 32,280 326 33,746
-------- ---------- -------- -------- ---- --------
Operating income (loss) .......... (2,058) 943 (1,115) 4,500 (1,217) 2,168
75 (E)
Other income (expense) ............ (97) (85)(A) (182) (2,160) (971)(G) (3,238)
-------- ---------- -------- -------- ------ --------
Income (loss) before
income taxes ..................... (2,155) 858 (1,297) 2,340 (2,113) (1,070)
Income taxes (benefit) ............ (412) 412 (A) 1,901 (380)(H) 1,521
-------- ---------- -------- -------- ------ --------
Income (loss) from
continuing operations ............ $ (1,743) $ 446 $ (1,297) $ 439 $(1,733) $ (2,591)
======== ========== ======== ======== ======= ========
Loss per common share --
basic and diluted ................ $ (0.19) $ (0.14) $ (0.04)
======== ======== ========
Weighted average number of
common shares outstanding
-- basic and diluted ............. 9,327 9,327 60,145
======== ======== ========
</TABLE>
F-32
<PAGE>
SPIGADORO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Amounts included within the notes to the Unaudited Pro Forma Condensed
Consolidated Financial Statements are reflected in thousands in order to comply
with the presentation of the accompanying Pro Forma Financial Statements.
(A) The Pro Forma Financial Statements give effect to the proposed
discontinuance of the computer businesses of Spigadoro as contemplated in this
proxy statement/prospectus in connection with the acquisition of Petrini. The
unaudited pro forma condensed consolidated balance sheet reflects the
reclassification of the assets and liabilities of the computer businesses to
assets held for sale. The amounts recorded have been adjusted to give effect to
management's estimate of their net realizable value resulting in an estimated
loss on disposal of $3,224,000. The unaudited pro forma condensed consolidated
statements of operations reflect the reclassification of the operations of these
computer businesses to discontinued operations resulting in a loss from
discontinued operations for the nine months ended September 30, 1999 and the
year ended December 31, 1998 of $1,158,000 and $446,000, respectively.
(B) The unaudited pro forma condensed consolidated balance sheet gives
effect to the proposed acquisition of Petrini by Spigadoro by combining the
historical balance sheet of Petrini and the historical balance sheet of
Spigadoro, adjusted for the discontinued operations as mentioned in (A) above
and the purchase accounting adjustments in (E) below, at September 30, 1999. The
transaction will be accounted for as a reverse acquisition, whereby Petrini will
be the accounting acquirer and Spigadoro will be the legal acquirer, using the
purchase method of accounting. During September 1998, Gruppo Spigadoro entered
into a transaction to acquire 67% of the outstanding common stock of Petrini
from Carlo Petrini and received an option to acquire the remaining 33% interest
from the bankruptcy receiver of the minority shareholder of Petrini. The option
to purchase the remaining 33% will be exercised prior to the consummation of the
acquisition by Spigadoro. Since Gruppo Spigadoro will own 100% of Petrini
immediately prior to Spigadoro's acquisition, the purchase accounting
adjustments are "pushed-down" to Petrini and are included within the pro forma
adjustments in the accompanying Pro Forma Financial Statements. The purchase
price for Petrini paid by Spigadoro, including cash paid at closing and the
issuance of debt, aggregated $44,360,000 and is allocated as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash, notes and common stock issued .......... $ 44,360
Petrini liabilities assumed .................. 82,073
--------
$126,433
========
</TABLE>
Allocated to assets as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------------------------
FMV HISTORICAL ADJUSTMENT
----------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current assets ..................... $ 68,261 $ 68,793 $ (532)
Equipment and improvements ......... 46,645 31,265 15,380
Intangibles ........................ 5,935 5,329 606
Other assets ....................... 2,691 5,786 (3,095)
Deferred tax liability ............. (3,022) (3,022)
Goodwill ........................... 5,923 5,923
-------- -------- --------
$126,433 $111,173 $ 15,260
======== ======== ========
</TABLE>
The above adjustment was included in the pro forma condensed consolidated
balance sheet in the adjustment column.
F-33
<PAGE>
SPIGADORO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
(C) The unaudited pro forma condensed consolidated balance sheet was
adjusted to reflect the issuance of 48,366,530 shares of Spigadoro common stock
to Spigadoro, in exchange for 100% of the outstanding common stock of Petrini.
As a result of the reverse acquisition, the unaudited pro forma condensed
consolidated balance sheet was adjusted to reflect the historical equity of
Petrini. The historical retained earnings of Petrini has been carried forward
and the remaining equity accounts of Petrini have been reclassified to reflect
the par value of the Spigadoro stock issued with any differences reflected as
paid-in capital. In addition, paid-in capital of Petrini has been increased by
an amount equal to the excess of cost over book basis of net assets acquired and
reduced by the amount of Spigadoro's debt assumed by Spigadoro. The pro forma
condensed consolidated balance sheet also reflects the reclassification of
Spigadoro's equity accounts exclusive of common stock and treasury stock to
paid-in capital.
(D) In connection with this transaction, Spigadoro assumed certain debt of
Gruppo Spigadoro related to its acquisition of Petrini in the amount of
$19,503,000 (face value of approximately $20 million), resulting in an increase
in liabilities and a decrease in paid-in capital. Certain notes have a stated
interest rate of 5% per annum and certain other notes have no stated interest
rate and were discounted at an average rate of 5%. The notes require principal
payments of $7,388,000 and $12,115,000 for the years ended September 30, 2000
and 2001, respectively.
(E) The unauidted pro forma condensed consolidated balance sheet reflects
Spigadoro's assets at their fair market value and the conversion of the Series A
convertible debentures and accrued interest into approximately 2,452,000 shares
of common stock which will be completed simultaneously with the acquisition. The
unaudited pro forma condensed consolidated statements of operations reflect the
elimination of the $3,440,000 gain realized by Spigadoro on the sale of
intellectual property during the nine months ended September 30, 1999 to give
effect to the adjustment of Spigadoro's assets to their fair value as of January
1, 1998. The unaudited pro forma condensed consolidated statements of operations
also reflects the elimination of interest related to the convertible debentures
for the nine months ended September 30, 1999 and the year ended December 31,
1998 of $110,000 and $75,000 respectively. In addition, Spigadoro recorded an
accrual of $600,000 relating to estimated costs to be incurred in the proposed
Petrini acquisition which has been charged to paid-in capital.
(F) The purchase accounting for the acquisition of Petrini by Gruppo
Spigadoro resulted in an increase in the basis of equipment and improvements of
$15,380,000 and trademarks of $606,000 as well as the recording of $5,923,000 of
goodwill. The increase in the basis of assets acquired is being depreciated and
amortized over the estimated useful lives ranging from 10 to 33 years. The
goodwill is being amortized over twenty years. The unaudited pro forma condensed
consolidated statements of operations reflect depreciation and amortization
expense recorded in cost of sales and general and administrative expenses for
the nine months ended September 30, 1999 and the year ended December 31, 1998 of
$668,000 and $891,000, respectively, and $245,000 and $326,000 respectively.
(G) Interest expense in the unaudited pro forma condensed consolidated
statements of operations, has been adjusted to reflect the increase in interest
relating to the debt assumed in the acquisition as if it occurred on January 1,
1998. The amount of interest expense recorded for the nine months ended
September 30, 1999 and the year ended December 31, 1998 was $728,000 and
$971,000, respectively.
(H) Income taxes (benefit) in the pro forma condensed consolidated
statements of operations have been adjusted to reflect the tax effect of the
pro forma adjustments relating to the additional depreciation and amortization
on purchase accounting adjustments made to fixed assets and trademarks using
the Company's effective tax rate of 41.25%.
F-34
<PAGE>
Exhibit 3.1(b)
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
IAT MULTIMEDIA, INC.
(Pursuant to Sections 242 of the
General Corporation Law of the State of Delaware)
DATED: DECEMBER 29, 1999
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware, does hereby certify:
1. The name of the Corporation is IAT Multimedia, Inc. (the "Corporation").
2. The Corporation's Amended and Restated Certificate of Incorporation is
hereby amended by deleting Article One in its entirety and substituting for it a
new Article One, such Article One to read as follows:
"ARTICLE ONE. The name of the corporation is Spigadoro, Inc. (the
"Corporation")."
