<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
December 31, 1999
Date of Report (Date of earliest event reported)
MSX INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 333-49821 38-3323099
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
275 REX BOULEVARD AUBURN HILLS, MICHIGAN
(Address of principal executive offices)
48326
(Zip Code)
(248) 299-1000
(Registrant's telephone number, including area code)
1
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective December 31, 1999 MSX International, Inc. (MSXI) acquired a majority
interest in Satiz S.r.l. ("Satiz"), a subsidiary of Fiat S.p.A. Satiz is
headquartered in Turin, Italy and specializes in commercial and technical
publishing including translation services, graphics, document systems, warehouse
and distribution services, and events. Satiz was founded in 1934 and became the
publishing center for the Fiat Group in 1994. Satiz employs almost 500 people
and has historical annual revenues in excess of $120 million (240 billion lire).
The acquisition of Satiz further enhances our ability to provide global value
added services to our customers.
Pursuant to a stock purchase agreement (attached as Exhibit 99.1) we acquired
75% of the outstanding common stock of Satiz for about $9.7 million. At closing,
Satiz had about $8.9 million of debt outstanding. The remaining 25% of the
outstanding common stock of Satiz have been retained by Fiat. Funding for the
transaction was provided under our credit facility, as amended and restated in
December 1999. The balance sheet of Satiz, as of December 31, 1999, will be
included in the consolidated balance sheet of MSXI as of January 2, 2000 to be
filed with our annual report on Form 10K at a later date. The acquisition was
accounted for under the purchase method of accounting.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements:
Satiz S.r.l. audited financial statements as of December 31, 1999
and 1998 and for the three years ended December 31, 1999............4
(b) Pro Forma Consolidated Financial Data:
MSX International, Inc. pro forma financial data for the fiscal
year ended January 2, 2000.........................................33
(c) Exhibits:
99.1 Stock Purchase Agreement...................................37
2
<PAGE> 3
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 hereunder duly authorized.
Dated: March 13, 2000
MSX INTERNATIONAL, INC.
By: /s/Frederick K. Minturn
-----------------------
Frederick K. Minturn
Executive Vice President, Chief Financial Officer
3
<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
SATIZ S.r.l.:
We have audited the accompanying balance sheet of SATIZ S.r.l. (formerly known
as SATIZ S.p.A.) as of December 31, 1998, and the related statements of income
and cash flows for the years ended December 31, 1997 and 1998, all expressed in
Euros (see Note 1). 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 generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audits 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 SATIZ S.r.l. as of December 31,
1998, and the results of its operations and its cash flows for the years ended
December 31, 1997 and 1998 in conformity with generally accepted accounting
principles in Italy (see Note 1).
The accounting principles referred to above vary in certain respects from
accounting principles generally accepted in the United States of America ("U.S.
GAAP"). A description of these differences and the adjustments required to
conform net income for the years ended December 31, 1997 and 1998 and
stockholders' equity as of December 31, 1997 and 1998 to U.S. GAAP are set forth
in Note 24 to the financial statements.
/s/Arthur Andersen
Turin, Italy
March 6, 2000
4
<PAGE> 5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of SATIZ Srl
We have audited the accompanying balance sheet of SATIZ Srl at December 31, 1999
and the related statement of income and of cash flows for the year then ended,
all expressed in Euros. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of SATIZ Srl at December 31, 1999, and
the results of its operations and its cash flows for the year then ended, in
conformity with accounting principles generally accepted in Italy.
Accounting principles generally accepted in Italy vary in certain significant
respects from the accounting principles generally accepted in the United States.
The application of the latter would have affected the determination of net
income for the year ended December 31, 1999 and the determination of
stockholders' equity and financial position at December 31, 1999 to the extent
summarized in Note 24 to the financial statements.
/s/PricewaterhouseCoopers SpA
Turin, Italy
March 8, 2000
5
<PAGE> 6
SATIZ Srl
BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1999
----------------- -----------------
Thousands of Thousands of Thousands of U.S.
Euro Euro dollars
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Inventories (Note 7) 842 1,858 $ 1,871
Receivables
- Trade receivables (Note 8) 61,113 60,891 61,320
- Other receivables (Note 9) 1,323 1,494 1,505
Cash and cash equivalents 344 410 413
Prepaid expenses and other 303 235 236
------------------------------------------------
TOTAL CURRENT ASSETS 63,925 64,888 65,345
------------------------------------------------
NON-CURRENT ASSETS
Intangible assets (Note 3) 2,624 13,041 13,133
Tangible fixed assets (Note 4) 3,553 4,484 4,516
Financial assets
- Investments in subsidiaries,
affiliates and other companies
(Note 5) 225 364 367
- Other receivables (Note 6) 3,024 - -
------------------------------------------------
TOTAL NON-CURRENT ASSETS 9,426 17,889 18,016
------------------------------------------------
------------------------------------------------
TOTAL ASSETS 73,351 82,777 $ 83,361
================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Financial debt (Note 12) 9,103 8,853 $ 8,915
Payables trade and other (Note 13) 45,510 50,648 51,005
Accrued income taxes (Note 14) 3,512 1,928 1,942
Accrued expenses and other liabilities
(Note 15) 1,726 2,202 2,218
------------------------------------------------
TOTAL CURRENT LIABILITIES 59,851 63,631 64,080
------------------------------------------------
------------------------------------------------
EMPLOYEE TERMINATION INDEMNITIES (NOTE 11) 5,729 6,813 6,861
------------------------------------------------
STOCKHOLDERS' EQUITY (NOTE 10)
Share capital 103 4,000 4,028
Additional paid in capital - 8,920 8,983
Retained earnings and other reserves 7,668 (587) (591)
------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 7,771 12,333 12,420
------------------------------------------------
------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 73,351 82,777 $ 83,361
================================================
</TABLE>
The accompanying notes to the financial statements are an
integral part of the above statements.
Exchange rate: Euro 0.9930 = U.S.$ 1.00 as of December 31,1999
The balances of 1998 have been restated from the
prior reporting currency (Italian Lire)
to the current reporting currency (Euro) using the fixed
exchange rate as of January 1, 1999 of Lire 1,936.27 = Euro 1
6
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SATIZ Srl
STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----------------------
Thousands of Thousands of Thousands of Thousands of U.S.
Euro Euro Euro dollars
<S> <C> <C> <C> <C>
REVENUES:
Revenues from sales and services (Note 17) 93,692 122,858 131,392 $ 132,318
Other income and revenues (Note 18) 127 749 189 190
-------------------------------------------------------
TOTAL REVENUES 93,819 123,607 131,581 132,508
-------------------------------------------------------
OPERATING EXPENSES:
Raw material supplies and merchandise
(Note 19) 51,955 61,798 54,676 55,061
Services (Note 20) 19,060 29,697 43,867 44,176
Lease and rental expense 2,054 2,519 4,325 4,355
Personnel costs (Note 21) 12,442 14,318 18,551 18,682
Depreciation, amortization and
write-downs (Note 22) 3,827 4,180 4,877 4,911
Change in inventory of raw
material supplies and merchandise (169) (100) (1,015) (1,022)
Other operating costs 702 1,222 553 557
-------------------------------------------------------
TOTAL OPERATING EXPENSES 89,871 113,634 125,834 126,720
-------------------------------------------------------
OPERATING INCOME 3,948 9,973 5,747 5,788
-------------------------------------------------------
FINANCIAL INCOME AND (EXPENSES) (Note 23):
Investment income 1,214 - - -
Other financial income 382 274 173 174
Interest and other financial expenses (691) (650) (299) (301)
-------------------------------------------------------
TOTAL FINANCIAL INCOME AND EXPENSES 905 (376) (126) (127)
-------------------------------------------------------
Writedowns of financial assets 775 - 82 83
-------------------------------------------------------
Extraordinary expenses 129 - - -
-------------------------------------------------------
INCOME BEFORE TAXES 3,949 9,597 5,539 5,578
-------------------------------------------------------
Income taxes 2,562 4,731 3,395 3,419
-------------------------------------------------------
NET INCOME 1,387 4,866 2,144 $ 2,159
=======================================================
</TABLE>
The accompanying notes to the financial statements are an
integral part of the above statements
Exchange rate: Euro 0.9930 = U.S.$ 1.00 as of December 31,1999
The balances of the years 1997 and 1998 have been
restated from the prior reporting currency (Italian Lire)
to the current reporting currency (Euro) using the fixed
exchange rate as of January 1, 1999 of Lire 1,936.27 = Euro 1
7
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SATIZ Srl
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
------ ------ --------------------
Thousands of Thousands of Thousands of Thousands of U.S.
Euro Euro Euro dollars
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income 1,387 4,866 2,144 $ 2,159
Depreciation and amortization 3,574 3,875 4,850 4,884
Losses from disposal of fixed assets 224 12 36 36
Write-down of financial assets 775 - 82 83
Dividend from subsidiaries merged during the year (777) - - -
Changes in working capital 2,765 (6,394) 598 602
Net changes in reserve for employee termination
indemnities 1,069 1,594 1,084 1,092
Other movements, net 130 (129) - -
--------------------------------------------------------
NET CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES 9,147 3,824 8,794 8,856
--------------------------------------------------------
INVESTING ACTIVITIES:
Investment in fixed assets:
- intangible (1,990) (2,226) (1,641) (1,653)
- tangible (1,833) (2,362) (1,862) (1,875)
- financial - (224) (221) (223)
Proceeds from sale of fixed assets 583 99 111 112
--------------------------------------------------------
Net cash flows used in investing activities (3,240) (4,713) (3,613) (3,639)
--------------------------------------------------------
FINANCING ACTIVITIES:
Dividends paid (1,136) (775) (5,164) (5,200)
Reimbursement of financial receivables - 290 299 301
Other financial debt (4,569) 1,464 (250) (252)
Tax on property (18) - - -
--------------------------------------------------------
NET CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES (5,723) 979 (5,115) (5,151)
--------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 184 90 66 66
CASH AND CASH EQUIVALENTS:
Beginning of year 70 254 344 347
--------------------------------------------------------
End of year 254 344 410 $ 413
========================================================
NON-CASH ACTIVITIES DUE TO REORGANIZATION:
Working capital not contributed - - 2,536 2,554
Financial receivable not contributed - - 2,725 2,744
Tangible and intangible assets not
contributed - - 896 902
Step-up of fixed assets - - (1,343) (1,352)
Goodwill from the contribution - - (12,396) (12,483)
Reorganization of equity - - (5,328) (5,366)
Increase of share capital - - 12,910 13,001
</TABLE>
The accompanying notes to the financial statements are an
integral part of the above statements
Exchange rate: Euro 0.9930 = U.S.$ 1.00 as of December 31,1999
The balances of the years 1997 and 1998 have been
restated from the prior reporting currency (Italian Lire)
to the current reporting currency (Euro) using the fixed
exchange rate as of January 1, 1999 of Lire 1,936.27 = Euro 1
8
<PAGE> 9
NOTE 1 - FORM AND CONTENT OF THE FINANCIAL STATEMENTS
SATIZ Srl ("SATIZ" or "the Company") specializes in commercial and technical
publishing including translation services, graphics, document systems, warehouse
and distribution services and events.
On September 30, 1999, SATIZ SpA (the predecessor company), through a
reorganization, contributed substantially all of the net assets associated with
its printing and publications operations to its newly formed subsidiary named
SATIZ Srl. The predecessor company, acting primarily as a holding company, then
changed its name to B & B Immobiliare SpA.
These financial statements reflect the financial position and results of
operations of the newly formed subsidiary. Specifically, the financial
statements of the Company prepared as of December 31, 1998 and for the years
ended December 31, 1997 and 1998 reflect the operations of the predecessor
company as such operations are substantially the same as those of the newly
formed subsidiary. The financial statements of the Company prepared as of
December 31, 1999 and for the year then ended include the net assets of the
Company as contributed by SATIZ SpA and the results of operations of the
predecessor company from January 1 to September 30, 1999 as well as the results
of operations of SATIZ Srl from October 1 to December 31, 1999.
Net assets not contributed by SATIZ SpA to the Company on September 30, 1999,
with a combined book value of approximately Euro 9,169 thousand on that date,
include primarily certain receivables and fixed assets, primarily a building,
the latter of which is being leased by the Company. Accordingly, such net assets
have been excluded from the balance sheet of the Company at December 31, 1999.
In addition, as required by the Italian law, at September 30, 1999 the Company
has estimated the value of its operations as would be determined by a third
party and has recognized the excess of such value over the net book value of
assets received in the contribution in the form of goodwill.
Until December 30, 1999, the Company was wholly owned by Fiat SpA. On December
31, 1999, Fiat SpA sold 75% of the net assets of SATIZ Srl to MSX International
Holdings Italia Srl, a wholly owned subsidiary of MSX International, Inc.
The financial statements of SATIZ were prepared on the basis of the accounts as
of December 31, 1997 and 1998 as approved by its Board of Directors. The
financial statements as of December 31, 1997 and 1998 correspond to the
statutory financial statements of SATIZ SpA. The 1999 financial statements have
been prepared from the accounting records of both SATIZ Srl and the predecessor
company.
The accounting policies are consistent with the Italian law related to statutory
financial statements interpreted and integrated by the accounting principles
established or adopted by the Italian Accounting Profession.
Italian generally accepted accounting principles ("Italian GAAP") differ in
certain material respects from U.S. generally accepted accounting principles
("U.S. GAAP"). The effects of these differences on stockholders' equity as of
December 31, 1998 and 1999 and on net income for each of the three years in the
period ended December 31, 1999 are set forth in Note 24.
9
<PAGE> 10
The financial statements are denominated in the Euro, which represents the
current reporting currency of SATIZ. Prior to January 1, 1999 the reporting
currency of the Company was Italian Lire. Accordingly, the balances for the year
ended December 31, 1997 and 1998 have been restated from Italian Lire to Euro at
the fixed rate as of January 1, 1999 of Lire 1,936.27= Euro 1.
The comparative balances reported in Euro depict the same trends as previously
reported.
The financial statements for periods prior to January 1, 1999 may not be
comparable to the other companies that are also reporting in Euro if they
restated from a different prior reporting currency.
The financial statements for 1999 are also presented in U.S. dollars for the
convenience of the reader, at the exchange rate of Euro 0.9930 = U.S.$ 1.00 as
of December 31, 1999, using the noon buying rate in the city of New York for
cable transfers in foreign currencies as announced by the U.S. Federal Reserve
Bank of New York for custom purposes. The translation into U.S. dollars has been
made solely for convenience and should not be construed as representations that
the Euro amounts actually could have been converted into U.S. dollars at the
rate indicated.
NOTE 2 - ACCOUNTING POLICIES
The principle accounting policies applied by SATIZ are as follows:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent highly liquid investments that are readily
convertible to cash and have original maturities of 90 days or less.
INTANGIBLE ASSETS
Intangible assets are recorded at cost. Amortization is calculated on a
straight-line basis over the following periods:
<TABLE>
<S> <C>
Stock issuance and expansion costs 5 years
Royalties on industrial patents and intellectual
properties representing software purchases Contract duration
Licenses, trademarks and other royalties Years to be benefited, not exceeding 3 years
Goodwill Years to be benefited, not exceeding 10 years
Other Contract duration
</TABLE>
10
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TANGIBLE FIXED ASSETS
Tangible fixed assets are recorded at purchased cost. Improvement costs are
capitalized only when they increase the asset productivity, while outlays for
maintenance and repairs are recorded as expenses during the period in which they
were incurred.
Depreciation is calculated on a straight-line basis over the estimated useful
lives of the assets using the following rates (these rates are reduced by 50% in
the year of acquisition):
<TABLE>
<CAPTION>
Percentage
---------------
<S> <C>
Land and Buildings 3%
Plant and Machinery 15.5% - 25%
Industrial and commercial equipment 25%
Other assets 12% - 25%
</TABLE>
In addition, during 1998 and 1997 accelerated depreciation has been provided,
only to obtain tax benefits, in compliance with article 67 of Presidential
Decree ("D.P.R.") No. 917 of December 22, 1986 or previous regulations.
Provision for accelerated and ordinary depreciation are reflected as adjustments
to the value of the tangible fixed assets.
FINANCIAL ASSETS - INVESTMENTS
Investments in subsidiaries and affiliates are stated at purchase cost. The
values are adjusted for any permanent losses in the subsidiaries.
The Company has not prepared consolidated financial statements because certain
new subsidiaries, incorporated in 1998 and 1999, were only partially operating
during those respective years and are not yet material. Had the Company prepared
such consolidated financial statements, no significant additional information,
other than as presented in Note 5, would have been provided.
INVENTORY
Inventories are stated at the lower of cost or market. Cost is determined using
purchase cost. Provision is made for potential losses on obsolete or slow-moving
inventories, taking into account their expected future use and estimated
realizable value.
ACCOUNTS RECEIVABLES AND PAYABLES
Accounts receivables (current and long-term) and payables are recorded at their
nominal value. Where required, provisions are made to write-down the receivables
to their estimated realizable value.
11
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EMPLOYEE TERMINATION INDEMNITY
The reserve, to cover employee termination indemnities, is calculated on the
basis of current legal and labor contract requirements and reflects the
undiscounted amount of the vested obligation for all employees at the date of
the financial statements.
RECOGNITION OF REVENUES AND EXPENSES
Revenues and expenses are recorded on the accrual basis. Revenues are recognized
at the moment that the service is provided or the property or goods are
transferred.
Dividends from subsidiaries and affiliates, and the related tax credit, are
recognized in the statement of income in the year in which they are paid. Tax
credits on dividends are used in computing taxable income for the fiscal year
when the dividends are received.
INCOME TAXES
Current income taxes, recorded in accrued income taxes, are provided on the
basis of estimated taxable income in accordance with current Italian tax laws.
NOTE 3 - INTANGIBLE ASSETS
Intangible fixed assets, net of accumulated amortization, are detailed as
follows:
<TABLE>
<CAPTION>
As of December 31,
---------------------
1998 1999
------- ---------
(Thousands of Euro)
<S> <C> <C>
Start-up and expansion costs 25 41
Patents and intellectual property 1,070 817
Licenses, trademarks and similar rights 142 31
Goodwill 277 11,156
Other 1,110 996
------- ---------
2,624 13,041
======= =========
</TABLE>
Start-up and expansion costs relate primarily to the upgrading of residual
technical facilities. Patents and intellectual property represent purchased
software. Licenses, trademarks and similar rights pertain to software licenses.
At December 31, 1999, goodwill primarily represents the amount deriving from the
contribution of net assets from SATIZ SpA to the Company, such assets having
been recognized at their fair market values on September 30, 1999, the date of
contribution. The gross amount on that date, Euro 12,396 thousand, is being
amortized over a period of ten years, the estimated period to be benefited.
