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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________
FORM 8-K/A-1
__________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 15, 1994
LEAR SEATING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 001-11311 13-3386776
- ------------------------------- ------------------ -------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
21557 Telegraph Road
Southfield, Michigan 48034
(Address of principal executive offices) (zip code)
(810) 746-1500
(Telephone number, including area code, of agent for service)
No Change
(Former name or former address, if changes since last report)
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The purpose of this Amendment No. 1 is to amend the exhibits
to the Registrant's Current Report on Form 8-K dated December 15, 1994, by
filing the Asset Purchase Agreement, dated December 15, 1994 between the
Registrant and Gilardini S.p.A. and the required financial statements for the
acquired businesses.
ITEM 7: Financial Statements, Pro Forma Financial Information and Exhibits:
B. Exhibits
2.1 Stock Purchase Agreement, dated December 15, 1994,
by and between Gilardini S.p.A. and Lear Seating
Corporation
2.2 Agreement to Furnish Copies of Omitted Schedules and
Exhibits to Stock Purchase Agreement
99.1 Combined financial statements of Fiat Seat Business
99.2 Pro Forma Financial Data
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
LEAR SEATING
CORPORATION
(Registrant)
/s/ James H. Vandenberghe
-------------------------
James H. Vandenberghe
Executive Vice President
Chief Financial Officer
Dated: February 28, 1995
3
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EXHIBIT INDEX
Exhibit Number Description of Exhibit
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2.1 Stock Purchase Agreement, dated December 15, 1994, by and
between Gilardini S.p.A. and Lear Seating Corporation
2.2 Agreement to Furnish Copies of Omitted Schedules and
Exhibits to Stock Purchase Agreement
99.1 Combined financial statements of Fiat Seat Business
99.2 Pro Forma Financial Data
4
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EXHIBIT 2.1
Stock Purchase Agreement
By and Between
Gilardini S.p.A.
and
Lear Seating Corporation
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INDEX
<TABLE>
<CAPTION>
Article Article Heading Page
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<S> <C> <C>
I Definitions 2
II Purchase and Sale of Purchased
Shares, Purchase Price and
Other Related Matters 8
III Closing and Closing Date
Deliveries 10
IV Pre-Closing Filings 17
V Pre-Closing Covenants 18
VI Financial Statements and Other
Documents 25
VII Warranties and Representations
of Seller 25
VIII Tax Matters 62
IX Indemnification of Purchaser 72
X Warranties and Representations
of Purchaser 80
XI Conditions of Closing Applicable
to Purchaser 81
XII Conditions of Closing Applicable
to Seller 85
XIII Termination 86
XIV Certain Understandings and
Agreements 87
XV Miscellaneous 90
</TABLE>
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") dated as of
November 15, 1994 by and between Lear Seating Corporation ("Purchaser"), a
Delaware corporation having its principal office at 21557 Telegraph Road,
Southfield, Michigan 48034 USA and being represented by Mr. James H.
Vandenberghe as duly authorized by resolutions of the Executive Committee of
the Board of Directors of Purchaser, and Gilardini S.p.A. ("Seller"), a
corporation organized under the laws of Italy (Italian Tax Code no.
00501280010) having its principal office at Corso Giulio Cesare, 300, 10154
Torino, Italy and being represented by Mr. Piero Maritano as duly authorized by
resolutions of the Board of Directors of Seller.
Recitals:
A. Seller, through its direct and indirect Subsidiaries
(as defined), is engaged in the business of manufacturing and selling
automotive seat systems.
B. Seller owns (or in the case of the stock of SEPI
S.p.A. held by Bertrand Faure S.A. and its affiliates ("Bertrand Faure") will
acquire on or prior to the Closing Date) (i) all of the issued and outstanding
shares of capital stock of SEPI S.p.A. (the "Company"), a corporation organized
under the laws of Italy (Italian Tax Code no. 01053770507) having its principal
office at Corso Giulio Cesare, 300, 10154, Torino, Italy consisting of
3,484,538 shares of common stock, par value 10,000 Italian Lira per share (the
"Company Shares"), (ii) all of the issued and outstanding shares of capital
stock of SEPI Poland Sp Z o.o., a
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corporation organized under the laws of Poland having its principal office at
Nowososnowiecka No. 1, Myslowice, Poland ("SEPI Poland"), consisting of 40
shares of capital stock, par value 1,000,000 Polish zloty per share (the "SEPI
Poland Shares") and (iii) thirty five percent (35%) of the issued share capital
of Markol Otomotiv Yan Sanayi Ve Ticaret Anonim Sirketi, a corporation
incorporated under the laws of Turkey (Registration No. 147859/95408) having
its principal office at Istanbul, Turkey ("Markol"), represented by 10,500,000
registered provisional share certificates of issued share capital each having
a nominal value of 5,000 Turkish Lira (the "Markol Shares") (such Company
Shares, SEPI Poland Shares and Markol Shares being hereinafter collectively
referred to as the "Purchased Shares").
