<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 16, 1996
Owens-Illinois, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-9576 22-2781933
--------------- ----------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
Owens-Illinois Group, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-13061 34-1559348
--------------- ----------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
One SeaGate, Toledo, Ohio 43666
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrants' telephone number,
including area code: 419-247-5000
Exhibit Index -- Page 4
Page 1 of 4 pages
<PAGE>
The Registrants hereby amend its Current Report on Form 8-K dated December 16,
1996 to include the information required under Items 7(a), 7(b) and 7(c).
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
(1) Audited consolidated finanical statements of Avir Finanziaria S.p.A.
and subsidiaries for the year ended December 31, 1995 (with
comparative information as of and for the year ended
December 31, 1994).
- Independent Auditors' Report
- Consolidated Balance Sheets
- Consolidated Profit and Loss Accounts
- Consolidated Statements of Changes in Net Equity
- Consolidated Cash Flow Statements
- Notes to Consolidated Financial Statements
(2) Unaudited condensed consolidated finanical statements of Avir
Finanziaria S.p.A. and subsidiaries for the six months ended
June 30, 1996 and 1995.
- Condensed Consolidated Balance Sheets
- Condensed Consolidated Profit and Loss Accounts
- Condensed Consolidated Cash Flow Statements
- Notes to Condensed Consolidated Financial Statements
(b) Unaudited pro forma financial information.
- Pro Forma Condensed Consolidated Balance Sheet at June 30, 1996
- Pro Forma Condensed Consolidated Income Statement for the six
months ended June 30, 1996
- Pro Forma Condensed Consolidated Income Statement for the year
ended December 31, 1995
- Notes to Pro Forma Condensed Consolidated Financial Statements
(c) Exhibits.
2.1 Acquisition Agreement dated December 16, 1996
23.1 Consent of KPMG S.p.A., Rome, Italy
Page 2 of 4 pages
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
OWENS-ILLINOIS, INC.
OWENS-ILLINOIS GROUP, INC.
By /s/ Lee A. Wesselmann
--------------------------
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated: March 3, 1997
Page 3 of 4 pages
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EXHIBIT INDEX
Exhibit
Number Exhibit
2.1 Acqusition Agreement dated December 16, 1996
23.1 Consent of KPMG S.p.A., Rome, Italy
Page 4 of 4 pages
<PAGE>
Independent Auditors' Report
----------------------------
The Shareholders
Avir Finanziaria S.p.A.
We have audited the accompanying consolidated balance sheet of Avir
Finanziaria S.p.A. and subsidiaries as of December 31, 1995 and the related
consolidated profit and loss account, statement of changes in net equity and
cash flow statement for the year then ended. These consolidated financial
statements are the responsibility of Avir Finanziaria S.p.A.'s management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the consolidated financial
statements of Vidrieria Rovira S.A., a subsidiary (62% ownership), which
statements reflect total assets constituting 8% and total revenues
constituting 9% of the related consolidated totals. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for Vidrieria Rovira
S.A., is based solely on the report of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the Republic of Italy, which standards are substantially
equivalent to auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audit and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Avir Finanziaria S.p.A. and
subsidiaries as of December 31, 1995, and the results of their operations and
their cash flows for the year then ended, in conformity with generally
accepted accounting principles in the Republic of Italy.
Accounting principles generally accepted in the Republic of Italy vary in
certain significant respects from accounting principles generally accepted in
the United States of America. Application of accounting principles generally
accepted in the United States of America would have affected net profit for
the year ended December 31, 1995 and net equity as of December 31, 1995, to
the extent summarized in Note 20 to the consolidated financial statements.
KPMG S.p.A.
Naples, Italy
May 13, 1996, except as to Note 21,
which is as of March 3, 1997
1
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CONSOLIDATED BALANCE SHEETS Avir Finanziaria S.p.A.
Millions of Lire
December 31, 1995 1994
- -----------------------------------------------------------------------------
Assets
A) Receivables from shareholders for
unpaid capital - -
B) Fixed Assets
I) Intangible assets:
1) Start-up and improvement costs 323 414
2) Costs of research, development and
publicity 38 128
3) Patents and rights to use third-party
patents 1,053 1,342
4) Concessions, licenses, brands and
similar rights 9 13
5) Differences on consolidation 1,933 3,227
6) Assets in progress and advances 50 14
7) Other 1,563 2,130
- -----------------------------------------------------------------------------
Total 4,969 7,268
II) Tangible assets:
1) Land and buildings 107,009 111,451
2) Plant and machinery 188,364 187,636
3) Industrial and commercial equipment 20,754 21,366
4) Other assets 1,089 1,177
5) Assets under construction and advances 47,310 12,109
- -----------------------------------------------------------------------------
Total 364,526 333,739
III) Financial assets:
1) Investment in:
b) associated companies 24,147 19,247
d) other companies 1,621 755
2) Loans receivable:
d) from third-parties
due within one year 257 139
due after one year 8,838 1,141
3) other securities 860 860
- -----------------------------------------------------------------------------
Total 35,723 22,142
=============================================================================
Total fixed assets (B) 405,218 363,149
=============================================================================
2
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CONSOLIDATED BALANCE SHEETS Avir Finanziaria S.p.A. (continued)
Millions of Lire
December 31, 1995 1994
- -----------------------------------------------------------------------------
C) Current assets
I) Inventories
1) raw materials and supplies 45,303 39,591
2) work-in-progress and semi-finished
products 5,563 1,699
4) finished products and goods for resale 85,071 92,315
5) advances 26 33
- -----------------------------------------------------------------------------
Total 135,963 133,638
II) Receivables:
1) from customers
due within one year 250,366 242,205
due after one year 8,907 6,480
3) due within one year 293 6,577
5) from third parties
due within one year 25,076 9,262
due after one year 26,523 22,381
- -----------------------------------------------------------------------------
Total 311,165 286,905
III) Financial assets:
4) other investments 6,569 -
6) loans receivable:
-- from third parties
due within one year 178,231 71,036
- -----------------------------------------------------------------------------
Total 184,800 71,036
IV) Cash on hand and at bank
1) bank and postal accounts 84,313 108,338
3) cash on hand 198 301
- -----------------------------------------------------------------------------
Total 84,511 108,639
- -----------------------------------------------------------------------------
Total current assets 716,439 600,218
D) Prepaid assets and accrued income 8,796 3,894
- -----------------------------------------------------------------------------
Total Assets 1,130,453 967,261
=============================================================================
Liabilities and Net Equity
A) Net equity
I) Share capital 22,092 22,092
II) Share premium reserve - -
III) Revaluation reserve 4,224 4,224
IV) Legal reserve 4,418 4,418
V) Treasury stock - -
3
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CONSOLIDATED BALANCE SHEETS Avir Finanziaria S.p.A. (continued)
Millions of Lire
December 31, 1995 1994
- -----------------------------------------------------------------------------
VI) Statutory reserves - -
VII) Other reserves
-- extraordinary reserve 78,584 74,610
-- taxed reserves 202 202
-- reserve for CASMEZ grants 99 99
-- reserve on gains re. Law 170 1,767 1,767
-- consolidation reserve 257,642 214,526
-- foreign exchange translation reserve 1,771 976
VIII) Retained earnings - -
IX) Net profit for the year attributable to the
Group 102,153 61,877
- -----------------------------------------------------------------------------
Total net equity attributable to the Group 472,952 384,791
Share capital and reserves attributable to
minorities 72,454 69,261
Net profit for the year attributable to
minorities 11,599 5,492
- -----------------------------------------------------------------------------
Total net equity attributable to minorities 84,053 74,753
- -----------------------------------------------------------------------------
Total Consolidated Net Equity 557,005 459,544
B) Risk and other provisions
1) Deferred compensation 308 204
2) Income taxes 34,281 33,460
3) Other 19,724 21,280
- -----------------------------------------------------------------------------
Total 54,313 54,944
C) Employees' termination indemnity 57,385 54,651
D) Payables
3) Banks overdrafts:
due within one year 46,265 66,442
due after one year 63,109 50,893
4) Due to other financial institutions:
due within one year 1,101 13,604
due after one year 30,296 17,094
5) Advances
due within one year 385 -
6) Trade payables
due within one year 182,416 145,733
7) Notes payable
due within one year 703 703
due after one year 40 743
9) Due to associated companies
due within one year 25 203
4
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CONSOLIDATED BALANCE SHEETS Avir Finanziaria S.p.A. (continued)
Millions of Lire
December 31, 1995 1994
- -----------------------------------------------------------------------------
11) Due to fiscal authorities
due within one year 97,315 68,311
12) Due to social security
due within one year 13,167 10,835
due after one year 44 115
13) Other payables
due within one year 16,068 11,759
due after one year 537 443
- -----------------------------------------------------------------------------
Total 451,471 386,878
E) Accrued expenses and deferred income 10,279 11,244
- -----------------------------------------------------------------------------
Total net equity and liabilities 1,130,453 967,261
=============================================================================
Memorandum Accounts
Liens on real estate on the Group's liabilities:
-- mortgages and privileges 83,787 78,070
-- reservation of property 743 1,446
- -----------------------------------------------------------------------------
Total guarantees 84,530 79,516
Other memorandum, commitments and contingency
accounts 3,901 3,895
- -----------------------------------------------------------------------------
Total Memorandum Accounts 88,431 83,411
5
<PAGE>
CONSOLIDATED PROFIT AND LOSS ACCOUNTS Avir Finanziaria S.p.A.
Millions of Lire
Years ended December 31, 1995 1994
- -----------------------------------------------------------------------------
A) Value of production
1) Revenues from sales 1,150,874 991,134
2) Variation in inventories of work-in-
progress, semi-finished and finished
products (3,615) 11,342
4) Capitalized labor 7,382 5,481
5) Other
-- contribution on operating expenses
revenues 144 702
-- other 8,452 9,534
- -----------------------------------------------------------------------------
Total 1,163,237 1,018,193
B) Cost of production
6) Raw materials, supplies and goods for
resale (397,644) (323,523)
7) Services received (284,966) (252,658)
8) Rentals and leasing charges (3,091) (3,535)
9) Personnel:
a) wages and salaries (132,094) (129,938)
b) social security contributions (48,441) (47,584)
c) employees' severance indemnities (9,713) (9,189)
d) deferred compensation (77) (1)
e) other (2,519) (3,297)
10) Depreciation and write-downs:
a) amortization of intangible assets (2,682) (3,731)
b) depreciation of tangible assets (69,734) (65,060)
c) other write-downs to fixed assets (132) (700)
d) provision for doubtful accounts risks (3,249) (5,477)
11) Variation in inventories of raw materials,
supplies and goods for resale 6,111 (595)
12) Provisions for risks (6,580) (1,215)
13) Other provisions (677) (303)
14) Other operating costs (20,118) (17,643)
- -----------------------------------------------------------------------------
Total (975,606) (864,449)
- -----------------------------------------------------------------------------
Difference between value and cost of production 187,631 153,744
C) Financial income and expense
15) Income from investments:
-- dividends 115 -
16) Other financial income
a) on long-term loans granted:
-- to third parties - 18
b) on investment securities 116 65
d) other 26,043 11,435
6
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CONSOLIDATED PROFIT AND LOSS ACCOUNTS Avir Finanziaria S.p.A. (continued)
Millions of Lire
Years ended December 31, 1995 1994
- -----------------------------------------------------------------------------
17) Interest and other financial charges
-- third-parties (22,534) (21,659)
- -----------------------------------------------------------------------------
Total 3,740 (10,141)
D) Adjustment to the value of financial assets
18) Revaluations
a) investments 8,645 3,551
19) Write-downs
a) investments (961) (15)
- -----------------------------------------------------------------------------
Total 7,684 3,536*
E) Extraordinary income and expense
20) Extraordinary income
-- gains on disposals 1,361 657
-- other 13,601 6,987
21) Extraordinary expense
-- losses on disposals (1,647) (726)
-- prior year income taxes (1,123) (1,164)
-- other (4,012) (7,230)
- -----------------------------------------------------------------------------
Total 8,180 (1,476)
- -----------------------------------------------------------------------------
Profit before income taxes 207,235 145,663
22) Income taxes (93,483) (78,294)
- -----------------------------------------------------------------------------
23) Net profit for the year 113,752 67,369
of which:
-- attributable to the Group 102,153 61,877
-- attributable to minorities 11,599 5,492
* In the 1994 financial statements the amount was included in "Other
revenues".
7
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN NET EQUITY Avir Finanziaria S.p.A.
Millions of Lire
Years ended December 31, 1995 and 1994
- ----------------------------------------------------------------------------
Attributable to the Group
Total
Net net
profit equity
Share Own Consolidation for the of the
capital reserves reserves Total year Group
- ----------------------------------------------------------------------------
Balance at
December 31,
1994 22,092 85,320 215,502 322,914 61,877 384,791
Dividends
distributed - - (13,255) (13,255) - (13,255)
Appropriation of
net profit to
reserves - 3,974 57,903 61,877 (61,877) -
Variations in
reserves - - (737) (737) - (737)
Net profits for
the year - - - - 102,153 102,153
- ----------------------------------------------------------------------------
Balance at
December 31,
1995 22,092 89,294 259,413 370,799 102,153 472,952
============================================================================
- ----------------------------------------------------------------------------
Attributable
to the Attributable to minorities
Group Share Net
Total net capital profit
equity of and for the Consolidated
the Group reserves year Total net equity
- ----------------------------------------------------------------------------
Balance at
December 31, 1994 384,791 69,261 5,492 74,753 459,544
Dividends distributed (13,255) (3,106) - (3,106) (16,361)
Appropriation of net
profit to reserves - 5,492 (5,492) - -
Variations in reserves (737) 807 - 807 70
Net profit for the
year 102,153 - 11,599 11,599 113,752
- ----------------------------------------------------------------------------
Balance at
December 31, 1995 472,952 72,454 11,599 84,053 557,005
============================================================================
8
<PAGE>
CONSOLIDATED CASH FLOW STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire
Years ended December 31, 1995 1994
- ---------------------------------------------------------------------------
Net Cash - beginning 137,537 15,182
Cash flows from operating activities
Net income - Group 102,153 61,877
Net income - External 11,599 5,492
Depreciation 72,416 68,791
Reversal of Group shares of the net result of
companies valued at net equity (8,626) (3,536)
(Gain)/Loss from disposal of assets 1,656 (1,899)
(Revaluation)/Devaluation of assets 131 700
Movement in working capital 39,393 39,338
Net movement in severance indemnity 2,734 (1,311)
Net movement in allowance for risks and charges (631) 3,682
- ---------------------------------------------------------------------------
220,825 173,134
Cash flows from investing activities
Investments in assets:
-- intangible (493) (861)
-- fixed (108,793) (64,503)
-- financial (9,680) (2,100)
Sales proceeds on disposal of fixed assets 12,304 25,196
- ---------------------------------------------------------------------------
(106,662) (42,268)
Cash flows from financing activities
-- Additional borrowings 31,310 35,992
-- Capital contributions 383 6,015
-- Loan repayments (24,278) (47,328)
- ---------------------------------------------------------------------------
7,415 (5,321)
Dividends paid (13,255) (6,627)
Other movements that do not form part of cash flows
from financing activities
Consolidation movements - -
Movements in reserves 2,546 6,428
Movements in shares of net equity of third parties (3,106) (2,991)
Conversion differences (3,833) -
- ---------------------------------------------------------------------------
(4,393) 3,437
Cash flows for the period 103,930 122,355
- ---------------------------------------------------------------------------
Net Cash - final 241,467 137,537
===========================================================================
9
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CONSOLIDATED CASH FLOW STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire
Years ended December 31, 1995 1994
- ---------------------------------------------------------------------------
Net cash, at year end, is as follows:
- -- Bank deposits and liquid funds 84,511 108,639
- -- Current financial debtors 184,800 71,036
- -- Current financial creditors (27,844) (42,138)
- ---------------------------------------------------------------------------
241,467 137,537
===========================================================================
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
The consolidated financial statements, consisting of the consolidated balance
sheets, consolidated profit and loss accounts, consolidated cash flow
statements and notes thereto, have been drawn up in accordance with the
requirements of Legislative Decree no. 127 of April 9, 1991 enacted as a
result of the VIIth EEC Directive.
1. Consolidation Group
The consolidation group includes the Italian and foreign companies in which
Avir Finanziaria S.p.A. (the "Company" and together with its subsidiaries, the
"Group") holds the majority of the voting rights and over which it exercises
significant control.
Compared to the consolidated financial statements at December 31, 1994, the
consolidation group shows only one change, due to the acquisition of the
entire share capital of Sonator Investments B.V. located in Amsterdam
(Holland).
During December 1995, the Company, as subscription of an increase in share
capital, transferred to Sonator Investments B.V. its controlling interest in
Vidrieria Rovira S.A., represented by 2,285,559 shares equal to 62.415% of the
share capital.
2. Changes in Unconsolidated Investments
Non-consolidated investments, over which the Group exercises significant
influence and normally represented by shareholdings of between 20% and 50%,
are valued using the equity method.
In accordance with the equity method, the consolidated financial statements do
not include the assets, liabilities, costs and revenues of the relevant
companies, but the Group's share of their equity, including the result for the
year, which is proportionately credited to the profit and loss under the item
"Adjustment to the value of financial assets".
The changes from the prior year are as follows:
- -- inclusion of Attivita' Industriali Friuli S.r.l., San Vito al Tagliamento
(PN) - 49%
- -- exclusion of Vetrerie Venete S.r.l., Verona; following the disposal of
735,000 shares, the shareholding reduced from 30% to 15.3%
Minority investments in other companies are valued at cost. Changes from the
prior year were:
- -- inclusion of Acque e Terme di Bognanco S.p.A. for the purchase of 800,000
shares with a nominal value of five hundred lire each
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
- -- inclusion of Vetrerie Venete S.r.l., following the decrease of the
investment from 30% to 15.3%
- -- elimination of the investments in Hotel Prince de Ligne S.r.o., Sediver
International S.A. and Sklo Export a.s., following their disposal
3. Basis of Consolidation
Financial statements used for the consolidation
- -----------------------------------------------
The financial statements used for the consolidation are those approved by the
shareholders' meetings of each consolidated company except for the financial
statements of one company valued under the equity method for which the
financial statements presented by the Board of Directors for the shareholders'
approval were used.
These financial statements have been adjusted, where necessary, to eliminate
items recorded exclusively to obtain fiscal benefits and to ensure they comply
with the accounting principles adopted by the Company.
The financial statements of foreign subsidiaries were reclassified to bring
them into line with Italian presentation requirements and were converted,
until December 31, 1994, into Italian lire using the year-end exchange (both
for balance sheet and profit and loss items). Beginning in 1995, financial
statements denominated in foreign currency are converted into Italian lire as
follows: profit and loss items at the average rate for the year and balance
sheet items at year-end exchange rates, except for the result for the year
which was converted with the same rates as the profit and loss account. The
difference arising on the result for the year between the application of
average rates and year-end rates is recorded in the "Foreign exchange
translation reserve" in net equity. The effects on net equity due to the
fluctuation of exchange rates between the end of 1995 and the end of 1994 are
also recorded in this account.
The exchange rates applied for the conversion are as follows:
- -----------------------------------------------------------------------------
1995 December 31, December 31,
Average 1995 1994
- -----------------------------------------------------------------------------
Czech crown 61.57 59.42 58.23
Dutch guilder 1,015.89 987.73 -
Pound sterling 2,556.27 2,458.22 2,533.43
Spanish peseta 13.08 13.05 12.33
- -----------------------------------------------------------------------------
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Principles of consolidation
- ---------------------------
All the consolidated companies have been included through the full
consolidation method, the main characteristics of which are as follows:
- -- assets, liabilities, costs and revenues are included at their full amount;
- -- equity and result for the year attributable to minority shareholders are
shown separately in specific items of the financial statements;
- -- the book value of the investments is eliminated against the corresponding
value of their equity;
- -- balances and transactions between the Group companies are eliminated;
- -- if significant, profits arising from transactions between Group companies
with respect to inventories held at year end by the acquiring company are
eliminated;
- -- if significant, gains and losses resulting from the transfer of fixed
assets between Group companies are eliminated;
- -- intercompany dividends and write-downs in the value of investments in
consolidated companies are eliminated;
- -- conversion differences in respect of financial statements expressed in
foreign currencies are recorded under a specific reserve in net equity;
- -- items recorded exclusively to obtain fiscal benefits are eliminated.
Any differences between acquisition cost and the proportional value of net
equity at the date of acquisition, in respect of consolidated subsidiaries and
investments valued under the equity method, have been treated as follows:
- -- negative differences are credited to the consolidation reserve;
- -- positive differences, if they do not relate to specific assets, are
recorded as difference in consolidation under intangible assets.
4. Accounting principles and valuation criteria
The accounting principles adopted in the preparation of the consolidated
financial statements are those recommended by the Consigli Nazionali dei
Dottori Commercialisti e dei Ragionieri and, where non existent, those
recommended by CONSOB and IASC - International Accounting Standards Committee.
Intangible assets
- -----------------
Start-up and improvement costs, relating primarily to incorporation and share
capital increase fees, and research, development and publicity costs are
amortized over a period not exceeding 5 years.