12
<PAGE> 13
At December 31, 1998 goodwill represents the net amount paid to Fiat Auto SpA
for the acquisition of the reprography business (approximately Euro 153 thousand
net of related amortization), and the net amount paid for the acquisitions of
the phototypesetting business for illustrated publication and to ITS and IVECO
in connection with technical publications (approximately Euro 124 thousand, net
of related amortization). Such amounts were not transferred to the new company
during the September 30, 1999 contribution from SATIZ SpA.
Other represents costs for leasehold improvements.
Changes in intangible assets during 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
As of December 31,
-------------------------
1998 1999
---------- ----------
(Thousands of Euro)
<S> <C> <C>
Balance at the beginning of the year 2,073 2,624
--------- ---------
Additions:
- - Start-up and expansion costs - 41
- - Patents and intellectual property 934 872
- - Licenses, trademarks and similar rights 103 -
- - Goodwill 169 12,439
- - Other 1,018 536
--------- ---------
Total Additions 2,224 13,888
--------- ---------
Amortization:
- - Start -up and expansion costs (23) (25)
- - Patents and intellectual property (779) (1,125)
- - Licenses, trademarks and similar rights (245) (111)
- - Goodwill (45) (1,560)
- - Other (581) (650)
--------- ---------
Total Amortization (1,673) (3,471)
--------- ---------
Balance at the end of the year 2,624 13,041
========= =========
</TABLE>
13
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NOTE 4 - TANGIBLE FIXED ASSETS
Tangible fixed asset balances, net of accumulated depreciation, are detailed as
follows:
<TABLE>
<CAPTION>
As of December 31,
--------------------------------------------------------------------------
1998 1999
---------------------------------- ------------------------------------
Depreciation Depreciation
and write- Net Book and write- Net Book
Cost downs Value Cost downs Value
--------- ------------ -------- --------- ------------ --------
(Thousands of Euro)
<S> <C> <C> <C> <C> <C> <C>
Land and Buildings 881 (133) 748 - - -
Plant and Machinery 7,476 (6,034) 1,442 2,161 (101) 2,060
Industrial and commercial equipment 1,176 (1,037) 139 419 (60) 359
Other assets 4,094 (2,870) 1,224 2,248 (183) 2,065
--------- --------- -------- --------- ------- --------
13,627 (10,074) 3,553 4,828 (344) 4,484
========= ========= ======== ========= ======= ========
</TABLE>
The net book value of other assets includes office equipment (as of December 31,
1998 and 1999, Euro 1,022 thousand and Euro 1,788 thousand, respectively) and
vehicles (as of December 31, 1998 and 1999, Euro 202 thousand and Euro 277
thousand, respectively).
Accumulated depreciation at December 31, 1998 includes accelerated depreciation
recorded in order to obtain tax benefits only. Such accelerated depreciation had
the effect of reducing stockholders' equity as of December 31, 1998 by Euro
1,079 thousand, and decreasing net income for 1998 by Euro 113 thousand, net of
tax effects (41.25% tax rate). The contribution of tangible fixed assets to the
Company on September 30, 1999 excluded the effects of accelerated depreciation.
For the nine months ended September 30, 1999, representing the period prior to
the contribution of fixed assets, the reversal of accelerated depreciation
increased net income by Euro 534 thousand, net of tax. In addition, for the
three months ended December 31, 1999, representing the period subsequent to the
contribution, net income was benefited by an amount of Euro 124 thousand, net of
tax, due to the amortization of the net amount established at the date of
contribution rather than the historical gross value.
14
<PAGE> 15
An analysis of the movements in tangible fixed assets is as follows:
<TABLE>
<CAPTION>
As of December 31,
------------------------
1998 1999
---------- ---------
(Thousands of Euro)
<S> <C> <C>
Balances at the beginning of the year 3,503 3,553
Additions:
- Plant and machinery 862 467
- Industrial and commercial equipment 153 308
- Other assets 1,347 1,087
------- -------
Total Additions 2,362 1,862
------- -------
Disposals (net of depreciation):
- - Land and buildings - (748)
- - Plant and machinery (5) (1)
- - Other assets (107) (145)
------- -------
Total Disposals (112) (894)
Depreciation: ------- -------
- - Land and buildings (26) -
- - Plant and machinery (939) (552)
- - Industrial and commercial equipment (186) (209)
- - Other assets (1,049) (618)
------- -------
Total Depreciation (2,200) (1,379)
------- -------
Step-up of fixed assets - 1,342
------- --------
Balance at the end of the year 3,553 4,484
======= ========
</TABLE>
NOTE 5 - FINANCIAL ASSETS - INVESTMENTS IN SUBSIDIARIES, AFFILIATES AND OTHER
COMPANIES
<TABLE>
<CAPTION>
As of December 31,
----------------------
1998 1999
-------- --------
(Thousands of Euro)
<S> <C> <C>
Investments in subsidiaries:
- - SATIZ Poland Sp.Zo.o (100% owned as of December 31, 1998 and 1999) 131 131
- - SATIZ Grafica S.r.l. (95% owned as of December 31, 1998 and 100% as of
December 31, 1999) 93 97
- - SATIZ do Brazil LTDA (100% owned as of December 31, 1999) - 135
- - Other investments 1 1
------ -----
Total investments in subsidiaries, affiliates and other companies 225 364
====== =====
</TABLE>
15
<PAGE> 16
SATIZ do Brazil LTDA was organized in June 1999 and began its operations in late
1999. SATIZ Poland SpZoo and SATIZ Grafica Srl were organized and began
operations during 1998. The subsidiaries were recorded at cost of acquisition
with no adjustments in the 1998 and 1999 financial results, as the investments
are lasting and instrumental to business operations, with favorable prospects of
short-term returns. The subsidiaries' results of operations in 1999 amounted to
a gain of approximately Euro 78 thousand for SATIZ Poland SpZoo (in 1998 a loss
of approximately Euro 6 thousand), of approximately Euro 99 thousand for SATIZ
Grafica Srl (in 1998 a loss of approximately Euro 87 thousand) and a loss of
approximately Euro 40 thousand for SATIZ do Brazil LTDA.
NOTE 6 - FINANCIAL ASSETS - OTHER RECEIVABLES
Other receivables at December 31, 1998 include a receivable from F.C.E. S.p.A
derived from the sale of Millefori SpA shares (a subsidiary of SATIZ in previous
years) and financial credits from Millefori SpA derived from previous periods,
net of write-downs in order to represent the final realizable value of the
credits. Such receivables were not contributed to the Company as part of the
reorganization (see Note 1).
An analysis of the movements in other receivables is as follows:
<TABLE>
<CAPTION>
As of December 31,
---------------------
1998 1999
------- --------
(Thousands of Euro)
<S> <C> <C>
Balance at the beginning of the year:
- Financial credits 3,538 3,799
- Write - down (775) (775)
------- -------
2,763 3,024
Interest due as of March 31, 1998 551 -
Reimbursements during the year (290) (299)
Less: Amounts not contributed - (2,725)
------- -------
Balance at the end of the year 3,024 -
======= =======
</TABLE>
On March 25, 1998 a new agreement, stating the new delayed payment plan for
claims from Millefori SpA and FCE SpA was signed, which requires FCE SpA to
fulfill all obligations owed to SATIZ SpA. Consequently the receivable increased
for accrued interest on March 31, 1998.
Based on the new agreement, the receivable is reimbursable in 100 monthly
installments. The interest rate is three months RIBOR, plus 4 percent.
Credits towards F.C.E. SpA and Millefori SpA are guaranteed by a fiduciary
deposit, with an irrevocable proxy, held at SIMONFIDUCIARIA SpA, for 3,984,120
F.C.E. SpA common shares and 1,940,000 Millefori SpA common shares. The
receivable from Millefori SpA is also supported by a second mortgage on the
company's building in La Cassa (Turin) belonging to Millefori SpA.
16
<PAGE> 17
NOTE 7 - INVENTORIES
<TABLE>
<CAPTION>
As of December 31,
---------------------
1998 1999
------- -------
(Thousands of Euro)
<S> <C> <C>
Inventory, gross 997 1,858
Provision for inventory (155) -
------- -------
842 1,858
======= =======
</TABLE>
Inventory consists primarily of raw materials such as photolithography and
photography films, cards, fixing chemicals, protective varnish, film developing
chemicals, print and photography paper, and sundry chemical products.
NOTE 8 - TRADE RECEIVABLES
<TABLE>
<CAPTION>
As of December 31,
------------------------
1998 1999
---------- ----------
(Thousands of Euro)
<S> <C> <C>
Trade receivables - FIAT Group 55,921 56,147
Trade receivables - Other Companies 5,633 4,716
Reserve for bad debt (483) (27)
---------- ----------
61,071 60,836
Subsidiaries 42 55
---------- ----------
61,113 60,891
========== ==========
</TABLE>
NOTE 9 - OTHER RECEIVABLES
<TABLE>
<CAPTION>
As of December 31,
-----------------------
1998 1999
--------- ---------
(Thousands of Euro)
<S> <C> <C>
Receivables from tax authorities 545 570
Tax credit requested for repayment 142 -
Other receivables from employees 21 12
Other 615 912
--------- ---------
1,323 1,494
========= =========
</TABLE>
17
<PAGE> 18
NOTE 10 - STOCKHOLDERS' EQUITY
The capital stock at December 31, 1999, after the reorganization of the Company,
of Euro 4,000 thousand represents 4,000,000 shares each at a par value of Euro
1.
Stockholders' equity movements are as follows:
<TABLE>
<CAPTION>
Reserves and retained earnings
----------------------------------------------------
Extra- Additional Net income
Capital Legal Other ordinary paid in Retained for the
stock reserve reserves reserve capital earnings year Total
------- ------- -------- -------- ---------- -------- ---------- -----
(Thousands of Euro)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS OF DECEMBER 31, 1996 46 19 - - - 431 1,827 2,323
Stockholders' meeting resolution
for disposition of previous year
profits - - 52 - - 639 (1,827) (1,136)
Increase of share capital 57 - - - - (57) - -
Surplus from merger - - - 1,124 - - - 1,124
Tax on equity - - - - - (18) - (18)
Net income for the year - - - - - - 1,387 1,387
----- ----- ----- ------- ------ ------- ------- --------
BALANCE AS OF DECEMBER 31, 1997 103 19 52 1,124 - 995 1,387 3,680
Stockholders' meeting resolution
for disposition of previous year
profits - 2 (52) - - 662 (1,387) (775)
Net income for the year - - - - - - 4,866 4,866
----- ----- ----- ------- ------ ------- ------- --------
BALANCE AS OF DECEMBER 31, 1998 103 21 - 1,124 - 1,657 4,866 7,771
Stockholders' meeting resolution
for disposition of previous year
profits - - - - - (298) (4,866) (5,164)
Reorganization of equity (93) (21) - (1,124) - (1,359) (2,731) (5,328)
Increase of share capital 3,990 - - - 8,920 - - 12,910
Net income for the year - - - - - - 2,144 2,144
----- ----- ----- ------- ------ ------- ------- --------
BALANCE AS OF DECEMBER 31, 1999 4,000 - - - 8,920 - (587) 12,333
===== ===== ===== ======= ====== ======= ======= ========
</TABLE>
NOTE 11 - EMPLOYEE TERMINATION INDEMNITIES
Under Italian labor laws and regulations all employees are entitled to an
indemnity upon termination of their employment relationship. The benefit accrues
to the employees on a pro-rata basis during their employment period and is based
on the individual's salary. The vested benefit payable accrues interest, and
employees can receive advances thereof in certain specified situations, all as
defined in the applicable labor contract regulations. The reserve for
termination indemnities shown in the financial statements reflects the total
amount of the indemnities, net of any advances taken, that each employee would
be entitled to receive if termination were to occur as of the balance sheet
date.
18
<PAGE> 19
Movements in the reserve are as follows:
<TABLE>
<CAPTION>
As of December 31,
-----------------------
1998 1999
--------- ---------
(Thousands of Euro)
<S> <C> <C>
Balance at the beginning of the year 4,135 5,729
Provision for the year 958 946
Indemnities and advances paid (687) (1,022)
Other variations, net 1,323 1,160
--------- ---------
Balance at the end of the year 5,729 6,813
========= =========
</TABLE>
NOTE 12 -FINANCIAL DEBT
The financial debt of Euro 9,103 thousand at December 31, 1998, is short-term
debt owed to Fiat Ge.Va. SpA (a related company), at the rate of Euribor rate
plus 0.1875% (3.7500% as of December 31, 1998).
As of December 31, 1999, the Company maintained a financing arrangement
with Fidis SpA that provides for borrowings of up to 100% of eligible accounts
receivable as defined in the agreement. The arrangement, which bears interest at
the Euribor rate plus 0.975% (4.514% as of December 31, 1999), expires on
December 12, 2001 and will automatically be renewed for additional 12-month
periods unless terminated by either party. Fidis SpA is a subsidiary of Fiat SpA
who owns a minority interest in SATIZ.
NOTE 13 - PAYABLE TRADE AND OTHER
<TABLE>
<CAPTION>
As of December 31,
-----------------------
1998 1999
--------- ---------
(Thousands of Euro)
<S> <C> <C>
Advance from customers 130 24
Trade payables 45,380 50,624
--------- ---------
45,510 50,648
========= =========
</TABLE>
19
<PAGE> 20
NOTE 14 - ACCRUED INCOME TAXES
<TABLE>
<CAPTION>
As of December 31,
---------------------
1998 1999
------- -------
(Thousands of Euro)
<S> <C> <C>
Treasury - for corporate income tax (IRPEG)
and regional tax (IRAP) 2,379 233
Individuals income tax (IRPEF) 532 660
Treasury on account of VAT 601 1,035
------- -------
3,512 1,928
======= =======
</TABLE>
NOTE 15 - ACCRUED EXPENSES AND OTHER LIABILITIES
<TABLE>
<CAPTION>
As of December 31,
---------------------
1998 1999
------- -------
(Thousands of Euro)
<S> <C> <C>
Social security and other accruals 854 1,100
Payables to employees 706 990
Other 166 112
------- -------
1,726 2,202
======= =======
</TABLE>
Other primarily reflects the debt to the "Industrial Association" and to the
"Po-Sangone Association".
NOTE 16 - LEASE COMMITMENTS
The Company leases office buildings in Italy from a related party. The Company
had the following minimum rental commitments under operating leases:
<TABLE>
<CAPTION>
As of December 31, 1999
-----------------------
(Thousands of Euro)
<S> <C>
2000 1,988
2001 1,143
2002 1,088
2003 830
Beyond 2003 1,990
-----
Total 7,039
=====
</TABLE>
20
<PAGE> 21
NOTE 17 - REVENUES FROM SALES AND SERVICES
Revenues are principally derived from the following activities:
photolithography, phototypesetting, reproduction of drawings, photography and
organization of conventions, writing and printing of user's manuals, standards,
editorial activities, services pertaining to information processing on
magnetic/optical supports, microfilming, stocking and distribution of manuals
and gadgets, and handling of brochures.
Revenues from sales and services during 1997, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------
1997 1998 1999
----------- ---------- ----------
(Thousands of Euro)
<S> <C> <C> <C>
Fiat Group 85,406 109,523 121,079
Other customer 8,286 13,335 10,313
----------- ---------- ----------
93,692 122,858 131,392
========== ========== ==========
</TABLE>
The increase in revenues is due to the expansion of the Company's business
activities.
NOTE 18 - OTHER INCOME AND REVENUES
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1997 1998 1999
--------- -------- ---------
(Thousands of Euro)
<S> <C> <C> <C>
Write back of bad debt reserve - 554 17
Contingent assets 74 146 103
Other 53 49 69
---- ----- -----
127 749 189
==== ===== =====
</TABLE>
The increase of Euro 622 thousand in 1998 is principally due to the release of a
previously recorded provision for bad debts against the loss on receivables
recorded in the statement of income in the item "Other operating costs".
NOTE 19 - RAW MATERIAL SUPPLIES AND MERCHANDISE
Raw material supplies and merchandise refer to the purchases of forms, printed
matter and standard forms, photolithographic and photographic film, LUM
printing, fixing baths and protection varnish, film developing chemicals,
printing and photographic paper, Specchio printing, sundry chemicals, sundry
microfilming material and publications for reselling.
These purchases amounted to Euro 51,468 thousand in 1997, Euro 61,129 thousand
in 1998 and Euro 53,526 thousand in 1999.
21
<PAGE> 22
Other purchases (stationary and printed matter, power, fluids, fuel, sundry
consumption materials etc.) amounted to approximately Euro 487 thousand in 1997,
Euro 669 thousand in 1998 and Euro 1,150 thousand in 1999.
NOTE 20 - SERVICES
Services amounted to Euro 19,060 thousand in 1997, Euro 29,697 thousand in 1998
and Euro 43,867 thousand in 1999. Services have increased since 1997 due to the
Company's expanded operations, and the introduction of the Euro as the
accounting currency for 1999 which involved information system adjustment costs.
NOTE 21 - PERSONNEL COSTS
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1997 1998 1999
--------- --------- ---------
(Thousands of Euro)
<S> <C> <C> <C>
Wages 8,402 9,940 12,947
Social contributions 3,377 3,408 4,155
Employee termination provision 661 963 1,159
Other 2 7 290
--------- --------- ---------
12,442 14,318 18,551
========= ========= =========
</TABLE>
Total personnel costs increased in 1999, in comparison to 1998, due to the
increased number of employees as well as the impact of personnel incentives
recognized in 1999.
<TABLE>
<CAPTION>
Registered
at Average Registered at Average Registered at Average
December 31, During December 31, During December 31, During
1997 1997 1998 1998 1999 1999
------------ ------ ------------ ------ ------------ ------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Employees 301 282 334 318 341 339
Executives 8 8 7 8 10 8
Workers 73 63 136 76 139 140
----- ----- ----- ----- ----- -----
Total 382 353 477 402 490 487
===== ===== ===== ===== ===== =====
</TABLE>
The increase of the number of employees is principally attributable to the
growth of the business operations during the years.
22
<PAGE> 23
NOTE 22 - DEPRECIATION, AMORTIZATION AND WRITE-DOWNS
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1997 1998 1999
------- ------- -------
(Thousands of Euro)
<S> <C> <C> <C>
Amortization of intangible fixed assets 1,072 1,673 3,471
Depreciation of tangible fixed assets 2,502 2,200 1,379
Write-down of trade receivables 253 307 27
------- ------- -------
3,827 4,180 4,877
======= ======= =======
</TABLE>
Depreciation includes accelerated depreciation recorded in 1997 and 1998 in
order to obtain tax benefits. Such adjustments had the effect of decreasing net
income for 1997 and 1998 by Euro 553 thousand and Euro 113 thousand,
respectively, net of tax effects. For 1999, net income was benefited by Euro 534
thousand due to the reversal of accelerated depreciation.