C. Purchaser desires to purchase from Seller, and Seller
desires to sell to Purchaser, the Purchased Shares, at the Closing on the
Closing Date (as those terms are hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
Definitions
1.01 Each term defined in the first paragraph and Recitals
shall have the meaning set forth above whenever used herein, unless otherwise
expressly provided or unless the context clearly requires otherwise.
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1.02 In addition to the terms defined in the first
paragraph and Recitals, whenever used herein, the following terms shall have
the meanings set forth below unless otherwise expressly provided or unless the
context clearly requires otherwise:
"ACM" - See Section 7.15(i).
"Actions" - See Section 7.15(f).
"Article 47 Procedure" - See Section 4.02.
"Balance Sheet" shall mean the audited consolidated balance
sheet of the Company and SEPI SUD as of December 31, 1993 included in the
Financial Statements.
"Balance Sheet Date" shall mean December 31, 1993.
"BF Company Shares" - See Section 5.04.
"Car Program Agreement" - See Section 3.02(xviii).
"Closing" - See Section 3.01.
"Closing Balance Sheet" - See Section 2.03(a).
"Closing Date" - See Section 3.01.
"Closing Financial Statements" - See Section 2.03(a).
"Closing Payment" - See Section 2.02(a).
"Company Subsidiaries" shall mean each of the Subsidiaries
other than SEPI Poland and Markol.
"Company's Accountants" - See Section 2.03(a).
"Consultant" - See Section 7.15(f).
"Controlled Subsidiaries" shall mean SEPI Poland, SEPI SUD and
any other corporation or entity of which stock (or equivalent ownership or
controlling interest) having voting power
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to elect a majority of the board of directors (or equivalent controlling person
or group) is directly or indirectly owned or controlled by the Company or by
SEPI Poland.
"Date of Notice of Claim" - See Section 9.07.
"Deferred Cash Spike Payment" - See Section 2.02(a).
"Employee Plan" - See Section 7.12(a).
"Environmental Claim" - See Section 7.15(c).
"Environmental Damages" - See Section 7.15(f).
"Environmental Indemnitees" - See Section 7.15(f).
"Fiat" means Fiat S.p.A. and Fiat Auto S.p.A.
"Fiat Guaranty Letter" - See Section 3.02(a)(xvi).
"Fiat Services Letter" - See Section 3.02(a)(xv).
"Financial Accommodation" - See Section 14.02.
"Financial Debts" shall mean the sum of those financial
statement items described on Exhibit A attached hereto, which financial
statement items are derived from the Closing Balance Sheet.
"Financial Statements" shall mean the audited financial
statements of the Company and SEPI SUD prepared in accordance with GAAP as of
and for the years ended December 31, 1991, 1992 and 1993 described on Exhibit B
attached hereto.
"GAAP" shall mean Italian generally accepted accounting
principles consistently applied.
"General Warranty Claims" - See Section 9.02(b).
"Gilardini Seats Group" shall mean the Company and the
Subsidiaries, collectively.
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"Hazardous Substance" - See Section 7.15(d).
"Indemnification Event" - See Section 7.15(j).
"Independent Auditors" - See Section 9.04(b).
"Italian Antitrust Approval" - See Section 4.01.
"MASTAL" - See Section 7.22.
"Material Contract" - See Section 7.11.
"1995 Budget" shall mean the projected results of operations
and financial position of the Company and SEPI SUD and of SEPI Poland for
calendar year 1995 included as a part of the Projections and attached hereto as
a part of Schedule 7.05.
"Non-Solicitation, Confidentiality and Non-Compete Agreement"
- - See Section 3.2(a)(xiv).
"Notice of Claim" - See Section 9.03.
"Person" shall mean any natural person, corporation,
partnership, joint venture, trust, association or unincorporated entity of any
kind.
"Poland Balance Sheet" shall mean the unaudited balance sheet
of the division of Gilardini Poland Sp Z o.o. engaged in the manufacture of
automotive seat systems in Poland as of September 30, 1994 included in the
Poland Financial Statements.
"Poland Preliminary Closing Balance Sheet" shall mean the
unaudited pro forma opening balance sheet of SEPI Poland as of November 15,
1994 attached hereto as Exhibit C.
"Poland Closing Balance Sheet" shall mean the audited opening
balance sheet of SEPI Poland as of November 15, 1994.
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"Poland Closing Balance Sheet Date" shall mean November 15,
1994.
"Poland Financial Statements" shall mean the Poland Balance
Sheet and the income statement of the division of Gilardini Poland Sp Z o.o.
engaged in the manufacture of automotive seat systems in Poland for the nine
month period ended September 30, 1994 attached hereto as Exhibit D.
"Pre-Closing Substance" - See Section 7.15(j).