Patents and rights to use patents of third-parties, relating principally to
trademarks and software programs are amortized over their duration and 5
years, respectively.
Brands are written-off over 10 years.
13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
The difference on consolidation relates to the goodwill paid on acquisition of
investments and is amortized over a maximum of 5 years.
Other intangibles include the earning rights (usufruct) on Avirunion a.s.
shares, costs related to loan agreements and improvements made to third-party
assets and are written-off on the basis of the duration of the underlying
contracts.
Tangible assets
- ---------------
Tangible assets are recorded at acquisition cost or manufacturing cost,
including directly attributable ancillary costs and increased by monetary
revaluations carried out by Italian subsidiaries in accordance with specific
legislation, and are shown net of accumulated depreciation.
Depreciation is calculated using the straight-line method, based on the useful
lives of the assets as well as on their effective utilization. In the year of
acquisition the rates used are decreased by half.
Assets under construction and advances are recorded on the basis of actual
costs incurred.
Ordinary maintenance and repairs are expensed as incurred.
Investments
- -----------
Investments in non-consolidated companies, in which the Group holds an
interest of at least 20%, are valued using the equity method.
Other investments relating to ownership of less than 20% are valued at cost,
eventually reduced to take into consideration any permanent diminutions in
value.
Fixed-interest securities
- -------------------------
Long-term securities are recorded at acquisition cost, which is equivalent to
nominal value since they are not marketable.
Securities purchased under resale agreements are recorded under financial
assets in current assets at their acquisition cost; the difference between the
sale and acquisition value is recorded as interest over the term of the
agreement.
Inventories
- -----------
Inventories are recorded at the lower of cost (purchase or internal
production) or market value. Cost is determined using the LIFO method with
annual layers.
14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Receivables and payables
- ------------------------
Receivables (both current and long-term) and payables are recorded at their
nominal value.
The value of receivables is adjusted to correspond to their net realizable
value.
Receivables and payables denominated in foreign currencies have been converted
into Italian lire using the exchange rates on the transaction date; losses on
exchange are covered by a specific provision recorded under "Risk and other
provisions", calculated as the negative difference between the balances
converted at the year-end exchange rates and the original transaction exchange
rates.
Accruals and prepayments
- ------------------------
They consist of income and expense items relating to more than one financial
year and are recorded under the accrual method of accounting.
Provision for income taxes
- --------------------------
The provision includes deferred taxes recorded by Italian subsidiaries on
realized gains on disposal of fixed assets and on prior year income, whose
taxation effects are spread over the year of realization and a number of
subsequent years, as well as those with respect to the elimination of
accelerated depreciation.
The provision also includes the amounts provided for by each consolidated
company with respect to expected fiscal charges on outstanding positions or
amounts under dispute.
Employees' severance indemnities
- --------------------------------
The provision is calculated in accordance with the relevant legislation and
labor contracts and reflects amounts accruing to each individual employee of
the consolidated companies at year-end.
Costs and revenues
- ------------------
They are recorded on the basis of prudent criteria using the accrual method of
accounting.
Income taxes
- ------------
Income taxes are calculated by each consolidated company based on a realistic
estimate of taxes payable in accordance with local current relevant
legislation.
15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
5. Fixed Assets
Intangible assets
- -----------------
Intangible assets and related accumulated amortization consist of the
following:
1995 1994
------------------------------ -----
Accumulated
Gross amortization Net Net
- ----------------------------------------------------------------------------
Start-up and improvement costs 1,750 1,427 323 414
Cost of research, development and
publicity 571 533 38 128
Patents and rights to use third-
party patents 2,238 1,185 1,053 1,342
Concessions, licenses, brands and
similar rights 22 13 9 13
Difference on consolidation 6,473 4,540 1,933 3,227
Assets in progress and advances 50 - 50 14
Other 3,819 2,256 1,563 2,130
- ----------------------------------------------------------------------------
14,923 9,954 4,969 7,268
============================================================================
The schedule below outlines the movements for the year in intangible assets
and accumulated amortization:
Accumulated
Gross amortization
- ----------------------------------------------------------------------------
Balance at December 31, 1994 20,210 (12,942)
Increases 493 -
Decreases (5,908) 5,777
Amortization - (2,682)
Exchange differences 128 (107)
- ----------------------------------------------------------------------------
Balance at December 31, 1995 14,923 (9,954)
The difference on consolidation of 1,933 relates to the positive differences
between the acquisition cost of investments and the corresponding share of net
equity, as explained in the accounting principles.
16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Movements during the year were as follows:
Balance at December 31, 1994 3,227
Amortization (1,294)
- -----------------------------------------------------------------------------
Balance at December 31, 1995 1,933
=============================================================================
Other intangible assets of 1,563 includes 1,098 with respect to earning
rights on Avirunion a.s. shares.
Tangible assets
- ---------------
1995 1994
---------------------------------- -------
Accumulated
Gross depreciation Net Net
- ----------------------------------------------------------------------------
Land and buildings 199,224 92,215 107,009 111,451
Plant and machinery 635,751 447,387 188,364 187,636
Industrial and commercial
equipment 83,204 62,450 20,754 21,366
Other assets 2,186 1,097 1,089 1,177
Assets under construction
and advances 47,310 - 47,310 12,109
- ----------------------------------------------------------------------------
967,675 603,149 364,526 333,739
============================================================================
The schedule below outlines the movements for the year in tangible assets and
accumulated depreciation:
Accumulated
Gross depreciation
- ----------------------------------------------------------------------------
Balance at December 31, 1994 915,885 (582,146)
Increases (decreases) for the year:
- -- acquisitions 108,793 -
- -- disposals (63,864) 51,780
- -- depreciation - (69,734)
- -- exchange differences 6,861 (3,049)
- ----------------------------------------------------------------------------
Balance at December 31, 1995 967,675 (603,149)
============================================================================
Medium and long-term loans are collateralized by mortgages (land and
buildings) and privileges (on plant and machinery) on tangible fixed assets.
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
In addition, machinery of 624, purchased in accordance with Law 1329/65 (so-
called Sabatini law), is held under capital leases.
As required by Art. 2427, paragraph 1, of the Italian Civil Code, the
following schedule details the various revaluations carried out on fixed
assets held by the Group at December 31, 1995:
Industrial
and
Land and Plant and Commercial Other
buildings machinery equipment assets (*) Total
- ----------------------------------------------------------------------------
Voluntary
revaluation 1968 827 107 - - 934
Voluntary
revaluation 1978 630 - - - 630
Law no. 576 of
2.12.75 3,491 2,896 247 - 6,634
Law no. 72 of
18.3.83 18,202 18,622 655 - 37,479
Law no. 413 of
30.12.91 35,193 - - 512 35,705
- ----------------------------------------------------------------------------
58,343 21,625 902 512 81,382
============================================================================
(*) Industrial building concessions.
Financial assets
- ----------------
In associated companies
- -----------------------
The balance consist of the following:
1995 1994
- ----------------------------------------------------------------------------
Attivita' Industriali Friuli S.r.l. 5,412 -
Avir Serapo S.r.l. 228 247
Nord Vetri S.p.A. 7,274 6,143
Sicilvetro S.p.A. 11,233 10,915
Vetrerie Venete S.p.A. - 1,942
- ----------------------------------------------------------------------------
24,147 19,247
============================================================================
The change is due to the effect of the results of companies valued under the
equity method, to the acquisition of the investment in Attivita' Industriali
Friuli S.r.l. and the reclassification of the investment in Vetrerie Venete
S.p.A. following the disposal of 735,000 shares.
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Other companies
- ---------------
The balance consist of the following:
1995 1994
- ----------------------------------------------------------------------------
Acque e Terme di Bognanco S.p.A. 800 -
CESI S.p.A. 16 16
Confidi Soc. Coop. a r.l. 5 5
Consorzio nazionale obbligatorio per il riciclaggio dei
contenitori per liquidi in vetro (compulsory national
consortium for the recycling of glass bottles) 35 36
Hotel Prince de Ligne s.r.o. - 212
Sediver International S.A. - 5
Skloexport a.s. - 481
Vetrerie Venete S.p.A. 765 -
- ----------------------------------------------------------------------------
1,621 755
============================================================================
The changes relate to the acquisition of the investment in Acque e Terme di
Bognanco S.p.A., to the reclassification of Vetrerie Venete S.p.A. as already
mentioned above and to the disposal of minority investments in Hotel Prince de
Ligne, Sediver International and Skloexport.
Loans receivable from third-parties
- -----------------------------------
1995 1994
- ----------------------------------------------------------------------------
Due within one year 257 139
Due after one year 8,838 1,141
- ----------------------------------------------------------------------------
9,095 1,280
============================================================================
Receivables due after one year consist of the following:
Guarantee deposits on utilities' contracts 1,386
Term deposit due on March 31, 1998 7,452
-----
8,838
=====
The term deposit relates to the Company and is related to the guarantee
(principal and interest) provided by a primary Italian bank in favor of
Mediocredito Centrale for a loan; according to the contract, the deposit will
bear interest to the Company at the best market conditions and eventually
through other forms of investment designed to maximize earnings.
The year-end balance of 7,452 was used to purchase treasury certificates under
agreements to resell expiring on April 1996.
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Other securities
- ----------------
1995 1994
- -----------------------------------------------------------------------------
These are as follows:
Treasury certificates, issue date January 1, 1994,
expiring January 1998, interest 12.5% p.a. 260 260
Vetrerie Veneta S.p.A. debentures, expiring July 1,
1999, variable interest rate credited every six
months on January 1 and July 1 600 600
- -----------------------------------------------------------------------------
860 860
=============================================================================
6. Current assets
Inventories
- -----------
1995 1994
- -----------------------------------------------------------------------------
Raw materials and supplies 45,303 39,591
Work-in-progress and semi-finished products 5,563 1,699
Finished products and goods for resale 85,071 92,315
Advances 26 33
- -----------------------------------------------------------------------------
135,963 133,638
=============================================================================
Inventories are valued using the LIFO method. If they had been valued at
current costs their value in the consolidated financial statements would have
been higher by approximately 24,000. At December 31, 1994, the difference
would have amounted to 25,000.
Receivables from customers
- --------------------------
1995 1994
- -----------------------------------------------------------------------------
Due within one year 265,475 249,240
Provision for doubtful accounts (15,109) (7,035)
- -----------------------------------------------------------------------------
250,366 242,205
Due after one year 12,888 11,344
Provision for doubtful accounts (3,981) (4,864)
- -----------------------------------------------------------------------------
8,907 6,480*
- -----------------------------------------------------------------------------
Total 259,273 248,685
=============================================================================
*of the total, this amount is due after 5 years
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Receivables from third-parties
- ------------------------------
1995 1994
- -----------------------------------------------------------------------------
Due within one year
- -- State and public offices 11,129 3,738
- -- Personnel 364 479
- -- Debit balances with suppliers 10,671 1,692
- -- Other 2,912 3,353
- -----------------------------------------------------------------------------
25,076 9,262
Due after one year:
- -- State and public offices 23,314 20,912
- -- Personnel 22 6
- -- Other 3,187 1,463
- -----------------------------------------------------------------------------
26,523 22,381
- -----------------------------------------------------------------------------
Total 51,599 31,643
=============================================================================
Financial assets
- ----------------
1995 1994
- -----------------------------------------------------------------------------
Other investments 6,569 -
=============================================================================
The item relates to shares of Italian public companies purchased during the
year and valued at the lower of cost or average market prices for the month of
December 1995.
Loans receivable from third parties
- -----------------------------------
1995 1994
- -----------------------------------------------------------------------------
Due within one year 178,231 71,036
=============================================================================
They mainly relate to swap contracts on fixed-interest Italian and foreign
securities.
Cash on hand and at bank
- ------------------------
1995 1994
- -----------------------------------------------------------------------------
Bank and postal accounts 84,313 108,338
Cash on hand 198 301
- -----------------------------------------------------------------------------
84,511 108,639
=============================================================================
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
7. Prepaid expenses and accrued income
1995 1994
- -----------------------------------------------------------------------------
Prepaid expenses
Interest income 7,922 2,502
Other 117 486
- -----------------------------------------------------------------------------
8,039 2,988
Accrued income
Interest expense and commissions 97 190
Rental, hiring and maintenance charges 60 47
Insurance premiums 130 74
Other items 470 595
- -----------------------------------------------------------------------------
757 906
- -----------------------------------------------------------------------------
Total 8,796 3,894
=============================================================================
8. Net equity
1995 1994
- -----------------------------------------------------------------------------
Attributable to the Company
Share capital 22,092 22,092
Reserves 348,707 300,822
Net profit for the year 102,153 61,877
- -----------------------------------------------------------------------------
472,952 384,791
Attributable to minorities
Share capital and reserves 72,454 69,261
Net profit for the year 11,599 5,492
- -----------------------------------------------------------------------------
84,053 74,753
- -----------------------------------------------------------------------------
Total net equity 557,005 459,544
=============================================================================
The share capital of the Company, issued and fully paid, amounts to 22,092 and
is made up of 44,183,295 shares with a nominal value of five-hundred lire
each.
The reserves of the Company and Italian consolidated companies include the
following at December 31, 1995 with respect to which no deferred income taxes
have been provided for since their distribution is not expected:
- -- revaluation reserve of 58,801, net of 30,388 utilized for share capital
increases in prior years;
- -- investment grants of 71,018.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
In addition, the following are included:
- -- investment grants of 1,891 subjected to income taxes at 56.25%;
- -- other reserves of 22,474 which, in the event of distribution, would be
taxed at an additional rate of 15% and 2,488 at an additional rate of
56.25%.
The reconciliation between the financial statements of the Company and the
consolidated financial statements with respect to net equity and profit for
the year follows:
Capital
and
Net profit reserves
for the of the Consolidation Net
year Group reserve equity
- ----------------------------------------------------------------------------
Financial statements of
the Company at
December 31, 1995 31,644 111,386 - 143,030
Net profit of other
consolidated companies,
net of minorities 113,281 - - 113,281
Consolidation adjustments:
- -- dividends recorded by
Group (51,503) - 51,503 -
- -- valuation of equity
investments 8,626 - 8,653 17,279
- -- difference between net
equity of consolidated
companies and relevant
net equity, net of
minorities - - 170,721 170,721
Other consolidation
adjustments 105 - 28,536 28,641
- ----------------------------------------------------------------------------
Consolidated financial
statements of the Company
at December 31, 1995 102,153 111,386 259,413 472,952
============================================================================
9. Risk and other provisions
1995 1994
- ----------------------------------------------------------------------------
Deferred compensation 308 204
Income taxes 34,281 33,460
Other 19,724 21,280
- ----------------------------------------------------------------------------
54,313 54,944
============================================================================
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
The provision for deferred compensation includes 177 with respect to agents'
leaving indemnities.
Income taxes relates primarily to deferred taxes provided with respect to the
elimination of accelerated depreciation. The provision also includes deferred
taxes on gains on disposals of fixed assets and on prior year income which
will be subject to taxation in future years as well as the presumed tax
charges on outstanding positions and items under litigation.
Other provisions reflect principally the provision for foreign exchange
fluctuations which is calculated in accordance with the net difference on
receivables and payables denominated in foreign currencies valued at year-end
exchange rates as well as provisions for reorganization costs and incentivated
resignations from employees.
10. Employees' termination indemnity
- ----------------------------------------------------------------------------
Balance at December 31, 1994 54,651
Charge for the year 9,713
Utilisation for indemnities paid (6,979)
- ----------------------------------------------------------------------------
Balance at December 31, 1995 57,385
============================================================================
The closing balance represents the amounts due to employees in accordance with
relevant legislation and labor contracts.
11. Payables
Bank overdrafts
- ---------------
Bank overdrafts are made up as follows:
1995 1994
- ----------------------------------------------------------------------------
Short-term 27,844 42,138
Long-term:
due within one year 18,421 24,304
due after one year 63,109 50,893
- ----------------------------------------------------------------------------
109,374 117,335
============================================================================
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Long-term loans relate to mortgage and other loans, whose changes during the
year were as follows:
- ----------------------------------------------------------------------------
Balance at December 31, 1994 75,197
New loans 30,611
Installments paid (24,278)
- ----------------------------------------------------------------------------
Balance at December 31, 1995 81,530
============================================================================
Detail of the long-term loans is as follows:
- ----------------------------------------------------------------------------
Maturity
- ----------------------------------------------------------------------------
Between
Within 1 and 5 After 5
1 year years years Total
- ----------------------------------------------------------------------------
BIMER-BANCA S.p.A. - 4,000 - 4,000
B.N.L. - Sezione di Credito
Industriale 666 766 - 1,432
Cassa di Risparmio delle Provincie
Lombarde 1 4 - 5
Centrobanca 500 - - 500
Credito Industriale Sardo 358 1,759 567 2,684
Istituto Mobiliare Italiano 9,592 24,777 6,662 41,031
Mediocredito Centrale 1,648 14,836 - 16,484
Mediocredito della Puglia 3,484 8,717 - 12,201
Mediocredito Toscano 1,639 - - 1,639
Mediocredito Trentino Alto Adige 264 657 81 1,002
SFIRS 269 283 - 552
- ----------------------------------------------------------------------------
18,421 55,799 7,310 81,530
============================================================================
Interest rates vary between 2.65% and 14.55%.
Mortgage loans are collateralized by mortgages on land and buildings,
privileges on plant and machinery and suretyships and endorsements given by
the company and other consolidated companies, while the loan of 16,484 from
Mediocredito Centrale of the Company is collateralized by a bank guarantee.
Due to other financial institutions
- -----------------------------------
1995 1994
- ----------------------------------------------------------------------------
Due within one year 1,101 13,604
Due after one year 30,296 17,094
- ----------------------------------------------------------------------------
31,397 30,698
============================================================================
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Amounts due after one year include a loan to the subsidiary Avirunion a.s.
(25,319) and are repayable within 5 years.
Advances
- --------
1995 1994
- ----------------------------------------------------------------------------
Due within one year 385 -
============================================================================
Advances related to deposits paid on preliminary contracts for the sale of
building premises.
Trade payables
- --------------
1995 1994
- ----------------------------------------------------------------------------
Due within one year 182,416 145,733
============================================================================
Notes payable
- -------------
1995 1994
- ----------------------------------------------------------------------------
Due within one year 703 703
Due after one year 40 743
- ----------------------------------------------------------------------------
743 1,446
============================================================================
Notes payable relate to principal and interest amounts in respect of loans
granted for the purchase of machinery in accordance with Law 170 of November
28, 1965; the amounts due are collateralized by the machinery acquired.
Notes due after one year fall due in 1997.
Due to associated companies
- ---------------------------
1995 1994
- ----------------------------------------------------------------------------
Nord Vetri S.p.A. - 186
Sicilvetro S.p.A. 25 17
- ----------------------------------------------------------------------------
25 203
============================================================================
They relate to commercial transactions due within one year.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Due to fiscal authorities
- -------------------------
1995 1994
- ----------------------------------------------------------------------------
Income taxes 76,839 54,535
Tax on net equity 2,646 2,342
Withholding taxes 6,416 4,445
Value-added taxes 2,560 2,561
Other 8,854 4,428
- ----------------------------------------------------------------------------
97,315 68,311
============================================================================
Due to social security
- ----------------------
1995 1994
- ----------------------------------------------------------------------------
Due within one year 13,167 10,835
Due after one year 44 115
- ----------------------------------------------------------------------------
13,211 10,950
============================================================================
Amounts mainly relate to contributions matured at the end of the year and
payable to the relevant authorities within the following year.
Other payables
- --------------
1995 1994
- ----------------------------------------------------------------------------
Personnel 12,915 9,290
Directors and statutory auditors 631 580
Credit balances with customers 1,217 880
Other 1,305 1,009
- ----------------------------------------------------------------------------
16,068 11,759
============================================================================
Other payables due after one year, amounting to 537 at December 31, 1995
(1994: 443) relate mainly to guarantee deposits of tenants and interest
matured thereon.
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
12. Accrued expenses and deferred income
1995 1994
- ----------------------------------------------------------------------------
Accrued expenses
- -- holiday leave due to employees 3,411 3,291
- -- interest on loans 671 611
- -- insurance premiums 23 205
- -- other 624 1,274
- ----------------------------------------------------------------------------
4,729 5,381
Deferred income
- -- interest grants 52 106
- -- investment grants 5,157 5,413
- -- rental charges 12 22
- -- other 329 322
- ----------------------------------------------------------------------------
5,550 5,863
- ----------------------------------------------------------------------------
10,279 11,244
============================================================================
In accordance with art. 55 of Presidential Decree 917/86 investment grants
amounting to 5,157 will be credited in the profit and loss accounts over the
next 9 years, the first 8 of which are for an amount of 640 and the 9th for
37; deferred taxes at December 31, 1995 on these grants amount go 2,744.