3. The Corporation's Amended and Restated Certificate of Incorporation is
hereby amended by deleting Article Four A in its entirety and substituting for
it a new Article Four A, such Article Four A to read as follows:
"ARTICLE FOUR. A. Classes of Stock. The Corporation is authorized to
issue two classes of stock to be designated, respectively, "Common Stock"
and "Preferred Stock". The total number of shares of which the Corporation
is authorized to issue is 110,000,000; 100,000,000 shares shall be Common
Stock, par value $.01 per share, and, 10,000,000 shall be Preferred Stock,
par value $.01 per share."
4. Shareholder approval of this amendment was given December 22, 1999 at a
special meeting.
5. The number of shares entitled to vote on the amendment was 11,748,551
shares of Common Stock.
<PAGE>
6. The number of shares voted for the amendment to the name change was
5,961,361. The number of shares voted against the amendment to the name change
was 10,120.
7. The number of shares voted for the amendment to the increase in
authorized capital was 5,952,761. The number of shares voted against the
amendment to the increase in authorized capital was 19,020.
IN WITNESS WHEREOF, the undersigned Corporation has caused this certificate
to be executed on its behalf by its duly authorized officer as of the date first
above written.
IAT MULTIMEDIA, INC.
By: /s/ Klaus Grissemann
----------------------------------------
Klaus Grissemann, Chief Financial Officer
-2-
<PAGE>
Exhibit 10.72
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated January 1, 2000 by and
between Spigadoro, Inc. f/k/a IAT Multimedia, Inc. (the "Company") and Lucio De
Luca (the "Executive") having an address of, Via Revere Guiseppe No.9, Milan,
Italy. ----------------------------------
- ------
W I T N E S S E T H:
WHEREAS, the Executive is willing to serve as Chief Operating Officer of
the Company and the Company desires to retain the Executive in that capacity on
the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
Section 1. Term of Employment. The Executive's employment under this
Agreement shall commence on January 1, 2000 (the "Commencement Date") and,
subject to earlier termination pursuant to Section 5 hereof, shall continue
until the third anniversary of the Commencement Date (the "Term"). The Executive
hereby represents and warrants that (i) he has the legal capacity to execute and
perform this Agreement, (ii) this Agreement is a valid and binding agreement
enforceable against him according to its terms, and (iii) the execution and
performance of this Agreement by him does not violate the terms of any existing
agreement or understanding to which the Executive is a party or by which he may
be bound.
Section 2. Position and Duties. During the Term, the Executive shall serve
as Chief Operating Officer of the Company and shall have such powers and duties
as are commensurate with such position and as may be conferred upon him from
time to time by the Chief Executive Officer or the Board of Directors of the
Company (the "Board"). During the Term, and except for illness or incapacity and
reasonable vacation periods of no more than 4 weeks in any calendar year, the
Executive shall devote all of his business time, attention, skill and efforts
exclusively to the business and affairs of the Company and its subsidiaries and
affiliates.
Section 3. Compensation. For all services rendered by the Executive in any
capacity required hereunder during the Term, including, without limitation,
services as an executive officer, director, or member of any committee of the
Company, or any subsidiary, affiliate or division thereof, other than Petrini,
S.p.A. with which the Executive has a separate employment agreement and receives
additional compensation, the Executive shall be compensated as follows:
(a) The Company shall pay the Executive a fixed salary at the rate of
$55,000 per annum ("Base Salary"). The Base Salary shall be subject to such
periodic review and such periodic increases as the Board shall deem appropriate
in accordance with the Company's
<PAGE>
customary procedures and practices regarding the salaries of executives. Base
Salary shall be payable in accordance with the customary payroll practices of
the Company, but in no event less frequently than monthly.
(b) The Company shall pay the Executive a one-time bonus of $75,000 on
the Commencement Date.
(c) The Company shall reimburse the Executive, for housing expenses in
an amount not to exceed $20,000 per annum subject to the Executive's
presentation of appropriate vouchers in accordance with such procedures as the
Company may from time to time establish for senior officers and to preserve any
deductions for Federal income taxation purposes to which the Company may be
entitled.
(d) The Executive shall receive options to purchase 250,000 shares of
the Company's common stock on the Commencement Date (the "Initial Options")
pursuant to and subject to the terms of the Company's 1999 Stock Option Plan
(the "Stock Option Plan"). The options shall vest as follows: 50,000 upon
execution of this Agreement, 66,667 on the first anniversary of the date of this
Agreement, 66,667 on the second anniversary of the date of this Agreement and
66,666 on the third anniversary of the date of this Agreement. The 250,000
options shall be exercisable at the Fair Market Value (as defined in the Stock
Option Plan) of the common stock as of the Commencement Date. The Executive
shall be entitled to additional grants under the Stock Option Plan at the
discretion of the Board of Directors.
(e) The Executive shall be entitled to participate in all compensation
and employee benefit plans or programs, and to receive all benefits, perquisites
and emoluments, for which any salaried employees of the Company are eligible
under any plan or program now or hereafter established and maintained by the
Company, to the fullest extent permissible under the general terms and
provisions of such plans or programs and in accordance with the provisions
thereof, including, without limitation, incentive compensation, bonus, group
hospitalization, health, dental care, life, disability or other insurance,
tax-qualified and non-qualified pension, savings, thrift and profit-sharing
plans, termination or severance pay programs, sick-leave plans, travel or
accident insurance, automobile allowance or automobile lease plans, and
executive contingent compensation plans, including, without limitation, capital
accumulation programs and stock purchase, restricted stock and stock option
plans. Notwithstanding the foregoing, nothing in this Agreement shall preclude
the amendment or termination of any such plan or program, provided that such
amendment or termination is applicable generally to the senior officers of the
Company or any subsidiary or affiliate.
Section 4. Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable travel or other expenses incurred by the Executive
in connection with the performance of his duties and obligations under this
Agreement, subject to the Executive's presentation of appropriate vouchers in
accordance with such procedures as the Company may from time to time establish
for senior officers and to preserve any deductions for Federal income taxation
purposes to which the Company may be entitled.
-2-
<PAGE>
Section 5. Effect of Termination of Employment. (a) In the event the
Executive's employment terminates, during the Term, due to either a Without
Cause Termination or a Constructive Discharge, the Company shall, as liquidated
damages or severance pay, or both, continue, subject to the provisions of
Section 6 below, to pay the Executive's Base Salary as in effect at the time of
such termination for the lesser of (i) the remainder of the then-current Term,
or (ii) a period of two years from the effective date of such termination. In
the event the Executive's employment terminates, whether during the Term or
following the expiration of the Term, due to a Permanent Disability, the Company
shall continue to pay the Executive's Base Salary as in effect at the time of
such termination for a period of six months from the date such disability
commenced; provided, that such amounts shall be offset by any amounts otherwise
paid to the Executive under the Company's then-existing disability program. In
addition, earned but unpaid Base Salary as of the date of termination of
employment shall be payable in full. The Executive shall be entitled to
continued group hospitalization, health and dental care insurance for the
periods specified in the Comprehensive Omnibus Budget Reconciliation Act
("COBRA") upon payment by the Executive of the amounts specified under COBRA.
(b) In the event that the Executive's employment hereunder terminates
due to a Termination for Cause, death of the Executive, or the Executive
terminates employment with the Company for reasons other than a Constructive
Discharge, Permanent Disability or retirement pursuant to the Company's
retirement plan (the "Retirement Plan"), earned but unpaid Base Salary as of the
date of termination of employment shall be payable in full. However, no other
payments shall be made, or benefits provided, by the Company under this
Agreement except for benefits payable under the Retirement Plan and benefits
that have already become vested under the terms of employee benefit programs,
including the Stock Option Plan, maintained by the Company or its affiliates for
its employees and except as otherwise required by law. Notwithstanding the
foregoing, in the event the the Executive's employment terminates, whether
during the Term or following the expiration of the Term, due to either a Without
Cause Termination or a Constructive Discharge, all of the Initial Options
granted to the Executive under Section 3(d) of this Agreement that have not yet
vested shall immediately vest as of the date of such termination.