"Preliminary Closing Financial Statements" shall mean the
unaudited balance sheet and statements of income and cash flows of the Company
and SEPI SUD for the nine months ended September 30, 1994 attached hereto as
Exhibit E.
"Premises" - See Section 7.15(b).
"Products" - See Section 7.14(f).
"Projections" - See Section 7.05(e).
"Purchase Price" - See Section 2.02(a).
"Purchaser's Accountants" - See Section 2.03(b).
"Related Agreements" - See Section 3.02(a)(x).
"Release" - See Section 7.15(d).
"SEPI Poland Employee Roster" - See Section 5.07.
"SEPI Poland Share Purchase Agreement" - See Section
3.02(a)(ii).
"SEPI SUD" means SEPI SUD S.p.A., a corporation organized
under the laws of Italy (Italian Tax Code no. 05974020017) having its
principal offices at Corso Giulio Cesare, 300, 10154, Torino, Italy.
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"Shareholders' Equity" shall mean the shareholders' equity
reflected on the Closing Balance Sheet determined in accordance with GAAP.
"Statutory Financial Statements" shall mean the financial
statements of the Company and the Company Subsidiaries required by Italian law.
"Subsidiary" shall mean each of the entities listed on Exhibit
F attached hereto, individually and "Subsidiaries" shall mean the entities
listed on Exhibit F attached hereto, collectively.
"Subsidiary Stock" shall mean the issued and outstanding
capital stock or equity interests of each Subsidiary all of which is owned by
the Company or the Seller, respectively, and is described on Exhibit F.
"Supply Agreement" - See Section 3.02(a)(xiii).
"Survey" - See Section 7.15(f).
"Tax Claims" - See Section 9.02(a).
"Taxes" - See Section 8.02(a).
"Threshold" - See Section 9.02(c).
"Transitional Services Agreement" - See Section 3.02(a)(xv).
1.03 Unless otherwise defined, the foregoing definitions shall
be equally applicable to both the singular and plural forms of the defined
terms. The words "herein," "hereof" and words of similar import as used in
this Agreement shall refer
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to this Agreement as a whole and not to any particular provision in this
Agreement.
ARTICLE II
Purchase and Sale of Purchased Shares,
Purchase Price and Other Related Matters
2.01 Upon the terms and subject to the conditions of this
Agreement, Seller shall sell, assign, convey, transfer and deliver the
Purchased Shares to Purchaser at the Closing on the Closing Date, and Purchaser
shall purchase the Purchased Shares from Seller at the Closing on the Closing
Date.
2.02 (a) The purchase price (the "Purchase Price") payable
by the Purchaser for the Purchased Shares shall be two hundred and fifty
billion Italian Lira (Lit 250,000,000,000) minus the amount of the Financial
Debts as of September 30, 1994 as derived from the Closing Balance Sheet, which
Financial Debts shall not exceed the amount of one hundred billion Italian Lira
(Lit 100,000,000,000) nor be lower than eighty billion Italian Lira (Lit
80,000,000,000). The closing payment (the "Closing Payment") payable at the
Closing on the Closing Date by Purchaser to Seller shall be the Purchase Price
minus twenty billion Italian Lira (Lit 20,000,000,000) (the "Deferred Cash
Spike Payment"), which Deferred Cash Spike Payment shall be payable by
Purchaser to Seller, without interest thereon, on November 30, 1998.
(b) The parties agree that the Purchase Price
shall be allocated among the Purchased Shares in a manner
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substantially consistent with the allocation set forth on Exhibit G hereto.
(c) All amounts paid pursuant to Sections 2.02(a)
hereof shall be by wire transfer of immediately available funds for credit to
the recipient thereof to a bank account or accounts designated by Seller.
Seller shall designate such bank account or accounts in writing at least five
(5) business days prior to Closing.
2.03 (a) Prior to the Closing, Seller shall cause the
Turin office of Arthur Andersen & Co., the Company's independent public
accountants (the "Company's Accountants"), to (i) audit the books of account
and registers of the Company and the Company Subsidiaries as of September 30,
1994 in accordance with GAAP; and (ii) prepare and deliver to Purchaser and
Seller by November 15, 1994 (A) an audited consolidated balance sheet of the
Company and the Company Subsidiaries as of September 30, 1994 ("Closing Balance
Sheet") and audited consolidated statements of income and cash flows for the
period from January 1, 1994 through September 30, 1994 (collectively, including
the Closing Balance Sheet, the "Closing Financial Statements"), each prepared
in a manner consistent with the Financial Statements and in accordance with the
accounting principles set forth on Exhibit H hereto; (B) the unqualified report
of the Company's Accountants on the foregoing financial statements stating that
such financial statements have been prepared in accordance with GAAP; and (C) a
calculation of
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the aggregate amount of Shareholders' Equity and Financial Debts as of
September 30, 1994 derived from the Closing Balance Sheet.