13. Memorandum accounts
Guarantees given
- ----------------
1995 1994
- ----------------------------------------------------------------------------
Mortgages and privileges on fixed assets of
consolidated companies 83,787 78,070
Reservation of property, as per Law 1329/65
(Sabatini) on machinery of consolidated companies 743 1,446
- ----------------------------------------------------------------------------
84,530 79,516
============================================================================
The amount of the guarantees corresponds to the amounts due on secured loans
still outstanding at year-end. For amounts in foreign currency the adjustment
to year end rates has been taken into consideration.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Other memorandum, commitments and contingency accounts
- ------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------
Leasing installments 101 95
Commitments 3,800 3,800
- ----------------------------------------------------------------------------
3,901 3,895
============================================================================
Commitments are with respect of the obligation of the Company to repurchase,
on July 30, 1998, 4,552 shares of Avirunion a.s. (representing 7% of the share
capital) at the agreed-upon base price of 3,800; the commitment is secured by
a bank guarantee.
14. Profit and loss account
1995 1994
- ----------------------------------------------------------------------------
Value of production 1,163,237 1,018,193
============================================================================
The following schedule shows the detail of revenues divided by category and
geographical area:
1995
Geographical Area
------------------------------- 1994
Italy Abroad Total Total
- ----------------------------------------------------------------------------
Revenues from sales:
- -- glass containers 671,097 264,910 936,007 827,037
- -- glass household products 14,516 27,395 41,911 32,926
- -- glass insulators 9,232 16,407 25,639 16,844
- -- molds 613 - 613 467
- -- raw materials and supplies 122,687 14,905 137,592 106,696
- ----------------------------------------------------------------------------
818,145 323,617 1,141,762 983,970
Services rendered 4,135 4,977 9,112 7,164
- ----------------------------------------------------------------------------
822,280 328,594 1,150,874 991,134
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Other revenues are made up as follows:
1995 1994
- ----------------------------------------------------------------------------
Revenues from properties 1,252 1,218
Gains on disposal of fixed assets 888 2,683
Indemnities received on damaged goods 209 189
Expenses recovered 4,705 1,172
Other 1,398 4,272*
- ----------------------------------------------------------------------------
8,452 9,534
Contributions on operating expenses 144 702
- ----------------------------------------------------------------------------
8,596 10,236
============================================================================
*The amount includes 3,536 of valuation adjustments to financial assets.
1995 1994
- ----------------------------------------------------------------------------
Cost of production 975,606 864,449
============================================================================
Costs for the purchase of raw materials, supplies and goods for resale are as
follows:
1995 1994
- ----------------------------------------------------------------------------
Raw materials 181,490 156,372
Suppliers 214,373 160,717
Goods for resale 1,781 6,434
- ----------------------------------------------------------------------------
397,644 323,523
============================================================================
Costs for services received are as follows:
1995 1994
- ----------------------------------------------------------------------------
Purchased services 32,666 33,778
Energy 136,059 119,445
Other manufacturing services 31,964 27,024
Commercial services 75,751 63,945
Administrative services 8,526 8,466
- ----------------------------------------------------------------------------
284,966 252,658
============================================================================
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
Rental and leasing charges comprise:
1995 1994
- ----------------------------------------------------------------------------
Rentals 3,037 2,979
Leasing installments 54 556
- ----------------------------------------------------------------------------
3,091 3,535
============================================================================
Personnel costs are as follows:
1995 1994
- ----------------------------------------------------------------------------
Salaries and benefits 192,844 190,009
============================================================================
The amount includes wages and salaries, the year's charge with respect to
employees termination indemnities, accrued holiday leave, social security
contributions arising from the application of labor contracts and current
legislation as well as other costs relating to canteen services and public
utility charges.
The average number of employees, divided by category, of the Company and the
consolidated companies is as follows:
1995 1994
- ----------------------------------------------------------------------------
Managers 48 49
White collar employees 757 774
Intermediates 277 281
Blue collar workers 2,883 2,966
- ----------------------------------------------------------------------------
3,965 4,070
of which on temporary lay-off schemes 63 109
============================================================================
Depreciation and write-downs are as follows:
1995 1994
- ----------------------------------------------------------------------------
Amortization of intangible assets 2,682 3,731
Depreciation of tangible assets 69,734 65,060
Other write-downs of intangible assets 132 -
Other write-downs of tangible assets - 700
Charge to the provision for doubtful accounts 3,249 5,477
- ----------------------------------------------------------------------------
75,797 74,968
============================================================================
The charge to the provision for doubtful accounts was calculated to adjust the
nominal value of receivables to their net realizable value.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------
Provision for risks 6,580 1,215
============================================================================
The charge relates mainly to the provision for exchange fluctuations (in both
years) and in 1995 it also includes reorganization costs.
1995 1994
- ----------------------------------------------------------------------------
Other provisions 677 303
============================================================================
The charge includes 630 for inventory obsolescence and 47 for agents'
termination indemnities.
Other operating costs are as follows:
1995 1994
- ----------------------------------------------------------------------------
Tax on net equity 2,383 2,342
Municipal tax on building premises 1,100 1,222
Indirect duties and taxes 2,253 1,858
Membership fees 1,432 1,243
Emoluments to Directors and Statutory Auditors 3,335 3,280
Losses on disposal of fixed assets 2,258 715
Other 7,357 6,983
- ----------------------------------------------------------------------------
20,118 17,643
============================================================================
15. Financial income and expense
Financial income and expense is composed of the following:
1995 1994
- ----------------------------------------------------------------------------
Income from investments 116 -
Other financial income 26,158 11,518
Interest and other financial expense (22,534) (21,659)
- ----------------------------------------------------------------------------
3,740 (10,141)
============================================================================
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
They are made up as follows:
1995 1994
- ----------------------------------------------------------------------------
Income from investments
-- dividends from other companies 115 -
(They relate to dividends received from Italian
public companies.)
============================================================================
Other financial income
-- interest on fixed-interest securities and
resale agreements (long-term) 116 65
-- interest on fixed-interest securities and
resale agreements (short-term) 11,986 2,426
-- interest on commercial paper transactions 870 -
-- interest grants 462 410
-- other interest income 7,351 4,793
-- exchange gains 5,373 3,824
- ----------------------------------------------------------------------------
26,158 11,518
============================================================================
1995 1994
- ----------------------------------------------------------------------------
Interest and other financial expense
-- interest on mortgage loans 6,690 6,111
-- interest on amount due to banks 527 5,616
-- other interest expense 4,298 2,017
-- discounts and other financial expense 6,394 4,254
-- exchange losses 4,625 3,661
- ----------------------------------------------------------------------------
22,534 21,659
============================================================================
No interest charges were capitalized during the year.
16. Adjustment to the value of financial assets
1995 1994
- ----------------------------------------------------------------------------
Revaluation of investments 8,645 3,551
Write-down of investments (961) (15)
- ----------------------------------------------------------------------------
7,684 3,536*
============================================================================
*In the 1994 financial statements, the amount was included in other income.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
The balance includes the Group's share of the year's results of companies
valued under the equity method; for 1995, it also includes a write-down of 941
on listed investments included in current assets on the basis of the average
prices for the month of December 1995.
17. Extraordinary income and expense
They are as follows:
1995 1994
- ----------------------------------------------------------------------------
Extraordinary income 14,962 7,644
Extraordinary expense (6,782) (9,120)
- ----------------------------------------------------------------------------
8,180 (1,476)
============================================================================
Extraordinary income for 1995 consists of:
1995
- ----------------------------------------------------------------------------
Gains on disposals of fixed assets 1,361
Utilization of charges recorded in prior years 1,130
1/10th of investment grants 639
Other extraordinary income and prior year income:
-- indemnities received from suppliers of
machinery 5,306
-- indemnities received for flood damages in
November 94 2,100
-- other 4,426 11,832
- ----------------------------------------------------------------------------
14,962
============================================================================
Extraordinary expense for 1995 is comprised of:
1995
- ----------------------------------------------------------------------------
Losses on disposals of fixed assets 1,647
Prior year income taxes 1,123
Incentives paid to leaving employees and related contributions 62
Other extraordinary expenses and prior year expenses 3,950
- ----------------------------------------------------------------------------
6,782
============================================================================
18. Income taxes
1995 1994
- ----------------------------------------------------------------------------
Current and deferred taxes 93,483 78,294
============================================================================
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
They relate to the income taxes of each consolidated company, mainly deferred
taxes related to the elimination of accelerated depreciation.
19. Emoluments to directors and statutory auditors
Emoluments due to Directors and Statutory Auditors of the Company in respect
of similar functions carried out in other consolidated companies are as
follows:
-- 1,901 for directors
-- 46 for statutory auditors
20. Differences between Italian GAAP and U.S. GAAP
The Group's accounting policies differ from accounting principles generally
accepted in the United States (hereafter "U.S. GAAP"). Differences which have
an effect on net profit and net equity are described below:
A. Revaluations of property -- Certain buildings were revalued to amounts in
excess of historical cost. These revaluations, which were either
authorized or required by Italian law, are permissible under Italian
accounting principles.
The total increase in tangible assets resulting from these revaluations
was credited to net equity. At December 31, 1995 net equities of the
consolidated companies included approximately 85,800 resulting from these
revaluations. Deferred tax liabilities on the taxable portion of such
revaluation reserve have not been provided. The amount of such
liabilities, not required to be accounted for according to SFAS 109 as
they relate to years prior to 1992, is approximately 43,000. Assets
revalued under Italian accounting principles are depreciated over their
remaining useful lives based on their revalued basis. U.S. GAAP does not
permit the revaluation of such assets. Accordingly, the increase in net
equity and the related increase in depreciation expense occurring as a
result of such revaluations have been reversed for U.S. GAAP purposes.
B. Depreciation on land -- Included in this adjustment is the reversal of
depreciation on land which is not permitted under U.S. GAAP.
C. Accounting for intangible assets and deferred charges -- The Group has
capitalized and deferred various costs which should be expensed under U.S.
GAAP. At December 31, 1995 these costs include research and development,
advertising expenses and certain other deferred charges.
D. Accounting for balances in foreign currencies -- The Group has certain
receivables and payables denominated in foreign currencies which are
recorded in the financial statements at the exchange rate prevailing at
the date of the transaction. Under U.S. GAAP, these balances are adjusted
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
at each balance sheet date using rates prevailing on the respective date
and both unrealized gains and losses are recognized. At each of the
balance sheet dates, the Group has recorded an adjustment only if an
unrealized loss resulted. Accordingly, the accompanying reconciliation
includes adjustments to recognise the unrealized gains.
E. Accounting for Government Grants -- The Group has received a number of
government grants for primarily investments in tangible assets. The Group
has accounted for these grants as either a direct credit to net equity or
as deferred revenue recognised over five to ten years based on the
prevailing Italian regulations and accounting principles at the time of
the grant. Under U.S. GAAP, all such grants would be deferred and
recognized through income over the estimated useful life of the related
assets.
F. Investments in Equity Securities -- During 1995, the Group invested in the
equity securities of several Italian publicly traded companies. At
December 31, 1995, the Group has adjusted the carrying value of these
investments to the current market value with the resulting charge or
credit being recorded in the income statement. Under SFAS 115, these
investments would be considered available-for-sale securities and the
unrealized gains and losses would be recorded as a separate component of
net equity, net of the related deferred taxes.
G. Accounting for income taxes -- The Group has recorded deferred taxes
following the accounting principles in those countries in which it
operates. The deferred taxes recorded substantially all relate to
differences in the basis of tangible assets for income tax and financial
reporting purposes. The accompanying reconciliations include the effect
of establishing deferred tax assets and liabilities in accordance with
SFAS 109 and the related change in the provision for income taxes. These
changes relate primarily to: (1) establishing deferred tax assets for
provisions for inventory, accounts receivable and plant shutdowns which
are not yet deductible for tax purposes; (2) establishing deferred tax
liabilities for government grants received after 1992 and undistributed
earnings of domestic subsidiaries after 1992 which are not taxable until
distributed; and (3) establishing deferred tax assets and liabilities on
the U.S. GAAP adjustments.
H. Cash Flow Statement -- The cash flow statement presented by the Group
differs from that of a statement of cash flows under U.S. GAAP primarily
in the definition of cash, classification of cash flows and gross versus
net reporting. Italian GAAP considers current financial debtors and
current financial creditors as a component of cash, while U.S. GAAP
classifies these items as operating activities. In addition, Italian GAAP
presents dividends paid and other movements as a separate cash flows,
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
while U.S. GAAP provides for dividends paid to be presented as financing
activities and other movements as either operating, investing or
financing, depending on the type of cash flow.
The following table reconciles net equity of December 31, 1995 between Italian
GAAP and U.S. GAAP:
Net equity as reported in the Italian consolidated financial
statements 472,952
A. Elimination of revaluation of property, net of related
accumulated depreciation (31,441)
B. Reversal of accumulated depreciation on land 2,846
C. Write-off of certain intangible assets and deferred charges,
net of accumulated amortisation (341)
D. Unrealized foreign exchange gains 1,737
E. Deferral of the recognition of government grants
(unamortized portion) (6,554)
F. Recognition of deferred taxes under FAS 109
-- net deferred income taxes on provisions (for inventory,
accounts receivable, plant shutdowns, etc.) which
are not yet deductible for tax purposes 7,258
-- deferred tax liabilities on the undistributed earnings of
domestic subsidiaries and Government grants received
after 1992 (4,791)
-- net deferred income taxes on U.S. GAAP adjustments 17,957
-------
Net equity in accordance with U.S. GAAP 459,623
=======
The following table reconciles net profit for the year ended December 31, 1995
between Italian GAAP and U.S. GAAP.
Net income as reported in the Italian consolidated
financial statements 102,153
A. Reversal of depreciation related to revaluation of property 2,302
B. Reversal of depreciation of land 566
C. Write-off of certain intangible assets and deferred charges,
net of amortisation expense 180
D. Unrealized foreign exchange gains 363
E. Recognition of government grants 3,023
F. Reversal of amounts recognised for the change in fair market
value of investments in equity securities 941
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
G. Recognition of deferred taxes under FAS 109:
-- net deferred income taxes on provision (for inventory,
accounts receivable, plant shutdowns, etc.) which are not
yet deductible for tax purposes 342
-- deferred tax liabilities on undistributed earnings of
domestic subsidiaries and government grants received
after 1992 (118)
-- net deferred income taxes on U.S. GAAP adjustments (3,923)
-------
Net profit in accordance with U.S. GAAP 105,829
=======
21. Subsequent events
At the beginning of April 1996, the Board of Directors approved the merger in
the Company of the controlled entities Adige Vetro S.r.l., Avir Commerciale
S.r.l., Aziende Ventrarie Italiane Ricciardi - A.V.I.R. S.p.A., Beninvest
S.r.l., Borma S.p.A., Compagnia Gestione Vetrerie - Co. Ge. Ve. S.p.A., I.A.G.
- - Holding S.r.l., Immobiliare Agricola Industriale S.r.l., Sicra S.r.l.,
Vetroceramica Turritana S.p.A., Vetropiave S.p.A., Vetrosilex S.p.A., and
Vetro Umbria S.r.l. A similar decision was reached by the Administrative
Bodies of the incorporated companies. This operation aims at simplifying the
Group company structure. The merger, that will take effect, for fiscal
purposes, from January 1, 1996, will result in an increase in capital to the
Company, as, to date, all the companies to be incorporated are 100% owned
either directly or indirectly.
At the end of April 1996, the controlled entity Borma S.p.A. disposed of land
and factories of the ex industrial establishment of Livorno, realizing a
capital gain of approximately 8,000.
In April 1996, the "Autorita Garante della Concorrensa e del Mercato" (Anti-
trust Commission) began an investigation on the principal producers of glass,
to establish whether an agreement had been reached to uniform prices to
customers prohibited by Art. 2 of Law 287/90, at the time of renewing supply
contracts during 1996, for the supply and repurchase of packaging (pallets and
buffers). In relation to the above, Avir Commerciale S.r.l. that operates as
a sales agent for the glass industry companies of the Group, was advised of
the opening of an investigation under Art. 14 of the cited Law 287/90. Based
on information that became available during 1996, and in light of the wider
inquiries which ensued, the Company as of March 3, 1997 understands that a
range of exposure of between 1% and 10% of one year's sales revenues could be
assessed under pertinent law. Based on the fact that such assessments have
been rare and that none have exceeded 4,200, the Company has decided to
provide 6,500 (1% of 1996 revenues) for this exposure as of December 31, 1996.
While management believes that no assessment is appropriate, the ultimate
resolution of this matter is not expected to exceed the amount provided.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
22. Expected management results
During the first few months of 1996, the Italian industrial companies of the
Group have recorded a drop in sales of containers compared to the same period
in 1995. In relation to the internal market, this is due to a decrease in
consumption and also the fact that large stocks have been accumulated by
clients due to previous promotions. The reduction may be due to the
appreciation in the lira with respect to prior year. Considering the
uncertain situation ahead, it is not possible to formulate a reliable forecast
that sales will reach the level of the prior year. Also the reduction could
be partly due to increases in sales prices. As a result of the planned
merger, the income components of the entities will flow into the economic
management of the Company and given the dividends earned in the first semester
of 1996, it is expected that the year will close with a positive result.
39
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS Avir Finanziaria S.p.A.
(unaudited)
Millions of Lira June 30, December 31, June 30,
1996 1995 1995
- ----------------------------------------------------------------------------
Assets
Fixed Assets
Intangible assets 4,123 4,969 6,378
Tangible assets 373,838 364,526 358,069
Financial assets 35,871 35,723 30,115
- ----------------------------------------------------------------------------
Total fixed assets 412,832 405,218 394,562
Current assets
Inventories 172,735 135,963 138,145
Receivables:
from customers 286,674 259,566 306,735
from third parties 52,122 60,395 47,358
- ----------------------------------------------------------------------------
Total receivables 338,796 319,961 354,093
Loans receivable and other
investments 68,278 184,800 121,268
Cash on hand and at bank 102,753 84,511 71,500
- ----------------------------------------------------------------------------
Total current assets 682,562 725,235 685,006
- ----------------------------------------------------------------------------
Total assets 1,095,394 1,130,453 1,079,568
============================================================================
Liabilities and Net Equity
Net equity
Net equity attributable to the
Group 502,378 472,952 421,637
Net equity attributable to
minorities 80,594 84,053 82,025
- ----------------------------------------------------------------------------
Total Consolidated Net Equity 582,972 557,005 503,662
Risk and other provisions 64,270 54,313 59,409
Employees' termination indemnity 58,617 57,385 54,210
Payables
Bank overdrafts 92,047 109,374 126,865
Due to other financial institutions 36,622 31,397 27,608
Trade payables 184,493 183,569 190,136
Other liabilities 76,373 137,410 117,678
- ----------------------------------------------------------------------------
Total current liabilities 512,422 573,448 575,906
- ----------------------------------------------------------------------------
Total net equity and liabilities 1,095,394 1,130,453 1,079,568
============================================================================
1
<PAGE>
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNTS Avir Finanziaria S.p.A.
(unaudited)
Millions of Lire
Six months ended June 30, 1996 1995
- -----------------------------------------------------------------------------
Value of production
Revenues from sales 531,464 577,064
Variation in inventories of work-in-
progress, semi-finished and finished
products 27,492 (3,926)
Capitalized labor 5,323 3,735
Contribution on operating expenses
revenues 69 9
- -----------------------------------------------------------------------------
Total 564,348 576,882
Cost of production
Raw materials, supplies and services (328,918) (333,779)
Personnel (98,622) (96,162)
Depreciation and amortization (36,979) (35,675)
Other write-downs and provisions (6,904) (6,573)
Other - net (5,447) (6,577)
- -----------------------------------------------------------------------------
Total (476,870) (478,766)
- -----------------------------------------------------------------------------
Difference between value and cost of production 87,478 98,116
Financial income and expense - net 3,653 696
Adjustment to the value of financial assets 3,479 2,936
Extraordinary income and expense - net 10,953 2,633
- -----------------------------------------------------------------------------
Profit before income taxes 105,563 104,381
Income taxes (48,665) (50,218)
- -----------------------------------------------------------------------------
Net profit for the year 56,898 54,163
of which:
-- attributable to the Group 49,342 47,227
-- attributable to minorities 7,556 6,936
2
<PAGE>
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS Avir Finanziaria S.p.A.
(unaudited)
Millions of Lire
Six Months ended June 30, 1996 1995
- ---------------------------------------------------------------------------
Net Cash - beginning 241,467 137,537
Cash flows from operating activities
Net income - Group 49,342 47,227
Net income - External 7,556 6,936
Depreciation 36,979 35,675
Reversal of Group shares of the net result of
companies valued at net equity (3,788) (3,184)
(Gain)/Loss from disposal of assets (9,888) 93
(Revaluation)/Devaluation of assets (400) -
Movement in working capital (115,720) (10,076)
Net movement in severance indemnity 1,232 (441)
Net movement in allowance for risks and charges 9,957 4,465
- ---------------------------------------------------------------------------
(24,730) 80,695
Cash flows from investing activities
Investments in assets:
-- intangible (467) (329)
-- fixed (58,745) (58,663)
-- financial - (8,637)
Sales proceeds on disposal of fixed assets 16,717 9,666
- ---------------------------------------------------------------------------
(42,495) (57,963)
Cash flows from financing activities
-- Additional borrowings 12,450 30,610
-- Capital contributions 1,553 -
-- Loan repayments (9,209) (16,957)
- ---------------------------------------------------------------------------
4,794 13,653
Dividends paid (17,673) (13,255)
Other movements that do not form part of cash flows
from financing activities
Movements in reserves (5,419) 9,500
Movements in shares of net equity of third parties (6,071) (3,106)
Conversion differences 8,657 (9,218)
- ---------------------------------------------------------------------------
(2,833) (2,824)
- ---------------------------------------------------------------------------
Cash flows for the period (82,937) 20,306
- ---------------------------------------------------------------------------
Net Cash - final 158,530 157,843
===========================================================================
3
<PAGE>
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS Avir Finanziaria S.p.A.