NOTE 23 - FINANCIAL INCOME AND EXPENSES
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------
1997 1998 1999
------- ------- -------
(Thousands of Euro)
<S> <C> <C> <C>
Investment income:
- - Subsidiaries 1,214 - -
------- ------- -------
1,214 - -
======= ======= =======
Interest income:
- - Third parties 327 245 170
- - Bank 9 9 3
- - Other 46 20 -
------- ------- -------
382 274 173
======= ======= =======
</TABLE>
Investment income from subsidiaries of Euro 1,214 thousand in 1997 represents
the dividends, and the related tax credit, paid by the subsidiary Societa per
Azioni Torinese Industria Zincografica - SATIZ when it was merged into SATIZ SpA
in 1997.
Interest income from third parties is primarily related to long-term receivables
from F.C.E. SpA and Millefori SpA.
23
<PAGE> 24
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1997 1998 1999
------- ------- -------
(Thousands of Euro)
<S> <C> <C> <C>
Interest expenses:
- Interest paid to Fiat Ge.Va. SpA 654 607 213
- Interest paid to bank 16 31 38
- Loss on exchange rate variations 19 9 44
- Other 2 3 4
------- ------- -------
691 650 299
======= ======= =======
</TABLE>
NOTE 24 - RECONCILIATION TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE
UNITED STATES
The financial statements of SATIZ are prepared in accordance with accounting
principles established or adopted by the Italian Accounting Profession, as
described in Notes 1 and 2, which differ in certain significant respects from
U.S. GAAP. The comments on the significant differences are as follows:
DEPRECIATION ON FIXED ASSETS
In 1998 and prior years, the Company recorded additional accelerated
depreciation in the financial statements, only to obtain fiscal benefits, in
compliance with Italian tax regulations. U.S. GAAP requires depreciation to be
recorded over the estimated useful life of the assets, which differs from the
accelerated depreciation approach used for the Italian financial statements. At
September 30, 1999 net assets contributed by the former SATIZ SpA were so
contributed at a value exclusive of the effects of accelerated depreciation and
therefore at a value in accordance with U.S. GAAP. However, said amounts were
recorded and subsequently depreciated at their net book value on such date
rather than at their respective pre-contribution gross values. This latter
impact has been included in the adjustment to derive U.S. GAAP depreciation.
STOCK ISSUANCE COSTS
Pursuant to Italian GAAP, the cost of issuing equity securities is recorded as
an asset and amortized over five years. U.S. GAAP requires such costs to be
charged to stockholders' equity at the date of issuance.
24
<PAGE> 25
DEFERRED TAXES
SATIZ does not recognize deferred income taxes on temporary differences between
the book and tax bases of assets and liabilities. This is not consistent with
U.S. GAAP which requires recognition of deferred income taxes on all temporary
differences between the book and tax bases of assets and liabilities.
TAX ON EQUITY
In 1997, the Company was assessed and remitted a tax on the statutory
stockholders' equity. This tax is charged against stockholders' equity. Under
U.S. GAAP, the amount of the tax is required to be charged to the income
statement. Beginning in 1998, with the introduction of the Regional Tax on
Production Activities, this tax has been eliminated.
ELIMINATION OF SUBSIDIARY DIVIDENDS
During 1997 the Company merged with its subsidiary, Societa per Azioni Torinese
Industria Zincografica - SATIZ. This merger was recorded for accounting purposes
as of January 1, 1997, and observed for legal purposes as of December 31, 1997.
For Italian GAAP purposes, SATIZ SpA observed an accounting procedure used in
Italy which allows a company to record in its income statement the dividends
distributed by the subsidiary during the same fiscal year, prior to the legal
effects of the merger. U.S. GAAP does not allow for these dividends to be
recorded in the income statement.
ELIMINATION OF GOODWILL
In accordance with Italian GAAP, the Company recognized goodwill for a gross
amount of Euro 12,396 thousand upon the contribution on September 30, 1999 of
certain net assets from SATIZ SpA to the Company. U.S. GAAP does not permit the
recognition of goodwill for such a contribution. Accordingly, the goodwill, net
of accumulated amortization and the related amortization expense must be
eliminated in deriving the U.S. GAAP results.
AMORTIZATION OF INTANGIBLE ASSETS
As a result of the contribution of certain intangible assets to the Company on
September 30, 1999, amortization expense for the year ended December 31, 1999
has been increased when determined in accordance with Italian GAAP due to the
requirement by the Italian law to record a full year of amortization in the
first year of recognition regardless of the date on which such assets are put in
place. Such excessive amortization is eliminated in accordance with U.S. GAAP.
EFFECT OF CHANGES IN TAX LAWS
During 1997, a change in the Italian tax laws was enacted which changed the tax
rates effective January 1, 1998. As the enactment date of this change was during
1997, under U.S. GAAP, the deferred tax assets and liabilities at December 31,
1997 were adjusted to reflect the new tax rate.
25
<PAGE> 26
Significant differences and the effect of the above on net income and
stockholders' equity are set out below:
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------------------------
NET INCOME 1997 1998 1999 1999
-------------- ------------ ------------ ----------------
(Thousands of
(Thousands of Euro) U.S. Dollars) (*)
<S> <C> <C> <C> <C>
Net income as reported in the statements of income 1,387 4,866 2,144 $ 2,159
Items increasing (decreasing) reported net income:
- - Depreciation on fixed assets 761 193 (745) (750)
- - Stock issuance costs 20 23 35 35
- - Deferred taxes 467 111 119 119
- - Tax on equity (18) -- -- --
- - Elimination of subsidiary dividends (777) -- -- --
- - Elimination of goodwill amortization -- -- 1,240 1,249
- - Intangible asset amortization -- -- 530 534
------- ------- ------- -------
U.S. GAAP income before reconciliation effects of income
taxes: 1,840 5,193 3,323 3,346
- - Tax effect of reconciling items (322) (89) (146) (147)
- - Effect of changes in tax laws (9) -- -- --
------- ------- ------- -------
Approximate net income in accordance with U.S. GAAP 1,509 5,104 3,177 $ 3,199
======= ======= ======= =======
</TABLE>
(*) Exchange rate: Euro 0.9930 = U.S. $ 1.00 as of December 31, 1999 (See Note
1)
26
<PAGE> 27
<TABLE>
<CAPTION>
As of December 31,
-------------------------------------------
STOCKHOLDERS' EQUITY 1998 1999 1999
----------- ---------- -------------
(Thousands of Euro) (Thousands of
U.S. Dollars) (*)
<S> <C> <C> <C>
Stockholders' equity as reported in the balance sheets 7,771 12,333 $ 12,420
Items increasing (decreasing) reported stockholders' equity:
- Accelerated depreciation of fixed assets (**) 1,837 -- --
- Stock issuance costs (**) (25) (41) (41)
- Deferred taxes 912 119 119
- Elimination of goodwill (**) -- (11,156) (11,234)
- Other depreciation on fixed assets -- (211) (213)
- Amortization of intangible assets -- 530 534
- Tax effect of reconciling items (747) (115) (116)
-------- -------- --------
Approximate stockholders' equity in accordance with U.S. GAAP
9,748 1,459 $ 1,469
======== ======== ========
</TABLE>
(*) Exchange rate: Euro 0.9930 = U.S. $ 1.00 as of December 31, 1999 (See Note
1)
(**) The gross amount and the related accumulated depreciation or amortization
for the reconciling items presented net, are as follows:
<TABLE>
<CAPTION>
As of December 31,
--------------------------------------------------------------------------
1998 1999
-------------------------------- ---------------------------------
Gross Accumulated Gross Accumulated
Amount Depreciation Net Amount Depreciation Net
------ ------------ ----- ------ ------------ -----
(Thousands of Euro)
<S> <C> <C> <C> <C> <C> <C>
Depreciation on
fixed assets -- 1,837 1,837 -- -- --
Stock issuance
costs (117) 92 (25) (51) 10 (41)
Goodwill -- -- -- (12,396) 1,240 (11,156)
</TABLE>
27
<PAGE> 28
The condensed financial statements presented below have been restated to reflect
the principal differences between the Company's accounting policies and U.S.
GAAP discussed above.
<TABLE>
<CAPTION>
As of December 31,
---------------------------------------------
BALANCE SHEETS 1998 1999 1999
(Thousands of Euro) (Thousands of U.S.
Dollars)(*)
<S> <C> <C> <C>
ASSETS
Current Assets 63,925 64,888 $65,345
Tangible Fixed Assets 5,390 5,269 5,306
Intangible Assets 2,599 1,378 1,388
Other Long- Term assets:
Deferred tax assets, net 165 4 4
Other 3,249 364 367
------- ------- -------
Total Assets 75,328 71,903 $72,410
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities 59,851 63,631 $64,080
Non current liabilities 5,729 6,813 6,861
------- ------- -------
Total Liabilities 65,580 70,444 70,941
Stockholders' equity 9,748 1,459 1,469
------- ------- -------
Total Liabilities and Stockholder's equity 75,328 71,903 $72,410
======= ======= =======
</TABLE>
(*) Exchange rate: Euro 0.9930 = U.S. $ 1.00 as of December 31, 1999 (See Note
1)
28
<PAGE> 29
<TABLE>
<CAPTION>
Years Ended December 31,
STATEMENTS OF INCOME ----------------------------------------------------------
1997 1998 1999 1999
(Thousands of
(Thousands of Euro) U.S. Dollars) (*)
<S> <C> <C> <C> <C>
Revenues 93,692 122,858 131,392 $ 132,318
Other income 127 749 189 190
--------- --------- --------- ---------
Total revenues 93,819 123,607 131,581 132,508
Operating expenses (89,238) (113,418) (124,774) (125,653)
Write downs of financial assets (775) -- (82) (83)
--------- --------- --------- ---------
Operating income 3,806 10,189 6,725 6,772
Interest income and expenses, net (309) (376) (126) (127)
--------- --------- --------- ---------
Income before income taxes 3,497 9,813 6,599 6,645
Income taxes:
- effect of change in tax laws (9) -- -- --
- other current and deferred taxes (1,979) (4,709) (3,422) (3,446)
--------- --------- --------- ---------
Total income tax expense (1,988) (4,709) (3,422) (3,446)
--------- --------- --------- ---------
Net income 1,509 5,104 3,177 $ 3,199
========= ========= ========= =========
</TABLE>
(*) Exchange rate: Euro 0.9930 = U.S. $ 1.00 as of December 31, 1999 (See Note
1)
<TABLE>
<CAPTION>
ADDITIONAL PAID
STATEMENTS OF CHANGES IN IN CAPITAL AND ACCUMULATED OTHER
STOCKHOLDERS' EQUITY COMPREHENSIVE CAPITAL RETAINED COMPREHENSIVE
INCOME STOCK EARNINGS INCOME TOTAL
(Thousands of Euro)
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1996 46 5,000 -- 5,046
Dividends -- (1,136) (1,136)
Increase in share capital 57 (57) --
1997 net income 1,509 -- 1,509 1,509
------ ------ ------ ------
Balance as of December 31, 1997 103 5,316 -- 5,419
Dividends (775) (775)
1998 net income 5,104 5,104 5,104
------ ------ ------ ------
Balance as of December 31, 1998 103 9,645 -- 9,748
Dividends (5,164) (5,164)
Reorganization of equity (93) (6,209) (6,302)
Increase in share capital 3,990 (3,990) --
1999 net income 3,177 3,177 3,177
------ ------ ------ ------
BALANCE AS OF DECEMBER 31, 1999 4,000 (2,541) -- 1,459
====== ====== ====== ======
</TABLE>
29
<PAGE> 30
OTHER U.S. GAAP DISCLOSURES
(A) USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(B) RELATED PARTY TRANSACTIONS
As a former wholly-owned subsidiary of Fiat SpA, the Company sells
its products and services to subsidiaries and affiliates of Fiat SpA.
Significant related party transactions and balances related to the
Fiat Group have been disclosed in the various notes to the financial
statements.
(C) CONCENTRATION OF REVENUES AND CREDIT RISK
The Company generates a significant portion of its revenues from the
Fiat Group and primarily in Italy. Accordingly, financial instruments
which potentially subject the Company to significant concentrations of
credit risk, consist principally of trade receivables.
Although the Company does not currently foresee a risk associated with
these geographical and credit concentrations, revenues and repayments
are dependent upon the financial stability of the Fiat Group and the
Italian economy in which it operates.
(D) ACCOUNTING FOR DEFERRED INCOME TAXES
The Company does not recognize deferred income taxes on all temporary
differences between the book and tax bases of assets and liabilities.
Deferred tax assets and liabilities are determined based on the temporary
differences between the financial and tax bases of assets and liabilities
using enacted tax rates in effect for the year in which the differences
are expected to reverse.
A detail of the provision for income taxes for 1997, 1998 and 1999 is as
follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1997 1998 1999 1999
---------- --------- ------- -------------
(Thousands of
(Thousands of Euro) U.S. Dollars)
(*)
<S> <C> <C> <C> <C>
Changes in tax laws (9) - - $ -
Deferred Taxes 145 22 (27) (27)
Current taxes (2,124) (4,731) (3,395) (3,419)
------ ------ ------ -------
(1,988) (4,709) (3,422) $(3,446)
====== ====== ====== =======
</TABLE>
(*) Exchange rate: Euro 0.9930 = U.S. $1.00 as of December 31, 1999
(See Note 1)
30
<PAGE> 31
The actual provision for income taxes is different from income taxes computed by
applying the Italian Statutory tax rate (53.2% in 1997, 41.25% in 1998 and
1999), primarily as a result of non-deductible items.
The components of the net deferred tax assets (liabilities) as of December 31,
1998, and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999 1999
------------ ----------- -------------------
(Thousands of
(Thousands of Euro) U.S. Dollars) (*)
<S> <C> <C> <C>
Deferred tax assets:
- - Depreciation -- 87 $ 88
- - Provision for bad debt 485 -- --
- - Provision for inventories 57 -- --
- - Other expenses not deductible (mainly maintenance expenses) 370 119 120
- - Stock issuance costs 11 17 17
----- ----- -----
Sub total 923 223 225
Deferred tax liabilities:
- Accelerated tax depreciation (758) (219) (221)
----- ----- -----
Net deferred tax assets 165 4 $ 4
===== ===== =====
</TABLE>
(*) Exchange rate: Euro 0.9930 = U.S. $ 1.00 as of December 31, 1999 (See Note
1)
A valuation allowance has not been provided at December 31, 1999 or 1998 as it
is more likely than not that no deferred tax assets will expire unutilized.
Realization of the recorded deferred tax assets of Euro 4 thousand at December
31, 1999 is dependent upon generating sufficient taxable income.
There are no reserves in stockholders' equity subject to income taxes in case of
distribution.
(E) FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial assets and liabilities
approximate their respective carrying amounts as of December 31, 1999 and 1998.
31
<PAGE> 32
<TABLE>
<CAPTION>
(F) OTHER INFORMATION
Years ended December 31,
-----------------------------------------------------------------------
1997 1998 1999 1999
-------------- ------------------- --------- ----------------------
Changes in working capital: (Thousands of
(Thousands of Euro) U.S. Dollars) (*)
<S> <C> <C> <C> <C>
Receivables (11,352) (9,923) (6,607) $(6,654)
Inventories (169) (100) (1,016) (1,023)
Other current assets 778 (809) 68 68
Payables, trade and other 15,685 1,326 5,138 5,174
Accrued income taxes (2,348) 2,852 1,577 1,588
Other accrued liabilities 171 260 1,438 1,449
------- ------- ------- -------
2,765 (6,394) 598 $ 602
======= ======= ======= =======
Cash paid for:
Interest 558 650 216 218
Taxes 2,920 2,247 4,405 4,436
</TABLE>
(*) Exchange rate: Euro 0.9930 = U.S.$1.00 as of December 31, 1999 (See Note 1).
(G) NEW ACCOUNTING STANDARDS
In 1998, the Financial Accounting Standard Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the statement of income, and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting.
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective date of SFAS No. 133" defers the effective date of
SFAS No. 133 until all fiscal quarters of all fiscal years beginning after June
15, 2000.
The Company is still analyzing the impact that this new accounting standard will
have on its financial statements.
32
<PAGE> 33
PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data have been derived from the
unaudited historical consolidated financial statements as of and for the fiscal
year ended January 2, 2000 of MSXI, from the audited historical financial
statements of Satiz S.r.l. for the year ended December 31, 1999, from the
unaudited historical financial statements for the three months ended March 31,
1999 of Rice Cohen International, Inc., from the unaudited historical financial
statements for the five months ended May 31, 1999 of Management Resources
International, Inc. and from the unaudited historical consolidated financial
statements for the nine months ended September 30, 1999 of Chelsea Computer
Consultants, Inc.
The unaudited pro forma financial data do not purport to represent what our
results of operations or financial position would actually have been had these
transactions occurred at January 3, 1999. This data also does not purport to
project our results of operations or financial position for or at any future
period or date. The unaudited pro forma financial data should be read in
conjunction with the related historical financial statements and notes thereto.
The results of operations of acquired companies are included in our
consolidated results of operations from the date of acquisition forward. The
unaudited pro forma consolidated income statement data have been prepared as if
the acquisitions and our $30 million offering of senior subordinated debt in May
1999 had occurred on January 3, 1999. The unaudited pro forma consolidated
income statement data give effect to:
- the acquisition of Satiz S.r.l. effective December 31, 1999 ( the "Satiz
Acquisition")
- the acquisition of Chelsea Computer Consultants, Inc. effective September
17, 1999 (the "Chelsea Acquisition");
- the acquisition of Management Resources International, Inc. effective June
21, 1999 (the "Management Resources Acquisition");
- the acquisition of Rice Cohen International, Inc. effective April 5, 1999
(the "Rice Cohen Acquisition"); of the $30 million offering of senior
subordinated debt in May 1999.