(b) Exhibit H attached hereto sets forth the
accounting principles to be applied by the Company's Accountants with respect
to the preparation of the Closing Financial Statements and the counting and
valuing the inventory in the preparation of the Closing Balance Sheet.
Purchaser and representatives of Purchaser, including Purchaser's independent
public accountants ("Purchaser's Accountants"), shall be permitted to
participate in the preparation of the Closing Financial Statements, shall be
provided access to the audit workpapers of the Company's Accountants and shall
be permitted to observe the taking of the physical inventory by the Company and
the Company's Accountants in the preparation of the Closing Balance Sheet. The
activities and rights of Purchaser and representatives of Purchaser (including
Purchaser's Accountants) described in the preceding sentence shall not in any
way affect, limit or terminate Purchaser's rights under this Agreement,
including, without limitation, its right to indemnification under Article IX
hereof.
ARTICLE III
Closing and Closing Date Deliveries
3.01 The term "Closing" as used herein shall refer to the
actual conveyance, transfer, assignment and delivery of the Purchased Shares to
Purchaser in exchange for the payment to Seller pursuant to Section 2.02(a) of
this Agreement. The Closing
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shall take place at the offices of Gilardini S.p.A., at Corso Giulio Cesare,
300, 10154, Torino, Italy, on November 30, 1994 at 10:00 a.m. Italian Time
provided that all of the conditions precedent set forth in Articles XI and XII
of this Agreement are satisfied or waived by the appropriate party hereto,
subject to Article XIII of this Agreement ("Closing Date"), or at such other
place and time or on such other date as is mutually agreed to in writing by
Seller and Purchaser.
3.02 At the Closing on the Closing Date:
(a) Seller shall deliver to the Purchaser:
(i) certificates representing all of the Company
Shares and the Markol Shares, which certificates shall be duly endorsed and
registered in accordance with applicable law;
(ii) the Share Purchase Agreement necessary to
effect the transfer of the SEPI Poland Shares in the form of Exhibit I attached
hereto (the "SEPI Poland Share Purchase Agreement") executed by Seller;
(iii) certificates representing all of the other
outstanding Subsidiary Stock;
(iv) written resignations, effective on the
Closing Date, and with respect to SEPI Poland, written evidence of the
termination of the employment contracts, of those officers, directors and
statutory auditors of the Company and the Controlled Subsidiaries that the
Purchaser shall have requested prior to the Closing;
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(v) all corporate and other records of the
Company and the Controlled Subsidiaries, including but not limited to, minute
books (including minutes of Board of Directors meetings, committee meetings,
shareholder meetings and statutory auditors meetings), stock books and
registers (including ledgers), books of account, leases and contracts,
financial records and personnel records;
(vi) Certificates/Articles of Incorporation or
other appropriate charter documents as are currently in effect, of the Company
and the Subsidiaries, certified, to the extent possible in any given
jurisdiction, as of a date as close to the Closing Date as is reasonably
practicable, by the appropriate governmental office or court and further
certified by an officer of the Company and/or the Subsidiaries, as applicable,
as of the Closing Date;
(vii) certificates, dated as of a date as close to
the Closing Date as is reasonably practicable, of the appropriate governmental
office or court where the Company and each of the Subsidiaries are organized
and of each of the jurisdictions in which the Company and each of the
Subsidiaries are qualified to transact business as to the good standing of the
Company and each of the Subsidiaries in such jurisdictions and further
certified by an officer of the Company and/or the Subsidiaries, as applicable,
as of the Closing Date, and certificates, dated as of a date as close to the
Closing Date as is reasonably practicable, of the appropriate governmental tax
authorities in Poland as to
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the good standing of (1) Gilardini Poland Sp. Z o.o. and (2) SEPI Poland with
respect to all taxes, charges and fees assessed in relation to (x) income and
(y) social security (ZUS) obligations and further certified by an officer of
Gilardini Poland Sp. Z o.o. and SEPI Poland, as applicable, as of the Closing
Date;
(viii) By-laws, if any, of the Company and each of
the Subsidiaries certified, as of the Closing Date, by its corporate secretary
or other appropriate corporate officer;
(ix) the foreign investment permit, if any, of
each of the Subsidiaries;
(x) certified copies of resolutions (i) of the
Board of Directors of Seller and/or any other appropriate Person approving the
execution, delivery and performance of this Agreement, the SEPI Poland Share
Purchase Agreement, the Non-Solicitation, Confidentiality and Non-Compete
Agreement and the Transitional Services Agreement and the consummation of the
transactions contemplated hereunder and thereunder, (ii) of Fiat S.p.A. and any
other appropriate Person approving the execution, delivery and performance of
the SEPI Poland Share Purchase Agreement, the Non-Solicitation, Confidentiality
and Non-Compete Agreement, the Supply Agreement, the Transitional Services
Agreement, the Fiat Services Agreement, the Fiat Guaranty Letter and the Car
Program Agreement (collectively, the "Related Agreements") and the consummation
of the transactions contemplated thereby and (iii) of the Board of Directors of
Markol pursuant to which they have authorized the amendment to
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the Articles of Association of Markol so as to permit the transfer of the
Markol Shares from Seller to Purchaser and acknowledging the purchase of the
Markol Shares by Purchaser and committing to duly register the Markol Shares in
the name of Purchaser in the stock book of Markol.