(unaudited)
Millions of Lire
Six Months ended June 30, 1996 1995
- ---------------------------------------------------------------------------
Net cash, at end of period, is as follows:
- -- Bank deposits and liquid funds 102,753 71,500
- -- Current financial debtors 68,278 121,268
- -- Current financial creditors (12,501) (34,925)
- ---------------------------------------------------------------------------
158,530 157,843
===========================================================================
4
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
June 30, 1996 and 1995
- ------------------------------------------------------------------------------
Note 1 - Basis of Presentation
The Condensed Consolidated Financial Statements presented herein are unaudited
but, in the opinion of management, reflect all adjustments necessary to
present fairly such information for the periods and at the dates indicated.
The following condensed unaudited financial statements do not contain all
information and footnotes normally contained in annual consolidated financial
statements; accordingly, they should be read in conjunction with the
Consolidated Financial Statements and notes thereto included elsewhere herein.
Note 2 -- Differences between Italian GAAP and U.S. GAAP
The Group's accounting policies differ from accounting principles generally
accepted in the United States (hereafter "U.S. GAAP"). Differences which have
an effect on net profit and net equity are described below:
A. Revaluations of property -- Certain buildings were revalued to amounts in
excess of historical cost. These revaluations, which were either
authorized or required by Italian law, are permissible under Italian
accounting principles.
The total increase in tangible assets resulting from these revaluations
was credited to net equity. At June 30, 1996 net equities of the
consolidated companies included approximately 85,800 resulting from these
revaluations. Deferred tax liabilities on the taxable portion of such
revaluation reserve have not been provided. The amount of such
liabilities, not required to be accounted for according to SFAS 109 as
they relate to years prior to 1992, is approximately 43,000. Assets
revalued under Italian accounting principles are depreciated over their
remaining useful lives based on their revalued basis. U.S. GAAP does not
permit the revaluation of such assets. Accordingly, the increase in net
equity and the related increase in depreciation expense occurring as a
result of such revaluations have been reversed for U.S. GAAP purposes.
B. Depreciation on land -- Included in this adjustment is the reversal of
depreciation on land which is not permitted under U.S. GAAP.
C. Accounting for intangible assets and deferred charges -- The Group has
capitalized and deferred various costs which should be expensed under U.S.
GAAP. At June 30, 1996 these costs include research and development,
advertising expenses and certain other deferred charges.
D. Accounting for balances in foreign currencies -- The Group has certain
receivables and payables denominated in foreign currencies which are
recorded in the financial statements at the exchange rate prevailing at
the date of the transaction. Under U.S. GAAP, these balances are adjusted
at each balance sheet date using rates prevailing on the respective date
and both unrealized gains and losses are recognized. At each of the
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
June 30, 1996 and 1995
- -----------------------------------------------------------------------------
balance sheet dates, the Group has recorded an adjustment only if an
unrealized loss resulted. Accordingly, the accompanying reconciliation
includes adjustments to recognise the unrealized gains.
E. Accounting for Government Grants -- The Group has received a number of
government grants for primarily investments in tangible assets. The Group
has accounted for these grants as either a direct credit to net equity or
as deferred revenue recognised over five to ten years based on the
prevailing Italian regulations and accounting principles at the time of
the grant. Under U.S. GAAP, all such grants would be deferred and
recognized through income over the estimated useful life of the related
assets.
F. Investments in Equity Securities -- During 1995, the Group invested in the
equity securities of several Italian publicly traded companies. At June
30, 1996, the Group has adjusted the carrying value of these investments
to the current market value with the resulting charge or credit being
recorded in the income statement. Under SFAS 115, these investments would
be considered available-for-sale securities and the unrealized gains and
losses would be recorded as a separate component of net equity, net of the
related deferred taxes.
G. Accounting for income taxes -- The Group has recorded deferred taxes
following the accounting principles in those countries in which it
operates. The deferred taxes recorded substantially all relate to
differences in the basis of tangible assets for income tax and financial
reporting purposes. The accompanying reconciliations include the effect
of establishing deferred tax assets and liabilities in accordance with
SFAS 109 and the related change in the provision for income taxes. These
changes relate primarily to: (1) establishing deferred tax assets for
provisions for inventory, accounts receivable and plant shutdowns which
are not yet deductible for tax purposes; (2) establishing deferred tax
liabilities for government grants received after 1992 and undistributed
earnings of domestic subsidiaries after 1992 which are not taxable until
distributed; and (3) establishing deferred tax assets and liabilities on
the U.S. GAAP adjustments.
H. Cash Flow Statement -- The cash flow statement presented by the Group
differs from that of a statement of cash flows under U.S. GAAP primarily
in the definition of cash, classification of cash flows and gross versus
net reporting. Italian GAAP considers current financial debtors and
current financial creditors as a component of cash, while U.S. GAAP
classifies these items as operating activities. In addition, Italian GAAP
presents dividends paid and other movements as a separate cash flows,
while U.S. GAAP provides for dividends paid to be presented as financing
activities and other movements as either operating, investing or
financing, depending on the type of cash flow.
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
June 30, 1996 and 1995
- -----------------------------------------------------------------------------
The following table reconciles net equity of June 30, 1996 between Italian
GAAP and U.S. GAAP:
Net equity as reported in the Italian consolidated financial
statements 502,378
A. Elimination of revaluation of property, net of related
accumulated depreciation (29,984)
B. Reversal of accumulated depreciation on land 2,960
C. Write-off of certain intangible assets and deferred charges,
net of accumulated amortisation (251)
D. Unrealized foreign exchange gains 2,730
E. Deferral of the recognition of government grants
(unamortized portion) (3,971)
F. Recognition of deferred taxes under FAS 109
-- net deferred income taxes on provisions (for inventory,
accounts receivable, plant shutdowns, etc.) which
are not yet deductible for tax purposes 7,216
-- deferred tax liabilities on the undistributed earnings of
domestic subsidiaries and Government grants received
after 1992 (5,516)
-- net deferred income taxes on U.S. GAAP adjustments 15,171
-------
Net equity in accordance with U.S. GAAP 490,733
=======
The following table reconciles net profit for the six months ended June 30,
1996 between Italian GAAP and U.S. GAAP.
Net income as reported in the Italian consolidated
financial statements 49,342
A. Reversal of depreciation related to revaluation of property 1,457
B. Reversal of depreciation of land 114
C. Write-off of certain intangible assets and deferred charges,
net of amortisation expense 90
D. Unrealized foreign exchange gains 993
E. Recognition of government grants 2,583
F. Reversal of amounts recognised for the change in fair market
value of investments in equity securities (94)
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Avir Finanziaria S.p.A.
Millions of Lire, except as otherwise indicated
June 30, 1996 and 1995
- -----------------------------------------------------------------------------
G. Recognition of deferred taxes under FAS 109:
-- net deferred income taxes on provision (for inventory,
accounts receivable, plant shutdowns, etc.) which are not
yet deductible for tax purposes (42)
-- deferred tax liabilities on undistributed earnings of
domestic subsidiaries and government grants received
after 1992 (726)
-- net deferred income taxes on U.S. GAAP adjustments (2,736)
------
Net profit in accordance with U.S. GAAP 50,981
======
8
<PAGE>
Item 7(b) PRO FORMA FINANCIAL STATEMENTS
The following pro forma condensed consolidated balance sheet and pro forma
condensed consolidated statements of operations depict the effects of the
acquisition of 100% of Avir Finanziaria S.p.A. ("AVIR") and the related
financing. For purposes of the pro forma condensed consolidated balance
sheet, the transaction is assumed to have occurred on June 30, 1996, whereas
for purposes of the pro forma condensed statements of operations, the transac-
tion is assumed to have occurred on January 1, 1995.
The pro forma financial statements do not purport to represent what Owens-
Illinois, Inc.'s ("Company") financial position or results of operations would
actually have been if all of the above transactions had actually occurred on
the dates indicated, or to project the Company's financial position or results
of operations for any future period or date.
Acquisition of AVIR
- -------------------
On December 16, 1996, the Company announced that it completed a definitive
agreement to purchase a controlling interest of approximately 76% in AVIR, the
largest manufacturer of glass containers in Italy. AVIR is based in Milan,
Italy and its shares are traded on the Milan Stock Exchange. Approximately
21% of the shares are publicly held, with the remaining shares controlled by
Dr. Natale Maderna, AVIR chairman, and members of the Maderna and Ricciardi
families. On February 3, 1997, the Company completed the acquisition of a 79%
controlling interest. In addition to acquiring this controlling interest, the
Company will also initiate a tender offer for the 21% of the shares of AVIR
that are publicly held. Total consideration for 100% of the AVIR shares is
expected to be approximately $580 million.
The acquisition is being accounted for under the purchase method of account-
ing. The total purchase cost of approximately $580 million will be allocated
to the tangible and identifiable intangible assets and liabilities of AVIR
based upon their respective fair values. Such allocations will be based upon
valuation and studies that have not been finalized. Accordingly, the alloca-
tion of the purchase cost included in the accompanying pro forma condensed
consolidated balance sheet is preliminary and, among other things, no alloca-
tion has been made to property, plant, and equipment. The unallocated excess
of purchase cost over net assets acquired is being amortized over 20 years in
the pro forma condensed consolidated statements of operations. Such period is
an estimate of the average life of the tangible and intangible assets to which
the excess purchase cost will be assigned.
1
<PAGE>
Owens-Illinois, Inc.
Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 1996
(Millions of Dollars)
AVIR
Consolidation Purchase
of AVIR Accounting Adjusted
Historical and Financing Company
Historical Amounts (1) Adjustments (2) Pro Forma
---------- ------------- --------------- ---------
Assets
Current assets:
Cash and short
term investments $ 120.4 $111.4 $ 231.8
Receivables, net 469.1 180.8 649.9
Inventories 489.3 112.6 $ 15.6 617.5
Prepaid expenses 87.0 16.3 103.3
-------- ------ ------- --------
Total current
assets 1,165.8 421.1 15.6 1,602.5
Investments and other
assets 798.3 48.1 846.4
Prepaid pension 638.8 638.8
Excess of purchase cost
over net assets
acquired 1,003.3 1.0 247.9 1,252.2
Property, plant, and
equipment, net 1,868.3 225.2 2,093.5
-------- ------ ------- --------
Total assets $5,474.5 $695.4 $ 263.5 $6,433.4
======== ====== ======= ========
Liabilities and
Share owners' Equity
Current liabilities:
Short-term loans and
long-term debt due
within one year $ 103.4 $ 21.8 $ 125.2
Accounts payable
and other
liabilities 746.3 179.9 926.2
-------- ------ --------
Total current
liabilities 849.7 201.7 1,051.4
Long-term debt 2,792.4 62.1 $ 576.4 3,430.9
Deferred taxes and
other liabilities 1,017.3 61.0 7.0 1,085.3
Minority share owners'
interests 183.4 50.7 234.1
Share owners' equity 631.7 319.9 (319.9) 631.7
-------- ------ ------- --------
Total liabilities
and share owners'
equity $5,474.5 $695.4 $ 263.5 $6,433.4
======== ====== ======= ========
See accompanying Notes to Pro Forma Condensed Consolidated Balance Sheet.
2
<PAGE>
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
(1) AVIR Historical Amounts -- Represents the historical carrying value of
AVIR's assets and liabilities prior to purchase accounting adjustments.
The translation into U. S. dollars has been made using the June 30, 1996
rate of 1,534.25 Italian Lire per U. S. dollar.
(2) Acquisition and Financing Adjustments -- Includes adjustments of the
carrying values of AVIR's assets and liabilities to eliminate historical
share owners' equity and revalue inventories accounted for on the LIFO
method. Additionally, the column reflects the incremental debt assumed
incurred to finance the acquisition.
3
<PAGE>
Owens-Illinois, Inc.
Pro Forma Condensed Consolidated Statement of Operations
Six Months Ended June 30, 1996
(Millions of Dollars, except per share amounts)
AVIR
AVIR Purchase
Historical Accounting Adjusted
Results of and Financing Company
Historical Operations (1) Adjustments (2) Pro Forma
---------- -------------- --------------- ---------
Revenues:
Net Sales $1,869.5 $299.4 $2,168.9
Other 63.0 25.4 88.4
-------- ------ --------
1,932.5 324.8 2,257.3
Costs and expenses:
Manufacturing,
shipping, and
delivery 1,446.4 196.6 1,643.0
Research, engineering,
selling, and
administrative 120.3 49.4 169.7
Interest 148.3 5.7 $ 18.2 172.2
Other 30.2 1.8 6.2 38.2
-------- ------ ------ --------
1,745.2 253.5 24.4 2,023.1
-------- ------ ------ --------
Earnings (loss) before
income taxes and
minority share owners'
interests 187.3 71.3 (24.4) 234.2
Provision (credit) for
income taxes 65.2 33.6 (7.0) 91.8
Minority share owners'
interests 15.9 5.0 20.9
-------- ------ ------ --------
Net earnings (loss) $ 106.2 $ 32.7 $(17.4) $ 121.5
======== ====== ====== ========
Net earnings per share
of common stock $ 0.88 $ 1.01
======== ========
Average shares
outstanding
(thousands) 120,172 120,172
======= =======
See accompanying Notes to Pro Forma
Condensed Consolidated Statement of Operations.
4
<PAGE>
Owens-Illinois, Inc.
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 1995
(Millions of Dollars, except per share amounts)
AVIR
AVIR Purchase
Historical Accounting Adjusted
Results of and Financing Company
Historical Operations (1) Adjustments (2) Pro Forma
---------- -------------- --------------- ---------
Revenues:
Net Sales $3,763.2 $622.6 $4,385.8
Other 117.8 36.2 154.0
-------- ------ --------
3,881.0 658.8 4,539.8
Costs and expenses:
Manufacturing,
shipping, and
delivery 2,948.5 411.1 3,359.6
Research, engineering,
selling, and
administrative 242.6 96.7 339.3
Interest 299.6 13.8 $ 39.3 352.7
Other 80.3 4.9 12.4 97.6
-------- ------ ------ --------
3,571.0 526.5 51.7 4,149.2
-------- ------ ------ --------
Earnings (loss) before
income taxes and
minority share owners'
interests 310.0 132.3 (51.7) 390.6
Provision (credit) for
income taxes 100.8 60.1 (15.1) 145.8
Minority share owners'
interests 40.1 7.2 47.3
-------- ------ ------ --------
Net earnings (loss) $ 169.1 $ 65.0 $(36.6) $ 197.5
======== ====== ====== ========
Net earnings per share
of common stock $ 1.40 $ 1.64
======== ========
Average shares
outstanding
(thousands) 119,348 119,348
======= =======
See accompanying Notes to Pro Forma
Condensed Consolidated Statement of Operations.
5
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(1) Consolidation of AVIR Historical Results -- Reflects the actual results
of operations for AVIR based on historical costs for the six months
ended June 30, 1996, and year ended December 31, 1995 prior to purchase
accounting adjustments and the effects of the related financing. The
translation into U. S. dollars has been made using the average rate for
the six months ended June 30, 1996 and the year ended December 31, 1995
of 1,557.51 and 1,627.41 Italian Lire, respectively, per U. S. dollar.
Financing for the acquisition has been assumed to be provided by
additional borrowings under the Company's Bank Credit Agreement which
was amended in November 1996. Interest is based on average rates in
effect under the Company's Bank Credit Agreement during the periods. In
the event any portion of the acquisition is financed or refinanced with
borrowings from sources other than under the Company's Bank Credit
Agreement, the incremental interest cost may be higher than that shown
in the pro forma condensed consolidated statements of operations.
(2) AVIR Purchase Accounting and Financing Adjustments -- Includes the
following increases (decreases) in earnings:
Six Months Year
ended ended
June 30, December 31,
1996 1995
---------- ------------
(Millions of Dollars)
Incremental interest cost assuming the
financing related to the acquisition
occurred on January 1, 1995 $(18.2) $(39.3)
Amortization of the unallocated excess
of purchase cost over net assets
acquired over 20 years (6.2) (12.4)
------ ------
(24.4) (51.7)
Tax benefits related to the incremental
interest cost, at incremental U. S.
statutory rates 7.0 15.1
------ ------
$(17.4) $(36.6)
====== ======
6
<PAGE>
<PAGE>
ACQUISITION AGREEMENT
BY AND AMONG
OI ITALIA S.R.L.
AND
THE SELLERS SET FORTH ON SCHEDULE 1
DATED DECEMBER 16, 1996
1
<PAGE>
TABLE OF CONTENTS
ARTICLE I
INTERPRETATION. . . . . . . . . . . . 3
1.1 Definitions . . . . . . . . . . . . . . . . . 3
1.2 References. . . . . . . . . . . . . . . . . . 3
ARTICLE II
PURCHASE AND SALE. . . . . . . . . . . 3
2.1 Actions to Occur at Signing . . . . . . . . . 3
2.2 Date and Place of the Closing . . . . . . . . 4
2.3 Conditions to Closing . . . . . . . . . . . . 4
2.4 Actions at the Closing. . . . . . . . . . . . 5
2.5 Consideration . . . . . . . . . . . . . . . . 5
2.6 Contingent Consideration. . . . . . . . . . . 6
2.7 Method of Payment . . . . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS. . . . . . . . . . . . 6
3.1 Escrow Agreement. . . . . . . . . . . . . . . 6
3.2 Consent and Approvals; No Violations. . . . . 6
3.3 Litigation Related to Transactions. . . . . . 7
3.4 Title to Holdings Shares, Company Shares
and Shares/Quotas of the Group Companies. . . 7
3.5 Public Shares . . . . . . . . . . . . . . . . 7
3.6 Corporate Organization; Capitalization. . . . 7
3.7 Merger of Company Subsidiaries;
Expiration of Withdrawal Rights . . . . . . . 8
3.8 Holdings Financial Matters. . . . . . . . . . 8
3.9 Company Financial Statements; Other
Financial Matters . . . . . . . . . . . . . . 8
3.10 Title and Related Matters; Leases;
Encumbrances . . . . . . . . . . . . . . . 10
3.11 Intellectual Property. . . . . . . . . . . 10
3.12 Contracts and Agreements . . . . . . . . . 11
3.13 Customers and Suppliers. . . . . . . . . . 13
3.14 Absence of Certain Changes . . . . . . . . 13
3.15 Insurance. . . . . . . . . . . . . . . . . 14
3.16 Taxes. . . . . . . . . . . . . . . . . . . 15
3.17 Employee Matters; Employee Benefit Plans . 15
3.18 Litigation . . . . . . . . . . . . . . . . 16
3.19 Compliance with Law; Environmental
Matters. . . . . . . . . . . . . . . . . . 16
3.20 Absence of Questionable Payments . . . . . 17
3.21 Products Liability; Product Recall . . . . 17
i
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER . . . . . . . . . . 17
4.1 Corporate Organization; Etc.. . . . . . . . 18
4.2 Consent and Approvals; No Violations. . . . 18
4.3 Escrow Agreement. . . . . . . . . . . . . . 18
ARTICLE V
COVENANTS OF THE PARTIES. . . . . . . 18
5.1 Full Access . . . . . . . . . . . . . . . . 18
5.2 No other Acquisitions in the European Union 19
5.3 Best Efforts. . . . . . . . . . . . . . . . 19
5.4 Board of Directors Membership; Shareholders and
Board of Directors Meetings . . . . . . . . 19
5.5 Public Shares . . . . . . . . . . . . . . . 19
5.6 Press Release . . . . . . . . . . . . . . . 19
5.7 Customers and Suppliers . . . . . . . . . . 20
5.8 Non-Compete; No Solicitation. . . . . . . . 20
5.9 Action by Sellers . . . . . . . . . . . . . 20
5.10 Shareholders Contribution . . . . . . . . . 20
5.11 Collection of Government Payments . . . . . 20
ARTICLE VI
CONDUCT OF THE BUSINESS . . . . . . . . 21
6.1 Ordinary Course of Business . . . . . . . . 21
6.2 Amendments. . . . . . . . . . . . . . . . . 21
6.3 Capital Changes; Asset Sales; Redemptions . 21
6.4 Certain Investments . . . . . . . . . . . . 21
6.5 Organization. . . . . . . . . . . . . . . . 21
6.6 Certain Changes . . . . . . . . . . . . . . 21
6.7 Contracts . . . . . . . . . . . . . . . . . 22
6.8 No Default. . . . . . . . . . . . . . . . . 23
ARTICLE VII
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES;INDEMNIFICATION. . . . . . . 23
7.1 Investigations; Survival; Exclusive Remedy. 23
7.2 Indemnity by the Sellers; Right of Set-Off. 23
7.3 Indemnity by the Purchaser. . . . . . . . . 24
7.4 Limitation. . . . . . . . . . . . . . . . . 24
7.5 Notice of Claims; Payment.. . . . . . . . . 26
7.6 Defense by Indemnifying Party . . . . . . . 27
ARTICLE VIII
TERMINATION . . . . . . . . . . . 28
ii
<PAGE>
ARTICLE IX
MISCELLANEOUS PROVISIONS . . . . . . . . 29
9.1 Entire Agreement; Amendments and Waivers. . 29
9.2 Waiver of Compliance. . . . . . . . . . . . 29
9.3 Expenses. . . . . . . . . . . . . . . . . . 29
9.4 Transfer Taxes. . . . . . . . . . . . . . . 29
9.5 Tax Amnesty . . . . . . . . . . . . . . . . 29
9.6 Notices . . . . . . . . . . . . . . . . . . 29
9.7 Assignment. . . . . . . . . . . . . . . . . 30
9.8 Publicity . . . . . . . . . . . . . . . . . 30
9.9 Brokers and Finders . . . . . . . . . . . . 30
9.10 Dispute Resolution . . . . . . . . . . . . 30
9.11 Counterparts; Language Conflicts . . . . . 31
9.12 Third Parties. . . . . . . . . . . . . . . 31
9.13 Governing Law. . . . . . . . . . . . . . . 31
SCHEDULES
Schedule 1 - Sellers and the Purchaser
1(a) Holdings' Shareholders
1(b) Direct Shareholders
Schedule 2 - Definitions
Schedule 3 - Disclosure Schedule
Schedule 4 - Additional Payments
4(a) Calculation of Contingent Consideration
4(b) Best Case Projections
Schedule 5 - Holdings Financial Statements
Schedule 6 - Unaudited Consolidated October 31, 1996 Financial Statements
Schedule 7 - Non-Compete and No Solicitation Provisions
Schedule 7.4(a)(v) - Cash Payments from Government Authorities
Schedule 8 - Percentages Applicable to Sellers
Schedule 9 - Notices
iii
<PAGE>
EXHIBITS
Custody Documents
Exhibit A - Forms of Powers of Attorney
Exhibit B - Form of Escrow Agreement
Additional Documents
Exhibit C - Persons who will enter into Management and Non-Competition
Agreements
Exhibit D - Opinions of Sellers' Counsel
Exhibit E - Opinion of Purchaser's Italian Counsel
iv
<PAGE>
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT dated December 16, 1996, by and among OI
Italia S.r.l. (formerly, KE.RO. S.r.l. et Co. Import-Export) (the "Purchas-
er"), a company organized and existing under the laws of Italy and an indirect
subsidiary of Owens-Illinois, Inc., represented herein by R. Scott Trumbull,
pursuant to the power of attorney attached hereto as Exhibit A(i), and the
members of the Maderna and Ricciardi families identified on Schedule 1 hereto
(collectively, the "Sellers"), represented herein by Carlo Pontecorvo pursuant
to the power of attorney attached hereto as Exhibit A(ii).