33
<PAGE> 34
PRO FORMA CONSOLIDATED INCOME STATEMENT DATA (UNAUDITED)
FISCAL YEAR ENDED JANUARY 2, 2000
(amounts in thousands)
<TABLE>
<CAPTION>
RICE COHEN
AND MANAGEMENT
SATIZ CHELSEA RESOURCES
INCOME STATEMENT MSXI ACQUISITION ACQUISITION(1) ACQUISITIONS
--------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
Net Sales $ 759,842 $ 132,508 $ 23,462 $ 2,900
Cost of Sales 653,542 113,539 19,796 2,208
--------- --------- -------- -------
Gross Profit 106,300 18,969 3,666 692
SG&A 64,814 10,627 2,322 -
Amortization of goodwill
and other intangibles 3,156 1,570 - -
--------- --------- -------- -------
Operating Income 38,330 6,772 1,344 692
Interest expense, net 21,141 127 168 -
--------- --------- -------- -------
Income before income taxes 17,189 6,645 1,176 692
Income tax provision 6,995 3,446 931 3
Minority Interest, net of tax - - - -
--------- --------- -------- -------
Net Income $ 10,194 $ 3,199 $ 245 $ 689
========= ========= ======== =======
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------------------------------------------
RICE COHEN
AND MANAGEMENT
SATIZ CHELSEA RESOURCES DEBT
INCOME STATEMENT ACQUISITION ACQUISITION ACQUISITIONS OFFERING PRO FORMA
----------- ----------- -------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net Sales $ - $ - $ - $ - $ 918,712
Cost of Sales - - (232)(h) - 788,853
-------- -------- ------- -------- ---------
Gross Profit - - 232 - 129,859
SG&A - - - 77,763
Amortization of goodwill
and other intangibles 310 (a) 396 (e) 126 (i) - 5,558
-------- -------- ------- -------- ---------
Operating Income (310) (396) 106 - 46,538
Interest expense, net 784 (b) 1,231 (f) 279 (j) (761)(l)
-------- -------- ------- 1,166 (m)
75 (n) 24,210
-------- ---------
Income before income taxes (1,094) (1,627) (173) (480) 22,328
Income tax provision (547)(c) (716)(g) 173 (k) (163)(o) 10,122
Minority Interest, net of tax 652 (d) - - - 652
-------- -------- ------- -------- ---------
Net Income $ (1,199) $ (911) $ (346) $ (317) $ 11,554
======== ======== ======= ======== =========
</TABLE>
(1) In anticipation of certain incremental business Chelsea began increasing its
number of consultants during late 1998. The planned incremental business did
not materialize and, as a result, consultant productivity was lower than
usual during the early months of 1999. During the spring of 1999, when it
became clear this incremental business would not materialize, Chelsea
terminated the employment of about 70 consultants on staff. Chelsea's
results of operations during 1999 were unfavorably impacted by the cost of
these consultants which Chelsea's management estimated at about $2.3
million, or $1.3 million after taxes. This information is provided to
supplement the historical results of operations.
See notes to pro forma consolidated financial statements
34
<PAGE> 35
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENT
(UNAUDITED)
BASIS OF PRESENTATION
The following pro forma adjustments are based on available information and
certain management estimates and assumptions. We believe that these adjustments
provide a reasonable basis for presenting all of the significant effects of the
Satiz, Chelsea, Rice Cohen and Management Resources acquisitions and the May
1999 offering of senior subordinated debt and that the pro forma adjustments are
properly applied in the unaudited pro forma consolidated financial statement.
ADJUSTMENTS TO PRO FORMA CONSOLIDATED INCOME STATEMENT FOR THE FISCAL YEAR ENDED
JANUARY 2, 2000
SATIZ ACQUISITION
(a) Record amortization of aggregate goodwill and other intangibles of $9.3
million resulting from the acquisition over an estimated useful life of 30
years.
(b) Record interest expense associated with borrowing of $9.7 million under our
credit facility, as amended and restated in December 1999, used to finance
the acquisition of Satiz. An assumed annual interest rate of 8.09% is used
based on the interest rates in effect at the date of the acquisition.
The impact on interest expense of a 1/8 of 1% change in the interest rate
related to our credit facility is about $12,000 on an annual basis.
(c) Record the income tax effect of the pro forma adjustments at an assumed
effective income tax rate of 50% (the historical effective tax rate of
Satiz).
(d) Record minority interest, net of taxes.
CHELSEA ACQUISITION
(e) Record amortization of aggregate goodwill of $16.7 million resulting from
the acquisition over an estimated useful life of 30 years.
(f) Record interest expense associated with borrowing of $19.9 million under our
credit facility used to finance the acquisition of Chelsea. An assumed
annual interest rate of 8.25% is used based on the interest rates in effect
at the date of the acquisition.
The impact on interest expense of a 1/8 of 1% change in the interest rate
related to our credit facility is about $25,000 on an annual basis.
(g) Record the income tax effect of the pro forma adjustments at an assumed
effective income tax rate of 44% (the historical annual effective tax rate
of Chelsea).
RICE COHEN AND MANAGEMENT RESOURCES ACQUISITIONS
(h) Reduce executive compensation expense to reflect contractual agreements
negotiated in connection with the Rice Cohen Acquisition ($183 thousand) and
eliminate legal expenses directly attributable to the Rice Cohen Acquisition
($49 thousand).
(i) Record amortization of the aggregate goodwill of $13.0 million resulting
from the Acquisitions over an estimated useful life of 30 years.
35
<PAGE> 36
(j) Record interest expense associated with borrowings of $13.7 million under
our credit facility used to finance the acquisitions at an assumed annual
interest rate of 6.7% which is based on the weighted average of the interest
rates in effect at the dates of the acquisitions.
(k) To increase the historical income tax provision of Rice Cohen and Management
Resources to reflect an effective income tax rate of 34% ($234 thousand) and
to record the income tax benefit resulting from the pro forma adjustments
related to the Rice Cohen and Management Resources acquisitions at an
effective income tax rate of 34% ($59 thousand).
$30 MILLION OFFERING OF SENIOR SUBORDINATED DEBT
(l) Record the reduction of interest expense associated with the use of $28.2
million of net proceeds to reduce amounts outstanding under our credit
facility at an assumed interest rate of 7.2%, which is based on the weighted
average of the interest rates in effect during the pro forma period.
(m) Record interest expense associated with the notes at an annual interest rate
of 11-3/8%.
(n) Record amortization of the costs associated with the offering of the notes.
(o) Record the income tax benefit resulting from the pro forma adjustments
related to the offering of the notes, at an assumed effective income tax
rate of 34%.
36
<PAGE> 37
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
EX-99.1 Stock Purchase Agreement
<PAGE> 1
[CONFORMED COPY]
================================================================================
STOCK PURCHASE AGREEMENT
dated as of
August 6, 1999
between
Satiz S.p.A.
and
MSX International Holding Ltd.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
1.1. Certain Defined Terms ................................................1
1.2. Other Defined Terms ..................................................5
ARTICLE 2
CONTRIBUTION OF SELLER'S OPERATIONS TO THE COMPANY
2.1. Contribution of Seller's Business to the Company .....................6
2.2. Excluded Assets and Liabilities ......................................7
2.3. Completion of Contribution ...........................................8
ARTICLE 3
PURCHASE AND SALE
3.1. Purchase and Sale ....................................................8
3.2. Purchase Price .......................................................8
3.3. Closing ..............................................................9
3.4. Actions at Closing ...................................................9
3.5. Adjustments to the Majority Price ...................................11
3.6. Determination of Closing Net Invested Capital and Closing
Net Debt ..........................................................11
3.7. Review of Closing Balance Sheet .....................................12
3.8. Disputes regarding the Closing Balance Sheet ........................12
3.9. Payment of Adjustment Amount ........................................13
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
4.1. General .............................................................13
4.2. Incorporation and Authority of the Seller ...........................14
4.3. Incorporation and Qualification of the Company ......................14
4.4. Capital of the Company and Subsidiary ...............................14
4.5. No Conflict .........................................................15
4.6. Financial Statements ................................................15
4.7. Absence of Certain Changes or Events ................................16
4.8. Absence of Litigation ...............................................17
(i)
<PAGE> 3
4.9. Compliance with Laws ..........................................18
4.10. Consents, Approvals, Licenses .................................18
4.11. Real Property .................................................19
4.12. Taxes .........................................................19
4.13. Contracts .....................................................20
4.14. Environmental Matters .........................................21
4.15. Intellectual Property .........................................22
4.16. Brokers .......................................................23
4.17. Grants and Subsidies ..........................................23
4.18. Assets ........................................................23
4.19. Inventory .....................................................24
4.20. Employees and Consultants .....................................24
4.21. Employees Plans ...............................................26
4.22. Business Conduct ..............................................26
4.23. Full Disclosure ...............................................27
4.24. No other Representations and Warranties .......................27
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.1. General .......................................................27
5.2. Organization, Authority and Qualification .....................27
5.3. No Conflict ...................................................28
5.4. Consents, Approvals, Licenses .................................28
5.5. Absence of Litigation .........................................29
5.6. Brokers .......................................................29
5.7. No other Representation and Warranties ........................29
ARTICLE 6
OBLIGATIONS AND COVENANTS
6.1. Conduct of Business Prior to the Closing ......................29
6.2. Access to Information .........................................31
6.3. Efforts; Consents; Guarantees .................................32
6.4. No Use of the Seller Names ....................................33
6.5. Covenant Not to Compete .......................................34
ARTICLE 7
EMPLOYMENT AND EMPLOYEE BENEFIT ARRANGEMENTS
7.1. Employment ....................................................35
(ii)
<PAGE> 4
7.2. Seller Plans ..................................................35
7.3. Severance and Retention Benefits ..............................35
ARTICLE 8
CONDITIONS TO CLOSING
8.1. Conditions to Obligations of the Seller .......................36
8.2. Conditions to Obligations of the Purchaser ....................37
ARTICLE 9
INDEMNIFICATION
9.1. Survival ......................................................38
9.2. Limitations on Indemnification ................................38
9.3. Indemnification by the Seller .................................39
9.4. Accounts Receivable ...........................................39
9.5. Indemnification by Purchaser ..................................40
9.6. Claims ........................................................40
9.7. No Other Remedy ...............................................41
ARTICLE 10
SELLER'S MINORITY SHAREHOLDING IN THE COMPANY
10.1. Seller's Shareholding in the Company after Closing ............42
10.2. Put Option ....................................................42
10.3. Call Option ...................................................42
10.4. Price of the Seller's Minority Shareholding ...................43
10.5. No Transfer of the Shares .....................................44
ARTICLE 11
TERMINATION, AMENDMENT AND WAIVER
11.1. Termination ...................................................44
11.2. Waiver ........................................................45
ARTICLE 12
GENERAL PROVISIONS
12.1. Expenses ......................................................45
12.2. Notices .......................................................46
12.3. Public Announcements ..........................................47
(iii)
<PAGE> 5
12.4. Headings ..............................................47
12.5. Severability ..........................................47
12.6. Entire Agreement ......................................48
12.7. Assignment ............................................48
12.8. No Third-Party Beneficiaries ..........................48
12.9. Waivers and Amendments ................................49
12.10. Governing Law and Disputes ............................49
12.11. Counterparts ..........................................49
(iv)
<PAGE> 6
THIS STOCK PURCHASE AGREEMENT (hereinafter the "Agreement")
is made by and between Satiz S.p.A. a Company duly organized and existing under
the laws of the Republic of Italy, having its registered office at Via Marenco
32, 10126, Torino (Italy) (hereinafter referred to as the "Seller") and MSX
International Holding Ltd., a Company duly organized and validly existing under
the laws of the United Kingdom, having its registered office at 85 New Cavendish
Street, London (hereinafter referred to as "the Purchaser");
WHEREAS, the Seller is engaged in the business of industrial
publishing, as described in Schedule 0 (hereinafter referred to as "Business");
WHEREAS, the Seller intends to contribute the Business to a
Company duly organized and existing under the laws of the Republic of Italy,
having its registered office at Via Marenco, 32, Turin 10126, corporate capital
Euro 10,000 (the "Company"), of which the Seller owns (and will own after the
completion of the contribution of the Business on a going concern basis) all the
issued and outstanding capital (the "Shares"); and
WHEREAS, the Seller wishes to sell to the Purchaser, and the
Purchaser wishes to purchase from the Seller 75% of the Shares, after completion
of the contribution and upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements and covenants hereinafter set forth, the Purchaser and the
Seller hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1. Certain Defined Terms
1.1.1 As used in this Agreement, the following terms
shall have the following meanings:
(a) "ACCOUNTING PRINCIPLES" means the requirements set
forth by the Italian law, interpreted and supplemented by the Italian accounting
principles issued by the National Boards of Dottori Commercialisti and of
Ragionieri and, where
-1-
<PAGE> 7
there are none, by those laid down by the International Accounting Standards
Committee (I.A.S.C.) consistently applied.
(b) "ACTION" means any claim, action, suit,
investigation or proceeding by or before any Governmental Authority.
(c) "AFFILIATE" means, when used with respect to a
specified Person, another Person that, either directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with the Person specified.
(d) "AGREEMENT" means this Stock Purchase Agreement
(including the Schedules hereto) and all amendments hereto made in accordance
with Section 12.10.
(e) "BALANCE SHEET DATE" means December 31, 1998.
(f) "BOOKS AND RECORDS" means all books of account and
other financial records of the Company.
(g) "BUSINESS DAY" means any day that is not a
Saturday, a Sunday or other day on which banks are required or authorized by law
to be closed in the Republic of Italy.
(h) "CONFIDENTIALITY AGREEMENT" means the letter
agreement executed as of May 21, 1999 by MSX International Inc., a company duly
organized and existing under the laws of Delaware and having its registered
office at 275 Rex Boulevard, Auburn Hills, Michigan to the benefit of the
Seller.
(i) "CONTRACT" means any contract, agreement,
indenture, note, bond, loan, instrument, lease, conditional sales contract,
mortgage, license, franchise agreement, insurance policy, binding commitment or
other agreement, other than purchase orders, relating to the Business.
(j) "EMPLOYEES" means the employees of the Seller and
the term Employee means any of the Employees.
(k) "ENCUMBRANCES" means any security interest, pledge,
mortgage, lien, charge, adverse claim of ownership or use, or other encumbrance
of any kind which impairs the relevant Person's right, title or interest in, or
the value, use or enjoyment of, the asset subject thereto.
(l) "GOVERNMENTAL AUTHORITY" means any government, any
gov-
-2-
<PAGE> 8
ernmental entity, regulatory authority, department, commission, board, agency
or instrumentality, and any court, arbitrator, tribunal, or judicial, body,
whether foreign, state or local.
(m) "GOVERNMENTAL ORDER" means any order, judgment,
injunction, decree, stipulation or determination entered by or with any
Governmental Authority.
(n) "INTELLECTUAL PROPERTY" shall mean all trademarks,
trade names, service marks, service names, patents, copyrights, applications
therefor and licenses or other rights in respect thereof.
(o) "KNOWLEDGE" or "KNOWN" means, with respect to any
matter in question, the actual knowledge of such matter of the executives of the
Seller.
(p) "LAW" means any state, local statute, law,
ordinance, regulation, rule, code or order.
(q) "LEASED REAL PROPERTY" means the real property
leased by the Company as tenant, listed in Schedule 1.1.1(q).
(r) "LICENSES" means the licenses, permits and other
governmental authorizations required for the operation of the Business as
conducted as of the date of this Agreement.
(s) "LOSSES" of a Person means any and all losses,
liabilities, damages, claims, awards, judgments, costs and expenses (including,
without limitation, reasonable attorneys' fees) actually suffered or incurred by
such Person, but excluding (i) any and all losses, liabilities, damages, claims,
awards, judgments, costs and expenses (including, without limitation, attorneys'
fees) resulting from consequential, punitive, special or similar damages, and
(ii) any favorable effect for tax purposes in any way deriving from or connected
to such loss.
(t) "MATERIAL ADVERSE EFFECT" means any change or
effect that is materially adverse to the operations, business, financial
condition or results of operations of the Company and/or of the Seller and/or
the Business, except for any such changes or effects resulting from (i) general
economic, regulatory, political or industry-wide conditions or (ii) this
Agreement or the transactions contemplated hereby or thereby, or the
announcement hereof or thereof.
(u) "NET INVESTED CAPITAL" means (i) the sum of total
assets of the Company other than financial assets (financial receivables, cash
and banks, etc.), less (ii) the sum of total liabilities and provisions other
than financial liabilities (loans,
-3-
<PAGE> 9
etc.).
(v) "NET DEBT" means the sum of loans and other
financial liabilities, less cash and financial receivables.
(w) "ORDINARY COURSE" means the conduct of the Business
consistent with past practice, on an arms length basis.
(x) "PARTIES" means the Seller and the Purchaser,
collectively or individually, as the case may be.
(y) "PERSON" means any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other entity.
(z) "PRO FORMA BALANCE SHEET" means the consolidated
balance sheet of the Seller and Participations, as hereinafter defined (with the
exception of Satiz do Brasil Ltda, not yet incorporated at that time) a copy of
which is enclosed as Schedule 1.1.1.(z) as of the Balance Sheet Date.
(aa) "PURCHASER MATERIAL ADVERSE EFFECT" means any
change or effect that is materially adverse to the operations, business,
financial condition or results of operations of the Purchaser and/or its
Subsidiaries, except for any such changes or effects resulting from general
economic, regulatory, political or industry-wide conditions.
(bb) "SELLER'S FINANCIAL STATEMENTS" means the
financial statements of the Seller at December 31, 1997 and 1998.
(cc) "SELLER PLANS" means each and all employee benefit
plans which provide benefits to Employees or their spouses or covered
dependents, including (i) any such plans that are employee welfare benefit plans
and (ii) any such plans that are employee pension benefit plans.
(dd) "SHAREHOLDERS AGREEMENT" means the Shareholders
Agreement, to be entered into as of the Closing, substantially reflecting the
terms set forth as Schedule 1.1.1.(dd).
(ee) "SUBSIDIARY" means each Person with respect to
which any of the Parties, directly or indirectly, owns or controls more than 50%
(fifty per cent) of its issued and outstanding voting securities.
(ff) "TECHNOLOGY" means mean all trade secrets,
proprietary information, software and computer programs and source code data
relating thereto (in-
-4-
<PAGE> 10
cluding all current and historical data bases), research records, test
information, market surveys, marketing know-how, inventions, know-how, processes
and procedures.
(gg) "TRANSITIONAL SERVICES AGREEMENT" means the
Transitional Services Agreement, to be entered into as of the Closing,
substantially reflecting the terms set forth as Schedule 1.1.1 (gg) hereto.