(c) For purposes of this Agreement, the following terms have the
following meanings:
(i) The term "Termination for Cause" means, to the maximum extent
permitted by applicable law, a termination of the Executive's employment by
the Company because the Executive has (a) materially breached or materially
failed to perform his duties under applicable law and such breach or
failure to perform constitutes self-dealing, willful misconduct or
recklessness, (b) committed an act of dishonesty in the performance of his
duties hereunder or engaged in conduct materially detrimental to the
business of the Company, (c) been convicted of a felony involving moral
turpitude, (d) materially breached or materially failed to perform his
obligations and duties hereunder, which breach or failure the Executive
shall fail to remedy within 30 days after written demand from
-3-
<PAGE>
the Company, or (e) violated in any material respect the representations
made in Section 1 above or the provisions of Section 6 below.
(ii) The term "Constructive Discharge" means a termination of the
Executive's employment by the Executive due to a failure of the Company or
its successors without the prior consent of the Executive to fulfill its
obligations under this Agreement in any material respect, including (a) any
failure to elect or re-elect or to appoint or reappoint the Executive to
the office of Chief Operating Officer, or (b) any other material change by
the Company in the functions, duties or responsibilities of the Executive's
position with the Company which would materially reduce the ranking or
level, dignity, responsibility, importance or scope of such position.
(iii) The term "Without Cause Termination" means a termination of
the Executive's employment by the Company other than due to Permanent
Disability, retirement or expiration of the Term and other than a
Termination for Cause.
(iv) The term "Permanent Disability" means permanently disabled so
as to qualify for full benefits under the Company's then-existing
disability insurance policy; provided, however, that if the Company does
not maintain any such policy on the date of determination, "Permanent
Disability" shall mean the inability of the Executive to work for a period
of six full calendar months during any eight consecutive calendar months
due to illness or injury of a physical or mental nature, supported by the
completion by the Executive's attending physician of a medical
certification form outlining the disability and treatment.
Section 6. Other Duties of Executive During and After Term. (a) The
Executive recognizes and acknowledges that all information pertaining to the
affairs, business, clients, or customers of the Company or any of its
subsidiaries or affiliates (any or all of such entities being hereinafter
referred to as the "Business"), as such information may exist from time to time,
other than information that the Company has previously made publicly available,
is confidential information and is a unique and valuable asset of the Business,
access to and knowledge of which are essential to the performance of the
Executive's duties under this Agreement. In consideration of the payments made
to him hereunder, the Executive shall not, except to the extent reasonably
necessary in the performance of his duties under this Agreement, divulge to any
person, firm, association, corporation, or governmental agency, any information
concerning the affairs, businesses, clients, or customers of the Business
(except such information as is required by law to be divulged to a government
agency or pursuant to lawful process), or make use of any such information for
his own purposes or for the benefit of any person, firm, association or
corporation (except the Business) and shall use his reasonable best efforts to
prevent the disclosure of any such information by others. All records,
memoranda, letters, books, papers, reports, accountings, experience or other
data, and other records and documents relating to the Business, whether made by
the Executive or otherwise coming into his possession, are
-4-
<PAGE>
confidential information and are, shall be, and shall remain the property of the
Business. No copies thereof shall be made which are not retained by the
Business, and the Executive agrees, on termination of his employment or on
demand of the Company, to deliver the same to the Company.
(b) In consideration of the payments made to him hereunder, during the
two-year period commencing on the effective date of the termination of his
employment, the Executive shall not, without express prior written approval of
the Board, directly or indirectly, own or hold any proprietary interest in, or
be employed by or receive remuneration from, any corporation, partnership, sole
proprietorship or other entity engaged in the production and sale of food and
animal feed products (a "Competitor"), other than severance-type or
retirement-type benefits from entities constituting prior employers of the
Executive. The Executive also shall not, during such two-year period, solicit
for the account of any Competitor, any customer or client of the Company or its
affiliates, or, in the event of the Executive's termination of his employment,
any entity or individual that was such a customer or client during the
twelve-month period immediately preceding the Executive's termination of
employment. The Executive also shall not, during such two-year period, act on
behalf of any Competitor to interfere with the relationship between the Company
or its subsidiaries and affiliates and their respective employees.
For purposes of the preceding paragraph, (i) the term "proprietary
interest" means legal or equitable ownership, whether through stockholding or
otherwise, of an equity interest in a business, firm or entity other than
ownership of less than 5 percent of any class of equity interest in a publicly
held business, firm or entity, and (ii) an entity shall be considered to be
"engaged in competition" if such entity is, or is a holding company for, a
company engaged in the manufacture or distribution of animal feed, flour or
pasta products in the countries comprising the European Union or the United
States.
(c) The Company's obligation to make payments, or provide for any
benefits under this Agreement (except to the extent vested or exercisable) shall
cease upon a violation of the preceding provisions of this section. The
provisions of this Section 6 shall survive the Executive's termination of his
employment with the Company.
(d) Executive acknowledges that he has carefully read and considered
all of the restraints imposed pursuant to this Section 6 and that each and every
one of said restraints is reasonable in respect to subject matter, length of
time, and area. Employee further acknowledges that damages at law would not be a
measurable or adequate remedy for a breach of the restrictive covenant contained
in Section 6(b) hereof, and accordingly consents to the entry by any court of
competent jurisdiction of order enjoining him from violating any of such
covenant. If any of the covenants contained in this Section 6 is held to be
invalid or unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision and in
its reduced form said provision shall then be enforceable.
Section 7. Withholdings. The Company may directly or indirectly withhold
from any payments made under this Agreement all Federal, state, city or other
taxes and all other
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<PAGE>
deductions as shall be required pursuant to any law or governmental regulation
or ruling or pursuant to any contributory benefit plan maintained by or on
behalf of the Company.
Section 8 Consolidation, Merger, or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into or with,
or transferring all or substantially all of its assets to, or engaging in any
other business combination with, any other person or entity which assumes this
Agreement and all obligations and undertakings of the Company hereunder. Upon
such a consolidation, merger, transfer of assets or other business combination
and assumption, the term "Company" used herein shall mean such other person or
entity and this Agreement shall continue in full force and effect.
Section 9 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be given in writing and shall be deemed to
have been duly given if delivered or mailed, postage prepaid, by same day or
overnight mail (i) if to the Executive, at the address set forth above, or (ii)
if to the Company, as follows:
Spigadoro, Inc.
70 East 55th Street, 24th Floor
New York, NY 10022
or to such other address as either party shall have previously specified in
writing to the other.
Section 10. No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect; provided, however, that nothing in this Section
10 shall preclude the assumption of such rights by executors, administrators or
other legal representatives of the Executive or his estate and their assigning
any rights hereunder to the person or persons entitled thereto.
Section 11. Source of Payment. All payments provided for under this
Agreement shall be paid in cash from the general funds of the Company. The
Company shall not be required to establish a special or separate fund or other
segregation of assets to assure such payments, and, if the Company shall make
any investments to aid it in meeting its obligations hereunder, the Executive
shall have no right, title or interest whatever in or to any such investments
except as may otherwise be expressly provided in a separate written instrument
relating to such investments. Nothing contained in this Agreement, and no action
taken pursuant to its provisions, shall create or be construed to create a trust
of any kind, or a fiduciary relationship, between the Company and the Executive
or any other person. To the extent that any person acquires a right to receive
payments from the Company hereunder, such right, without prejudice to rights
which employees may have, shall be no greater than the right of an unsecured
creditor of the Company.
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<PAGE>
Section 12. Binding Agreement; No Assignment. This Agreement shall be
binding upon, and shall inure to the benefit of, the Executive and the Company
and their respective permitted successors, assigns, heirs, beneficiaries and
representatives. This Agreement is personal to the Executive and may not be
assigned by him without the prior written consent of the Company. Any attempted
assignment in violation of this Section 12 shall be null and void.