WHEREAS, certain of the Sellers identified on Schedule 1(a) hereto
(the "Holdings' Shareholders") own 100,300,000 shares (the "Holdings Shares")
representing all of the issued and outstanding capital of Orion, S.p.A. (for-
merly known as Natale Maderna & C. S.a.p.A.), a company organized and
existing under the laws of the Republic of Italy ("Holdings");
WHEREAS, certain of the Sellers identified on Schedule 1(b) hereto
(the "Direct Shareholders") own 9,779,410 of the Company Shares (the "Direct
Shares") which constitute 23.290% of the Company Shares in Aziende Vetrarie
Industriali Ricciardi - AVIR S.p.A. (formerly known as AVIR Finanziaria
S.p.A.), a company organized and existing under the laws of the Republic of
Italy (the "Company" or "AVIR"), a company principally engaged, directly or
through the Group Companies, in the manufacture and sale of glass products in
Italy, Spain and the Czech Republic;
WHEREAS, certain individuals identified on Schedule 1(b) hereto
(the "Minors") own 1,240,000 of the Company Shares which constitute 2.953% of
the Company Shares;
WHEREAS, Holdings owns 22,100,000 of the Company Shares which
constitute 52.633% of the Company Shares;
WHEREAS, the remaining 8,869,830 of the Company Shares which
constitute 21.124% of the Company Shares is owned by the Public Shareholders;
WHEREAS, by virtue of their direct or indirect ownership of
31,879,410 of the Company Shares which constitute 75.922% of the Company
Shares, the Sellers exercise effective control of the Company, and are fully
informed as to the Company's operations, prospects and conditions (financial
or otherwise); and
WHEREAS, the Purchaser wishes to acquire, directly or indirectly,
(i) as a result of the transactions contemplated herein, all of the Company
Shares held, directly and indirectly, by the Sellers and (ii) as a result of
the transactions contemplated in a separate agreement, all of the Company
Shares held by the Minors.
2
<PAGE>
NOW, THEREFORE, in consideration of the covenants, representa-
tions, warranties and agreements contained herein, and intending to be legally
bound hereby, the Purchaser and the Sellers agree as follows:
ARTICLE I
INTERPRETATION
1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires,
capitalized terms shall have the meanings ascribed thereto in Schedule 2 here-
to.
1.2 References. The descriptive headings of the Articles,
Sections, Schedules and Exhibits of this Agreement are inserted for conve-
nience of reference only and shall not affect the interpretation of this
Agreement. All references in this Agreement to an "Article", "Section",
"Schedule" or "Exhibit" refer to the corresponding Article, Section, Schedule
or Exhibit of this Agreement.
ARTICLE II
PURCHASE AND SALE
2.1 Actions to Occur at Signing.
(a) At the time of execution and delivery of this Agreement
(the "Signing"), the following actions were taken by or on behalf of the
Parties.
(i) each of the Sellers and the Purchaser con-
firmed the accuracy of the representations and warranties con-
tained in Articles III and IV hereof, respectively;
(ii) each of the Sellers and the Purchaser have
executed and delivered to each other and the Escrow Agent the
original of or counterparts to the Escrow Agreement, in the form
set forth in Exhibit B hereto;
(iii) all of the documents required to transfer
title to the Holdings Shares and Company Shares owned by the
Sellers have been duly deposited with the Escrow Agent, to be held
in accordance with the terms of the Escrow Agreement pending re-
lease upon satisfaction of the terms and conditions for their
transfer under this Agreement;
(iv) the Purchaser has delivered to the Escrow
Agent the Holdings Purchase Consideration and the Direct Shares
Consideration;
3
<PAGE>
(v) the Company and each of the persons identi-
fied on Exhibit C hereto have executed and delivered to the Pur-
chaser a letter agreement regarding management and non-competition
arrangements subject to Closing, and to become effective as of the
date of the Closing (the "Management and Non-Competition Agree-
ments");
(vi) the Sellers shall have provided the Pur-
chaser with the ability to manage the business and affairs of
Holdings, the Company and the Company Subsidiaries in accordance
with the terms and conditions set forth in Articles V and VI
hereof;
(vii) the Escrow Agent shall execute and deliv-
er to the Purchaser and the Sellers executed copies of the Escrow
Agreement;
(viii) the Sellers shall deliver to the
Purchaser original executed copies of an opinion of Sellers'
Counsel, substantially in the form of Exhibit D, hereto;
(ix) the Purchaser shall deliver to the Sellers
original executed copies of an opinion of the Purchaser's Italian
Counsel, substantially in the form of Exhibit E, hereto; and
(x) the Sellers shall have caused (A) the
resignation of at least 1 director of Holdings (once Holdings has
more than 1 director), at least 3 directors of the Company and at
least 1 director of such of the Company Subsidiaries as the
Purchaser shall designate, and (B) the calling of the Board of
Directors meetings of Holdings, the Company and the Company
Subsidiaries for the appointment by "cooptazione" of at least 1
designee to the Board of Directors of Holdings, at least 3
designees to the Board of Directors of the Company and at least 1
designee to the Board of Directors of each of such of the Company
Subsidiaries as the Purchaser shall designate.
2.2 Date and Place of the Closing.
(a) The Parties agree that each shall use its best efforts
to cause the actions set forth in Section 2.4 hereof (the "Closing") to occur
on or prior to December 31, 1996; provided that all conditions to such Closing
set forth in Section 2.3 have been satisfied or waived in writing.
(b) The Closing shall take place at the offices of the
Escrow Agent in Milan.
2.3 Conditions to Closing. The obligations of the Parties to
complete the Closing shall be subject to the satisfaction or waiver in writing
by the Sellers and the Purchaser of the following conditions:
4
<PAGE>
(a) No Injunction. There shall be no effective injunction,
writ, preliminary restraining order or any order of any nature issued by a
court of competent jurisdiction directing that the Transactions or any of them
not be consummated as so provided or imposing any material conditions on the
consummation of the Transactions.
(b) Competition Review. Clearance of the transactions
contemplated by this Agreement under relevant antitrust or competition
regulations in Italy and Germany.
(c) Receipt of the Unaudited Consolidated October 31, 1996
Financial Statements with projections of the balance sheet of the Company as
of, and projections of profit and loss accounts for the Company for the twelve
months ending, December 31, 1996.
2.4 Actions at the Closing. Subject to the terms and conditions
and in reliance upon the representations and warranties set forth herein, at
the Closing, the transactions set forth below shall occur, and shall be deemed
to occur simultaneously:
(a) the Escrow Agent, on behalf of the Holdings' Sharehold-
ers, shall endorse to the Purchaser the Holdings Shares;
(b) the Escrow Agent, on behalf of the Direct Shareholders,
shall endorse to the Purchaser the Direct Shares; and
(c) The Escrow Agent shall deliver to the Sellers on behalf
of the Purchaser the cash payment with respect to the Holdings Purchase
Consideration and the Direct Shares Consideration less an amount equal to the
Secured Amount (such sum to be retained by the Escrow Agent).
2.5 Consideration.
(a) Each of the Parties agrees that the following aggregate
amounts shall be paid as consideration to the holders of the various interests
transferred hereunder:
(i) the Holdings Purchase Consideration shall
be approximately LIT 4,666 per Holdings Share, for 100,300,000
Holdings Shares, for an aggregate amount of LIT 468,029,900,526
(the "Holdings Purchase Consideration"); and
(ii) the Direct Shares Consideration shall be
approximately LIT 20,932 per Direct Share, for 9,779,410 Direct
Shares, for an aggregate amount of LIT 204,707,058,490
(the "Direct Shares Consideration").
(b) Subject to approval by CONSOB the Parties acknowledge
that the public offer price proposed to be offered by the Purchaser to the
Public Shareholders in the subsequent public offer shall be approximately LIT
20,932 per Public Share.
5
<PAGE>
2.6 Contingent Consideration. The Parties acknowledge that the
amounts set forth in Section 2.5 hereof reflect the Purchaser's estimation of
the value of the Company, as of the signing. In the event that the perfor-
mance of the Glass Business for the three fiscal years commencing January 1,
1997 should exceed expectations, the Purchaser agrees to pay an additional
amount (the "Contingent Consideration") to the Sellers, in accordance with the
percentages set forth on Schedule 8, determined as set forth in Schedule 4(a)
hereto, in relation to the Sellers' best case financial projections for the
Company set forth in Schedule 4(b) hereto. In the event that any amount in
respect of the Contingent Consideration is required to be paid to the Public
Shareholders, such amounts shall be deducted from the Contingent Consideration
payable to the Sellers, in accordance with the percentages set forth on
Schedule 8.
2.7 Method of Payment.
(a) Of the amounts to be received by the Sellers upon the
Closing, as set forth in Section 2.5 above, the Parties agree that the Escrow
Agent shall pay the Holdings Purchase Consideration and the Direct Shares
Consideration, plus interest accrued thereon, each in cash, by wire transfer
in immediately available funds to the account or accounts designated by the
Sellers in writing.
(b) The Sellers agree that in order to secure the
Purchaser's right to indemnification provided in Article VII hereof, cash in
the aggregate amount of LIT 26.5 billion (the "Secured Amount") shall be
deposited with the Escrow Agent, pursuant to the Escrow Agreement, to be re-
tained by the Escrow Agent for the period specified in the Escrow Agreement.
(c) The Sellers agree that the Contingent Consideration
shall be, without duplication, subject to the Right of Set-Off, provided,
however, that the Contingent Consideration shall not be considered in provid-
ing for the Secured Amount.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
The Sellers represent and warrant to the Purchaser as follows:
3.1 Escrow Agreement. Each of the Sellers has taken all action
required by law or otherwise required to be taken by it to authorize the
execution and delivery of the Escrow Agreement, and such agreement is a valid
and binding obligation of each of the Sellers enforceable in accordance with
its terms.
3.2 Consent and Approvals; No Violations.
(a) Except as contemplated by Section 2.3, no consent, ap-
proval or authorization of, or declaration, filing or registration with, any
6
<PAGE>
Governmental Authority or any other person is required in connection with the
execution, delivery and performance of this Agreement or the consummation of
the Transactions.
(b) The execution and delivery of this Agreement by the
Sellers, the performance hereof and the consummation of the transactions con-
templated hereby will not (i) violate any provision of the Articles of Asso-
ciation of any of Holdings, the Company or any Group Company, (ii) (assuming
receipt of all governmental approvals contemplated by Section 2.3) violate any
statute, rule, regulation, judgment, order or decree of any Governmental Au-
thority or (iii) conflict with or result in a violation, or breach of, or con-
stitute a default under, or give rise to any right of cancellation or termina-
tion of, any Permit or License or agreement or violate, or be in conflict
with, or constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or cause the acceleration of the
maturity of any debt or obligation pursuant to, or result in the creation or
imposition of any Lien upon any property or assets of any of Holdings, the
Company or any Group Company under, any Contracts and/or Agreements to which
any of Holdings, the Company or any Group Company is bound, or to which the
property of any of Holdings, any Group Company or the Company is subject.
3.3 Litigation Related to Transactions. There is no action,
suit, inquiry, proceeding or investigation by or before any Governmental
Authority pending or threatened against or involving the Sellers, Holdings,
the Company, any Group Company, or the Glass Business, which questions or
challenges the validity of this Agreement or any action taken or to be taken
by Holdings, the Company, or the Sellers pursuant to this Agreement or in con-
nection with the transactions contemplated hereby; nor is there any valid
basis for any such action, proceeding or investigation.
3.4 Title to Holdings Shares, Company Shares and Shares/Quotas of
the Group Companies. The outstanding shares of capital stock of the Company
and Holdings which are legally or beneficially owned by any of the Sellers,
the outstanding shares of the Company which are legally or beneficially owned
by Holdings, and the outstanding shares/quotas of the Group Companies which
are owned by the Company are as set forth in Schedule 1(a), 1(b) hereto and
3.6(b) of the Disclosure Schedule, respectively, and such shares/quotas are
owned, directly or indirectly, free and clear of all Liens.
3.5 Public Shares. None of the Sellers, Holdings, the Company or
their senior executives and directors nor, to the best of the Sellers' knowl-
edge, any of the Group Companies or their respective Affiliates, senior
executives and directors or any one acting on their behalf, has bid for or
purchased any Public Shares or taken any action for the purpose of creating
actual or apparent trading in or raising the price of the Public Shares.
3.6 Corporate Organization; Capitalization. (a) Each of Hold-
ings, the Company and the Company Subsidiaries is a company duly organized and
existing under the laws of its jurisdiction and has full corporate power and
authority to carry on its business as it is now being conducted. Except for
7
<PAGE>
the changes (i) made to the Articles of Association of Avirunion, in
connection with the Company's acquisition of Avirunion, (ii) necessitated by
the merger by incorporation (the "Merger") of various subsidiaries of the
Company into the Company, (iii) necessitated by the change of Holdings from a
SAPA to an S.p.A., and (iv) related to Vetroceramica Turritana S.p.A., the
Articles of Association of each of Holdings, the Company and the Company Sub-
sidiaries have not been amended since January 1, 1996 and have been in full
force and effect since such date. Each of the Sellers has taken all action
required by law or otherwise required to be taken by it to authorize the exe-
cution and delivery of this Agreement and the consummation of the transactions
contemplated hereby, and this Agreement is a valid and binding agreement of
each of the Sellers enforceable in accordance with its terms.
(b) Schedule 3.6(b) of the Disclosure Schedule sets forth
the name, jurisdiction of incorporation and capitalization of each of
Holdings, the Company and the Group Companies. All of the shares of Holdings,
the Company and the Group Companies are duly authorized, validly issued and
fully paid. There are no bonds, debentures, notes or other indebtedness
having voting rights (or convertible into securities having such rights) of
any of Holdings, the Company and the Group Companies issued and outstanding.
Except as and to the extent set forth in Schedule 3.6(b) of the Disclosure
Schedule, none of Holdings, the Company or any Company Subsidiary owns,
directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership interest in any
business not listed in Schedule 3.6(b) of the Disclosure Schedule.
3.7 Merger of Company Subsidiaries; Expiration of Withdrawal
Rights. (a) As of the date hereof, the deed of merger relating to the Merger
has been executed and has been filed with the competent courts in accordance
with all relevant laws.
(b) Withdrawal rights have been exercised in connection
with the change of the corporate purpose of the Company in connection with the
Merger with respect to 2,194,055 shares of capital stock in the Company (the
"Withdrawn Shares") and, as a result of which an amount equal to LIT11,742 per
share was paid by the Company in respect of the Withdrawn Shares on October
31, 1996, and the Withdrawn Shares have been cancelled. No withdrawal rights
remain outstanding as of the date hereof.
3.8 Holdings Financial Matters. Except as set forth in Schedule
5, Holdings (without regard to the consolidation of its subsidiaries) has no
liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise). Upon the Signing, the financial condition of Holdings will
conform to that set forth in the Holdings balance sheet as of October 31, 1996
and statement of profit and loss for the 10 months ending October 31, 1996,
each as set forth in Schedule 5 to this Agreement (the "Holdings Financial
Statements").
3.9 Company Financial Statements; Other Financial Matters. (a)
The Sellers have made available to the Purchaser copies of the Audited Finan-
cial Statements, including the Audited Balance Sheet and the Interim Unaudited
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Financial Statements, including the Interim Unaudited Balance Sheet.
Unaudited Consolidated October 31, 1996 Financial Statements are attached
hereto as Schedule 6. The Audited Financial Statements, including the Audited
Balance Sheet, the Interim Unaudited Financial Statements, including the
Interim Unaudited Balance Sheet, and the Unaudited Consolidated October 31,
1996 Financial Statements are true, complete and accurate and fairly present
the financial position of the Company and the Company Subsidiaries as at the
dates thereof and the results of operations and changes in financial position
for the periods then ended. The Sellers have used their best efforts to
assure that the Other Financial Information is as true and accurate as
possible. The Sellers have made available to the Purchaser copies of the Fi-
nancial Books and Records. The Financial Books and Records are true, accurate
and complete and contain all information necessary to prepare the Audited Fi-
nancial Statements. The Audited Financial Statements, the Interim Unaudited
Financial Statements and the Unaudited Consolidated October 31, 1996 Financial
Statements were prepared from the Financial Books and Records in accordance
with Italian GAAP consistently applied throughout the periods involved.
(b) Except for liabilities incurred in the Ordinary Course
since the date of the Holdings Financial Statements and the Unaudited Consoli-
dated October 31, 1996 Financial Statements, respectively, none of Holdings,
the Company or the Company Subsidiaries has any liabilities or obligations of
any nature (absolute, accrued, contingent or otherwise) which are not fully
reflected or reserved against in the Holdings Financial Statements and the
Unaudited Consolidated October 31, 1996 Financial Statements, as the case may
be; and the reserves reflected in the Holdings Financial Statements and the
Unaudited Consolidated October 31, 1996 Financial Statements are adequate, ap-
propriate and reasonable, as determined in accordance with past practice and
Italian GAAP consistently applied.
(c) All Inventory of the Company and each Company
Subsidiary, reflected in the Audited Balance Sheet, the Interim Unaudited
Balance Sheet or the Unaudited Consolidated October 31, 1996 Financial
Statements, is merchantable and fit for the purpose for which it was procured
or manufactured, and consists of a quantity (as reflected in the Unaudited
Consolidated October 31, 1996 Financial Statements) and quality warranted, us-
able and salable in the Ordinary Course. Except in the Ordinary Course, to
the best of the Sellers' knowledge, none of the Company or any Company Sub-
sidiary is under or expected to become subject to any liability or obligation
with respect to the return of inventory or merchandise in the possession of
wholesalers, distributors, retailers or other customers.
(d) The Audited Balance Sheet, the Interim Unaudited
Balance Sheet and the Unaudited Consolidated October 31, 1996 Balance Sheet
each contains all of the assets of the Company and the Company Subsidiaries
necessary to operate the Glass Business in substantially the same manner as it
has been conducted since January 1, 1995.
(e) The Accounts Receivable set forth on the Audited Bal-
ance Sheet, the Interim Unaudited Balance Sheet and the Unaudited Consolidated
October 31, 1996 Balance Sheet represent bona fide sales actually made in the
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Ordinary Course and are duly reflected on such balance sheets. Each Account
Receivable is valid and not subject to any setoff or counterclaim and is cur-
rent and has been collected in full or will be collected in full, subject to
reserves, in the Ordinary Course.