1.2. Other Defined Terms
1.2.1 The following terms shall have the meanings
defined for such terms in the Sections set forth below:
Term Section
Adjustment Amount 3.5.2
Business recitals
Closing 3.3.1
Closing Balance Sheet 3.6.1
Closing Date 3.3.1
Closing Net Debt 3.2.4
Closing Net Invested Capital 3.6.1(a)
Common Law Environmental Principles 4.14.2
Company recitals
Consideration 3.2
Contribution Date 2.1.1
Delivery Date 3.6.2
EBIT 10.4.2
Environmental Law 4.14.2
Environmental Permit 4.14.2
Excluded Assets 2.2
Fiat Geva REF3.2.4
Final Closing Balance Sheet 3.7.1
Firm 3.8.2
Indemnified Party 9.6.1
Indemnifying Party 9.6.1
Listed Contracts 4.13.1
Majority Price 3.2.1
Majority Shareholding 3.1.1
Minimum Net Debt 3.2.5
Minority Price 10.4.1
Minority Shareholding 10.1.1
-5-
<PAGE> 11
Opening Balance Sheet 4.6.1
Option Notice 10.2.2
Other Claims 9.6.1
Participation 2.1.1(l)
Purchaser recitals
Retained Names and Marks 6.4.1
Seller recitals
Seller's Operations 2.1
Shares Recitals
Termination Date 11.1.1
Third Party Claim 9.6.1
ARTICLE 2
CONTRIBUTION OF SELLER'S OPERATIONS TO THE COMPANY
2.1. Contribution of Seller's Business to the Company
2.1.1 As soon as practicable after the execution of
this Agreement, but in any event before October 31, 1999, and effective not
later than the last day of the month the contribution is made (the date such
contribution is effective being hereinafter referred to as "Contribution Date"),
Seller shall contribute to the Company, free and clear of all Encumbrances, all
of its right, title and interest in the Business and the liabilities and
obligations related thereto ("Seller's Operations"), excluding those assets and
liabilities specifically listed in section 2.2, and including without limitation
the following assets and liabilities:
(a) all inventory and supplies, including raw
materials, work-in-process and finished products;
(b) all furnishings, furniture, computer equipment,
office equipment and supplies, vehicles, machinery and equipment, fixtures and
improvements, and other tangible personal property used in the conduct of the
Business and owned by or leased to the Seller;
(c) all contracts, agreements, arrangements and/or
commitments relating to the Business, including all the Leased Real Property
leases to which the Seller is a Party as a tenant;
(d) all Technology, know-how, patents, trademarks and
intangibles relating to the Business, including the "SATIZ" trademark, all
customer and vendor lists relating to the Business, all files, correspondence
and documents relating to cus-
-6-
<PAGE> 12
tomers and vendors and all production data, equipment maintenance data,
accounting records, inventory records, sales and sales promotional data,
advertising materials, cost and pricing information, business plans, reference
catalogues, engineering records and any other such data and records, computer
files relating to the Business;
(e) all permits and licenses used in the conduct of the
Business;
(f) all employment relationship relating to the
Business with connected liabilities for TFR and other accrued liabilities
connected to employment relationship;
(g) all other assets owned by Seller which are used
primarily in the Business;
(h) all trade receivables and credits of the Business,
whether recorded or unrecorded, including without limitation all receivables
from Seller's Affiliates;
(i) all recorded trade payables of the Business,
including, without limitation all trade payables due to Seller's Affiliates;
(j) cash, prepaid expenses and deposits;
(k) goodwill; and
(l) 100% of the capital of SATIZ GRAFICA S.r.l., of
SATIZ POLAND s.p.z.o.o. and of SATIZ DO BRASIL Ltda (hereafter "Participations")
2.1.2 The contribution deed shall include a section
specifying that the Seller and the Company shall settle in cash any differences
between the value of the assets and liabilities as of the date of reference of
the appraisal provided for by Article 2343 of the Italian Civil Code and the
Contribution Date.
2.2. Excluded Assets and Liabilities
2.2.1 Notwithstanding the foregoing, the following
assets, properties, rights and liabilities of Seller are not intended to be
contributed to the Company and shall not be deemed Seller's Operations
("Excluded Assets"):
(a) real property and buildings owned by the Seller and
leases thereon;
(b) the lit. 7.355 million It. Lit. receivable from
F.C.E. S.p.A. (and
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related provision); and
(c) all liabilities and obligations, known or unknown,
contingent or otherwise relating to or arising out of the Business prior to the
Contribution Date which are not recorded in the Books and Records of the Seller.
2.3. Completion of Contribution
2.3.1 The contribution of the Business from Seller to
the Company shall be completed (i.e., means the completion of the corporate
procedures under Art. 2436 and third paragraph of Art. 2343 of the Italian Civil
Code) and the Shares shall therefore be duly issued and in condition to be
freely transferred in accordance with Italian law at the Closing Date.
ARTICLE 3
PURCHASE AND SALE
3.1. Purchase and Sale
3.1.1 Provided that this Agreement shall not have been
terminated in accordance with Article 11, upon the terms and subject to the
conditions set forth in this Agreement, at the Closing the Seller shall sell to
the Purchaser, free and clear of Encumbrances and the Purchaser shall purchase
from the Seller, Shares representing the seventy five per cent (75%) of the
outstanding capital of the Company ("Majority Shareholding").
3.1.2 At Closing the Seller shall retain a minority
equity interest in the Company corresponding to 25% of the Shares which will be
subject to Put and Call options as defined in Article 10 below.
3.2. Purchase Price
3.2.1 The agreed price of 100% of the Shares is equal
to (i) lit. 53,000,000,000 (fifty three billion) (ii) minus an amount equal to
the consolidated Net Debt of the Company and Participations as of the Closing
Date ("Purchase Price") (iii) subject to the adjustment contemplated by Section
3.5 of this Agreement.
3.2.2 The purchase price is based on a Net Invested
Capital re-
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sulting from the Pro Forma Balance Sheet of it. lit. 29.1 (twenty nine point
one) billion ("Minimum Net Invested Capital").
3.2.3 The agreed price of Majority Shareholding
("Majority Price") is equal to 75% of It lit. 53,000,000,000 (fifty three
billion) (ii) minus an amount equal to 75% of the consolidated Net Debt of the
Company and Participations as of the Closing Date ("Closing Net Debt") subject
to the adjustment contemplated by Section 3.5.
3.2.4 The consolidated Net Debt of the Company and
Participation as of the Closing Date ("Closing Net Debt") shall include among
others the amount that Purchaser or its designated bank shall pay to Fiat Geva
S.p.A. ("Fiat Geva") pursuant to section 3.4.1 (c).
3.2.5 Should the parties not agree at Closing on the
Closing Net Debt a predetermined amount equal to the amount that Seller shall
pay to Fiat Geva pursuant to section 3.4.1 (c) will be taken into account
("Minimum Net Debt") for the Closing procedures and in the post-closing
adjustments such amount will be adjusted.
3.3. Closing
3.3.1 Subject to the terms and conditions of this
Agreement, the sale and purchase of the Majority Shareholding and the payment
and delivery of the Majority Price shall take place at a closing (the "Closing")
to be held at Seller's choice as soon as practicable after the Contribution Date
and in no event later than 90 (ninety) days from the date the contribution is
made, provided that all the conditions to the obligations of the Parties set
forth in Article 8 have been satisfied or waived (other than conditions which
are contemplated to be satisfied simultaneously with the Closing and are capable
of being so satisfied), at the offices of Notary Antonio Maria Marocco, in Corso
Re Umberto 8, Turin or at such other time or such other date or such other place
as the Seller and the Purchaser may mutually agree upon in writing.
3.3.2 Seller shall advise Purchaser of the Closing Date
by notice to be received by Purchaser at least 15 days prior to the Closing
Date.
3.4. Actions at Closing
3.4.1 At the Closing:
(a) Seller and Purchaser shall execute the Majority
Shareholding purchase notarial deed substantially in the form set forth in
Schedule 3.4.1 (a). Such
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notarial deed shall in no manner alter or modify or supersede any of the rights
or obligations of any of the Parties pursuant to this Agreement, which shall
continue to govern the transaction contemplated herein and any liability related
thereto (including but not limited to any indemnification obligation) and shall
in no manner be superseded, altered or modified by such notarial deed.
(b) The Purchaser shall pay to the Seller the Majority
Price by wire transfer of immediately available funds to a bank account
specified in writing by the Seller at least ten days prior to the Closing Date
and shall deliver to the Seller copy of the irrevocable order to its bank for
the corresponding amount.
(c) The Purchaser, or a bank designated by the
Purchaser at least ten days prior to Closing, shall pay the 75% of the
outstanding debt of the Company to Fiat Geva S.p.A. by wire transfer of
immediately available funds to a bank account specified in writing by Fiat Geva
at least ten days prior to the Closing (and shall deliver to the Seller the copy
of the irrevocable order to its bank for the corresponding amount) and Seller
shall cause Fiat Geva to acknowledge receipt of the payment and release the
Company.
(d) The Seller shall deliver to the Purchaser the
letters from FIAT S.p.A., FIAT Auto S.p.A., Iveco S.p.A. and New Holland S.p.A.
substantially in the form attached to this Agreement in Schedule 3.4.1. (d) duly
signed by such companies.
(e) The Seller shall (i) cause the sole director (or
the directors) and the statutory auditors, if any, of the Company to resign,
with the declaration that they have no claims or demands with respect to the
Company and (ii) cause the ordinary shareholders meeting of the Company to
resolve the election of Purchaser's and Seller's designees to the Board of
Directors and Board of Statutory Auditors of the Company in accordance with the
provision of the Shareholders Agreement;
(f) Unless the same has not been accomplished upon the
execution of the Deed of Contribution, Seller shall cause extraordinary
shareholders meetings to resolve the change of the name of the Company into
"SATIZ S.r.l." and the change of the name of Seller so to remove the name
"SATIZ" by amending the By-laws contained in Schedule 3.4.1 (f) and any
additional amendment required by Purchaser in accordance with the provision of
the Shareholders Agreement;
(g) Seller and Purchaser shall execute the Shareholders
Agreement and the Company and the Seller shall execute the Transitional Services
Agreement;
(h) The Seller shall procure to the Company and
maintain until it retains the Minority Shareholding, a credit line, for an
amount corresponding to the 25% of the Closing Net Debt, at fair market
conditions.
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3.5. Adjustments to the Purchase Price
3.5.1 The Purchase Price shall be subject to adjustment
as follows:
(a) if the Closing Net Invested Capital will be less
than the Minimum Net Invested Capital, the Purchase Price shall be reduced by an
amount equal to the amount by which the Closing Net Invested Capital is less
than the Minimum Net Invested Capital, or
(b) if the Closing Net Invested Capital will be more
than the Minimum Net Invested Capital, the Purchase Price will be increased by
an amount equal to the amount by which the Closing Net Invested Capital exceeds
the Minimum Net Invested Capital.
(c) in addition, in the event that the Parties at the
Closing have not agreed on the amount of the Closing Net Debt: (i) if the
Closing Net Debt will be less than the Minimum Net Debt, the Purchase Price will
be increased by an amount equal to the amount by which the Closing Net Debt is
less than the Minimum Net Debt, or (ii) if the Closing Net Debt will be more
than the Minimum Net Debt, the Purchase Price will be decreased by an amount
equal to the amount by which the Closing Net Debt is more than the Minimum Net
Debt.
3.5.2 The aggregate amount pursuant to which the
Purchase Price shall be reduced or increased pursuant to paragraphs (a) or (b)
or (c) of Section 3.5.1 shall be referred to herein as the "Adjustment Amount".
3.5.3 The adjustment contemplated by this Section shall
apply for the 75% of the Adjustment Amount to the Majority Price and for the 25%
of the Adjustment Amount to the Minority Price.
3.6. Determination of Closing Net Invested Capital and
Closing Net Debt
3.6.1 As soon as practicable, but in no event later
than 90 (ninety) calendar days after the Closing Date, Purchaser shall cause the
Company to prepare and deliver to the Parties:
(a) a consolidated balance sheet of the Company and
Participations as of the Closing Date prepared in accordance with the principles
set forth in section 1.1.1 ("Closing Balance Sheet") from which the Company's
and Participation' consolidated Net Invested Capital as of Closing Date
("Closing Net Invested Capital") and the
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Closing Net Debt shall result and be specifically identified; and
(b) a report by an accounting firm mutually agreed upon
by the Parties before Closing, stating that the Closing Balance Sheet has been
prepared following the principles set forth in section 1.1.1.
3.6.2 The date on which the above documents shall be
delivered to Purchaser is referred to as the "Delivery Date".
3.6.3 The Closing Balance Sheet shall be prepared in
the same manner as the Pro Forma Balance Sheet, using the same line items or
accounts and applying the Accounting Principles, except for the goodwill
deriving from the contribution of Seller's Operations to the Company pursuant to
Article 2 above, as well as any reevaluation of assets resulting from the
attribution of such goodwill will be deducted from the Closing Net Invested
Capital.
3.6.4 Seller shall provide the Company with reasonable
free assistance (also from employees and usual consultants) and access to
necessary books and records in order to prepare the Closing Balance Sheet.
3.6.5 Each Party shall be entitled to request any
information and/or documentation relating to the Closing Balance Sheet and the
Purchaser shall cause the Company to comply with such requests, provided that
all related costs and expenses shall be borne by the requesting Party
3.7. Review of Closing Balance Sheet.
3.7.1 Each of the Parties shall have the right to
review the Closing Balance Sheet. If none of the Parties gives notice to the
contrary within 30 days after the Delivery Date, the Closing Balance Sheet and
the Closing Capital and Closing Net Debt resulting therefrom shall be deemed to
be final and binding upon the Parties and the Closing Balance Sheet shall be
considered final ("Final Closing Balance Sheet").
3.8. Disputes regarding the Closing Balance Sheet
3.8.1 If either of the Parties gives notice in writing
to the other within 30 days after Delivery Date that it disagrees with the
Closing Balance Sheet and specifies (a) the items as to which it so disagrees
and the reasons therefor and (b) the amount of the adjustment it proposes with
respect to each item, the Parties will then attempt to resolve their differences
with respect thereto.
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<PAGE> 18
3.8.2 If the Parties are unable to resolve their
dispute, the disputed items may be referred, within 60 (sixty) days from the
receipt of the notice, by either of the parties to an accounting firm mutually
agreed upon by the Parties among the "Big Five" accounting firms (the "Firm")
(or if such firm is unable or unwilling to serve, to another "Big Five"
accounting firm selected by agreement between the Parties hereto).
3.8.3 If neither Party refers the dispute within the
above-mentioned period to the Firm, the adjustments proposed shall be considered
final and binding and the Closing Balance Sheet reflecting such adjustment shall
be deemed the Final Closing Balance Sheet.
3.8.4 If the dispute is referred to the Firm, the Firm
shall render its decision resolving the dispute within 30 days after the dispute
has been referred. Should the Firm require additional information, the Parties
shall promptly comply with reasonable requests of the Firm, which shall, within
30 days after receipt of such information, determine and report to the Parties
upon such remaining disputed items. The decision of the Firm shall be final,
conclusive and binding on the Parties; however, the determination of the Firm
(i) shall address only items in dispute, and (ii) with respect to any individual
item in dispute shall not be in excess of, nor less than, the greatest or lowest
value, respectively, for that item claimed by the Parties. The fees and expenses
of the Firm shall be allocated among all of the Parties equally. The Closing
Balance Sheet, amended to reflect the decision of the Firm, shall be considered
as the Final Closing Balance Sheet.
3.9. Payment of Adjustment Amount
3.9.1 In the event that the Adjustment Amount as
finally determined in accordance with the provisions of sections 3.6, 3.7 or 3.8
hereof exceeds zero, then, within fifteen Business Days after the date of the
final determination of the Final Closing Balance Sheet, the Party obligated
pursuant to this ARTICLE 3 to pay the Adjustment Amount shall pay by wire
transfer of immediately available funds, to an account designated in writing by
the other Party at least two days prior to such date, 75% (seventy five per
cent) of the Adjustment Amount.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
4.1. General
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4.1.1 The Seller represents and warrants to the
Purchaser as follows as of the date of this Agreement and as of the date of the
Closing:
4.2. Incorporation and Authority of the Seller
4.2.1 As of the date of this Agreement and as of the
date of Closing the Seller is and will be a corporation duly incorporated,
validly existing and in good standing under the laws of Italy and has and will
have all necessary corporate power and authority to enter into this Agreement,
to carry out its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby.
4.2.2 The execution and delivery of this Agreement by
the Seller, the performance by the Seller of its obligations hereunder and
thereunder, and the consummation by the Seller of the transactions contemplated
hereby and thereby, have been duly authorized by all requisite corporate action
on the part of the Seller or will be authorized by the next Board of Directors'
meeting of Seller.
4.2.3 This Agreement has been duly executed and
delivered by the Seller, and (assuming due authorization, execution and delivery
by the Purchaser) this Agreement constitutes the legal, valid and binding
obligations of the Seller, enforceable against the Seller in accordance with its
terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally.
4.3. Incorporation and Qualification of the Company
4.3.1 At Closing the Company and the Participations
will be duly incorporated, validly existing and in good standing under the laws
of their jurisdictions and will have the requisite corporate power and authority
to own, operate or lease the properties and assets constituting the Seller's
Operations or now owned, operated or leased and to carry on the Business in all
material respects as currently conducted by Seller. The Company and the
Participations at Closing will be duly qualified to do business, and in good
standing, in each jurisdiction where the character of the properties owned,
operated or leased or the nature of their activities make such qualification
necessary, except for such failures which, individually or in the aggregate,
would not have a Material Adverse Effect.
4.4. Capital of the Company and Participations
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<PAGE> 20
4.4.1 The Company has a corporate capital of Euro
10,000 that will be increased by Closing of the amount that will be determined
by the Appraisal for the contribution. At Closing all the Shares of the Company,
including those deriving from the contribution, shall be owned by Seller and all
the Participations shall be owned by the Company. At Closing all Shares shall
have been duly authorized and validly issued and shall be fully paid and shall
not have been issued in violation of any pre-emptive rights. There shall be no
options, warrants or rights of conversion or other rights, agreements,
arrangements or commitments relating to the capital of the Company or of the
Participations obligating the Company or the Seller to issue or sell any Shares
of the Company or to pay any dividends out of the Company or the Participations.
The Seller and the Company will own all the Shares free and clear of
Encumbrances.
4.4.2 Except as set forth in Schedule 4.4.2, the
Company and the Participations do not have and will not have at Closing any
Subsidiaries or any shares, interests or securities or management control in any
corporate entity, partnership, joint-venture, consortium or other entity.
4.5. No Conflict
4.5.1 Except as set forth in Schedule 4.5, the
execution, delivery and performance of this Agreement by the Seller does not and
will not:
(a) violate or conflict with the By-Laws of the Seller
or the Company or any of the Participations,
(b) conflict with or violate any Law or Governmental
Order applicable to the Seller, the Company or any of the Participations,
(c) result in any breach of, or constitute a default or
event which with the giving of notice or lapse of time, or both, would become a
default, or result in the creation of any Encumbrance on the Shares or on any of
the assets or properties of the Company or of the Seller or of the
Participations pursuant to, any Contract to which the Seller or the Company is a
party or by which any of such assets or properties is bound or affected, except,
in the case of clauses (b) and (c), as would not, individually or in the
aggregate, have a Material Adverse Effect or prevent the Seller from
consummating the transaction contemplated by this Agreement.
4.6. Financial Statements
4.6.1 Schedule 4.6.1 includes, or prior to Closing,
shall include:
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(a) Seller's Financial Statements; and
(b) the Company's opening balance sheet as of the
Contribution Date (hereinafter "Opening Balance Sheet").
4.6.2 Since its incorporation, the Company will have
maintained Books and Records in sufficient detail to reflect fairly and
accurately, in all material respects, its transactions. The Books and Records
will have been maintained in accordance with the Accounting Principles
consistently applied and will give a true, correct and complete view of all
matters.
4.6.3 The Financial Statements have been prepared in
accordance with the Accounting Principles and are true, correct and complete and
present fairly and accurately the financial condition of the Seller and the
results of its operations.
4.6.4 The Pro Forma Balance Sheet is true and correct
in all material respects and each individual line item thereon is in accordance
to the Accounting Principles consistently applied.
4.6.5 The Opening Balance Sheet will be true, correct
and complete in all respects and will present fairly and accurately the
financial condition of the Company as of the Contribution Date and will reflect
the transaction described in article 2 hereof. The Opening Balance Sheet will be
utilized as the opening balance sheet of the Company for Italian statutory
purposes and for the purpose of reconciliation of the contribution in values
between the date of reference of the appraisal and the Contribution Date as
provided in section 2343 of the Italian Civil Code.