(xi) the opinions of Dr. Carlo Bondone, in-house
counsel to Seller and the Gilardini Seats Group, dated the Closing Date in form
and substance satisfactory to Purchaser;
(xii) the opinions of Altheimer & Grey, independent
outside counsel to SEPI Poland, dated the Closing Date, with respect to the
matters set forth on Exhibit J attached hereto in form and substance
satisfactory to Purchaser;
(xiii) the Supply Agreement (including the side
letter attached thereto) in the form of Exhibit K attached hereto (the "Supply
Agreement") executed by Fiat Auto S.p.A.;
(xiv) the Non-Solicitation, Confidentiality and
Non-Compete Agreement in the form of Exhibit L attached hereto (the
"Non-Solicitation, Confidentiality and Non-Compete Agreement") executed by
Seller and Fiat S.p.A.;
(xv) (A) the Transitional Services Agreement in
form and substance satisfactory to Purchaser and Seller (the "Transitional
Services Agreement") executed by Seller, which Transitional Services Agreement
will provide that Seller will continue to provide EDP and certain other
identified services currently provided by Seller to the Gilardini Seats Group
after Closing and, as a result of the final settlement of certain
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differences between the 1995 Budget and the Projections previously delivered,
those services until December 31, 1995, valued at Three Billion Two Hundred
Thousand Italian Lira (Lit 3,200,000,000), will be provided at no charge; and
(B) a letter (the "Fiat Services Letter") executed by Fiat S.p.A. pursuant to
which Fiat S.p.A. will confirm its agreement to provide, or cause one of its
affiliates to provide, the continuation of those certain services identified by
Purchaser as were provided by Fiat S.p.A. or such affiliate to the Company or a
Subsidiary prior to the Closing Date at such costs and upon such terms as are
consistent with past practices and identified in the Fiat Services Letter; and
(xvi) a letter (together with a form of guarantee)
in form and substance satisfactory to Purchaser and Fiat S.p.A. executed by
Fiat S.p.A. (the "Fiat Guaranty Letter"), pursuant to which Fiat agrees to
guaranty the obligations of Seller under this Agreement upon the occurrence of
either of the following events: (i) Fiat ceases to own, directly or
indirectly, in excess of 50% of the stock of Seller, or (ii) the net worth of
the Seller determined in accordance with GAAP is less than 250 billion Italian
Lira;
(xvii) a letter executed by Fiat S.p.A. in form and
substance satisfactory to Purchaser and Fiat S.p.A. pursuant to which Fiat
S.p.A. will confirm its agreement with the Company that commencing on December
1, 1994, all or a portion, as requested by Purchaser, of the invoices for
products manufactured
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by the Company and sold to Fiat Auto S.p.A. shall from that time forward be
grossed up to include all applicable value added taxes; and
(xviii) an agreement executed by Seller in form and
substance satisfactory to Purchaser and Seller (the "Car Program Agreement")
pursuant to which Seller agrees to continue for three years at its sole cost
and expense, or pay all costs and expenses related to, the employee automotive
program presently provided to 58 managers of the Company and the Subsidiaries
on the same terms and conditions as are currently in place.
(b) The Purchaser shall deliver to Seller:
(i) the Closing Payment to be delivered by
the Purchaser pursuant to Section 2.02(a) of this Agreement;
(ii) the SEPI Poland Share Purchase
Agreement executed by Purchaser;
(iii) certified copies of resolutions of the
Board of Directors of Purchaser approving the execution, delivery and
performance of this Agreement and the Related Agreements and the consummation
of the transactions contemplated hereunder and thereunder;
(iv) the opinions of Winston & Strawn and
of Gianni, Origoni & Partners, counsel to the Purchaser, each dated the Closing
Date in form and substance satisfactory to Seller;
(v) the Supply Agreement executed by
Purchaser; and
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(vi) the Non-Solicitation, Confidentiality and
Non-Compete Agreement executed by Purchaser; and
(vii) the Transitional Services Agreement and the Fiat
Services Agreement executed by Purchaser.
3.03 Seller and Purchaser shall, on request, on and after
the Closing Date, cooperate with one another by furnishing any additional
information, executing and delivering any additional documents and/or
instruments and doing any and all such other things as may be reasonably
required by the parties or their counsel to consummate or otherwise implement
the transactions contemplated by this Agreement.