3.10 Title and Related Matters; Leases; Encumbrances. (a) Each
of Holdings, the Company and the Company Subsidiaries has good, valid and mar-
ketable title to all the assets which they purport to own, including, without
limitation, all the assets reflected in the Audited Balance Sheet, the Interim
Unaudited Balance Sheet and the Financial Books and Records. All assets are
free and clear of all title defects or objections or Liens, except for those
that are disclosed in the Interim Unaudited Balance Sheet and except for those
that are incurred in the Ordinary Course thereafter.
(b) All material leases pursuant to which Holdings, the
Company and the Company Subsidiaries lease Real Property or Personal Property
are valid, binding and enforceable in accordance with their terms, and are in
full force and effect; there are no existing defaults by Holdings, the Company
or the Company Subsidiaries thereunder; no event has occurred which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a default thereunder; and no consent to the
Transactions is needed by the lessors.
(c) With due consideration to the nature of the Glass
Business and the age of the Company's and Company Subsidiaries' plants,
structures and equipment, such plants, structures and equipment are in good
operating condition and they may need routine maintenance and repairs which
are not material in nature or cost.
(d) As of the date hereof, neither the whole nor any
material portion of the assets of Holdings, the Company or the Company Sub-
sidiaries is subject to any decree or order to be sold or is being condemned,
expropriated or otherwise taken by any Governmental Authority with or without
payment of compensation therefor, nor, to the best of the Sellers' knowledge,
has any such condemnation, expropriation or taking been proposed.
3.11 Intellectual Property
(a) Schedule 3.11(a) of the Disclosure Schedule identifies
all licenses and other Contracts or Agreements with third parties (other than
Affiliates of the Purchaser and Affiliates of the Company) to which the Compa-
ny or any Company Subsidiary is a party (either as licensor or licensee) or
otherwise subject relating to any Intellectual Property and no claims have
been asserted by any person to the use of any Intellectual Property or chal-
lenging or questioning the validity or effectiveness of any such license or
Contract or Agreement, and neither the Sellers nor the Company knows of any
valid basis for any such claim.
(b) Except as identified in Schedule 3.11(b) of the
Disclosure Schedule, none of the Company nor any Group Company has, nor has
been alleged to have, infringed upon any Intellectual Property or misappro-
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priated or misused any invention, trade secret or other proprietary informa-
tion entitled to legal protection. None of Holdings, the Company nor any
Group Company has asserted any claim of infringement, misappropriation or
misuse within the past three years.
(c) The Company and the Company Subsidiaries have good and
valid title to, or otherwise possess adequate and sufficient rights to use,
all Intellectual Property and other proprietary information necessary to per-
mit the Company and the Company Subsidiaries to conduct the Glass Business in
the same manner as such business has been conducted prior to the date hereof
and all necessary fees have been properly paid.
3.12 Contracts and Agreements.
(a) Except as set forth in Schedule 3.12(a) of the
Disclosure Schedule, none of Holdings, the Company nor any Group Company has
entered into or is a party to:
(i) except for any contracts with utilities,
any purchase contracts or commitments which continue for a period
of more than twelve months or are in excess of the normal, ordi-
nary and usual requirements of business other than agreements
between Holdings, the Company or a Company Subsidiary, on the one
hand, and Holdings, the Company or a Company Subsidiary, on the
other hand;
(ii) any outstanding sales contracts, commit-
ments, proposals or orders which continue for a period of more
than twelve months, or exceed LIT 7.5 billion or are expected to
result in any material loss upon completion or performance there-
of, after allowance for direct distribution expenses or any out-
standing contracts, bids or sales or service proposals quoting
prices which are expected not to result in a profit in the
Ordinary Course;
(iii) any outstanding contracts with officers,
employees, agents, consultants, advisors, salesmen, sales repre-
sentatives, distributors or dealers, the cancellation of which
requires a notice period longer than the mandatory period required
by applicable law or national collective bargaining agreements,
and without liability, penalty or premium other than as required
by applicable law or national collective bargaining agreements, or
any agreement or arrangement providing for the payment of any
bonus or commission based on sales or earnings other than those
provided by applicable law or national collective bargaining
agreements;
(iv) any employment agreement, or any other
agreement that contains any severance or termination pay liabil-
ities or obligations, other than customary obligations provided by
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national collective bargaining agreements or otherwise required by law;
(v) any collective bargaining or union con-
tracts or agreements which are not customary in the Glass
Business;
(vi) any agreement with any employee or agent
to pay compensation at the gross annual rate of more than LIT 200
million for services rendered;
(vii) any agreement restricting its ability to
carry on the Glass Business anywhere in the world;
(viii) any agreement with respect to the return
of inventory or merchandise in the possession of wholesalers, dis-
tributors, retailers or other customers;
(ix) any agreements to assume any debt or
similar obligation of others;
(x) any outstanding loan to any person;
(xi) any power of attorney other than those
issued in the Ordinary Course;
(xiiA any agreements concerning confidentiality
or restricting any other entity or person (including, without
limitation, current employees of the Company or any Group Company)
from competing with it in the Glass Business except for agreements
entered into with Affiliates of the Purchaser; and
(xiii) any other agreements, contracts, commit-
ments or restrictions which are material to its business, opera-
tions or prospects taken as a whole or which require the making of
any charitable contribution.
(b) The Sellers have made available to the Purchaser a cor-
rect and complete copy of each written agreement listed on Schedule 3.12(a) of
the Disclosure Schedule described under Section 3.12(a) above.
(c) All of the Contracts and Agreements are legal, valid,
binding, enforceable and in full force and effect and will continue to be
legal, valid, binding and enforceable and in full force and effect on
identical terms following the consummation of the Transactions. To the best
of Sellers' knowledge, no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under, nor has
any party repudiated any provision of, any of the Contracts and Agreements.
(d) None of Holdings, the Company nor any Company Subsid-
iary is in default under or in violation of, nor, to the best of Sellers'
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knowledge, is there any valid basis for any claim of default under or viola-
tion of, any Contract or Agreement or restriction to which it is a party or by
which it is bound.
3.13 Customers and Suppliers. (a) There has not been any mate-
rial adverse change in the business relationship of any of the Company or any
Group Company with any customer or supplier.
(b) As of the date of this Agreement, other than in the
Ordinary Course, there are no claims against the Company or the Company Sub-
sidiaries to return merchandise by reason of alleged overshipments, defective
merchandise or otherwise, or of merchandise in the hands of customers under an
understanding that such merchandise would be returnable.
3.14 Absence of Certain Changes. Except as set forth in Schedule
3.14 of the Disclosure Schedule, since the date of the Audited Financial
Statements, Holdings, the Company and the Company Subsidiaries have conducted
the Glass Business only in the Ordinary Course, and other than in the Ordinary
Course neither Holdings, the Company, any Company Subsidiary, nor the Glass
Business has:
(i) Suffered any material adverse change in its
financial conditions, assets, liabilities (absolute, accrued,
contingent or otherwise), reserves, business, operations or pros-
pects other than changes reflected in the Unaudited Consolidated
October 31, 1996 Financial Statements, or those arising from or
relating to general economic conditions of the glass industry in
Italy;
(ii) Incurred any liabilities or obligations
(absolute, accrued, contingent or otherwise) other than as
reflected in the Interim Unaudited Financial Statements, or the
Unaudited Consolidated October 31, 1996 Financial Statements, or
increased, or experienced any change in any assumptions underlying
or methods of calculating any bad debt, contingency or other re-
serves;
(iii) Paid, discharged or satisfied any claims,
liabilities or obligations (absolute, accrued, contingent or oth-
erwise) other than the payment, discharge or satisfaction of lia-
bilities and obligations reflected or reserved against in the Au-
dited Financial Statements;
(iv) Permitted or allowed any of its property
or assets (real, personal or fixed, tangible or intangible) to be
subjected to any Lien;
(v) Written down the value of any Inventory
(including write-downs by reason of shrinkage or mark-down) or
written off as uncollectible any notes or accounts receivable,
except for immaterial write-downs;
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(vi) Cancelled any credits or waived any claims
or rights of substantial value;
(vii) Transferred any of its properties or as-
sets (real, personal or fixed, tangible or intangible) except for
sales of properties or assets unrelated to the Glass Business;
(viii) Disposed of or permitted to lapse any
rights to the use of any patent, trademark, trade name or copy-
right, or disposed of or disclosed to any person other than repre-
sentatives of the Purchaser any trade secret, formula, process or
know-how not theretofore a matter of public knowledge;
(ix) Granted any general increase in the com-
pensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit sharing or other plan or
commitment) or any increase in the compensation payable or to
become payable to any officer or employee, and no such increase is
customary on a periodic basis or required by agreement or under-
standing;
(x) Made any capital expenditure or commitment
other than as specifically provided for in the Interim Unaudited
Financial Statements or the Unaudited Consolidated October 31,
1996 Financial Statements;
(xi) Other than in connection with the fiscal
year ended December 31, 1995 and the redemption contemplated by
the Merger, declared, paid or set aside for payment any dividend
or other distribution in respect of its capital stock or redeemed,
purchased, or otherwise acquired, directly or indirectly, any
shares of capital stock or other securities of Holdings, the
Company or any Company Subsidiary;
(xii) Made any change in any method of account-
ing or accounting practice;
(xiii) Paid, loaned or advanced any amount to,
or transferred or leased any properties or assets (real, personal
or fixed, tangible or intangible) to, or entered into any agree-
ment or arrangement with, any of the Sellers, its senior
executives or directors or any Affiliate of any of its senior
executives or directors; or
(xiv) Agreed, whether in writing or otherwise,
to take any action described in this Section 3.14.
3.15 Insurance. All material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by or pro-
viding coverage for the Company and each Company Subsidiary are in full force
and effect, all premiums with respect thereto covering all periods up to and
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including the date of the Closing have been paid, and no notice of cancella-
tion or termination has been received with respect to any such policy. Such
policies are sufficient for compliance with all requirements of law and of all
agreements to which the Company or any Company Subsidiary is a party; are val-
id, outstanding and enforceable policies; provide adequate insurance coverage
for the assets and operations of the Company and each Company Subsidiary; will
remain in full force and effect through the Closing Date and will not in any
way be affected by, or terminate or lapse by reason of, the execution of this
Agreement. Each of the Company and each Company Subsidiary has been covered
during the past five (5) years by insurance in scope and amount customary and
reasonable for the Glass Business.
3.16 Taxes. (a) Each of Holdings, the Company and Company
Subsidiaries has duly filed all Tax reports and returns required to be filed
by it and has duly paid all Taxes and other charges due or claimed to be due
from it by any Governmental Authority (including, without limitation, those
due in respect of the properties, income, franchises, licenses, sales or pay-
rolls of any of them); the reserves for Taxes reflected in the Audited Balance
Sheet, the Interim Unaudited Balance Sheet and the Unaudited Consolidated
October 31, 1996 Financial Statements are adequate; and there are no Liens for
Taxes upon any property or assets of Holdings, the Company or any Company
Subsidiary. Copies of the tax returns of Holdings, the Company and each
Company Subsidiary in respect of all years not barred by the statute of limi-
tations were made available to the Purchaser; and except as set forth in
Schedule 3.16(a)(i) of the Disclosure Schedule, there are no assessments or
inspections, and except as set forth in Schedule 3.16(a)(ii) of the Disclosure
Schedule, any assessments have been fully paid; and no issue has been raised
by the relevant local tax office in any examination which reasonably could be
expected to result in a proposed deficiency for any period not examined. Fur-
ther, no state of facts exists or has existed which would constitute grounds
for the assessment of any Tax liability with respect to the periods which have
not been audited by the relevant local tax office. Schedule 3.16(a)(iii) of
the Disclosure Schedule contains a list of all the Tax amnesties benefitted by
Holdings, the Company and any of the Company Subsidiaries.
(b) Each of Holdings, the Company and the Company Subsid-
iaries has complied in all material respects with all applicable laws, rules
and regulations relating to the withholding of Taxes and have, within the time
and in the manner prescribed by law, withheld from employees' wages and paid
over to the proper Governmental Authorities all amounts required to be so
withheld and paid over under all applicable laws.
(c) Except as set forth in Schedule 3.16(c) of the
Disclosure Schedule, no power of attorney has been granted by Holdings, the
Company or any Company Subsidiary with respect to any matter relating to Taxes
which is currently in force.
3.17 Employee Matters; Employee Benefit Plans. (a) There is no
labor strike, material dispute, material slowdown or material stoppage actual-
ly pending or, to the best of Sellers' knowledge, threatened against or af-
fecting the Company or any Company Subsidiary and none of the Company nor any
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<PAGE>
Company Subsidiary has experienced any material work stoppage since January 1,
1995.
(b) Any sum due as salary, severance indemnity, social
security contribution, unpaid holidays and other benefits or bonuses due to
their employees by any of the Company or the Company Subsidiaries, and other
reserves concerning such employment relationships have been duly paid or
allocated, in accordance with all applicable laws and regulations concerning
labor and social security matters. All the obligations towards the abovesaid
employees, as well as towards any social security agency have been duly
fulfilled.
(c) All the employees of the Company or any Company
Subsidiary are duly registered in the payroll of said companies.
(d) Except as set forth in Schedule 3.17(d) of the
Disclosure Schedule, no litigation is pending or, to the knowledge of the
Sellers, threatened before any judicial and administrative court or arbitral
tribunal with respect to any of the employees of the Company or any Company
Subsidiary involving more than LIT 150 million.
(A) Any and all obligations concerning Law no. 482 of April
2, 1968, concerning the mandatory hiring of certain categories of employees
(such as disabled, refugees, widows, etc.) have been substantially fulfilled.
3.18 Litigation. Except as disclosed in Schedule 3.16(a)(i) and
3.18(i) of the Disclosure Schedule, there is no action, suit, inquiry,
proceeding or investigation by or before any Governmental Authority pending
or, to the best of Sellers' knowledge, threatened against or involving Hold-
ings, the Company, any Group Company, or the Glass Business, nor is there any
valid basis for any such action, proceeding or investigation. Except as dis-
closed in Schedule 3.18(ii) of the Disclosure Schedule, none of Holdings, the
Company nor any Group Company is subject to any judgment, order or decree en-
tered in any lawsuit or proceeding which may have an adverse effect on its
business practices or on its ability to acquire any property or conduct the
Glass Business in any area.
3.19 Compliance with Law; Environmental Matters. (a) The Glass
Business has been conducted in accordance with all applicable laws, regula-
tions and other requirements of all Governmental Authorities. Except as set
forth in Schedule 3.18(i) and 3.18(ii) of the Disclosure Schedule, none of
Holdings, the Company nor any Group Company has received any notification of
any asserted present or past failure to comply with such laws, rules or regu-
lations.
(b) Except as set forth in Schedule 3.19(b) of the
Disclosure Schedule, the Company and the Company Subsidiaries have obtained
all Permits and Licenses relating to pollution or protection of the environ-
ment, and the Company, the Company Subsidiaries and the Glass Business are in
substantial compliance with all terms and conditions of the required Permits
and Licenses, and are also in substantial compliance with all other limita-
16
<PAGE>
tions, restrictions, conditions, standards, prohibitions, requirements, obli-
gations, schedules and timetables contained in those laws or contained in any
relevant regulation, decree or judgment. None of the Company, the Company
Subsidiaries nor the Sellers are aware of, or have received notice of, any
events, circumstances, practices or actions which may interfere with or pre-
vent continued compliance with applicable law, or which may give rise to any
legal liability, or otherwise form the basis of any claim, action, suit, pro-
ceeding, hearing or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, or hazardous or toxic material or
waste.
3.20 Absence of Questionable Payments. None of Holdings, the
Company, the Company Subsidiaries, the Sellers nor any director or senior
executive nor, to the knowledge of the Sellers, any Group Company other than
the Company Subsidiaries, or any agent, employee or other person acting on
behalf or for the benefit of Holdings, the Company, the Group Companies or the
Sellers, has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating
to political activity to government officials or others or established or
maintained any unlawful or unrecorded funds in violation of any applicable
law. None of the Sellers, Holdings, the Company, the Company Subsidiaries nor
any current director or senior executive nor, to the knowledge of the Sellers,
any Group Company other than the Company Subsidiaries, or any agent, employee
or other person acting on behalf or for the benefit of the Sellers, Holdings,
the Company or the Group Companies, has accepted or received any unlawful con-
tributions, payments, gifts, or expenditures.
3.21 Products Liability; Product Recall. (a) Each product
manufactured, sold, leased, or delivered by any of the Company or the Company
Subsidiaries has been in conformity with all applicable contractual commit-
ments and all express and implied warranties.
(b) There is no action, suit, inquiry, proceeding or in-
vestigation by or before any Governmental Authority pending or threatened
against or involving the Company or any Company Subsidiary relating to any
product alleged to have been manufactured or sold by the Company or any
Company Subsidiary and alleged to have been defective, or improperly designed
or manufactured, nor is there any valid basis for any such action, proceeding
or investigation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
The Purchaser hereby represents and warrants to the Sellers as
follows:
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4.1 Corporate Organization; Etc. The Purchaser is a corporation
validly existing and in good standing under the laws of Italy. The Purchaser
has full corporate power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby. The Purchaser has taken all
action required by law or otherwise required to be taken by it to authorize
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and this Agreement is a valid and binding
agreement of the Purchaser enforceable in accordance with its terms.
4.2 Consent and Approvals; No Violations. (a) The execution and
delivery of this Agreement by the Purchaser, the performance hereof and the
consummation of the transactions contemplated hereby will not (i) violate any
provision of its charter documents, (ii) violate any statute, rule, regu-
lation, judgment, order or decree of any public body or authority by which the
Purchaser or any of its property or assets are bound, or (iii) conflict with
or result in a violation, acceleration or breach of, or constitute a default
under, or give rise to any right of cancellation or termination of, any
Contract or Agreement.
(b) Except as contemplated by Section 2.3 hereof, no con-
sent, approval or authorization of, or declaration, filing or registration
with, any Governmental Authority or any other person is required in connection
with the execution, delivery and performance of this Agreement or the consum-
mation of the Transactions by the Purchaser.
4.3 Escrow Agreement. The Purchaser has duly executed and
delivered the Escrow Agreement, and such agreement is a valid and binding
obligation of the Purchaser enforceable against it in accordance with its
terms.
ARTICLE V
COVENANTS OF THE PARTIES
The Parties covenant and agree as follows:
5.1 Full Access. Between the date of this Agreement and the date
of the Closing, the Sellers shall, and the Sellers shall cause Holdings to,
afford, with respect to Holdings, and shall cause the Company to afford, with
respect to the Company and all Company Subsidiaries, to the Purchaser, its
counsel, accountants and other representatives full access to the plants, of-
fices, warehouses, properties, books and records of Holdings, the Company and
all Company Subsidiaries and the Sellers shall, and the Sellers shall cause
Holdings to, cause the officers and accountants of Holdings, the Company and
all Company Subsidiaries to furnish such additional financial and operating
data and other information as the Purchaser shall from time to time reasonably
request; provided further, that the Sellers shall use reasonable efforts to
provide similar access for all Group Companies other than the Company
Subsidiaries.
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5.2 No other Acquisitions in the European Union. Prior to the
receipt of approval from the applicable antitrust authorities in Italy and
Germany for the transactions contemplated by this Agreement, the Purchaser
shall not purchase any company in the glass container industry which has its
principal operations in the European Union.
5.3 Best Efforts. Each of the Parties agrees to use its best
efforts to take, or cause to be taken, by the Company or others, all action to
do, or cause to be done, and to assist and cooperate with the other Parties in
doing, all things necessary, proper or advisable to consummate and make
effective the Transactions, including, but not limited to, (a) the obtaining
of all necessary governmental approvals and the making of all necessary reg-
istrations and filings (including, but not limited to, filings with any
Governmental Authority, if any) and the taking of all reasonable steps as may
be necessary to obtain any governmental approval or waiver, or to avoid any
actually or potentially adverse action or proceeding by any Governmental
Authority, and (b) the satisfaction of the conditions to the Closing set forth
in Section 2.3.
5.4 Board of Directors Membership; Shareholders and Board of
Directors Meetings. Pending the Closing, the Sellers (i) shall cause all the
designees of the Purchaser (only 1 in the case of the Board of Directors of
Holdings) to be granted the powers necessary to manage the business and
affairs of Holdings, the Company and the Company Subsidiaries in the Ordinary
Course, (ii) will cause the resignation of all the current directors and will
use their best efforts to cause the resignation of all the statutory auditors
of Holdings, the Company and the Company Subsidiaries, with effect as of the
Closing, and the calling of the relevant shareholders' meetings for the
appointment of new boards that will be selected by the Purchaser and (iii)
subsequent to the date the designees of the Purchaser are granted the powers
described in clause (i) above, will continue to cause the designees of the
Purchaser to remain appointed to the Boards of Directors (as Directors and
Managing Directors) of each of Holdings, the Company and such of the Company
Subsidiaries as the Purchaser shall designate consistent with the provisions
of Section 2.1(a). Any action to be taken at any Board of Directors or Share-
holders meeting of Holdings, the Company or the Company Subsidiaries shall re-
quire the favorable vote of the Purchaser or the Purchaser's designees. With
regard to Shareholders meetings, pending the Closing the Purchaser will be
represented by the Escrow Agent which will vote at said meetings in accordance
with the Escrow Agreement.