4.6.6 The minute books of the Company will contain
complete and accurate records of all of its shareholders' and directors'
meetings and of all corporate actions taken by such shareholders and directors.
The meetings of directors and shareholders referred to in such minute books will
have been duly called and held, and the resolutions appearing in such minute
books will have been duly adopted. The signatures appearing on all documents
contained in such minute books will be the true signatures of the persons
purported to have signed the same
4.7. Absence of Certain Changes or Events
4.7.1 Except as stated in Schedule 4.7 or as
contemplated in this Agreement, since the Balance Sheet Date, the Business has
been conducted in all material respects in the Ordinary Course and none of the
following actions has occurred:
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(a) (i) sale, lease, transfer or disposal of any of the
assets of the Business, (ii) mortgage, pledge or encumbrance of any of the
assets of the Business, (iii) amendment, transfer, assignment or cancellation
any Listed Contract or any Leased Real Property leases, (iv) acquisition (by
merger, consolidation, or acquisition of stock or assets) of any corporation,
entering into any partnership or other business organization or division
thereof, (v) increase of the rate of compensation payable to any of the
employees or agents of the Company, or entering into any new, or amendment in
any material respect of any existing, employment agreement, except in the
Ordinary Course (vi) assumption or guarantee of any indebtedness for borrowed
money, or (vii) entering into any Contract exceeding the criteria set forth in
Section 4.13, or into any leases of real property, except in the Ordinary Course
(viii) damage, destruction or loss (whether or not covered by insurance)
materially affecting the properties or business of the Seller or Company loan by
Seller or Company to any person, or guaranty of any loan or any commitment to
loan funds to any person or entity, (ix) material adverse change, amendment or
termination other than in the Ordinary Course, of any Contract involving more
than Lire 100,000,000 (one hundred million) (x) lapse in any insurance policy or
coverage of the properties or assets of Seller or the Company that was not
re-insured without a gap in coverage; (xi) purchase commitments in excess of
normal operating inventories or at prices higher than current market prices;
(b) (i) amendment of the Company By-laws, or (ii)
issuance of any Shares of capital stock; or declare of any dividend;
(c) entering into any agreement to do any of the things
described in (a) or (b) above.
4.7.2 Except as it would not have a Material Adverse
Effect: (i) the capital investments carried out by Seller or by the Company have
been made in the Ordinary Course, and have been entered into on arm's length
terms and conditions, and (ii) the assets acquired thereby have been installed
or are in the process of being installed, and are, in proper working order and
conform in all material respects to the specifications set out in the relevant
purchase orders.
4.8. Absence of Litigation
4.8.1 Except as set forth in Schedule 4.8, there are no
Actions pending or threatened against the Company or the Seller, with respect to
any of the assets or properties of the Business and neither the Seller nor the
Company, nor their respective assets and properties, are subject to any
Governmental Orders, that, individually or in the aggregate, would have a
Material Adverse Effect or would prevent the Seller from consummating the
transactions contemplated by this Agreement or the Company from running the
Business.
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<PAGE> 23
4.8.2 None of the directors, officers, employees or
representatives of Seller or the Company are being prosecuted for any criminal
offense relating to the conduct of the Business, nor is Seller aware of any
circumstances likely to lead to such prosecution.
4.8.3 There is not in existence any adverse
Governmental Order or Action enjoining or requiring the Seller or the Company to
take any action with respect to their business, assets or properties.
4.9. Compliance with Laws
4.9.1 The Company and the Seller are in compliance with
all applicable Laws, and neither the Seller nor the Company has received any
notice to the effect that the Company or the Seller are not in compliance with
any applicable Laws, except, (a) as set forth in the Schedule 4.9 or (b) where
the failure to comply would not, individually or in the aggregate, have a
Material Adverse Effect.
4.10. Consents, Approvals, Licenses
4.10.1 No consent, approval, authorization, license,
order or permit of, or declaration, filing or registration with, or notification
to, any Governmental Authority is required to be made or obtained by the Seller
or the Company in connection with the execution, delivery and performance of
this Agreement and or the consummation of the transactions contemplated hereby
or thereby, except:
(a) as set forth in Schedule 4.10;
(b) applicable requirements of antitrust law, rule or
regulations in any affected jurisdiction;
(c) where the failure to obtain such consents,
approvals, authorizations, licenses, orders or permits, or to make such
declarations, filings, registrations or notifications, would not, individually
or in the aggregate, have a Material Adverse Effect or prevent the Seller from
consummating the transactions contemplated by this Agreement.
4.10.2 All of the Licenses of the Company required for
the conduct of the Business will be at Closing in full force and effect and the
Company will be at Closing in compliance with each such License, except as would
not, individually or in the aggregate, have a Material Adverse Effect and, as of
the date of this Agreement, there is no action pending or, to the Knowledge of
the Seller, threatened against Seller
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<PAGE> 24
to terminate the rights of the Seller under any such License.
4.11. Real Property
4.11.1 The Company at Closing will not own nor have any
agreements, commitments or obligation to purchase real property or any rights
thereto.
4.11.2 All leases for Leased Real Property are (i) in
full force and effect, (ii) neither Seller nor the Company is and will be at
Closing in default in any material respect under any of the Leases and no notice
of default by Seller or the Company under any of the Leases has been received or
is threatened. No condemnation, expropriation, eminent domain or similar
proceeding is pending or threatened with respect to any of such properties.
4.12. Taxes
4.12.1 Except as would not have a Material Adverse
Effect or as set forth in Schedule 4.12:
(a) all tax returns required or which relate to the
Company for any period (or portion thereof) ending on or before the Closing Date
have been filed (taking into account any extension of time to file), and all
such returns are complete and correct
(b) for any period (or portion thereof) ending on or
before Closing Date, the Company has paid all such Taxes which are due, whether
or not shown to be due on a Tax Return (and where payment is not yet due or is
disputed in good faith by appropriate proceedings, has established, to the
extent consistent with past practice and in accordance with the Accounting
Principles, proper reserves on its Books and Records for such payment);
(c) no claim for assessment or collection of taxes,
relating to the Seller or the Company that is or may become payable by the
Company or chargeable as a lien on its assets or properties, has been asserted
by any taxing authority;
(d) neither the Seller nor the Company is aware of any
material proposed additional Taxes, interest or penalties to be assessed against
the Company; and
(e) to the best of Seller's Knowledge, none of the
activities of the Business will cause the Company to have a taxable presence or
permanent establishment in any country other than Italy.
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4.13. Contracts
4.13.1 Schedule 4.13.1 lists the following Contracts
(collectively the "Listed Contracts") in effect as of the date of this Agreement
relating to the Business to which the Seller is a party:
(a) all Contracts (other than the Leases in Schedule
1.1.1.(q)) that the Seller reasonably anticipates will, in accordance with their
terms, involve aggregate payments by Seller and/or by the Company of more than
Three Hundred Million Lire (Lit 300,000,000) within the 12 month period
following the date of this Agreement that are not cancelable without liability
on not more than 60 days notice;
(b) joint venture agreements;
(c) all Contracts relating to indebtedness for borrowed
money or capitalized leases, or other Contract in respect of which the Company
or Seller is obligated to provide funds in respect of, or to guarantee or
assume, any debt of any Person, in each case, in excess of It. Lire 300.000.000
(three hundred million) including intercompany indebtedness;
(d) each indemnity arrangement arising in connection
with any sale or disposition of assets (other than sales of assets in the
ordinary course of business);
(e) each Contract that the Seller reasonably
anticipates will, in accordance with its terms, involve aggregate payments to
the Company and/or Seller of more than Three Hundred Million Lire
(Lit.300.000.000) (three hundred million) within the 12-month period following
the date of this Agreement; and
(f) each loan, credit line, factoring, discounting and
other forms of financing in favor of, or granted by the Seller or the Company,
with the relevant maximum amounts and due dates.
4.13.2 Except as set forth in the Schedule 4.13.2,
neither Company nor the Seller is (and, to the Knowledge of the Seller, no other
party is), in breach or violation of, or default under, any of the Listed
Contracts, whose breach, violation or default would, individually or in the
aggregate, have a Material Adverse Effect.
4.13.3 To the Knowledge of the Seller, the Seller has
not received notice of any claim that any Listed Contract is not valid and
enforceable in accordance with its terms for the periods stated therein, or that
there is under any such Listed Contract any existing default or events of
default or events which with notice or lapse of time or both would constitute
such defaults which, individually or in the aggregate, would result in a
Material Adverse Effect.
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4.13.4 Each Listed Contract is a valid agreement, enforceable in
accordance with its terms, except in each case where enforceability may be
limited by bankruptcy, insolvency or other similar laws affecting creditors'
rights generally.
4.13.5 As a result of the transactions contemplated by this Agreement,
no parties of any Listed Contracts with Seller have (i) ceased or, to the
Knowledge of Seller, will cease to use the products, goods or services of the
Seller and/or the Company, (ii) have reduced or, to the Knowledge of Seller,
will reduce the use of such products, goods or services, or (iii) sought or are,
to the Knowledge of Seller, seeking to reduce the prices they pay for such
products, goods or services, or (iv) will have the right to terminate the Listed
Contracts, except as set forth on Schedule 4.13.5.
4.13.6 The services rendered by the Seller to its customers pursuant to
the Listed Contracts are fully satisfactory to the customers and no complaint,
claim or adverse comment has been made or threatened nor, in the opinion of
Seller, is there a reason for a complaint, claim or adverse comment to be made.
4.14. Environmental Matters
4.14.1 Except as would not have a Material Adverse Effect,
(a) neither the business or operations of the Company or of the Seller
nor any of the Leased Real Property violates any applicable Environmental Law,
(b) the Company and/or the Seller have not stored or used any
pollutants, contaminants or hazardous or toxic wastes, substances or materials
in violation of any Environmental Law,
(c) the Company and/or the Seller have not received any written or oral
notice from any Governmental Authority advising it that the Leased Real Property
or the operation of the Company's or Seller's business is in violation of any
Environmental Law or any applicable Environmental Permit or that it is
responsible (or potentially responsible) for the cleanup of any pollutants,
contaminants or hazardous or toxic wastes, substances or materials,
(d) the Company and/or the Seller are not party to any government or
private litigation or proceedings involving a demand for damages or other
potential liability pursuant to any Environmental Laws,
(e) neither the Company, nor the Seller, nor any director or officer of
the Company or of Seller has buried, dumped, disposed, spilled or released any
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pollutants, contaminants or hazardous or toxic wastes, substances or materials
in violation of applicable Environmental Laws,
(f) there is no condition or circumstance at, on or beneath the
premises at which the Company or Seller are conducting (or have conducted)
Business, or at, on or beneath any property at which wastes of the Company or of
the Seller have been deposited or disposed by or at the behest or direction of
the Company or of the Seller that (i) requires abatement or correction by the
Company or Seller or under any Environmental Law or (ii) gives rise to any civil
or criminal liability, and
(g) the Company and the Seller have timely filed all reports required
to be filed by them under applicable Environmental Laws with respect to the
Leased Real Property and the operation of their business, and the Company and
the Seller have generated and maintained, in all material respects, all data,
documentation and records required to be generated or maintained under any
applicable Environmental Laws with respect thereto.
4.14.2 For the purposes of this Agreement, the following terms shall
have the meanings set forth below:
"ENVIRONMENTAL LAW" shall mean any law, statute, regulation, rule,
order, consent decree, settlement agreement or governmental requirement of any
governmental authority, as in effect on the date of this Agreement, which
relates to or otherwise imposes liability or standards of conduct concerning
discharges or releases of any pollutants, contaminants or hazardous or toxic
wastes, substances or materials into ambient air, water or land, or otherwise
relating to the manufacture, processing, generation, distribution, use,
treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants or hazardous or toxic wastes, substances or materials.
"ENVIRONMENTAL PERMIT" shall mean any licenses, permits, variances,
approvals or other authorizations required by or pursuant to any applicable
Environmental Law.
4.15. Intellectual Property
4.15.1 At Closing the Company will own or have the right to use all
Intellectual Property and all Technology used or held for use in the conduct of
the Business as presently conducted by Seller and/or as contemplated to be
conducted, without any conflict with the rights of others, in each case with
such exceptions as would not have, in the aggregate, a Material Adverse Effect
and subject to limitations contained in any applicable license agreement.
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4.15.2 With such exceptions as would not have, in the aggregate, a
Material Adverse Effect, since January 1, 1998, neither the Seller, nor the
Company have received any notice from any person challenging the right to use
any Intellectual Property or Technology owned or used by or licensed with
respect to the Business.
4.15.3 With such exceptions as would not have, in the aggregate, a
Material Adverse Effect, neither the Company nor the Seller have made any claim
that any person has violated or infringed its respective rights with respect to
any Intellectual Property or Technology owned or used by or licensed and there
is no basis for the making of any such claim.
4.15.4 Except as would not have a Material Adverse Effect, upon
consummation of the transactions contemplated by this Agreement, the Company
will own all software programs and databases related to the Business owned to
the extent owned prior to such consummation, free and clear of all Encumbrances.
4.15.5 Appropriate actions have been taken in order to ensure that the
computer based systems of the Company will be able to operate and effectively
process data which includes dates on and after 1 January 2000.
4.15.6 Neither the Seller nor any employee or director of the Seller or
of the Company owns, directly or indirectly, in whole or in part, any
Intellectual Property or Technology the use of which is necessary for the
conduct of the Business as presently conducted or as contemplated to be
conducted.
4.16. Brokers
4.16.1 Except Mediobanca S.p.A. no party is entitled to any brokerage,
finder's or other advisor fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Seller. The Seller is solely responsible for the fees and expenses of
Mediobanca S.p.A.
4.17. Grants and Subsidies
4.17.1 The Seller and the Company have not been granted nor applied for
any subsidies, grants or other support by governmental agencies or other
authorities.
4.18. Assets
4.18.1 Except as provided in Schedule 4.18.1, the assets to be
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contributed by Seller to the Company pursuant to Article 2, along with the
Leased Real Property, will constitute all of the tangible and intangible assets
necessary to conduct the Business as currently conducted and as was conducted on
January 1, 1999 except for retirements of assets in the Ordinary Course.
4.18.2 The assets to be contributed to the Company pursuant to Article
2 used in the Business process (i) at Closing will be in substantially the same
condition as on January 1, 1999, normal wear and tear excepted, (ii) since
January 1, 1999 have been regularly maintained in the Ordinary Course and (iii)
are, and will be at the time of Closing, in material conformity with applicable
laws and regulations; except to the extent replaced or Scheduled to be replaced
in the Ordinary Course.
4.18.3 The Company will have full and exclusive title in and to all of
the contributed assets (tangible and intangible) and such title will not be
subject to any Encumbrances, except as provided on Schedule 4.18.1 or in the
Closing Balance Sheet.
4.18.4 There are no material violations of applicable zoning, building,
statutes, ordinances or regulations relating to the properties and assets
(leased or owned) that will be contributed of the Company pursuant to Article 2,
except as indicated in Schedule 4.18.1.
4.19. Inventory
4.19.1 All inventories, net of reserves, if any, which are reflected in
the Final Closing Balance Sheet and the Opening Balance Sheet (i) are normal
qualitative standards and are saleable in the Ordinary Course at normal selling
prices; (ii) are now, and will be on the Closing Date, of a quality and quantity
which can be sold, used or consumed within periods reasonable in the industry
and in the Ordinary Course.
4.20. Employees and Consultants
4.20.1 Schedule 4.20.1 contains a true and complete list of the names,
titles and current salaries of all the Employees (including managers) as of June
30, 1999, who are to be transferred to the Company as part of the Business. None
of such Employees is redundant to Seller or will be redundant to the Company
with respect to the Business, all such Employees are currently active and there
are no reserves for potential redundancy or related matters on Seller's books or
those of any Affiliate of Seller for any transferred employees. From the Balance
Sheet Date no employees
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have been hired except in the Ordinary Course in order to fulfill the needs of
the Business. Seller shall provide Purchaser an updated Schedule 4.20.1 at
Closing indicating changes therein.
4.20.2 All employment relationships with Seller and the Company are and
will be at Closing governed by the applicable national collective agreements
listed in Schedule 4.20.2, and the employees have not been granted economic
conditions or indemnities which are not consistent with normal market salaries
in the industry or which are not consistent with such agreements or with the
law. Seller and the Company are and at Closing will be in compliance with all
material obligations deriving from such employment relationships, whether
relating to compensation or to other aspects of employment (including severance
indemnity).
4.20.3 Seller and the Company have and will have at Closing timely and
completely paid all wages, salaries, fees, bonuses, compensation and social
security contributions due to all employees and consultants.
4.20.4 During the past 3 (three) years there has been no actual or
threatened employee strike, work stoppage, slow-down or lock-out which has
materially disrupted the Business or had any material adverse change in the
relations with the employees and there are no circumstances which make it likely
that any such matters will occur by reason of the transactions contemplated in
this agreement.
4.20.5 Seller has no knowledge that any of the Employees listed on
Schedule 4.20.1 intend to cease their relationship with Seller and/or the
Company due to this Agreement. The Seller has not caused (directly or
indirectly) the transfer of any of its executive employees ("dirigente") to
other employment positions with other companies, or the termination of their
employment relationships since January 1, 1999.
4.20.6 Seller and the Company have carried on and will carry on until
Closing Date the Business in full compliance with all applicable laws and
regulations concerning safety at work, hygiene and health, fire and accident
prevention and with all applicable employment laws in general.
4.20.7 All consultancy or service arrangements with individuals and/or
entities are valid and binding agreements for the services provided for therein.
4.20.8 The contribution of the Business will be made in compliance with
applicable labor procedures under art. 47 of Law 428/90.
4.20.9 Except in the Ordinary Course, since January 1, 1999, there has
been (i) no increase in any bonus, percentage compensation, service award or
other like benefit, granted, made or agreed to be awarded for any Employee,
including
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managers, agents or consultants of the Business or of the Company, nor (ii) any
increase in any welfare, pension, retirement or similar payment or arrangement,
other than in the Ordinary Course Schedule or required by mandatory provisions
of the law.
4.21. Employees Plans
4.21.1 There are no Seller's Plans applicable to Employees other than
those listed on Schedule 4.21.
4.21.2 Except as set forth on Schedule 4.21, Seller (with respect to
the Business), and the Company do not have any liability or obligations to
current Employees or retirees or their spouses to provide life or medical
insurance benefits after retirement.
4.21.3 All social security contributions due by Seller, and the Company
have been duly paid and provisions for TFR (i.e., severance indemnity) and other
indemnities are fully and properly made and recorded in the Financial Statements
and will be in the Final Closing Balance Sheet. Further, the TFR as reflected on
the Final Closing Balance Sheet are, under the laws and regulations in force
upon the date of this Agreement, sufficient to satisfy unpaid TFR entitlements
related to the period of employment prior to the Closing Date to all employees
of the Company.