Section 13. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without reference to the choice of law principles thereof.
Section 14. Entire Agreement. This Agreement shall constitute the entire
agreement among the parties with respect to the matters covered hereby and shall
supersede all previous written, oral or implied understandings among them with
respect to such matters.
Section 15. Amendments. This Agreement may only be amended or otherwise
modified, and compliance with any provision hereof may only be waived, by a
writing executed by all of the parties hereto. The provisions of this Section 15
may only be amended or otherwise modified by such a writing.
Section 16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
shall together be deemed to constitute one and the same instrument.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by the undersigned, thereunto duly authorized, and the Executive has
signed this Agreement, all as of the date first written above.
SPIGADORO, INC.
By: /s/ Jacob Agam
--------------------------------
Name: Jacob Agam
Title: Chairman of the Board and
Chief Executive Officer
/s/ Lucio De Luca
-----------------------------------
LUCIO DE LUCA
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<PAGE>
Exhibit 10.73
AMENDED & RESTATED
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated January 1, 2000 by and
between Spigadoro, Inc. f/k/a IAT Multimedia, Inc. (the "Company") and Jacob
Agam (the "Executive") having an address of c/o Vertical Holdings Limited,
Westbourne, The Grange, St. Peter Port, Guernsey.
W I T N E S S E T H:
WHEREAS, the Executive previously entered into an Employment Agreement with
the Company dated September 1, 1998; and
WHEREAS, the Company and the Executive now wish to amend and restate their
agreement respecting the employment of Executive; and
WHEREAS, the Executive is willing to serve as Chief Executive Officer of
the Company and the Company desires to retain the Executive in that capacity on
the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
Section 1. Term of Employment. The Executive's employment under this
Amended & Restated Agreement shall be effective on January 1, 2000 (the
"Commencement Date") and, subject to earlier termination pursuant to Section 5
hereof, shall continue until the third anniversary of the Commencement Date (the
"Term"). The Executive hereby represents and warrants that (i) he has the legal
capacity to execute and perform this Agreement, (ii) this Agreement is a valid
and binding agreement enforceable against him according to its terms, and (iii)
the execution and performance of this Agreement by him does not violate the
terms of any existing agreement or understanding to which the Executive is a
party or by which he may be bound.
Section 2. Position and Duties. During the Term, the Executive shall serve
as Chief Executive Officer of the Company and shall have such powers and duties
as are commensurate with such position and as may be conferred upon him from
time to time by the Board of Directors of the Company (the "Board"). During the
Term, and except for illness or incapacity and reasonable vacation periods, the
Executive shall devote such of his business time, attention, skill and efforts
as are necessary to the business and affairs of the Company and its subsidiaries
and affiliates; provided, however, it is expressly understood that Executive
provides managerial services to companies other than the Company and shall
continue to devote a portion
<PAGE>
of his business time to such other companies in conjunction with his duties
hereunder to the extent that such activities do not inhibit or prohibit the
performance of his duties hereunder or inhibit or conflict in any material way
with the business of the Company, its subsidiaries and affiliates. In addition,
the Executive may engage in charitable, educational, religious, civic and
similar types of activities (all of which shall be deemed to benefit the
Company), speaking engagements, membership on the board of directors of other
organizations, and similar activities to the extent that such activities do not
inhibit or prohibit the performance of his duties hereunder.
Section 3. Compensation. For all services rendered by the Executive in any
capacity required hereunder during the Term, including, without limitation,
services as an executive officer, director, or member of any committee of the
Company, or any subsidiary, affiliate or division thereof, the Executive shall
be compensated as follows:
(a) The Company shall pay the Executive a fixed salary at the rate of
$300,000 per annum ("Base Salary"). Base Salary shall be payable in accordance
with the customary payroll practices of the Company, but in no event less
frequently than bi-weekly.
(b) The Executive shall be entitled to participate in all compensation
and employee benefit plans or programs, and to receive all benefits, perquisites
and emoluments, for which any salaried employees of the Company are eligible
under any plan or program now or hereafter established and maintained by the
Company, to the fullest extent permissible under the general terms and
provisions of such plans or programs and in accordance with the provisions
thereof, including, without limitation, incentive compensation, bonus, group
hospitalization, health, dental care, life, disability or other insurance,
tax-qualified and non-qualified pension, savings, thrift and profit-sharing
plans, termination or severance pay programs, sick-leave plans, travel or
accident insurance, automobile allowance or automobile lease plans, and
executive contingent compensation plans, including, without limitation, capital
accumulation programs and stock purchase, restricted stock and stock option
plans. Notwithstanding the foregoing, nothing in this Agreement shall preclude
the amendment or termination of any such plan or program, provided that such
amendment or termination is applicable generally to the senior officers of the
Company or any subsidiary or affiliate.
Section 4. Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable travel or other expenses incurred by the Executive
in connection with the performance of his duties and obligations under this
Agreement, subject to the Executive's presentation of appropriate vouchers in
accordance with such procedures as the Company may from time to time establish
for senior officers and to preserve any deductions for Federal income taxation
purposes to which the Company may be entitled.
Section 5. Effect of Termination of Employment. (a) In the event the
Executive's employment terminates, whether during the Term or following the
expiration of the Term, due to either a Without Cause Termination or a
Constructive Discharge, the Company shall, as liquidated damages or severance
pay, or both, continue, subject to the provisions of Section 6 below, to pay the
Executive's Base Salary as in effect at the time of such termination for the
lesser
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<PAGE>
of (i) the remainder of the then-current Term, or (ii) a period of twelve months
from the effective date of such termination. In the event the Executive's
employment terminates, whether during the Term or following the expiration of
the Term, due to a Permanent Disability, the Company shall continue to pay the
Executive's Base Salary as in effect at the time of such termination for a
period of twelve months from the date of such disability commenced; provided,
that such amounts shall be offset by any amounts otherwise paid to the Executive
under the Company's then-existing disability program. In addition, earned but
unpaid Base Salary as of the date of termination of employment shall be payable
in full. The Executive shall be entitled to continued group hospitalization,
health and dental care insurance for the periods specified in the Comprehensive
Omnibus Budget Reconciliation Act ("COBRA") upon payment by the Executive of the
amounts specified under COBRA.
(b) In the event that the Executive's employment hereunder terminates due
to a Termination for Cause, death of the Executive, or the Executive terminates
employment with the Company for reasons other than a Constructive Discharge,
Permanent Disability or retirement pursuant to the Company's retirement plan
(the "Retirement Plan"), earned but unpaid Base Salary as of the date of
termination of employment shall be payable in full. However, no other payments
shall be made, or benefits provided, by the Company under this Agreement except
for benefits payable under the Retirement Plan and benefits that have already
become vested under the terms of employee benefit programs maintained by the
Company or its affiliates for its employees and except as otherwise required by
law.
(c) For purposes of this Agreement, the following terms have the following
meanings:
(i) The term "Termination for Cause" means, to the maximum extent
permitted by applicable law, a termination of the Executive's employment by
the Company because the Executive has (a) materially breached or materially
failed to perform his duties under applicable law and such breach or
failure to perform constitutes self-dealing, willful misconduct or
recklessness, (b) engaged in conduct materially detrimental to the business
of the Company, (c) been convicted of a felony involving moral turpitude,
(d) materially breached or materially failed to perform his obligations and
duties hereunder, which breach or failure the Executive shall fail to
remedy within 30 days after written demand from the Company, or (e)
violated in any material respect the representations made in Section 1
above or the provisions of Section 6 below.
(ii) The term "Constructive Discharge" means a termination of the
Executive's employment by the Executive due to a failure of the Company or
its successors without the prior consent of the Executive to fulfill its
obligations under this Agreement in any material respect, including (a) any
failure to elect or re-elect or to appoint or reappoint the Executive to
the office of Chief Executive Officer, or (b) any other material change by
the Company in the functions, duties or responsibilities of the Executive's
position with the Company which would
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<PAGE>
materially reduce the ranking or level, dignity, responsibility, importance
or scope of such position.