ARTICLE IV
Pre-Closing Filings
4.01 The Purchaser covenants and agrees to promptly file
an application with the Autorita Garante della Concorrenza e del Mercato for
approval of the transactions contemplated hereby (the "Italian Antitrust
Approval"). Seller covenants and agrees to cooperate with Purchaser in
connection with the preparation and filing of the Italian Antitrust Approval
application and represents and warrants that all data and information provided
to Purchaser in connection with such application is true and correct.
4.02 The Seller and Purchaser covenant and agree with each
other to complete the procedures set forth in Article 47 of Italian Law
428-1990 (the "Article 47 Procedure") and to
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cooperate with each other in complying with the Article 47 Procedure.
4.03 The Seller and Purchaser covenant and agree with each
other to (a) promptly file, or cause to be promptly filed, with any United
States, Italian, Polish, Turkish or other foreign agency or any state or local
governmental body or agency, all such other notices, applications or other
documents as may be necessary to consummate the transaction contemplated hereby
and (b) thereafter diligently pursue all consents or approvals from any such
governmental agencies or bodies as may be necessary to consummate the
transactions contemplated hereby.
ARTICLE V
Pre-Closing Covenants
5.01 The Seller shall at all reasonable times prior to the
Closing Date make the office facilities, plants, machinery and equipment,
inventories, books of account and records (including all corporate books and
records of any kind) of the Gilardini Seats Group available for examination and
inspection by Purchaser and its representatives, advisors and agents. No such
examination, inspection or audit by Purchaser or its representatives, advisors
or agents shall in any way affect, diminish or terminate any of the
representations, warranties or covenants of the Company or Seller herein
expressed.
5.02 Seller represents and warrants that from September 30,
1994 until the date hereof, it has conducted the businesses of the Gilardini
Seats Group in compliance with the covenants set
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forth in Section 5.02(a)-(k) below. From and after the date hereof, and until
the Closing Date, the Seller shall (and Seller shall cause the Company and the
Subsidiaries to), unless a representative of Purchaser specified on Exhibit M
shall otherwise agree in writing.
(a) carry on the businesses of the Gilardini
Seats Group in the ordinary course and refrain from doing, or causing to be
done, anything that is represented and warranted not to have been done since
the Balance Sheet Date in Sections 7.18(a) through (p) hereof;
(b) continue to insure Gilardini Seats Group and
all their properties, real and personal, owned or leased by the Gilardini Seats
Group substantially in accordance with the manner set forth on Schedule 7.17
hereto, and use, operate, maintain and repair all such properties in accordance
with the Gilardini Seats Group's prior practice;
(c) use its best efforts (without making any
commitments on behalf of Purchaser) to preserve the Gilardini Seats Group's
business organizations intact, keep available the Gilardini Seats Group's
present employees, and preserve the Gilardini Seats Group's present
relationships with their employees, suppliers and customers and others having
business relationships with it;
(d) refrain from doing any act or omitting to do
any act, or permitting any act or omission to act, that will
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cause a breach of any material agreement, contract, commitment or obligation of
any of the Gilardini Seats Group;
(e) furnish to Purchaser within twenty five (25)
days after the end of each month ending after September 30, 1994 an unaudited
consolidated balance sheet and statements of income and cash flows of the
Company and SEPI SUD and, for each month ending after October 31, 1994, of SEPI
Poland for such period prepared in a manner consistent with past practice;
(f) not solicit, encourage, cooperate with or
facilitate (by way of furnishing information, or otherwise) any inquiries or
proposals (other than the transaction contemplated hereby) for the acquisition
of the stock, assets or business of the Gilardini Seats Group;
(g) maintain and keep the facilities, machinery
and equipment of the Gilardini Seats Group that are necessary to the operation
of the business being conducted by the Gilardini Seats Group in good operating
condition and repair, except for ordinary wear and tear;
(h) not merge or consolidate, or permit any
Subsidiary to merge or consolidate, with any other Person;
(i) consult with Purchaser regarding all
significant developments, transactions and proposals relating to the business
of the Gilardini Seats Group;
(j) not allow any of the Gilardini Seats Group to
(i) amend its Bylaws (other than in connection with the capital contribution
required pursuant to Section 5.09 hereof), (ii)
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incur any indebtedness (other than ordinary course working capital
indebtedness), (iii) incur or extend the timing of its payment of any payables
or other liabilities outside of the ordinary course of business, (iv) change
any payment terms of, or change any payment practices with respect to, any
payable or receivable or (v) enter into any contract or agreement involving in
excess of three hundred million Italian Lira (Lit 300,000,000) except for
purchase orders and supply orders in the ordinary course of business, and
except for the acquisition by SEPI Poland of the business and assets reflected
in the Poland Closing Balance Sheet; and
(k) promptly notify Purchaser of any material
adverse change that may hereafter occur with respect to the financial
condition, results of operations, business, prospects, rights, licenses,
properties or assets of the Gilardini Seats Group whether or not covered by
insurance, or with respect to relationships between the Gilardini Seats Group
and any of its employees, creditors, suppliers, customers or others having
business relationships with the Gilardini Seats Group.