4.21.4 All obligations of Seller and the Company, for unemployment
compensation benefits, pension benefits, salaries, bonuses, sick leave, vacation
and other forms of compensation payable to Employees in respect of the services
rendered by any of them prior to the Closing Date have been or will be paid
prior to Closing or adequate accruals therefor have been made in the Books and
Records of the relevant entity, and the Financial Statements accurately reflect
the accrual for such obligations for services through their respective dates.
4.22. Business Conduct
4.22.1 Except as it would not have a Material Adverse Effect, during
the past five years neither the Seller nor any of its directors, employees or
any third party acting on behalf of Seller has incurred in conducting the
Business in any violation of laws or regulations of the United States or of any
other country.
4.22.2 The ongoing business of a consistently similar nature as to
products and services with Fiat Auto S.p.A. over the years 1997, 1998 and 1999
has permitted, without significant increase in volumes for each category of
goods and services, a trend of reduction of prices net of inflation and changes
in costs of materi-
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als.
4.23. Full Disclosure
4.23.1 No representation or warranty made by Seller in this Agreement
contains any untrue statements of material fact or omits to state a material
fact necessary to make the statements herein not misleading.
4.24. No other Representations and Warranties
4.24.1 The Seller makes to the Purchaser only the representations and
warranties set forth in this Agreement and no others.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.1. General
5.1.1 The Purchaser represents and warrants to the Seller as follows:
5.2. Organization, Authority and Qualification
5.2.1 The Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of United Kingdom and has all
necessary corporate power and authority to enter into this Agreement, to carry
out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
5.2.2 The execution and delivery of this Agreement by the Purchaser,
the performance by the Purchaser of its obligations hereunder and thereunder and
the consummation by the Purchaser of the transactions contemplated hereby and
thereby, have been duly authorized by all requisite corporate action on the part
of the Purchaser or will be authorized by the next Board of Directors meeting of
Purchaser.
5.2.3 This Agreement has been duly executed and delivered by the
Purchaser, and (assuming due authorization, execution and delivery by the
Seller) this Agreement constitutes legal, valid and binding obligations of the
Purchaser, en-
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forceable against the Purchaser in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally.
5.3. No Conflict
5.3.1 The execution, delivery and performance of this Agreement by the
Purchaser does not and will not:
(a) violate or conflict with the Articles of Association and Memorandum
of the Purchaser or any of its Affiliates;
(b) conflict with or violate any Law or Governmental Order applicable
to the Purchaser or its Affiliates; or
(c) result in the breach of, or constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any Contract to which the Purchaser or any of its Affiliates is
a party except, in the case of clauses (a) and (b), as would not, individually
or in the aggregate, have a material adverse effect on the Purchaser or prevent
the Purchaser from consummating the transactions contemplated by this Agreement.
5.4. Consents, Approvals, Licenses
5.4.1 No consent, approval, authorization, license, order or permit of,
or declaration, filing or registration with, or notification to, any
Governmental Authority is required to be made or obtained by the Purchaser or
any of its Affiliates in connection with the execution, delivery and performance
of this Agreement, or the consummation of the transactions contemplated hereby
or thereby, except:
(a) applicable requirements of applicable antitrust law, rule or
regulation in any affected jurisdiction, or
(b) where the failure to obtain such consents, approvals,
authorizations or licenses, orders or permits, or to make such declarations,
filings, registrations, or notifications, would not, individually or in the
aggregate, have a material adverse effect on the Purchaser or prevent the
Purchaser from consummating the transactions contemplated by this Agreement.
5.5. Absence of Litigation.
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5.5.1 The Purchaser represents and warrants as follows:
(a) there are no Actions pending or, to the knowledge of the Purchaser,
threatened in writing, against the Purchaser or any of its Affiliates, and
(b) neither the Purchaser nor any of its Affiliates is subject to any
Governmental Order,
(c) in each case that would, individually or in the aggregate, have a
material adverse effect on the Purchaser or prevent the Purchaser from
consummating the transactions contemplated by this Agreement.
5.6. Brokers
5.6.1 Except for Citicorp Venture Capital, no party is entitled to any
advisor', finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchaser or its Affiliates.
5.6.2 Purchaser shall be solely responsible for its fees and expenses.
5.7. No other Representation and Warranties
5.7.1 The Purchaser makes to the Seller only the representations and
warranties set forth in this Agreement and no others.
ARTICLE 6
OBLIGATIONS AND COVENANTS
6.1. Conduct of Business Prior to the Closing
6.1.1 Unless the Purchaser otherwise agrees in writing (such agreement
not to be unreasonably withheld or delayed), and except as contemplated by this
Agreement or as otherwise set forth in the Schedule 6.1, between the date of
this Agreement and the Closing Date, the Seller shall and shall cause the
Company to:
(a) operate in all material respects only in the Ordinary Course;
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(b) use reasonable efforts to preserve the current relationships with
customers, suppliers, distributors, officers, consultants and other employees
and other persons with which there are significant business relationships;
(c) use reasonable efforts to maintain their tangible assets and
properties in their current condition, normal wear and tear excepted; and
(d) maintain the books, accounts and records in the usual, regular and
ordinary manner, on a basis consistent with past practice.
6.1.2 Unless the Purchaser otherwise agrees in writing (such agreement
not to be unreasonably withheld or delayed), and except as contemplated by this
Agreement or as otherwise set forth in the Schedule 6.1, between the date of
this Agreement and the Closing Date, the Seller shall not and shall not permit
the Company to adopt any of the following actions:
(e) any sale, assignment, transfer, mortgage, pledge or lease of any
material assets of the Seller or of the Company, except in the Ordinary Course;
(f) any merger or consolidation by the Company with another Person, or
any purchase of or investment by the Company or by Seller in the business of
another Person;
(g) any increase in the rates of direct compensation fees or
commissions payable or to become payable by Seller or the Company to any
director, officer, employee, agent or consultant, other than in the Ordinary
Course;
(h) discharge or satisfaction of any Encumbrances, or payment of any
obligation or liability, absolute or contingent, by the Seller or the Company,
other than current liabilities incurred in the Ordinary Course;
(i) cancellation of any debts or claims, except those excluded from the
Pro Forma Balance Sheet, except in each case in the Ordinary Course;
(j) action or transaction involving the sale, lease or other
disposition of any assets of the Seller or Company in excess of One Hundred
Million Lire (Lit. 100,000,000) in the aggregate other than in the Ordinary
Course;
(k) change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates or
income recognition methods) by Seller or the Company;
(l) revaluation by the Seller or by the Company of any of their as-
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sets;
(m) damage, destruction or loss (whether or not covered by insurance)
materially affecting the properties or business of the Seller or Company;
(n) loan by Seller or Company to any person, or guaranty of any loan or
any commitment to loan funds to any person or entity;
(o) material change, amendment or termination, or notice, other than in
the Ordinary Course, of any Contract involving more than Lire 100,000,000 (one
hundred million);
(p) lapse in any insurance policy or coverage of the properties or
assets of Seller or the Company that was not re-insured without a gap in
coverage;
(q) termination by the Company of employment of any of the key
employees of Seller or the Company;
(r) purchase commitments in excess of normal operating inventories or
at prices higher than current market prices; or
(s) agreement or other commitment with reference to the Business or the
Company to do any of the foregoing.
6.2. Access to Information
6.2.1 From the date of this Agreement until the Closing, upon
reasonable notice, the Seller shall, and shall cause the officers, employees,
auditors and agents of the Company to:
(a) afford the officers, employees, consultants and authorized agents
and representatives of the Purchaser reasonable access, during normal business
hours, to its Books and Records, and
(b) furnish to the officers, employees, consultants and authorized
agents and representatives of the Purchaser such additional financial and
operating data and other information regarding the Seller and the Company as the
Purchaser may from time to time reasonably request; provided, however, that the
Purchaser shall not unreasonably interfere with the business or operations of
the Company. Any information provided by the Seller or the Company pursuant
hereto shall be subject to the provisions of the Confidentiality Agreement until
the Closing.
6.2.2 The parties agree that they shall preserve and keep all
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Books and Records in their possession for a period of at least eight years from
the Closing Date.
6.2.3 Each Party agrees that it will cooperate with and make available
to the other Party, during normal business hours, all Books and Records,
information and employees (without substantial disruption of employment) which
are necessary or useful in connection with preparation of financial statements,
any Tax inquiry, audit, investigation or dispute, any audit by exchanges or data
providers, any litigation or investigation or any other matter requiring any
such Books and Records, information or employees for any reasonable business
purpose. The Party requesting any such Books and Records, information or
employees shall bear all of the out-of-pocket costs and expenses (including,
without limitation, attorneys' fees, but excluding reimbursement for salaries
and employee benefits) reasonably incurred in connection with providing such
Books and Records, information or employees and shall keep all such information
confidential. The Seller may require certain financial information relating to
the Company for periods prior to the Closing Date for the purpose of preparing
financial statements, filing Tax returns and other governmental reports, and the
Purchaser agrees to furnish such information to the Seller at the Seller's
request and expense.
6.3. Efforts; Consents; Guarantees
6.3.1 Each Party hereto shall use reasonable efforts to take, or cause
to be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable to consummate promptly and make effective the
transactions contemplated by this Agreement.
6.3.2 Each Party hereto shall use reasonable efforts to obtain all
authorizations, consents, orders and approvals of, and to give all notices to
and make all filings with, all Governmental Authorities that may be or become
necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement. Each Party will cooperate fully with
the other in obtaining such consents, giving such notices and making such
filings. Each Party required by law to do so, shall make appropriate filings
pursuant to the applicable antitrust laws and regulations with respect to the
transaction contemplated by this Agreement and promptly supply any additional
information and documentary material that may be requested pursuant to such laws
and regulations.
6.3.3 The Purchaser will use reasonable efforts to enter into
arrangements pursuant to which the Seller and its Affiliates will be released
from any guarantees of or relating to the Company with respect to which the
Seller or any of its Affiliates could have any liability after the Closing
Schedule, even by providing guar-
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antees, letters of credit or similar undertakings with respect thereto from any
shareholders or third parties. In the event that any such releases are not
obtained by the Purchaser, the Purchaser shall indemnify and hold harmless the
Seller and its Affiliates from and against any and all Losses based upon,
arising out of or resulting from (i) any breach after the Closing by the
Purchaser or its Affiliates (including the Company) of any agreement to which
any such guarantee relates or (ii) any payments made by the Seller or its
Affiliates under any such guarantees relating to the period afeter the Closing.
6.4. No Use of the Seller Names
6.4.1 Except for the name and trademark "SATIZ", which is to be
transferred to the Company, no interest in or right to use any trademark of the
Seller or of its Affiliates or trade name incorporating such trademark
(collectively, the "Retained Names and Marks") is being transferred to the
Purchaser pursuant to the transactions contemplated hereby.
6.4.2 The Purchaser will, immediately following the Closing Date, cause
the Company to remove or obliterate all the Retained Names and Marks from its
signs, purchase orders, invoices, sales orders, labels, letterheads, shipping
documents, and other items and materials, and not to put into use after the
Closing Date any such items and materials not in existence on the Closing Date
that bear any Retained Name or Mark or any name, mark or logo similar thereto.
6.4.3 Notwithstanding the foregoing, the Company may, for a period of
120 calendar days following the Closing Date (or, to the extent that changes are
required at individual customer locations, for a period of up to six months
following the Closing Date), use any purchase orders, invoices, sales orders,
labels, letterheads printed forms, or shipping documents existing on the Closing
Date that bear any Retained Name or Mark or any name, mark or logo similar
thereto, where the removal of any Retained Name or Mark or any such similar
name, mark or logo would be impractical; provided, that the Purchaser shall
place, or cause to be placed, a stamp, mark or other notation on any such item
that identifies the Company as an Affiliate or business of the Purchaser.
6.4.4 The Purchaser agrees that the Seller shall have no responsibility
for claims by third parties arising out of, or relating to, the use by the
Purchaser, the Company or any Affiliate thereof of any Retained Name or Mark or
the operations of the Company after the Closing Date, and the Purchaser agrees
to indemnify and hold harmless the Seller from any and all claims that may
result therefrom or that may arise out of the use thereof by the Purchaser, the
Company or any Affiliate thereof.
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6.5. Covenant Not to Compete
6.5.1 The Seller covenants and agrees that, if the Closing is
consummated and except as permitted under this section, for a period of five
years after the Closing Date, it will not and will cause its Affiliates not to
market, sell or provide or offer to sell or provide goods or services falling in
the scope of the Business to third parties in any location in which the Company
or any Subsidiary or Affiliate of the Company engages in such business as of the
day before the Closing Date. It is the desire and intent of the Parties that the
provisions of this section shall be enforced to the fullest extent permitted
under the laws and public polices of each jurisdiction in which enforcement is
sought. If any court determines that any provision of this section is
unenforceable, such court shall have the power to reduce the duration or scope
of such provision, as the case may be, or terminate such provision and, in
reduced form, such provision shall be enforceable. It is the intention of the
Parties that the foregoing restrictions shall not be terminated, unless so
terminated by a court, but shall be deemed amended to the extent required to
render them valid and enforceable, such amendment to only apply with respect to
the operation of this section in the jurisdiction of the court that has made the
adjudication.
6.5.2 For the avoidance of doubt nothing in this Article shall be
construed as prohibiting the Seller or any of its Affiliates from conducting any
activity or business related to web management and electronic commerce.
6.5.3 The Seller covenants and agrees that, if the Closing is
consummated, for a period of five years after the Closing Date, it will not, and
will cause its Affiliates not to, directly or indirectly, solicit for
employment, either as an employee or consultant, any employee or consultant of
the Purchaser, the Company or any of the Subsidiaries to become an employer or
consultant or otherwise provide services to the Seller or any of its
Subsidiaries; provided, however, that nothing in this section shall be construed
as prohibiting the Seller or any of its Affiliates from conducting any general
solicitation (including by placing advertisements in any form or method not
targeted at employees or independent contractors of the Purchaser and its
Subsidiaries).
6.5.4 With effect from the Contribution Date, Seller shall file with
the Italian tax authorities a request for a certificate limiting the tax
liability to which the Company succeeds (jointly with Seller) as a result of the
contribution of the Business.
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ARTICLE 7
EMPLOYMENT AND EMPLOYEE BENEFIT ARRANGEMENTS
7.1. Employment
7.1.1 Immediately after the Closing Date and subject to the
other provisions of this Article, Purchaser shall cause each Employee
listed in Schedule 4.20.1 to continue to be employed in his or her
respective position with the Company, whether or not the Employee is
subject to a written employment agreement, at salary and wages and
terms and as those in effect immediately prior to the Closing Date,
subject to the further terms and conditions of this Article.
7.1.2 The foregoing shall not be interpreted as restricting
the right of the Company to combine offices and operations in order to
take advantage of synergies of operations and management, as permitted
by applicable law.
7.2. Seller Plans
7.2.1 As of the Closing Date, the Company shall cease to be a
participating employer under the Seller Plans, schemes or other
arrangements, that is sponsored by the Seller or any of its Affiliates
and that covers either employees of the Seller and its Affiliates and
the Seller shall take, or cause to be taken, all such action as may be
necessary to effect such cessation of participation.
7.2.2 Effective as of the Closing Date, all Employees shall
cease to be active participants in all the Seller Plans, and the Seller
shall take all necessary measures to cause such cessation of
participation.
7.2.3 Purchaser shall establish and maintain, or shall cause
the Company to establish and maintain, as of the Closing Date, for all
Employees such employee benefit plans, programs and policies and fringe
benefits that would provide benefits to such Employees that, in the
aggregate, are substantially equivalent, to those provided to current
employees of Purchaser
7.3. Severance and Retention Benefits
7.3.1 The Purchaser agrees to provide, or cause the Company to
provide, severance pay and other benefit entitlements which may be
owing to any Employee listed on Schedule 4.20.1 and transferred to the
Company whose employment terminates after the Closing Date. Such
severance pay and benefit entitlements shall be
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determined (on an Employee by Employee basis) in accordance with the
severance and other policies of Purchaser applicable to such employee;
provided, however, that in calculating such severance pay or benefit
entitlement, Purchaser shall grant credit to such employee for all
service on or prior to the Closing Date with the Seller, the Company
and its Affiliates.
ARTICLE 8
CONDITIONS TO CLOSING
8.1. Conditions to Obligations of the Seller
8.1.1 The obligations of the Seller to consummate the
transactions contemplated by this Agreement shall be subject to the
fulfillment or waiver, at or prior to the Closing, of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement shall be true
and correct as of the Closing, with the same force and effect as if
made as of the Closing (or, in the case of representations and
warranties of the Purchaser which address matters only as of a
particular date, as of such date), except where the failure of such
representations and warranties to be true and correct would not,
individually or in the aggregate, have a material adverse effect on the
Purchaser or prevent the sale or purchase of the Shares or the payment
of the Purchase Price;
(b) Covenants. The covenants and agreements contained in this
Agreement to be complied with by the Purchaser at or prior to the
Closing shall have been complied with in all respects;
(c) No Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other Governmental Order which is in effect and has the
effect of prohibiting the sale or purchase of the Shares or the
delivery of the Majority Price;
(d) Antitrust approval or notices. All required notices to the
Antitrust Authorities, if any, shall have been duly filed and all
required approvals from such Authorities shall have been obtained or
any waiting period related thereto shall have expired;
(e) No Purchaser Material Adverse Effect. No Purchaser
Material Adverse Effect shall have occurred prior to Closing;
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(f) Execution of Agreements and delivery of letters. The
Shareholders Agreement and the Transitional Services Agreement shall
have been duly executed;
(g) Board Approval. The Board of Directors of Itedi Sp.A., the
parent company of the Seller, shall have approved this Agreement before
August 31, 1999.
8.2. Conditions to Obligations of the Purchaser
8.2.1 The obligations of the Purchaser to consummate the
transactions contemplated by this Agreement shall be subject to the
fulfillment or waiver, at or prior to the Closing, of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Seller contained in this Agreement shall be true and
correct as of the Closing, with the same force and effect as if made as
of the Closing (or, in the case of representations and warranties of
the Purchaser which address matters only as of a particular date, as of
such date), except where the failure of such representations and
warranties to be true and correct would not, individually or in the
aggregate, have a Material Adverse Effect or prevent the sale or
purchase of the Shares;
(b) Covenants. The covenants and agreements contained in this
Agreement to be complied with by the Seller at or prior to the Closing
shall have been complied with in all respects;
(c) No Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other Governmental Order which is in effect and has the
effect of prohibiting the sale or purchase of the Shares;
(d) Antitrust approval or notices. All required notices to the
Antitrust Authorities, if any, shall have been duly filed and all
required approvals from such Authorities shall have been obtained or
any waiting period related thereto shall have expired;
(e) No Material Adverse Effect. No Material Adverse Effect
shall have occurred prior to Closing;
(f) Execution of Agreements. The Shareholders Agreement and
the Transitional Services Agreement shall have been duly executed and
the letters attached to this Agreement as Schedule 3.4.1. shall have
been duly signed and delivered
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to the Purchaser;
(g) Board Approval. The Board of Directors of MSX International Inc.,
the parent company of the Seller, shall have approved this Agreement before
August 31, 1999.