5.5 Public Shares. Each of the Sellers agrees that it will not,
and will use its best efforts to cause Holdings, the Company, the Group Compa-
nies and their respective Affiliates, officers and directors or any one acting
on their behalf not to, bid for or purchase any Public Shares or take any
action for the purpose of creating actual or apparent trading in or affecting
the price of the Public Shares.
5.6 Press Release. Within five business days after the date of
this Agreement, the Parties hereto agree to issue to the general public and
those publications which report on the glass industry a press release which
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shall be prepared jointly by the Purchaser and the Sellers, in compliance with
CONSOB regulations.
5.7 Customers and Suppliers. Promptly after the dissemination of
the press release pursuant to Section 5.6, the Sellers shall cause the Company
and Company Subsidiaries to assist in the preparation by the Purchaser of, and
to promptly distribute, letters and other notices to those customers, suppli-
ers, employees and joint venture partners of the Company or any Company
Subsidiary as the Purchaser, in consultation with the Company and Company
Subsidiaries, determines to be necessary or desirable in connection with the
maintenance of the Company's business relations; provided further, that the
Sellers shall use reasonable efforts to cause the Company and the Company
Subsidiaries to assist in the preparation by the Purchaser of, and to promptly
distribute, letters and other notices to those customers, suppliers, employees
and joint venture partners of any Group Company other than the Company Subsid-
iaries as the Purchaser, in consultation with the Company and Company
Subsidiaries, determines to be necessary or desirable in connection with the
maintenance of the Company's business relations.
5.8 Non-Compete; No Solicitation. The Sellers agree to be bound
by the terms and provisions of Schedule 7.
5.9 Action by Sellers. The Sellers irrevocably agree, also in
the interest of the Purchaser, that for all purposes of this Agreement they
will be represented herein by (i) Dott. Natale Maderna (born in Naples on
September 1, 1920, domiciled in Naples, Parco Carelli, 87, Tax Code No. MDR
NTL 20P01 F839T), or (ii) a designee of Dott. Maderna in the event Dott.
Maderna should resign. In the event that (i) Dott. Maderna resigns without
nominating a designee or becomes incapacitated or (ii) the designee of Dott.
Maderna resigns or becomes incapacitated, the Sellers will be represented by
Dott. Carlo Pontecorvo (born in Naples on January 5, 1951, domiciled in
Naples, Via Posillipo, 50, Tax Code No. PNT CRL 51A05 F839X) and, in the event
that Dott. Pontecorvo resigns or becomes incapacitated, the Sellers will act
by a majority in interest (evidence of which shall be provided to the
Purchaser) according to the percentages set forth in Schedule 8.
5.10 Shareholders Contribution. The Sellers acknowledge that the
Consideration described in Section 2.5 has been paid also in consideration of
a "shareholders loan dedicated on account of a capital increase" (the "Share-
holders Contribution") of LIT 85,575,960,000 which is reflected as net equity
on the balance sheet contained in the Holdings Financial Statements, and,
accordingly, the Sellers agree that (i) if, subsequent to the date hereof,
Holdings issues any additional shares of capital stock in respect of such
Shareholders Contribution, the Purchaser shall have the exclusive right to
subscribe for, receive and own such shares or (ii) if, subsequent to the date
hereof, Holdings repays, in full or in part, the Shareholders Contribution,
the Purchaser shall be exclusively entitled to such repayment.
5.11 Collection of Government Payments. The Purchaser will seek
to cause the Company and/or the Group Companies to collect the cash payments
from the government authorities as contemplated by Section 7.4(a)(v).
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ARTICLE VI
CONDUCT OF THE BUSINESS
Pending the Closing, except as otherwise requested by or expressly
consented to or approved by the Purchaser in writing, the Sellers agree to ob-
serve and to cause Holdings, the Company and the Company Subsidiaries to ob-
serve, and the Sellers agree to use reasonable efforts to cause the Group
Companies other than the Company Subsidiaries to observe, the following provi-
sions:
6.1 Ordinary Course of Business. Subject to the provisions of
this Article VI and to the extent permitted by applicable law, the Company and
the other Group Companies shall carry on the Glass Business in the Ordinary
Course under the management and direction of the Purchaser's designees.
6.2 Amendments. No change or amendment shall be made in the
Articles of Association or other constitutive documents of Holdings, the Com-
pany or any Group Company, unless so requested by the Purchaser.
6.3 Capital Changes; Asset Sales; Redemptions. Neither Holdings,
the Company nor any Group Company will issue or sell any shares of its capital
stock or other securities, acquire directly or indirectly, by redemption or
otherwise, any capital stock, reclassify or split-up any such capital stock,
declare or pay any dividends thereon in cash, securities or other property or
make any other distribution, grant or enter into any options, warrants, calls
or commitments of any kind with respect thereto or transfer any assets other
than in the Ordinary Course.
6.4 Certain Investments. Neither Holdings, the Company nor any
Group Company will organize any subsidiary, acquire any capital stock or other
equity securities of any corporation or acquire any equity or ownership inter-
est in any business.
6.5 Organization. Each of Holdings, the Company and each Group
Company shall preserve its corporate existence and business organization
intact, to keep available to the Purchaser, its respective officers and key
employees, and to preserve for the Purchaser's benefit its relationships with
licensors, suppliers, distributors, customers and others having business rela-
tions with it.
6.6 Certain Changes. Neither Holdings, the Company nor any Group
Company will:
(a) Borrow or agree to borrow any funds or incur, or assume
or become subject to, whether directly or by way of guarantee or otherwise,
any obligation or liability (absolute or contingent), except obligations and
liabilities incurred in the Ordinary Course;
(b) Pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction when due in the Ordinary Course of liabili-
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ties or obligations reflected or reserved against in the Audited Balance Sheet
or incurred in the Ordinary Course since the date of the Audited Balance
Sheet, or prepay any obligation having a fixed maturity of more than ninety
(90) days from the date such obligation was issued or incurred;
(c) Transfer any of its property or assets (real, personal
or fixed, tangible or intangible) other than in the Ordinary Course, or permit
or allow any such property or asset to be subjected to any Lien of any kind;
(d) Write down the value of any Inventory or write off as
uncollectible any notes or accounts receivable, except for immaterial
write-downs and write-offs in the Ordinary Course;
(e) Cancel any debts or waive any claims or rights of sub-
stantial value or transfer any of its properties or assets, except in the
Ordinary Course;
(f) Dispose of or permit to lapse any rights to the use of
Intellectual Property, or dispose of or disclose to any person any trade
secret, formula, process or know-how not theretofore a matter of public knowl-
edge;
(g) Grant any general increase in the compensation of offi-
cers or employees (including any such increase pursuant to any bonus, pension,
profit sharing or other plan or commitment) or any increase in the compensa-
tion payable or to become payable to any officer or employee;
(h) Make any capital expenditure or commitment other than
in the Ordinary Course;
(i) Pay, loan or advance any amount to, transfer or lease
any properties or assets to, or enter into any agreement or arrangement with,
any of the Sellers or any officers or directors of Holdings, the Company or
any Group Company or any Affiliate of such persons or any of its officers or
directors, except for directors' fees and compensation to officers in the
Ordinary Course;
(j) Grant or extend any power of attorney or act as guar-
antor, surety, co-signer, endorser, co-maker, indemnitor or otherwise in
respect of the obligation of any person, corporation, partnership, joint ven-
ture, association, organization or other entity;
(k) Change the auditors of Holdings, the Company or any of
the other Group Companies, or
(l) Agree, whether in writing or otherwise, to do any of
the foregoing.
6.7 Contracts. Unless so requested by the Purchaser, no Contract
or Agreement will be entered into, and no purchase of raw material or supplies
and no sale of assets will be made, by or on behalf of the Company or any
Company Subsidiary, except (i) any normal Contract or Agreement for the pur-
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chase of, and normal purchases of, raw materials or supplies, made in the
Ordinary Course, and (ii) any normal Contract or Agreement for the sale of,
and normal sales of, Inventory in the Ordinary Course.
6.8 No Default. Neither the Sellers, Holdings, the Company nor
any Group Company shall do any act or omit to do any act, or permit any act or
omission to act, which would be reasonably like to cause or result in a breach
of or default under any material Contract or Agreement of Holdings, the Com-
pany or any other Group Company, or which would cause the breach of any war-
ranty made hereunder.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES;INDEMNIFICATION
7.1 Investigations; Survival; Exclusive Remedy. (a) The right
to indemnification, payment of Indemnified Costs or other damages or other
remedy based on representations, warranties, covenants and obligations of the
Parties will not be affected by any investigation conducted with respect to,
or any knowledge acquired (or capable of being acquired) at any time, whether
before or after the execution and delivery of this Agreement or at the date of
the Closing, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant or obligation.
(b) The representations and warranties of the Purchaser
shall be extinguished upon the Closing. The representations and warranties of
the Sellers shall survive until the third anniversary of the Closing, on which
date they shall terminate; provided, however, that any representation or
warranty made by the Sellers relating to (i) Taxes, shall survive until the
tolling of all applicable statutes of limitation, or (ii) title to securities
acquired or to be acquired by the Purchaser hereunder shall survive without
limitation. Any claim made or notified pursuant to this Article VII before
the otherwise applicable termination date shall survive such termination. Un-
less otherwise specified herein, the covenants and agreements of the Parties
shall survive the Closing without limit for purposes of indemnification
hereunder.
(c) Except as provided by Articles 1425-1440, 1483 and 1484
of the Italian Civil Code, the right to indemnification shall be the exclusive
remedy of the Parties.
7.2 Indemnity by the Sellers; Right of Set-Off. (a) Subject to
the limitations set forth in this Article VII, the Sellers hereby, jointly and
severally up to the amount of the limitation contained in Section 7.4(c) and
severally to the extent of liability, if any, in excess of such limitation,
agree to indemnify and hold the Purchaser, Holdings, the Company, and the
other Group Companies, harmless at all times from and against, and shall pay
to the Purchaser, Holdings, the Company and the other Group Companies, as the
case may be, the full amount (but in the event the Purchaser asserts a claim
for indemnification on behalf of the Company in respect of any Group Company
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other than the Company, the full amount multiplied by the percentage of such
Group Company owned, directly or indirectly, by the Company) of any and all
Indemnified Costs that may be incurred by the Purchaser, Holdings, the Company
and the other Group Companies, including their respective directors and offi-
cers (collectively, "Purchaser Indemnified Party"), arising out of, involving
or relating to, either directly or indirectly, any of the following:
(i) Any inaccuracy in any representations or
warranties of the Sellers set forth in this Agreement, the Disclo-
sure Schedule or any certificate or other document delivered or to
be delivered pursuant hereto;
(ii) The matters disclosed in that report dated
February 1996 delivered by the Sellers to the Purchaser as
initialled by counsel to the Sellers and the Purchaser (the "Phe-
nol Liabilities"), notwithstanding such disclosure or the
Purchaser's actual knowledge with respect thereto;
(iii) Any breach of any covenant, obligation or
agreement of the Sellers set forth in this Agreement, the Escrow
Agreement or any Schedule, Exhibit, certificate or other document
delivered or to be delivered pursuant hereto; and
(iv) Any liabilities or obligations of Holdings
arising prior to the Closing.
(b) Subject to the provisions of this Article VII, a Pur-
chaser Indemnified Party will be obligated to satisfy any Indemnified Costs by
exercise of the right of set-off ("Right of Set-Off") against the Secured
Amount or the Contingent Consideration (but in the case of the Contingent
Consideration, only if such amounts have become or are likely to become pay-
able within 90 days from the date of any Notice of Claim). Satisfaction of
any indemnification claim by exercise of the Right of Set-Off (including any
earned interest thereon) shall not affect the Sellers' indemnification commit-
ments under this Article VII to the extent that such commitments have not
previously been fully satisfied by exercise of the Right of Set-Off. Any con-
tribution arrangements among the Sellers shall not affect any Purchaser
Indemnified Party's rights under this Article VII.
7.3 Indemnity by the Purchaser. The Purchaser hereby indemnifies
and agrees to hold the Sellers harmless from and against, and shall pay to the
Sellers the full amount of any and all Indemnified Costs that may be incurred
by the Sellers, arising out of, involving or relating to, any breach of any
covenant, obligation or agreement of the Purchaser set forth in this Agreement
or any certificate or other document delivered or to be delivered pursuant
hereto.
7.4 Limitation. (a) The amount of Indemnified Costs
for which the Sellers would otherwise be liable to the Purchaser Indemnified
Parties under this Article VII shall be reduced to the extent that:
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(i) any reserves or accruals for liabilities reflected on
the audited consolidated balance sheet of the Company as of December 31, 1996
(the "December 31, 1996 Balance Sheet") subsequently prove to have been over-
stated with respect to the total amount of the relevant items; provided,
however, that all reserves and accruals on such balance sheet must be audited
and in conformity with past practice and Italian GAAP consistently applied;
(ii) insurance recoveries relating to events occurring prior
to the date hereof exceed the amount of any related insurance receivable
reflected on the December 31, 1996 Balance Sheet; provided, however, that all
receivables on such balance sheet must be audited and in conformity with past
practice and Italian GAAP consistently applied;
(iii) collections relating to Accounts Receivables reflected
on the December 31, 1996 Balance Sheet exceed such reflected amount; provided,
however, that all receivables on such balance sheet must be audited and in
conformity with past practice and Italian GAAP consistently applied;
(iv) debt reflected on the December 31, 1996 Balance Sheet
is forgiven in whole or in part; provided, however, that all debt on such
balance sheet must be audited and in conformity with past practice and Italian
GAAP consistently applied; and
(v) the amount of cash payments that the Company and/or any
Group Company receives during the four year period beginning January 1, 1996
and ending December 31, 1999 from government authorities as per Schedule
7.4(a)(v) exceeds LIT 18,000,000,000 (it should be noted that the amounts
stated in such Schedule 7.4(a)(v) are indicative amounts expected to be
received); provided that, the amount of Indemnified Costs shall not be reduced
for any amount of such cash payments from government authorities in excess of
LIT 43,535,000,000 and, therefore, the maximum reduction of Indemnified Costs
pursuant to this subsection 7.4(a)(v) shall not exceed LIT 25,535,000,000;
provided further, that any reduction made pursuant to this subsection
7.4(a)(v) as a result of cash payments received by any Group Company other
than the Company shall equal the full amount of such cash payment multiplied
by the percentage of the Group Company owned by the Company.
(b) The Sellers shall not be obligated to indemnify any
Purchaser Indemnified Party under this Article VII unless and until the aggre-
gate amount of Indemnified Costs (after taking account of the provisions of
Section 7.4(a) above) incurred by Purchaser Indemnified Parties equals or ex-
ceeds LIT 5.0 billion, in which event Indemnified Costs in excess of such
amount shall be payable pursuant to this Article VII.
(c) Subject to Article 1229 of the Italian Civil Code, the
Indemnified Costs (after taking account of the provisions of Sections 7.4 (a)
and (b) above) arising from (i) any inaccuracy in any representations or
warranties of the Sellers set forth in this Agreement, the Disclosure Schedule
or any certificate or other document delivered or to be delivered pursuant
hereto or (ii) the Phenol Liabilities, notwithstanding such disclosure or the
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Purchaser's actual knowledge with respect thereto, for which the Sellers may
be liable shall be limited to LIT 26.5 billion (the "Cap"), provided that:
(i) such Cap shall apply to indemnifiable costs arising out
of, involving or relating to, matters of potential liability undisclosed or
inaccurately disclosed in this Agreement or the Disclosure Schedule; and
(ii) such Cap shall not serve to limit liability for
undisclosed (whether known or unknown) or inaccurately disclosed matters which
would result in a breach of (1) Section 3.4 (which covers title to Holdings
Shares, Company Shares and shares/quotas of the Group Companies), (2) Section
3.8 (which covers financial matters relating to Holdings) and (3) Section 3.16
(which covers Taxes); provided that, with regard to any indemnifiable costs
arising out of, involving or relating to, the matters described in clauses
(1), (2) and (3) of this Section 7.4(b)(ii) which are in excess of the Cap,
the Sellers shall be severally, and not jointly, liable for such costs in
excess of the Cap, only after full exhaustion of the Cap, and only to the
extent of LIT 640,236,959,016 in accordance with the percentages set forth in
Schedule 8.
(d) As noted in Section 7.1(b), the representations and
warranties of the Sellers shall survive until the third anniversary of the
Closing, except that (i) any representation or warranty made by the Sellers
relating to Taxes shall survive until the tolling of all applicable statutes
of limitation, and (ii) any representation or warranty made by the Sellers
relating to title to securities acquired or to be acquired by the Purchaser
hereunder shall survive without limitation.
(e) No Phenol Liability shall be deemed to be an
Indemnified Cost except to the extent that the aggregate amount of any Phenol
Liabilities exceed USD 8 million, in which event 50% of the amount by which
such Phenol Liabilities exceed USD 8 million shall be deemed to be Indemnified
Costs for which the Sellers shall remain liable, subject to the limitations
set forth in clauses (a), (b) and (c) of this Section 7.4.
7.5 Notice of Claims; Payment. (a) Notwithstanding any other
provision contained in this Agreement, any Indemnified Party shall be deemed
to have waived any right thereto unless such party gives to the Indemnifying
Party written notice of Claim (the "Notice of Claim"), which Notice of Claim
must be submitted by the Purchaser (in the case of a claim by a Purchaser
Indemnified Party) or by an authorized designee of the Sellers (in the case of
a claim by the Sellers), and shall contain, to the extent known to the Indem-
nified Party, the facts constituting the basis for such Claim.
(b) The Purchaser shall pay to the Sellers all Indemnified
Costs determined pursuant to this Article VII not later than thirty days
after (i) the Sellers provide written Notice of Claim under this Article VII
to the Purchaser and the Purchaser does not object to such Claim or (ii) a
final arbitration award if the Purchaser raises an objection to such Claim.
If the Purchaser wrongfully withholds its payment, it shall be required to pay
interest at an annualized rate equal to the sum of (i) the Applicable Rate
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charged on the due date plus (ii) two percent (2%) for the period commencing
on the due date and ending on the date such payment is made. For purposes of
this Section 7.5(b), the due date shall be the date thirty days after the
occurrence of either of the events described in clause (i) and (ii) of the
first sentence of this Section 7.5(b).
(c) If the Purchaser Indemnified Party shall have incurred
any Indemnified Costs to which in its judgment it is entitled to be
indemnified by the Sellers pursuant to this Article VII, the Purchaser shall
deliver the Notice of Claim to the Sellers at the addresses specified in
Schedule 9 specifying the amount of such Indemnified Costs to which it main-
tains it is entitled to indemnification and the facts constituting the basis
of such claim. The Sellers may dispute all or any portion of such Indemnified
Costs; provided that the Sellers shall notify the Purchaser in writing of any
disputed amounts, specifying the exact amounts in dispute and the basis for
such dispute, within 45 calendar days of the Sellers' receipt of Purchaser's
Notice of Claim. As promptly as possible after December 31, 1999, the Pur-
chaser shall provide the Sellers with a certificate (the "Officer's Certifi-
cate") of an officer of the Company setting forth (i) the aggregate amount of
Indemnified Costs to which it maintains it is entitled to indemnification and
(ii) the amounts to be deducted from such aggregate amount pursuant to Section
7.4(a) and 7.4(b). The Sellers shall pay to the Purchaser the amount speci-
fied in clause (i) of the previous sentence (plus interest thereon accrued
from the date of the occurrences for which indemnity is so claimed, provided
that interest shall not accrue or be payable with respect to any Indemnified
Cost until all reserves or accruals relating to such Indemnified Cost on the
December 31, 1996 Balance Sheet have been exhausted) minus the amounts speci-
fied in Section 7.4(a)(ii), (iii), (iv) and (v) (plus interest thereon accrued
from the date of the recovery, collection, debt forgiveness and/or receipt of
cash payments from government authorities, as the case may be, referred to in
Section 7.4(a)(ii), (iii), (iv) and (v)) not later than thirty days after (i)
the Purchaser delivers the Officer's Certificate to the Sellers and the
Sellers do not object to the contents of such Officer's Certificate or (ii) a
final arbitration award if the Sellers raise an objection to the contents of
such Officer's Certificate. If the Sellers wrongfully withhold payment, they
shall be required to pay interest at an annualized rate equal to the sum of
(i) the Applicable Rate charged on the due date plus (ii) two percent (2%) for
the period commencing on the due date and ending on the date such payment is
made. For purposes of this Section 7.5(c), the due date shall be the date
thirty days after the occurrence of either of the events described in clause
(i) and (ii) of the fourth sentence of this Section 7.5(c).