5.03 On or prior to the Closing Date the Seller shall
deliver to Purchaser the written consents, waivers, approvals, licenses and
authorizations, governmental or otherwise, in form and substance reasonably
satisfactory to Purchaser, which are required to be obtained by the Gilardini
Seats Group prior to the consummation of any of the transactions contemplated
hereby, whether pursuant to law, agreement, commitment or otherwise,
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including without limitation, the consents of its joint venture partners in
Industrias Cousin Freres, S. L. and Markol. On or prior to the Closing Date,
Seller shall have obtained the consent of the shareholders and a resolution of
the directors of Markol, pursuant to which they have agreed to amend the
Articles of Association of Markol so as to remove any restriction upon the
transfer of the Markol Shares from Seller to Purchaser.
5.04 The Seller shall have on or prior to the Closing Date
taken all steps necessary to exercise its right to acquire, and shall have
acquired all interests in the Company held by Bertrand Faure (the "BF Company
Shares").
5.05 Prior to the Closing Date the Seller shall have
caused the Company to transfer all of its interest in Cousin Italiana S.r.l. in
liquidation to Seller or an entity designated by Seller in exchange for
eighty-five million Italian Lira (Lit 85,000,000).
5.06 Each of Seller and Purchaser shall not take any
action that would result in any of its respective representations and
warranties not being true in all material respects on the Closing Date. Each
of Seller and Purchaser shall use reasonable efforts to cause the fulfillment
at the earliest practicable date of all of the conditions to its respective
obligations to consummate the sale and purchase under this Agreement.
5.07 At least ten (10) days prior to the Closing Date the
Seller shall deliver to Purchaser a list (the "SEPI Poland Employee Roster") of
all current employees of the Gilardini Seats
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Group directly engaged in the manufacture of the Products in Poland, including
employees on maternity, military or disability leave, who on or prior to the
Closing shall be employed by SEPI Poland.
5.08 The Seller shall have on or prior to the Closing Date
caused (i) Fiat Auto Poland S.A. to deliver a letter agreement to SEPI Poland
pursuant to which Fiat Auto Poland S.A. will agree that all of the rights,
contractual or otherwise, of the Gilardini Seats Group pertaining to the use of
equipment and manufacturing facilities in Poland from Fiat Auto Poland S.A.,
and the provision of services with respect to such facilities, will be made
available to SEPI Poland for the useful life of such equipment and
manufacturing facilities, without expense and on the other terms currently
provided, and (ii) Gilardini Poland Sp Z o.o. to deliver a letter agreement to
SEPI Poland pursuant to which Gilardini Poland Sp Z o.o. agrees to enter into
new agreements with SEPI Poland in form and substance satisfactory to Purchaser
and its counsel, with terms no less favorable to SEPI Poland than those
currently afforded the Gilardini Seats Group in Poland, providing for the
continuation of certain identified services and all rights, contractual or
otherwise, of the Gilardini Seats Group pertaining to the use of certain
equipment and manufacturing facilities in Poland from Gilardini Poland Sp Z
o.o., all in a manner consistent with the past and current operation and
arrangements between the predecessor businesses of Gilardini Poland Sp Z o.o.
and SEPI Poland.
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5.09 The Seller shall have after the date hereof and on or
prior to the Closing Date made net additional capital contributions in cash of
nine billion Italian Lira (Lit 9,000,000,000) to the Company. Purchaser and
Seller acknowledge that such capital contribution has been required by
Purchaser as a result of the final settlement of certain discrepancies between
the 1994 budget delivered by Seller as part of the Projections and the
Preliminary Closing Financial Statements.
5.10 Purchaser acknowledges Seller's plans to move a
portion of its Dabrowo, Poland production to Myslowice, Poland, initially on a
temporary lease basis and ultimately to purchase the Myslowice, Poland
facility. Seller covenants and agrees to proceed with its plans to purchase
such facility and to make available to SEPI Poland that portion of the
Myslowice, Poland facility as is necessary to allow SEPI Poland to continue to
conduct its business, at such cost as is proportionate to SEPI Poland's use in
relation to Gilardini Poland Sp. Z o.o.'s cost of such facility and use
thereof, and Purchaser covenants and agrees to purchase or lease from Gilardini
Poland such portion of the Myslowice, Poland facility based on such cost (or,
if leased, based on the fair market value of such lease) and on other mutually
acceptable terms.
5.11 The Seller shall have prior to the Closing taken all
steps necessary to cure certain formal defects, if any, in the documents
evidencing the Company's title to its Pozzilli and Grugliasco facilities.