ARTICLE 9
INDEMNIFICATION
9.1. Survival
9.1.1 Provided the Closing is consummated, except as otherwise set
forth in this section, the representations and warranties made in this Agreement
shall survive the Closing and remain in full force and effect (a) within the
limitation period provided for by any applicable law with respect to any
liability related to Tax matters, environmental matters, labor matters,
employees pensions or health insurance matters and (b) for three years after the
Closing Date for all other matters. Covenants and other agreements shall survive
the Closing in accordance with their terms.
9.1.2 No limitation either in time or in amount shall apply to
indemnification for breach of covenants contained herein or excluded
liabilities.
9.2. Limitations on Indemnification by Seller
9.2.1 The provisions for indemnity herein shall be effective
(a) only when Losses for which indemnification is sought were not
provided for or were insufficiently provided for in the Final Closing Balance
Sheet;
(b) only when the aggregate amount of all Losses exceeds Three Hundred
Million Lire (Lit. 300,000,000) (in which case the Seller shall indemnify the
Purchaser for the losses in excess thereof), and
(c) only until the amount paid by the Seller in respect of Losses
aggregates an amount equal to It. Lire 10 (ten) billion (and in no event shall
the Seller have any liability hereunder in excess thereof).
9.2.2 In addition, no indemnification shall be due for Losses recovered
by the Indemnified Party prior to indemnification (due to, by way of example but
not of limitation, payments made by insurance companies, debtors etc.). Any
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amount recovered by the Indemnified Party after indemnification by the
Indemnifying Party shall be transferred to the Indemnifying Party within ten
business days after it has been received by the Indemnified Party.
9.3. Indemnification by the Seller
9.3.1 Subject to the above Sections and except as otherwise set forth
in this Agreement, the Seller shall indemnify and hold harmless the Purchaser,
its Affiliates, and their respective officers, directors, employees and agents,
from and against any and all Losses, based upon, arising out of, or resulting
from, any of the following:
(a) any untrue representation, and/or breach by the Seller of the
warranties made by the Seller in this Agreement (it being understood that,
notwithstanding anything to the contrary contained in the Agreement, to
determine if there had been a breach of a representation or warranty and the
Losses arising from such breach, after Closing such representation or warranty
shall be read as if it were not qualified by materiality); or
(b) failure by the Seller to perform its covenants or agreements
contained in this Agreement; or
(c) any liabilities asserted against, imposed upon or incurred by the
Company, as a consequence of any acts or facts that took place (although not yet
known), prior to Closing Date, except as provided in section 9.4 with respect to
liabilities for uncollected receivables.
9.3.2 The indemnification obligation pursuant to this section 9.3.1 (a)
shall be effective notwithstanding any due diligence or other review made by
Purchaser; provided, however, that it is expressly agreed that the Purchaser
shall not make any indemnification claim against the Seller solely for Seller's
failure to disclose information when the failure has not caused the Purchaser to
suffer Losses.
9.4. Accounts Receivable
9.4.1 Seller hereby warrants the collectibility of all the accounts
receivable of the Company listed in the Final Closing Balance Sheet. One year
after the Closing, the Parties shall review the status of such accounts
receivable. Any of such accounts receivable that are more than six months old
from the due date shall be assigned to Seller against payment by Seller to the
Company of a sum equal to the accounts receivable less their reserves provided
for on the Final Closing Balance Sheet, if
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any. Purchaser shall cause the Company to take such actions as Seller shall
reasonably request in order to assist in the collection of the assigned accounts
receivable.
9.5. Indemnification by Purchaser
9.5.1 Except as otherwise set forth in this Agreement, the Purchaser
shall indemnify and hold harmless the Seller and its Affiliates, and their
respective, directors, employees and agents, from and against any and all Losses
based upon, resulting from or arising out of any of the following:
(a) untrue representations and/or breach by the Purchaser of the
warranties made by the Purchaser in this Agreement (it being understood that,
notwithstanding anything to the contrary contained in the Agreement, to
determine if there had been a breach of a representation or warranty and the
Losses arising from such breach, after Closing such representation or warranty
shall be read as if it were not qualified by materiality);
(b) failure by the Purchaser to perform its covenants or agreements
contained in this Agreement; or
(c) any liability or obligation relating to the operation and ownership
of the business of the Company after Closing.
9.6. Claims
9.6.1 When a Party seeking indemnification under this article (the
"Indemnified Party") receives notice of any claims made by third parties
(individually, a "Third Party Claim" and collectively, "Third Party Claims") or
has any other claim for indemnification other than a Third Party Claim which is
to be the basis for a claim for indemnification hereunder (defined as "Other
Claims"), the "Indemnified Party" shall give written notice thereof to the other
Party (the "Indemnifying Party") reasonably indicating (to the extent known) the
nature of such claims and the basis thereof and providing or making available
any documentation related to such claim in its possession.
9.6.2 The notice of third Party Claims shall be given promptly and in
any event not later than within 20 (twenty) days from the date the Indemnified
Party has received notice of such claim. The notice of Other Claims shall be
given within 3 (three) months from the date the Indemnified Party is aware of
the circumstances on which such claim is based. Failure to give notice shall not
excuse a Party from its indemnification obligation except to the extent it is
prejudiced by the delay.
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9.6.3 Any difference between the Parties relating to the right of any
of the Parties to indemnification pursuant to this Article which is not resolved
by mutual agreement between the parties within 60 (sixty) days from the receipt
by the Indemnifing Party of the notice contemplated herein may be submitted to
Court resolution pursuant to Section 12.11.
9.6.4 Upon notice of a Third Party Claim from the Indemnified Party,
the Indemnifying Party shall assume the defense of such Third Party Claim,
including its compromise or settlement, and shall pay all costs and expenses
thereof and shall be fully responsible for the outcome; provided, however that
the Indemnified Party shall fully cooperate to the defense and settlement of the
Third Party Claim and shall comply with reasonable instructions of the
Indemnifying Party and shall provide the Indemnified Party with any information
and assistance which may be reasonably required to this purpose
9.6.5 No compromise or settlement in respect of any Third Party Claims
may be made by an Indemnified Party without first notifying the Indemnifying
Party's of the terms of the settlement. The Indemnifying Party shall be liable
with respect to any compromise or settlement thereof effected if it did not
object in writing to the terms of settlement within 20 days from the receipt of
the notice specified above.
9.6.6 The indemnification payments shall be effected by the
Indemnifying Party within 30 (thirty) days from the disbursement by the
Indemnified Party, for any of the reasons under this Section.
9.6.7 The Indemnified Party shall take all commercially reasonable
steps to mitigate damages in respect of any claim for which it is seeking
indemnification, including, without limitation, using commercially reasonable
efforts to effect recovery of available insurance claims in connection with such
claim, and shall use commercially reasonable efforts to avoid any costs or
expenses associated with such claim and, if such costs and expenses cannot be
avoided, to minimize the amount thereof.
9.6.8 Any indemnification payment required under this Article shall be
increased by such amount, as may be necessary to ensure that the Indemnified
Party receives an amount which, after deducting any tax cost, is equal to the
full amount which the Indemnified Party would have received had such
indemnification payment not been subject to tax.
9.7. No Other Remedy
9.7.1 The Parties hereto acknowledge and agree that, from and
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after the Closing, their sole and exclusive remedy with respect to any and all
claims relating to the breach of representations, and warranties contained in
this Agreement (other than any claims for fraud) shall be pursuant to the
indemnification provisions set forth in this ARTICLE 9; provided, however, that
this sentence shall not limit the rights of the Parties hereto to seek specific
performance of any provision of this Agreement. In furtherance of the foregoing,
each of the Parties hereto hereby waives, to the fullest extent permitted under
applicable law, any and all other rights, claims and causes of action it may
have, from and after the Closing, against the other Party or their respective
officers, directors, employees, agents, representatives and Affiliates relating
to the breach of representations and warranties contained in this Agreement.
ARTICLE 10
SELLER'S MINORITY SHAREHOLDING IN THE COMPANY
10.1. Seller's Shareholding in the Company after Closing
10.1.1 After Closing, Seller shall retain a 25% (twenty five per cent)
equity interest in the Company or such minor interest which may result after any
increase of the share capital of the Company which Seller may decide, in its own
discretion, not to subscribe ("Minority Shareholding").
10.2. Put Option
10.2.1 From September 1, 2002 to December 31, 2002 Seller shall have
the right to require Purchaser to acquire all of the Seller's Minority
Shareholding and Purchaser shall acquire such Minority Shareholding, according
to the terms and conditions provided below.
10.2.2 The put option provided for above shall be exercised by delivery
within the period above specified of a written notice to the Purchaser ("the
Option Notice"). The Option Notice shall be irrevocable.
10.2.3 Within 30 (thirty) days from the date of delivery of the Option
Notice Seller shall duly transfer all its Minority Shareholding free of any
Encumbrances to the Purchaser (or to any party as the Purchaser may designate)
against payment to Seller of the purchase price indicated in Section 10.4 below.
10.3. Call Option
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10.3.1 From September 1, 2002 to December 31, 2002 Purchaser
shall have the right to require Seller to sell Seller's Minority
Shareholding and Seller shall sell such Minority Shareholding,
according to the terms and conditions provided below.
10.3.2 The call option provided for above shall be exercised
by delivery within the period above specified of a written notice to
the Seller ("the Option Notice"). The Option shall be irrevocable.
10.3.3 Within 30 (thirty) days from the date of delivery of
the Option Notice Seller shall duly transfer all its Minority
Shareholding free of any Encumbrances to the Purchaser (or to any party
as the Purchaser may designate) against payment to the Seller of the
purchase price indicated in Section 10.4 below.
10.4. Price of the Seller's Minority Shareholding
10.4.1 Without any regard to the percentage of the Minority
Shareholding at the time of the transfer, the purchase price for the
transfer of the Minority Shareholding from Seller to Purchaser
("Minority Price") shall be equal to:
(a) 25% of It. lit. 53,000,000,000 (fifty three billion)
(b) minus an amount equal to 25% of the consolidated Net Debt
of the Company and Participations as of the Closing Date
(c) plus or minus 25% (twenty five per cent) of the Adjustment
Amount,
(d) plus interest at the annual rate equal to 12 months EURO
LIBOR from Closing to the date of transfer of the Minority
Shareholding,
(e) minus any dividend received by Seller from Closing to the
date of transfer of the Minority Shareholding, and
(f) (i) plus It. lit. 500,000,000 (five hundred million) if
the Company's EBIT ("risultato operativo") as of December 31, 2001
exceeds lit. 14.4 billion, or (ii) minus It. lit. 500,000,000 (five
hundred million) if the Company's EBIT ("risultato operativo") as of
December 31, 2001 is less than lit. 9.6 billion.
10.4.2 For the purposes of this Section 10.4, the term "EBIT"
shall have the meaning set forth in Schedule 10.4 hereto.
10.4.3 The Seller shall have the right to review all the
accounts
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and related documents on the basis of which the EBIT has been determined.
10.5. No Transfer of the Shares
10.5.1 Neither of the Parties shall sell, transfer or otherwise dispose
of any of its Shares to third Parties other than their Subsidiaries, before
December 31, 2002.
10.5.2 After such date, if the put or call option has not been exercised, the
Parties will be free to sell or transfer their Shares to third parties other
than their Subsidiaries, in accordance with the terms and conditions contained
in the Company's By-laws.
ARTICLE 11
TERMINATION, AMENDMENT AND WAIVER
11.1. Termination
11.1.1 This Agreement may be terminated at any time prior to the
Closing:
(a) by the mutual written consent of the Seller and the Purchaser;
(b) by either the Seller or the Purchaser if any Governmental Authority
with jurisdiction over such matters shall have issued a Governmental Order
restraining, enjoining or otherwise prohibiting the sale or purchase of the
Shares hereunder and such order, decree, ruling or other action shall have
become final and un-appealable; provided, however, that the provisions of this
section shall not be available to any Party unless such Party shall have used
its best efforts to oppose any such Governmental Order or to have such
Governmental Order vacated or made inapplicable to the transactions contemplated
by this Agreement;
(c) by either the Seller or the Purchaser if the Closing shall not have
occurred prior to 150 (one hundred fifty) days from date of this Agreement (the
"Termination Date"); provided, however, that no Party hereto shall have the
right to terminate this Agreement under this section if such Party's failure to
fulfill any obligation under this Agreement shall have been the cause of, or
shall have resulted in, the failure of the Closing to occur prior to the
Termination Date;
(d) by Purchaser pursuant to the further investigation and due
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gence that Purchaser will conduct, by written notice, upon (i) discovery of an
untrue representation or breach of any material covenant and/or warranty and/or
agreement by the Seller set forth in this Agreement, or (ii) if a representation
of the Seller has become untrue or a covenant or warranty has not been complied
with in both (i) and (ii) such that the condition set forth in Section 8.2 would
no be satisfied; provided, however, that, if the breach is curable by Seller, it
has not been cured within 30 days from the receipt of the notice thereof by the
Purchaser;
(e) by Seller, by written notice, (i) upon discovery of an untrue
representation or breach of any material covenant and/or warranty and/or
agreement by the Purchaser set forth in this Agreement, or (ii) if any
representation or warranty of Purchaser shall have become untrue or if a
covenant or warranty has not been complied with in both (i) and (ii) such that
the condition set forth in Section 8.1 would no be satisfied; provided, however,
that, if the breach is curable by Purchaser, it has not been cured within 30
days from the receipt of the notice thereof by the Seller.
11.2. Waiver
11.2.1 At any time prior to the Closing, either Party hereto may (a)
extend the time for the performance of any of the obligations or other acts of
the other Party hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the Party to be bound thereby.
ARTICLE 12
GENERAL PROVISIONS
12.1. Expenses
12.1.1 Unless otherwise expressly provided herein, all costs and
expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transaction contemplated hereby and thereby shall be paid by the Party
incurring such costs and expenses, whether or not the Closing shall have
occurred.
12.1.2 Notwithstanding the above:
(a) all fees and expenses connected to the antitrust filings related
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to the transaction shall be borne equally the Parties;
(b) all costs, fees and expenses deriving from the sale of the Shares
shall be borne equally by Seller and Purchaser.
12.2. Notices
12.2.1 All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given or made (and shall be deemed to
have been duly given or made upon receipt) by delivery in person, by courier
service, by cable, by telecopy, by telegram or by registered mail (postage
prepaid, return receipt requested) to the respective Parties at the following
addresses (or at such other address for a Party as shall be specified in a
notice given in accordance with this Section):
if to the Seller:
SATIZ S.p.A. (or new name it shall adopt on or before Closing)
c/o Itedi S.p.A.
Corso Marconi 20
10128 - Torino
Attention: Chief Executive Officer
Telecopier: +39 011 686 1481
with copy to:
Giorgio Fossati
FIAT S.p.A.
Via Nizza 250
10126 Torino
Fax: +39 011 686 2196
if to the Purchaser:
MSX INTERNATIONAL Inc.
275 Rex Bulevard
Auburn Hills MI 48326Attention: Chief Executive Officer
with copy to: Vice President and General Counsel
Telecopier: 001 248 299 1038
with copy to:
Bruno R. Pavia
Andrea Accornero
PAVIA E ANSALDO
Via dell'Annunciata 7
20121 Milano
Fax: 02 653306
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12.3. Public Announcements
12.3.1 Unless otherwise required by applicable Law or stock exchange
requirements, no Party to this Agreement shall make any public announcements in
respect of this Agreement or the transaction contemplated hereby or thereby, nor
shall otherwise communicate with any news media, without the prior written
consent of the other Party (which consent shall not be unreasonably withheld).
If a public statement is required to be made pursuant to the foregoing sentence,
the Parties shall consult with each other, to the extent reasonably practicable,
in advance as to the contents and timing thereof.
12.4. Confidentiality
12.4.1 Each Party acknowledges that, after the execution of this
Agreement and during the course of preparing any and all the actions required
for the occurrence of the Closing and thereafter, such Party may be provided
with and obtain access to confidential information belonging to the other Party.
No Party hereto shall disclose to any third party, until the Closing and
thereafter, any confidential information received from the other Party.
12.5. Headings
12.5.1 The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
12.6. Severability
12.6.1 If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
Party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.
12.7. Entire Agreement
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12.7.1 This Agreement constitutes the entire agreement of the Parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral (other than the
Confidentiality Agreement, which shall survive until the Closing and, if this
Agreement is terminated prior to consummation of the Closing, then the
Confidentiality Agreement shall survive such termination in accordance with the
terms of the Confidentiality Agreement), between the Seller and the Purchaser
with respect to the subject matter hereof.
12.8. Assignment
12.8.1 Neither this Agreement nor any of the Parties' rights hereunder
shall be assignable by any Party hereto without the prior written consent of the
other Party hereto.
12.8.2 Notwithstanding the foregoing, Purchaser shall have the right
to designate one of its Subsidiaries to acquire the Shares as provided hereunder
and in such event: (i) references to Purchaser in connection with the
acquisition or holding of such Shares or to any obligations set forth in this
Agreement shall be deemed to be references also to such Subsidiary, which at
Closing shall accept in writing and acknowledge its rights and obligations
pursuant to this Agreement, and (ii) Purchaser shall remain jointly and
severally liable with its designated Subsidiary for any obligation hereunder.
12.9. No Third-Party Beneficiaries
12.9.1 Except as provided in ARTICLE 4, ARTICLE 5 and Section 12.8.2
(and, in the case of ARTICLE 9, solely with respect to Indemnified Parties
thereunder), this Agreement is for the sole benefit of the Parties hereto and
their permitted assigns and nothing herein, express or implied, is intended to
or shall confer upon any other person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
12.10. Waivers and Amendments
12.10.1 This Agreement may be amended or modified, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
Parties hereto or, in the case of a waiver, by the Party waiving compliance. No
delay on the Part of any Party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any Party of any right, power or privilege hereunder, nor any single or partial
exercise of any other right,
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power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which any Party may otherwise have at Law or in equity.
12.11. Governing Law and Disputes
12.11.1 This Agreement shall be governed by, and construed in
accordance with, the laws of Italy applicable to contracts executed in and to be
performed in that State. All actions and proceedings arising out of or relating
to this Agreement shall be heard and determined in a Italian court sitting in
Milan, and the Parties hereto hereby irrevocably submit to the exclusive
jurisdiction of such courts in any such action or proceeding.
12.12. Counterparts
12.12.1 This Agreement may be executed in one or more counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
The Seller
By: /s/ Alberto Nicolello
Name: Alberto Nicolello
Title: Chairman
The Purchaser
By: /s/ Carol Creel
Name: Carol Creel
Title: Managing Director
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