(iii) The term "Without Cause Termination" means a termination of
the Executive's employment by the Company other than due to Permanent
Disability, retirement or expiration of the Term and other than a
Termination for Cause.
(iv) The term "Permanent Disability" means permanently disabled so
as to qualify for full benefits under the Company's then-existing
disability insurance policy; provided, however, that if the Company does
not maintain any such policy on the date of determination, "Permanent
Disability" shall mean the inability of the Executive to work for a period
of six full calendar months during any eight consecutive calendar months
due to illness or injury of a physical or mental nature, supported by the
completion by the Executive's attending physician of a medical
certification form outlining the disability and treatment.
Section 6. Other Duties of Executive During and After Term. (a)
The Executive recognizes and acknowledges that all information pertaining to the
affairs, business, clients, or customers of the Company or any of its
subsidiaries or affiliates (any or all of such entities being hereinafter
referred to as the "Business"), as such information may exist from time to time,
other than information that the Company has previously made publicly available,
is confidential information and is a unique and valuable asset of the Business,
access to and knowledge of which are essential to the performance of the
Executive's duties under this Agreement. In consideration of the payments made
to him hereunder, the Executive shall not, except to the extent reasonably
necessary in the performance of his duties under this Agreement, divulge to any
person, firm, association, corporation, or governmental agency, any information
concerning the affairs, businesses, clients, or customers of the Business
(except such information as is required by law to be divulged to a government
agency or pursuant to lawful process), or make use of any such information for
his own purposes or for the benefit of any person, firm, association or
corporation (except the Business) and shall use his reasonable best efforts to
prevent the disclosure of any such information by others. All records,
memoranda, letters, books, papers, reports, accountings, experience or other
data, and other records and documents relating to the Business, whether made by
the Executive or otherwise coming into his possession, are confidential
information and are, shall be, and shall remain the property of the Business. No
copies thereof shall be made which are not retained by the Business, and the
Executive agrees, on termination of his employment or on demand of the Company,
to deliver the same to the Company.
(b) In consideration of the payments made to him hereunder, during the
period (the "Restricted Period") commencing on the effective date of the
termination of his employment (the "Termination Date") and ending on the earlier
of the second anniversary of the Termination Date or upon the occurrence of a
Termination Transaction (as hereafter defined), the Executive shall not, without
express prior written approval of the Board, directly or indirectly,
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<PAGE>
own or hold any proprietary interest in, or be employed by or receive
remuneration from, any corporation, partnership, sole proprietorship or other
entity engaged in competition with the Company or any of its affiliates (a
"Competitor"), other than severance-type or retirement-type benefits from
entities constituting prior employers of the Executive. The Executive also shall
not, during the Restricted Period, solicit for the account of any Competitor,
any customer or client of the Company or its affiliates, or, any entity or
individual that was such a customer or client during the twelve-month period
immediately preceding the Termination Date. The Executive also shall not, during
the Restricted Period, act on behalf of any Competitor to interfere with the
relationship between the Company or its subsidiaries and affiliates and their
respective employees.
For purposes of the preceding paragraph, (i) the term "proprietary
interest" means legal or equitable ownership, whether through stockholding or
otherwise, of an equity interest in a business, firm or entity other than
ownership of less than 5 percent of any class of equity interest in a publicly
held business, firm or entity, (ii) an entity shall be considered to be "engaged
in competition" if such entity is, or is a holding company for, a company
engaged in the manufacture or distribution of animal feed, flour or pasta
products in the countries comprising the European Union or the United States,
and (iii) "Termination Transaction" shall mean (x) the merger or consolidation
of the Company with another company which is not affiliated with the Company
where the shareholders (or equity holders as the case may be) of the Company,
immediately prior to the merger or consolidation, do not beneficially own
immediately after the merger or consolidation, shares of the corporation issuing
cash or securities in the merger or consolidation entitling such shareholders to
the majority of all votes (without consideration of the rights of any class of
stock to elect directors by a separate class vote) to which all stockholders of
such corporation would be entitled in the election of directors, or (y) the sale
or disposition of all or substantially all of the assets or equity of the
Company to an entity not affiliated with the Company.
(c) The Company's obligation to make payments, or provide for any
benefits under this Agreement (except to the extent vested or exercisable) shall
cease upon a violation of the preceding provisions of this section. The
provisions of this Section 6 shall survive the Executive's termination of his
employment with the Company.
(d) Executive acknowledges that he has carefully read and considered
all of the restraints imposed pursuant to this Section 6 and that each and every
one of said restraints is reasonable in respect to subject matter, length of
time, and area. Employee further acknowledges that damages at law would not be a
measurable or adequate remedy for a breach of the restrictive covenants
contained herein, and accordingly consents to the entry by any court of
competent jurisdiction of order enjoining him from violating any of such
covenants. If any of the covenants contained in this Section 6 is held to be
invalid or unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision and in
its reduced form said provision shall then be enforceable.
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<PAGE>
Section 7. Withholdings. The Company may directly or indirectly withhold
from any payments made under this Agreement all Federal, state, city or other
taxes and all other deductions as shall be required pursuant to any law or
governmental regulation or ruling or pursuant to any contributory benefit plan
maintained by or on behalf of the Company.
Section 8 Consolidation, Merger, or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into or with,
or transferring all or substantially all of its assets to, or engaging in any
other business combination with, any other person or entity which assumes this
Agreement and all obligations and undertakings of the Company hereunder. Upon
such a consolidation, merger, transfer of assets or other business combination
and assumption, the term "Company" used herein shall mean such other person or
entity and this Agreement shall continue in full force and effect.
Section 9 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be given in writing and shall be deemed to
have been duly given if delivered or mailed, postage prepaid, by same day or
overnight mail (i) if to the Executive, at the address set forth above, or (ii)
if to the Company, as follows:
Spigadoro, Inc.
70 East 55th Street, 24th Floor
New York, NY 10022
or to such other address as either party shall have previously specified in
writing to the other.
Section 10. No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect; provided, however, that nothing in this Section
10 shall preclude the assumption of such rights by executors, administrators or
other legal representatives of the Executive or his estate and their assigning
any rights hereunder to the person or persons entitled thereto.
Section 11. Source of Payment. All payments provided for under this
Agreement shall be paid in cash from the general funds of the Company. The
Company shall not be required to establish a special or separate fund or other
segregation of assets to assure such payments, and, if the Company shall make
any investments to aid it in meeting its obligations hereunder, the Executive
shall have no right, title or interest whatever in or to any such investments
except as may otherwise be expressly provided in a separate written instrument
relating to such investments. Nothing contained in this Agreement, and no action
taken pursuant to its provisions, shall create or be construed to create a trust
of any kind, or a fiduciary relationship, between the Company and the Executive
or any other person. To the extent that any person acquires a right to receive
payments from the Company hereunder, such right, without prejudice to rights
which employees may have, shall be no greater than the right of an unsecured
creditor of the Company.
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<PAGE>
Section 12. Binding Agreement; No Assignment. This Agreement shall be
binding upon, and shall inure to the benefit of, the Executive and the Company
and their respective permitted successors, assigns, heirs, beneficiaries and
representatives. This Agreement is personal to the Executive and may not be
assigned by him without the prior written consent of the Company. Any attempted
assignment in violation of this Section 12 shall be null and void.
Section 13. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without reference to the choice of law principles thereof.
Section 14. Entire Agreement. This Agreement shall constitute the entire
agreement among the parties with respect to the matters covered hereby and shall
supersede all previous written, oral or implied understandings among them with
respect to such matters.
Section 15. Amendments. This Agreement may only be amended or otherwise
modified, and compliance with any provision hereof may only be waived, by a
writing executed by all of the parties hereto. The provisions of this Section 15
may only be amended or otherwise modified by such a writing.
Section 16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
shall together be deemed to constitute one and the same instrument.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by the undersigned, thereunto duly authorized, and the Executive has
signed this Agreement, all as of the date first written above.
SPIGADORO, INC.