7.6 Defense by Indemnifying Party. An Indemnified Party shall
initially undertake the defense of any Third Party Claim (at the expense of
the Indemnifying Party) until the Indemnifying Party has acknowledged in writ-
ing that the Third Party Claim might give rise to an Indemnified Cost, whether
or not involving litigation, at which point the Indemnifying Party will be
entitled to assume the defense of such claim; provided, that the Indemnified
Party may at any time, at its election, participate (including through
representation by attorneys of its own) in such defense, provided, further,
that such participation shall be at the Indemnified Party's own expense. If
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the Indemnifying Party does not assume control of the defense as provided
above, the Indemnified Party may defend against such claim, in such manner as
it may deem appropriate, including, but not limited to, settling such claim
before or at any stage of the litigation (after giving notice thereof to the
Indemnifying Party) on such terms as the Indemnified Party may deem appropri-
ate; provided, however, that the Indemnified Party shall not settle any such
claim for consideration other than money without the prior written consent of
the Indemnifying Party and the Indemnified Party shall not, without the prior
written consent of the Indemnifying Party, settle or compromise any claim or
consent to the entry of any judgment that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to the Indemnifying Party
of a release from all liability in respect of such claim. Upon request, the
Indemnified Party shall give the Indemnifying Party access to such information
possessed by the Indemnified Party as the Indemnifying Party reasonably re-
quests relating to such claim. At the Indemnifying Party's reasonable
request, the Indemnified Party will cooperate with the Indemnifying Party in
the preparation of such defense if the Indemnifying Party reimburses the
Indemnified Party for the reasonable expenses incurred in connection with such
request. The Indemnifying Party shall not settle any such claim for consid-
eration other than money or consideration unrelated to the assets or oper-
ations of the Indemnified Party without the prior written consent of the In-
demnified Party and the Indemnifying Party shall not, without the prior writ-
ten consent of the Indemnified Party, settle or compromise any claim or
consent to the entry of any judgment that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to the Indemnified Party
of a release from all liability in respect of such claim. The party con-
testing or defending a Third Party Claim shall afford to the other party and
its counsel an opportunity to be present at, and to participate in conferences
with all persons, including Governmental Authorities, asserting such claims
and conferences with representatives or counsel for such persons.
ARTICLE VIII
TERMINATION
(a) This Agreement may be terminated by mutual written agreement
of the Purchaser and the Sellers, and shall not come into full force and
effect in the event that the conditions to Closing provided under Section 2.3
have not occurred on or prior to March 31, 1997.
(b) In case of termination of this Agreement under this Article
VIII, all confidential information received by any Party with respect to the
business of any other Party or its Affiliates will be kept confidential and
will not, without the prior written consent of the party disclosing such
information, be disclosed by the party receiving such information (or such
Party's representatives), in whole or in part, and will not be used by the
Party receiving such information (or such Party's representatives), directly
or indirectly, for any purpose other than in connection with completing the
Transactions.
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ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Entire Agreement; Amendments and Waivers. This Agreement
(together with the documents, instruments and writings delivered pursuant
hereto, including the Disclosure Schedule and other Schedules and Exhibits
hereto) supersedes all prior documents, understandings and agreements, oral or
written, relating to these Transactions, including without limitation, the
letter of intent, dated May 30, 1996, between Owens-Illinois, Inc., Holdings
and the Sellers, and, except as contemplated by various written agreements
entered into concurrently herewith, constitutes the entire understanding be-
tween the Parties with respect to the subject matter hereof; provided,
however, that in the event this Agreement is terminated, or does not come into
full force and effect, in accordance with Section 8(a) hereof, the provisions
contained in Section 8(b) shall remain in full force and effect. Any modifica-
tion or amendment to, or waiver of, any provision of this Agreement may be
made only by an instrument in writing executed by the Party against whom
enforcement thereof is sought.
9.2 Waiver of Compliance. Any failure of the Sellers or the Pur-
chaser to comply with any obligation, covenant, agreement or condition herein
may be expressly waived in writing by the Purchaser or the Sellers, respec-
tively, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
9.3 Expenses. Whether or not the Transactions shall be consum-
mated, each Party shall pay all of its own fees and expenses relating to the
transactions contemplated by this Agreement, including, without limitation,
all fees of counsel, actuaries, financial advisors and accountants. The fees
and expenses associated with the Escrow shall be shared equally between the
Sellers, on the one hand, and the Purchaser, on the other hand.
9.4 Transfer Taxes. The Purchaser agrees that it will pay any
stamp duty ("tassa sui contratti di borsa") and other endorsement costs (other
than taxes) incurred in connection with the endorsement of the Holdings Shares
and the Direct Shares to the Purchaser.
9.5 Tax Amnesty. If a tax amnesty becomes available to Holdings,
the Company and/or the Company Subsidiaries for any period for which the
Sellers may have liability, the Sellers may request that Holdings, the Company
and/or the Company Subsidiaries take advantage of such tax amnesty and the
cost will be borne by the Sellers. If, for any reason, Holdings, the Company
and/or the Company Subsidiaries do not wish to take advantage of the tax
amnesty, they may veto the request of the Sellers in which case the liability
of the Sellers for the relevant period subject to the amnesty will be limited
to the cost of the amnesty.
9.6 Notices. Any notice or other communication to a Party
required or permitted hereunder shall be made in writing and may be sent by
registered mail, return receipt requested, addressed to the address of such
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Party set forth in Schedule 9 hereto or to such other address as such other
Party shall have communicated to each other Party.
9.7 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the Parties without the prior written consent of the other Party or
Parties, as the case may be, provided, however, that the Purchaser may assign,
without any prior consent of the other Parties, its rights, interests and
obligations to a subsidiary of Owens-Illinois, Inc., provided that the
Purchaser shall remain responsible for its obligations hereunder.
9.8 Publicity. Other than as provided for in Sections 5.6 and
5.7 of this Agreement, no Party hereto shall make or issue, or cause to be
made or issued, any announcement or written statement concerning this Agree-
ment or the Transactions for dissemination to the general public without the
prior written consent of the other Parties. This provision shall not apply,
however, to any announcement or written statement required to be made by law
or the regulations of any Governmental Authority, except that the Party re-
quired to make such announcement shall consult with the other Parties concern-
ing the timing and content of such announcement before such announcement is
made.
9.9 Brokers and Finders. Neither the Sellers, Holdings, nor the
Company or any Group Company or any of their respective officers, directors or
employees have employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the Transac-
tions. Except for Morgan Stanley & Co., the Purchaser has not employed any
broker or finder or incurred any liability for brokerage fees, commissions or
finder fees in connection with the transactions contemplated by this Agree-
ment.
9.10 Dispute Resolution. The Parties shall attempt to resolve
any dispute arising in connection with this Agreement amicably by mutual
agreement. Any such dispute between the Parties which cannot be settled by
agreement within a period of sixty (60) days shall be finally resolved by
arbitration under the Rules of Conciliation and Arbitration of the ICC. Any
such arbitration shall be initiated by the delivery of a notice in writing by
any Party to the other Party following such sixty (60) day period. The arbi-
tration panel shall be comprised of three (3) arbitrators, one (1) to be ap-
pointed by the Purchaser, and one (1) to be appointed by the Sellers, and the
third by the first two (2) arbitrators. If either of the first two (2) arbi-
trators are not appointed within the time provided by said rules, or the two
(2) arbitrators fail to agree on the choice of the third within thirty (30)
days after the appointment of the second arbitrator becomes effective, such
arbitrator(s) shall be appointed by the International Court of Arbitration of
the ICC. The place of arbitration shall be Geneva, Switzerland. The language
to be used in the arbitral proceeding shall be English. The decision and
award of the arbitral tribunal shall be final, non-appealable and binding on
all parties hereto and their successors and permitted assigns hereunder, shall
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include a decision regarding the allocation of costs relating to any such
arbitration and all matters related thereto, and shall be enforceable in any
court of competent jurisdiction in accordance with the United Nations Conven-
tion on the Recognition and Enforcement of Foreign Arbitral Awards.
9.11 Counterparts; Language Conflicts. This Agreement may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same instrument. This Agreement, including the Disclosure Schedule attached
hereto, is executed in English and in an Italian translation. If any provi-
sion contained in the English version of this Agreement conflicts or is incon-
sistent with any provision in the Italian translation of this Agreement, then
the provision in the English version shall prevail; provided, however, that in
the case of Exhibit A (for which no English version will be produced), the
Italian version shall prevail.
9.12 Third Parties. Except as specifically set forth or referred
to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation other than the
Parties hereto and their successors or assigns (including any Affiliate of
Owens-Illinois, Inc.), any rights or remedies under or by reason of this
Agreement.
9.13 Governing Law. This Agreement and the legal relations among
the Parties shall be governed by and construed in accordance with the laws of
the Republic of Italy, without regard to its conflicts of law doctrine.
31
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
duly executed, all as of the day and year first above written.
OI ITALIA S.R.L.
By: /s/R. Scott Trumbull
--------------------
Name: R. Scott Trumbull
Title: Attorney-in-Fact
SELLERS NAMED ON SCHEDULE 1 HERETO
By: /s/Carlo Pontecorvo
-------------------
Name: Carlo Pontecorvo
Title: Attorney-in-fact
32
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SCHEDULE 2
DEFINITIONS
"Accounts Receivable" shall mean the trade accounts receivable of the
Company and Company Subsidiaries relating to the Glass Business which are out-
standing on the date hereof.
"Affiliate" shall mean, with respect to a specified person, (A) any
person directly or indirectly owning, controlling, or holding five percent or
more of the securities of the specified person, except where such ownership is
a portfolio investment; (B) any person five percent or more of whose securi-
ties are directly or indirectly owned, controlled, or held by such specified
person, except where such ownership is a portfolio investment; (C) any person
directly or indirectly controlling, controlled by, or who is under common con-
trol with, the specified person; (D) any officer, director, partner, copart-
ner, or employee of the specified person; (E) any trust or estate in which the
specified person has a substantial beneficial interest or as to which the
specified person serves as a trustee or in a similar capacity; and (F) any
relative or spouse of the specified person, or any relative of such spouse.
"Applicable Rate" means three-month RIBOR as published in the daily
newspaper "Il sole - 24 Ore."
"Audited Balance Sheet" means the audited, consolidated balance sheet of
the Company as at December 31, 1995, included in the Audited Financial State-
ments.
"Audited Financial Statements" means the audited consolidated Financial
Statements of the Company covering each of the three year periods ended Decem-
ber 31, 1993, 1994 and 1995, in the form as filed by the Company with CONSOB.
"Billion" means one thousand million.
"Business Day" means any day during which banks are generally scheduled
to be open for business in Milan and New York City, and during which regular
trading is scheduled to occur on the Milan Stock Exchange.
"Cap" has the meaning set forth in Section 7.4(c) of this Agreement.
"Claim" means any claim or any legal or equitable action or any arbitra-
tion proceeding by any party, including a Third Party Claim.
"Closing" has the meaning set forth in Section 2.2(a) of this Agreement.
"Company" has the meaning set forth on page 1 of this Agreement.
"Company Shares" means the 41,989,240 shares, par value LIT500 each, of
the Company issued and outstanding as of the date of this Agreement, excluding
the 2,194,055 Withdrawn Shares.
"Company Subsidiary" means the companies set forth under "Subsidiaries"
in Schedule 3.6(b) of the Disclosure Schedule.
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"CONSOB" means Commissione Nazionale per le Societa e la Borsa, the
Italian national companies and stock exchange commission.
"Contingent Consideration" has the meaning set forth in Section 2.6 of
this Agreement, determined in accordance with Schedule 4(a) hereto.
"Contracts and/or Agreements" means agreements, contracts, commitments,
leases, subleases, indentures, mortgages, instruments, security interests,
guaranties, insurance policies, warranty claims, rights against third parties,
causes of action, other similar arrangements and rights thereunder.
"Direct Shareholders" has the meaning set forth on page 1 of this Agree-
ment.
"Direct Shares" has the meaning set forth in page 1 of this Agreement.
"Direct Shares Consideration" has the meaning set forth in Section
2.5(a)(ii) of this Agreement.
"Disclosure Schedule" means the document entitled Disclosure Schedule,
attached as Schedule 3 to this Agreement, which is delivered by the Sellers to
the Purchaser simultaneously with the execution hereof, and incorporated here-
in by reference, containing the information required to be included therein
pursuant to this Agreement.
"Escrow Agent" means Societa per Amministrazioni Fiduciarie "SPAFID"
S.p.A., an Italian company with registered offices in Milan, 6, Piazza P.
Ferrari.
"Escrow Agreement" is the agreement referred to in Section 2.1(a)(ii) of
this Agreement.
"Financial Books and Records" means all ledgers, books, accounts and
journals used in connection with preparing any Financial Statements, including
certain originals of which are required by law or any Governmental Authority
to be maintained by Holdings, the Company, or any Group Company.
"Financial Statements" means consolidated income statement, balance
sheet, and funds flow statement and accompanying footnotes at or for the peri-
od ending on any specified date.
"Glass Business" means the business of developing, testing, manufactur-
ing, marketing, selling and exporting glass container and packaging products,
tableware and insulators and related support operations, as currently con-
ducted by the Group Companies, as a going concern.
"Governmental Authority" means any court or governmental or other
regulatory or administrative agency, commission body, official or any stock
exchange authority having jurisdiction over the Parties, Holdings, the Company
or any Group Company or any of their properties or operations.
2
<PAGE>
"Group Companies" means the Company, any Company Subsidiary and Affili-
ates or investees of the Company set forth in Schedule 3.6(b) of the Disclo-
sure Schedule.
"Holdings" has the meaning set forth on page 1 of this Agreement.
"Holdings Financial Statements" has the meaning set forth in Section 3.8
of this Agreement.
"Holdings Purchase Consideration" has the meaning set forth in Section
2.5(a)(i) of this Agreement.
"Holdings' Shareholders" has the meaning set forth on page 1 of this
Agreement.
"Holdings Shares" has the meaning set forth on page 1 of this Agreement.
"ICC" means the International Chamber of Commerce.
"Indemnified Costs" means penalties, losses, damages, liabilities, costs
or expenses (including, without limitation, reasonable attorneys' fees and
other dispute resolution costs).
"Indemnified Party" means any party entitled to indemnification under
Article VII of this Agreement.
"Indemnifying Party" means any party from whom indemnification is sought
under Article VII of this Agreement.
"Intellectual Property" means all design registrations, patents, patent
applications, service marks, product registrations, scientific data relating
to the safety and efficacy of products, trademarks, trademark registrations,
trademark applications, corporate names, logos, copyrights, copyright applica-
tions, industrial design registrations, utility models, trade names, trade
rights, whether or not registered (or by whatever name or designation), owned
or licensed, directly or indirectly, in whole or in part by the Company or any
Company Subsidiary, and all proprietary data, formula cards and technical,
manufacturing or marketing know-how or information (and materials embodying
such information) in the possession of the Company or any Company Subsidiary,
including new developments, discoveries, inventories and trade secrets and
documentation thereof (including related papers, drawings, models, prototypes,
chemical and biological compositions, formulas, diaries, notebooks, specifica-
tions, methods of manufacture, data-processing cards, disks, tapes and other
software and all data contained therein or thereon), goodwill associated
therewith, licenses and sublicenses granted and obtained with respect thereto,
and rights thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions, used in
connection with, or that relate to, or are necessary to the operation of the
Glass Business.
3
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"Interim Unaudited Balance Sheet" means the unaudited consolidated
balance sheet of the Company as at June 30, 1996, included in the Interim
Unaudited Financial Statements.
"Interim Unaudited Financial Statements" means the interim unaudited
consolidated Financial Statements of the Company for the six month period
ended June 30, 1996, including the Interim Unaudited Balance Sheet, prepared
by the Company pursuant to Italian GAAP in a manner consistent with the
Audited Financial Statements.
"Inventory" means raw materials and supplies, manufactured and purchased
parts, goods in process and finished goods other than spare parts expensed.
"Italian GAAP" means Italian generally accepted accounting principles.
"Liens" means any claim, mortgage, deed of trust, pledge, security
interest, lien, conditional sales arrangement charge or other encumbrance of
any kind.
"LIT" means Lire (or in the singular Lira), the lawful currency of the
Republic of Italy.
"Management and Non-Competition Agreements" has the meaning set forth in
Section 2.1(a)(v) of this Agreement.
"Merger" has the meaning set forth in Section 3.6(a) of this Agreement.
"Minors" has the meaning set forth on page 1 of this Agreement.
"Notice of Claim" has the meaning set forth in Section 7.5(a) of this
Agreement.
"Ordinary Course" means the ordinary course of business consistent with
(a) past custom and practices of the Glass Business, including with respect to
quantity, price and frequency and (b) the financial plan and accounting
practices reflected in the Audited Financial Statements and the Unaudited
Consolidated October 31, 1996 Financial Statements.
"Other Financial Information" means the statements of accounts, budgets,
income statements, balance sheets, and similar financial information of Hold-
ings, the Company and the Company Subsidiaries including, without limitation,
an estimated statement of profitability (excluding extraordinary items) for
the twelve-month period ending December 31, 1996, with respect to the Glass
Business which have been provided to the Purchaser.
"Parties" means the Purchaser and the Sellers.
"Permits and Licenses" means franchises, approvals, permits, licenses,
including paid up licenses on all computer software, orders, registrations,
certificates, variances, and similar rights obtained from any Governmental
Authority, used in connection with, or that relate to, or are necessary to,
the operation of the Glass Business.
4
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"Personal Property" means tangible personal property, whether owned or
leased, including machinery, equipment, computers and computer software, fur-
niture, automobiles, trucks, tractors, trailers, tools, jigs, and dies, wher-
ever located.
"Phenol Liabilities" shall have the meaning set forth in Section
7.2(a)(ii) of this Agreement.
"Public Shareholders" means such persons, other than Sellers, who may
from time to time own the Public Shares.
"Public Shares" means the 8,869,830 shares of capital stock in the
Company, representing 21.124% of the Company Shares listed for trading on the
Milan Stock Exchange.
"Purchaser" has the meaning set forth on page 1 of this Agreement.
"Purchaser Indemnified Party" has the meaning set forth in Section
7.2(a) of this Agreement.
"Purchaser's Auditors" means Reconta Ernst & Young, [Milan] office.
"Purchaser's Italian Counsel" means Gianni, Origoni & Partners.
"Real Property" means real property, whether owned or leased, including
all buildings, improvements, fixtures, fittings, production lines, equipment,
easements, rights of way and appurtenants thereon and thereto.
"Right of Set-Off" has the meaning set forth in Section 7.2(b) of this
Agreement.
"Secured Amount" has the meaning set forth in Section 2.7(b) of this
Agreement.
"Sellers" has the meaning set forth on page 1 of this Agreement.
"Sellers' Counsel" means Studio Legale e Tributario, 4 Via di Porta
Pinciana, Rome.
"Shareholders Contribution" has the meaning set forth in Section 5.10 of
this Agreement.
"Signing" has the meaning set forth in Section 2.1(a) of this Agreement.
"Tax" or "Taxes" means all taxes, charges, fees, levies and other
assessments, including, without limitation, income, excise, capital, property,
immovable property, sales, use, payroll (including required withholdings),
value added, social security and franchise taxes imposed by any Governmental
Authority, but excluding Transfer Taxes. Such term shall include any inter-
est, penalties or additions payable in connection with such taxes, charges,
fees, levies or other assessments.
5
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"Third Party Claim" means any claim or any legal or equitable action or
any arbitration proceeding by a person who is not a party to this Agreement.
"Transactions" shall mean the acquisition, by the means specified in
Article II of this Agreement by the Purchaser, of the Holdings Shares and the
Direct Shares.
"Transfer" means to sell, convey, assign, transfer, deliver or otherwise
dispose, whether voluntarily or by operation of law.
"Transfer Taxes" means all transfer, recording, registration, stamp
duty, capital, sales and similar taxes or fees imposed by law or any Govern-
mental Authority in connection with or otherwise due and payable as a result
of any actions necessary to effect the Transactions.
"Unaudited Consolidated October 31, 1996 Financial Statements" means the
unaudited consolidated balance sheet of the Company as at October 31, 1996 and
the unaudited consolidated profit and loss statement of the Company for the
ten month period ending October 31, 1996.
"Withdrawn Shares" has the meaning set forth in Section 3.7(b) of this
Agreement.
The plural or singular, as the case may be, of any defined term shall have a
meaning correlative to such defined term.
6
Exhibit 23.1
Consent of Independent Auditors
-------------------------------
The Board of Directors
Avir Finanziaria S.p.A.
We consent to the incorporation by reference in the registration statement
(No. 33-51982) on Form S-3 of Owens-Illinois, Inc., in the registration
statements (Nos. 33-43559 and 33-57139) on Forms S-8 of Owens-Illinois, Inc.
Stock Purchase and Saving Plan, Non-Union Retirement and Savings Plan,
Supplemental Retirement Plan and Long-Term Savings Plan, in the registration
statement (No. 33-44252) on Form S-8 pertaining to the Stock Option Plan for
Key Employees of Owens-Illinois, Inc., in the registration statement (No. 33-
57141) on Form S-8 pertaining to the Stock Option Plan for Directors of Owens-
Illinois, Inc. of our report dated May 13, 1996, except as to Note 21, which
is as of March 3, 1997, with respect to the consolidated financial statements
of Avir Finanziaria S.p.A. and subsidiaries as of and for the year ended
December 31, 1995, which report appears in the Form 8-K/A of Owens-Illinois,
Inc. dated March 3, 1997.
KPMG S.p.A.
Rome, Italy
March 3, 1997