By: /s/ Klaus Grissemann
--------------------------------
Name: Klaus Grissemann
Title: Chief Financial Officer
/s/ Jacob Agam
-----------------------------------
JACOB AGAM
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<PAGE>
Exhibit 10.74
FIRST PROMISSORY NOTE
US $6,337,000 December 29, 1999
IAT Multimedia, Inc. (the "Purchaser") hereby promises to pay to Gruppo
Spigadoro N.V. (the "Seller") or registered assignees, by wire transfer of
immediately available funds, in lawful currency of the United States of America,
at an account to be designated in writing by the Seller, the principal amount of
SIX MILLION THREE HUNDRED THIRTY-SEVEN THOUSAND US DOLLARS ($6,337,000)
together with interest on such principal amount at the Applicable Interest Rate
(as defined below), calculated on the basis of a 360 day year compromised of
twelve 30 day months, per annum from the date hereof to the Maturity Date (as
defined below). All terms not otherwise defined herein shall have the meaning
ascribed to them in that certain Stock Purchase Agreement (the "Agreement"),
dated as of November 3, 1999, by and between the Seller and the Purchaser. As
used herein, "Applicable Interest Rate" means a rate of interest per annum equal
to 5% provided that in no event shall the rate of interest hereunder exceed the
rate permitted by applicable laws. If any amount of principal or interest on or
in respect of this note (hereinafter, the "First Promissory Note") becomes due
and payable on any date which is not a Business Day, such amount shall be
payable on the next succeeding Business Day. This First Promissory Note is the
Promissory Note referred to in Schedule 2.2, item #1 of the Agreement.
1. Maturity Date. As used herein, the term "Maturity Date" shall mean the
earlier (i) of December 31, 2000 or (ii) the completion of a public offering by
the Purchaser in which the Purchaser realizes at least US $20 million of net
proceeds.
2. Prepayment. The Purchaser may, at any time, but shall not be required
to, prepay, in whole or in part, amounts due under this First Promissory Note,
provided that such prepayment shall include all principal and accrued interest
as of the date of such prepayment.
3. Conversion of Promissory Note. (a) This First Promissory Note shall be
convertible into shares of Purchaser Common Stock at the option of the
Purchaser, in whole or in part, at any time and from time to time, at a
conversion price equal to the greater of $2.50 or 85% of the average closing
price of Purchaser Common Stock as reported by the primary stock market or
exchange on which the Purchaser Common Stock is traded for the five (5) trading
days prior to a notice of conversion (the "Conversion Notice"). Each Conversion
Notice shall be in writing and shall specify the principal amount of the note to
be converted and the date on which such conversion is to be effected, which date
may not be prior to the date such Conversion Notice is deemed to have been
delivered hereunder (the "Conversion Date"). If no Conversion Date is specified
in the Conversion Notice, the Conversion Date shall be the date that such
Conversion Notice is deemed delivered hereunder. Any Conversion Notice given
shall be irrevocable. If the Purchaser is requiring conversion of less than all
of the principal amount represented by this First Promissory Note, the Purchaser
shall promptly deliver to the Seller a new note for such principal amount as has
not been converted.
<PAGE>
(b) The number of shares so delivered under (a) above shall be further
adjusted by the Board of Directors of the Purchaser or, an authorized committee
thereof, to reflect any issuance of new stock, stock dividend, common stock
split, share combination, exchange of shares, merger, consolidation,
recapitalization, separation, reorganization, liquidation or extraordinary
dividend or similar transaction payable in stock of the Purchaser all for the
purpose of providing dilution protection for the Seller.
4. Successors and Assignees. The terms of this First Promissory Note shall
be binding upon and inure to the benefit of and be enforceable by the respective
successors and permitted assignees of the Purchaser and the Seller, and,
enforceable by any holder or holders of this First Promissory Note; provided
that the rights, obligations, covenants and agreements of the Purchaser under
this First Promissory Note may not be assigned or delegated, as applicable,
without the written consent of the Seller. In the event of any such transfer and
assignment of this First Promissory Note, the Purchaser shall, upon surrender of
this First Promissory Note to the Purchaser, execute and deliver in exchange
therefor a new note. Each such new note shall be dated so that there will be no
loss of interest on the surrendered First Promissory Note and registered in the
name of such person as the Seller or other holder of the surrendered First
Promissory Note may request.
5. Notices. All notices and other communications with respect to this First
Promissory Note shall be in writing and shall be sent by hand delivery, receipt
acknowledged, or by facsimile transmission, as follows:
If to the Seller, to:
Gruppo Spigadoro N.V.
Strawinskylaan 1725, 1077 XX
Amsterdam, The Netherlands
Facsimile: 31 206647557
Attention: Marc S. Goldfarb
If to the Purchaser, to:
Jacob Agam, Chairman
IAT Multimedia, Inc.
70 East 55th Street
New York, New York 10022
Telefax: 212-754-4044
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<PAGE>
with copies to:
Steven Skolnick, Esq.
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Telefax: 973-597-2400
6. Modifications and Amendments. No modification, rescission, waiver,
forbearance, release or amendment of any provision of this First Promissory Note
shall be made, except by a written agreement duly executed by the Purchaser and
the Seller.
7. Jurisdiction; Governing Law. The Purchaser and Seller (a) acknowledge
and agree that, in any suit, action or proceeding under this promissory note,
the courts of the State of New York or the courts of the United States District
Court for the Southern District of New York shall have the exclusive
jurisdiction thereof and (b) consent to and waive any objection which the Seller
now has or may hereafter have to proper venue existing in any of such courts.
This First Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York, without regard to conflict of laws
principles thereof.
8. Lost, Mutilated or Stolen Note. Upon receipt of evidence, reasonably
satisfactory to the Purchaser of the loss, theft, destruction or mutilation of
this First Promissory Note and, in the case of any such mutilation, upon the
surrender of this First Promissory Note for cancellation to the Purchaser at its
principal office, the Purchaser will execute and deliver, in lieu thereof, a new
note of like tenor containing the same terms as this First Promissory Note,
dated so that there will be no loss of interest on such lost, stolen, destroyed
or mutilated First Promissory Note. Any First Promissory Note in lieu of which
any such new note has been so executed and delivered by the Purchaser shall not
be deemed to be an outstanding First Promissory Note for any purposes.
9. Headings. Paragraph headings used in this First Promissory Note are for
convenience of reference only, are not part of this First Promissory Note and
are not to effect the construction of, or to be taken into consideration in
interpreting, this First Promissory Note.
10. Severability. If any provision of this First Promissory Note is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the provisions of this First Promissory Note shall remain in full
and effect.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned hereto has caused this First Promissory
Note to be executed by its duly authorized officers as of the date first above
written.
IAT MULTIMEDIA, INC.
By: /s/ Klaus Grissemann
-------------------------------
Name: Klaus Grissemann
Title: Chief Financial Officer
AGREED AND ACCEPTED:
GRUPPO SPIGADORO N.V.
By: /s/ Jacob Agam
-------------------------------
Name: Jacob Agam
Title: Chairman of the Board and
Chief Executive Officer
-4-
<PAGE>
Exhibit 10.75
SECOND PROMISSORY NOTE
US $1,000,000 December 29, 1999
IAT Multimedia, Inc. (the "Purchaser") hereby promises to pay to Carlo
Petrini (the "Noteholder"), or registered assignees, by wire transfer of
immediately available funds to the account designated below, in lawful currency
of the United States of America, the principal amount of ONE MILLION US DOLLARS
($1,000,000) on the Maturity Date. This Second Promissory Note is a non-interest
bearing note. All the terms not otherwise defined herein shall have the meaning
ascribed to them in that certain Stock Purchase Agreement (the "Agreement"),
dated as of November 3, 1999, by and between Gruppo Spigadoro N.V. and the
Purchaser. This Second Promissory Note is the promissory note referred to in
Schedule 2.2, item #2 of the Agreement.
1. Maturity Date. As used herein, the term "Maturity Date" shall mean March
31, 2000.
2. Payment Instructions. All payments due under this note shall be by wire
transfer to:
Finnat Euramerica S.p.A.
Piazza del Gesu no. 49
00186 Roma
ABI 03087
CAB 03200
C/c no. 45605
For Carlo Petrini
3. Prepayment. The Purchaser may, at any time, but shall not be required
to, prepay, in whole or in part, amounts due under this Second Promissory Note.
4. Successors and Assignees. The terms of this Second Promissory Note shall
be binding upon and inure to the benefit of and be enforceable by the respective
successors and permitted assignees of the Purchaser and the Noteholder, and,
enforceable by any holder or holders of this Second Promissory Note; provided
that the rights, obligations, covenants and agreements of the Purchaser under
this Second Promissory Note may not be assigned or delegated, as applicable,
without the written consent of the Noteholder. In the event of any such transfer
and assignment of this Second Promissory Note, the Purchaser shall, upon
surrender of this Second Promissory Note to the Purchaser, execute and deliver
in exchange therefor a new note. Each such new note shall be registered in the
name of such person as the Noteholder or other holder of the surrendered Second
Promissory Note may request.
<PAGE>
5. Notices. All notices and other communications with respect to this
Second Promissory Note shall be in writing and shall be sent by hand delivery,
receipt acknowledged, or by facsimile transmission, as follows:
If to the Noteholder, to:
Sig. Carlo Petrini
Petrini S.p.A
Bastia Umbra (Perugia)
Italy
Telefax: 39-758009341
If to the Purchaser, to:
Jacob Agam, Chairman
IAT Multimedia, Inc.
70 East 55th Street
New York, New York 10022
Telefax: 212-754-4044
with copies to:
Steven Skolnick, Esq.
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Telefax: 973-597-2400
6. Modifications and Amendments. No modification, rescission, waiver,
forbearance, release or amendment of any provision of this Second Promissory
Note shall be made, except by a written agreement duly executed by the Purchaser
and the Noteholder.
7. Jurisdiction; Governing Law. The Purchaser and Noteholder (a)
acknowledge and agree that, in any suit, action or proceeding under this
promissory note, the courts of the State of New York or the courts of the United
States District Court for the Southern District of New York shall have the
exclusive jurisdiction thereof, and (b) consent to and waive any objection which
the Noteholder now has or may hereafter have to proper venue existing in any of
such courts. This Second Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to conflict
of laws principles thereof.
8. Lost, Mutilated or Stolen Note. Upon receipt of evidence, reasonably
satisfactory to the Purchaser of the loss, theft, destruction or mutilation of
this Second Promissory Note and, in the case of any such mutilation, upon the
surrender of this Second Promissory Note for cancellation to the Purchaser at
its principal office, the Purchaser will execute and deliver, in lieu thereof, a
new note of like tenor containing the same terms as this Second Promissory Note,
-2-
<PAGE>
dated so that there will be no loss of interest on such lost, stolen, destroyed
or mutilated Second Promissory Note. Any Second Promissory Note in lieu of which
any such new note has been so executed and delivered by the Purchaser shall not
be deemed to be an outstanding Second Promissory Note for any purposes.
9. Headings. Paragraph headings used in this Second Promissory Note are for
convenience of reference only, are not part of this Second Promissory Note and
are not to effect the construction of, or to be taken into consideration in
interpreting, this Second Promissory Note.
10. Severability. If any provision of this Second Promissory Note is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the provisions of this Second Promissory Note shall remain in full
and effect.
IN WITNESS WHEREOF, the undersigned hereto has caused this Second
Promissory Note to be executed by its duly authorized officers as of the date
first above written.
IAT MULTIMEDIA, INC.
By: /s/ Jacob Agam
--------------------------------
Name: Jacob Agam
Title: Chairman of the Board and
Chief Executive Officer
AGREED AND ACCEPTED:
/s/ Carlo Petrini
- --------------------------
CARLO PETRINI
-3-
<PAGE>
Exhibit 10.76
FOURTH PROMISSORY NOTE
ITL. 12,050,000,000 December 29, 1999
IAT Multimedia, Inc. (the "Purchaser") hereby promises to pay to Carlo
Petrini (the "Noteholder"), or registered assignees, by wire transfer of
immediately available funds to the account designated below, in lawful currency
of Italy, the principal amount of TWELVE BILLION FIFTY MILLION ITALIAN LIRA
(ITL. 12,050,000,000) on the Maturity Date; provided, however, that in no event
shall the principal amount, in the aggregate, paid to the Noteholder hereunder
exceed SEVEN MILLION US DOLLARS ($7,000,000) based upon the currency exchange
rate in effect on the respective payment date(s). This Fourth Promissory Note is
a non-interest bearing note. All the terms not otherwise defined herein shall
have the meaning ascribed to them in that certain Stock Purchase Agreement (the
"Agreement"), dated as of November 3, 1999, by and between Gruppo Spigadoro N.V.
and the Purchaser. This Fourth Promissory Note is the promissory note referred
to in Schedule 2.2, item #4 of the Agreement.
1. Maturity Date; Payment. As used herein, the term "Maturity Date" shall
mean June 30, 2000.
2. Payment Instructions. All payments due under this note shall be by wire
transfer to:
Finnat Euramerica S.p.A.
Piazza del Gesu no. 49
00186 Roma
ABI 03087
CAB 03200
C/c no. 45605
For Carlo Petrini
3. Prepayment. The Purchaser may, at any time, but shall not be required
to, prepay, in whole or in part, amounts due under this Fourth Promissory Note.
4. Security. This Fourth Promissory Note is secured by a guaranty of Seller
and a pledge of Purchaser Common Stock pursuant to a Stock Pledge Agreement (the
"Stock Pledge Agreement"), dated as of the date hereof, by and between the
Seller and the Noteholder.
5. Successors and Assignees. The terms of this Fourth Promissory Note shall
be binding upon and inure to the benefit of and be enforceable by the respective
successors and permitted assignees of the Purchaser and the Noteholder, and,
enforceable by any holder or holders of this Fourth Promissory Note; provided
that the rights, obligations, covenants and agreements of the Purchaser under
this Fourth Promissory Note may not be assigned or delegated, as applicable,
without the written consent of the Noteholder. In the event of any such transfer
and assignment of this Fourth Promissory Note, the Purchaser shall, upon
surrender of
<PAGE>
this Fourth Promissory Note to the Purchaser, execute and deliver in exchange
therefor a new note. Each such new note shall be registered in the name of such
person as the Noteholder or other holder of the surrendered Fourth Promissory
Note may request.
6. Notices. All notices and other communications with respect to this
Fourth Promissory Note shall be in writing and shall be sent by hand delivery,
receipt acknowledged, or by facsimile transmission, as follows:
If to the Noteholder, to:
Sig. Carlo Petrini
Petrini S.p.A.
Bastia Umbra (Perugia)
Italy
Telefax: 39-758009341
If to the Purchaser, to:
Jacob Agam, Chairman
IAT Multimedia, Inc.
70 East 55th Street
New York, New York 10022
Telefax: 212-754-4044
with copies to:
Steven Skolnick, Esq.
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Telefax: 973-597-2400
7. Modifications and Amendments. No modification, rescission, waiver,
forbearance, release or amendment of any provision of this Fourth Promissory
Note shall be made, except by a written agreement duly executed by the Purchaser
and the Noteholder.
8. Jurisdiction; Governing Law. The Purchaser and Noteholder (a)
acknowledge and agree that, in any suit, action or proceeding under this
promissory note, the courts of the State of New York or the courts of the United
States District Court for the Southern District of New York shall have the
exclusive jurisdiction thereof and (b) consent to and waive any objection which
the Noteholder now has or may hereafter have to proper venue existing in any of
such courts. This promissory note shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to conflict
of laws principles thereof.
-2-
<PAGE>
9. Lost, Mutilated or Stolen Note. Upon receipt of evidence, reasonably
satisfactory to the Purchaser of the loss, theft, destruction or mutilation of
this Fourth Promissory Note and, in the case of any such mutilation, upon the
surrender of this Fourth Promissory Note for cancellation to the Purchaser at
its principal office, the Purchaser will execute and deliver, in lieu thereof, a
new note of like tenor containing the same terms as this Fourth Promissory Note,
dated so that there will be no loss of interest on such lost, stolen, destroyed
or mutilated Fourth Promissory Note. Any Fourth Promissory Note in lieu of which
any such new note has been so executed and delivered by the Purchaser shall not
be deemed to be an outstanding Fourth Promissory Note for any purposes.
10. Headings. Paragraph headings used in this Fourth Promissory Note are
for convenience of reference only, are not part of this Fourth Promissory Note
and are not to effect the construction of, or to be taken into consideration in
interpreting, this Fourth Promissory Note.
11. Severability. If any provision of this Fourth Promissory Note is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the provisions of this Fourth Promissory Note shall remain in full
and effect.
IN WITNESS WHEREOF, the undersigned hereto has caused this Fourth
Promissory Note to be executed by its duly authorized officers as of the date
first above written.
IAT MULTIMEDIA, INC.
By: /s/ Jacob Agam
------------------------------
Name: Jacob Agam
Title: Chairman of the Board and
Chief Executive Officer
AGREED AND ACCEPTED:
/s/ Carlo Petrini
- --------------------------
CARLO PETRINI
-3-
<PAGE>
Exhibit 10.77
THIRD PROMISSORY NOTE
US $6,150,000 December 29, 1999
IAT Multimedia, Inc. (the "Purchaser") hereby promises to pay to Carlo
Petrini (the "Noteholder"), or registered assignees, by wire transfer of
immediately available funds to the account designated below, in lawful currency
of the United States of America, the principal amount of SIX MILLION ONE HUNDRED
FIFTY THOUSAND US DOLLARS ($6,150,000) at the Maturity Date. This Third
Promissory Note shall be a non-interest bearing note. All the terms not
otherwise defined herein shall have the meaning ascribed to them in that certain
Stock Purchase Agreement (the "Agreement"), dated as of November 3, 1999, by and
between Gruppo Spigadoro N.V. and the Purchaser. This Third Promissory Note is
the promissory note referred to in Schedule 2.2, item #3 of the Agreement.
1. Maturity Date. As used herein, the term "Maturity Date" shall mean
December 31, 2000.
2. Payment Instructions. All payments due under this note shall be by wire
transfer to:
Finnat Euramerica S.p.A.
Piazza del Gesu no. 49
00186 Roma
ABI 03087
CAB 03200
C/c no. 45605
For Carlo Petrini
3. Prepayment. The Purchaser may, at any time, but shall not be required
to, prepay, in whole or in part, amounts due under this Third Promissory Note.
4. Security. This Third Promissory Note is secured by a guaranty of Seller
and a pledge of Purchaser Common Stock pursuant to a Stock Pledge Agreement (the
"Stock Pledge Agreement"), dated as of the date hereof, by and between the
Seller and the Noteholder.
5. Conversion of Promissory Note. (a) This Third Promissory Note shall be
convertible into shares of Purchaser Common Stock at the option of the
Noteholder, in whole or in part, at any time and from time to time, at a
conversion price equal to the greater of $2.50 or 85% of the average closing
price of Purchaser Common Stock as reported by the primary stock market or
exchange on which the Purchaser Common Stock is traded for the five (5) trading
days prior to the notice of conversion (the "Conversion Notice"). Each
Conversion Notice shall be in writing and shall specify the principal amount of
the note to be converted and the date on which such conversion is to be
effected, which date may not be prior to the date such Conversion Notice is
deemed to have been delivered hereunder (the "Conversion Date"). If no
Conversion
<PAGE>
Date is specified in the Conversion Notice, the Conversion Date shall be the
date that such Conversion Notice is deemed delivered hereunder. Any Conversion
Notice given shall be irrevocable. If the Noteholder is requiring conversion of
less than all of the principal amount represented by this Third Promissory Note,
the Purchaser shall promptly deliver to the Noteholder a new note for such
principal amount as has not been converted.
(b) The number of shares so delivered under (a) above shall be further
adjusted by the Board of Directors of the Purchaser or, an authorized committee
thereof, to reflect any issuance of new stock, stock dividend, common stock
split, share combination, exchange of shares, merger, consolidation,
recapitalization, separation, reorganization, liquidation or extraordinary
dividend or similar transaction payable in stock of the Purchaser all for the
purpose of providing dilution protection for the Seller.
6. Successors and Assignees. The terms of this Third Promissory Note shall
be binding upon and inure to the benefit of and be enforceable by the respective
successors and permitted assignees of the Purchaser and the Noteholder, and,
enforceable by any holder or holders of this Third Promissory Note; provided
that the rights, obligations, covenants and agreements of the Purchaser under
this Third Promissory Note may not be assigned or delegated, as applicable,
without the written consent of the Noteholder. In the event of any such transfer
and assignment of this Third Promissory Note, the Purchaser shall, upon
surrender of this Third Promissory Note to the Purchaser, execute and deliver in
exchange therefor a new note. Each such new note shall be registered in the name
of such person as the Noteholder or other holder of the surrendered Third
Promissory Note may request.
7. Notices. All notices and other communications with respect to this Third
Promissory Note shall be in writing and shall be sent by hand delivery, receipt
acknowledged, or by facsimile transmission, as follows:
If to the Noteholder, to:
Sig. Carlo Petrini
Petrini S.p.A.
Bastia Umbra (Perugia)
Italy
Telefax: 39-758009341
If to the Purchaser, to:
Jacob Agam, Chairman
IAT Multimedia, Inc.
70 East 55th Street
New York, New York 10022
Telefax: 212-754-4044
-2-
<PAGE>
with copies to:
Steven Skolnick, Esq.
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Telefax: 973-597-2400
8. Modifications and Amendments. No modification, rescission, waiver,
forbearance, release or amendment of any provision of this Third Promissory Note
shall be made, except by a written agreement duly executed by the Purchaser and
the Noteholder.
9. Jurisdiction; Governing Law. The Purchaser and Noteholder (a)
acknowledge and agree that, in any suit, action or proceeding under this
promissory note, the courts of the State of New York or the courts of the United
States District Court for the Southern District of New York shall have the
exclusive jurisdiction thereof and (b) consent to and waive any objection which
the Noteholder now has or may hereafter have to proper venue existing in any of
such courts. This promissory note shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to conflict
of laws principles thereof.
10. Lost, Mutilated or Stolen Note. Upon receipt of evidence, reasonably
satisfactory to the Purchaser of the loss, theft, destruction or mutilation of
this Third Promissory Note and, in the case of any such mutilation, upon the
surrender of this Third Promissory Note for cancellation to the Purchaser at its
principal office, the Purchaser will execute and deliver, in lieu thereof, a new
note of like tenor containing the same terms as this Third Promissory Note,
dated so that there will be no loss of interest on such lost, stolen, destroyed
or mutilated Third Promissory Note. Any Third Promissory Note in lieu of which
any such new note has been so executed and delivered by the Purchaser shall not
be deemed to be an outstanding Third Promissory Note for any purposes.
11. Headings. Paragraph headings used in this Third Promissory Note are for
convenience of reference only, are not part of this Third Promissory Note and
are not to effect the construction of, or to be taken into consideration in
interpreting, this Third Promissory Note.
12. Severability. If any provision of this Third Promissory Note is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the provisions of this Third Promissory Note shall remain in full
and effect.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned hereto has caused this Third
Promissory Note to be executed by its duly authorized officers as of the date
Third above written.
IAT MULTIMEDIA, INC.
By: /s/ Jacob Agam
-----------------------------
Name: Jacob Agam
Title: Chairman of the Board and
Chief Executive Officer
AGREED AND ACCEPTED:
/s/ Carlo Petrini
- --------------------------
CARLO PETRINI
-4-
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use of our Report dated October 14, 1999, except for the
convenience translation of the financial statements into U.S. Dollars as to
which the date is November 23, 1999, with respect to the financial statements of
Petrini S.p.A. as of December 31, 1998 and 1997 and for each of the three years
in the period ended December 31, 1998, included in the Form 8-K of Spigadoro,
Inc.
Perugia, Italy
January 11, 2000
Reconta Ernst & Young S.p.A.