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ARTICLE VI
Financial Statements and Other Documents
6.01 On or prior to the date hereof Seller shall have (or
Seller shall have caused the Company and the Subsidiaries to have) delivered to
Purchaser the following:
(a) the Financial Statements, the Preliminary Closing
Financial Statements, the Poland Financial Statements and the Projections;
(b) a true and correct copy of the Certificate/ Articles
of Incorporation or other appropriate charter documents of the Company and each
of the Subsidiaries, including all amendments thereto, certified to by the
appropriate corporate officer of the Company and each of the Subsidiaries; and
(c) a true and correct copy of the By-laws, if any, of
the Company and each of the Subsidiaries certified to by the appropriate
corporate officer of the Company and each Subsidiary.
ARTICLE VII
Representations and Warranties of Seller
Seller represents and warrants to Purchaser (which warranties
and representations shall survive the Closing regardless of what examination,
inspections, audits and other investigations the Purchaser has heretofore made
or may hereafter make, with respect to such warranties and representations), as
follows:
7.01 Each of Seller, Fiat and the Company and each of the
Subsidiaries is a duly organized and validly existing
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corporation under the laws of jurisdiction of its incorporation and each has
all corporate power and lawful authority necessary to own its properties and to
transact the business in which it is currently engaged. The Company and each
Subsidiary is duly qualified to do business and is in good standing in each
jurisdiction where it owns or leases real property and where the nature of its
business requires it to be so qualified. Each of Seller and Fiat has taken all
requisite action to approve this Agreement and the Related Agreements.
7.02 Except as disclosed on Schedule 7.02, on the date
hereof neither the Company nor any Subsidiary own, and on the Closing Date
neither the Company nor any Subsidiary will own, any capital stock or other
securities (other than the Subsidiary Stock) or any other direct or indirect
interest or investment in any firm, corporation or other entity (including any
joint venture or partnership).
7.03 Neither the execution and delivery of this Agreement
or the Related Agreements nor the consummation of the transactions contemplated
hereby or thereby, nor compliance by Seller, Fiat or the Company with any of
the provisions hereof or thereof, will:
(a) except as disclosed on Schedule 7.03(a), violate, or
conflict with, or result in a breach of any provisions of, 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
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result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company or any Subsidiary or the
Purchased Shares, under any of the terms, conditions or provisions of the
Articles of Incorporation, Charter or By-laws, if any, of Seller, Fiat, the
Company or any Subsidiary, or any note, bond, mortgage, indenture, deed of
trust, license, agreement, lease or other instrument or obligation to which
Seller, Fiat, the Company or any Subsidiary is a party, or by which Seller,
Fiat, the Company or any Subsidiary or Seller's, Fiat's or the Company's or any
of the Subsidiaries' properties or assets may be bound or affected; or
(b) violate any order, writ, injunction, decree, or any
statute, rule or regulations, applicable to Seller, Fiat, the Company or any
Subsidiary or any of the properties or assets of Seller, Fiat, the Company or
any Subsidiary.
7.04 (a) The Company has total authorized capital stock
of 3,484,538 shares of common stock, 10,000 Italian Lira par value per share
and on the Closing Date the Company will have the same total authorized capital
stock, 10,000 Italian Lira par value per share, adjusted to reflect losses in
1994 and the capital contribution required by Section 5.09. The Company Shares
constitute, and on the Closing Date will constitute, the only shares of capital
stock of the Company which are issued and outstanding. The Company does not,
and on the Closing Date will not, hold any of its shares of capital stock in
its treasury.
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(b) Exhibit F sets forth the total issued and
outstanding capital stock or issued share capital, as the case may be, of each
Subsidiary owned by Seller or the Company and the percentage ownership interest
of Seller or the Company thereof. The Subsidiary Stock constitutes, and on the
Closing Date will constitute, the only shares of capital stock of any
Subsidiary which are owned by Seller, the Company or a Subsidiary. No
Subsidiary holds, and on the Closing Date no Subsidiary will hold, any of its
shares of capital stock in its treasury.
(c) Except as set forth in Schedule 7.04, the
Company Shares and Subsidiary Stock are validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership thereof and
are not subject to any preemptive rights (except those provided by applicable
law) or prohibitions or limitations upon transfer, and, except as disclosed on
Schedule 7.04, there are no voting trust agreements or other contracts,
agreements or arrangements restricting voting, management or dividend rights or
transferability with respect to either the Company Shares or the Subsidiary
Stock.
(d) Except as disclosed on Schedule 7.04, Seller
owns and has good and valid title to the Purchased Shares free and clear of any
mortgages, pledges, liens, claims, charges, security interests, encumbrances,
assessments or other adverse interests of any kind or nature whatsoever. On
the Closing Date, Seller will own the Purchased Shares free and clear of any
mortgages, pledges, liens, claims, charges, security interests,
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encumbrances, preemptive rights (except as provided by applicable law in favor
of Purchaser), call rights, assessments or other adverse interests of any kind
or nature whatsoever. The Company owns, and on the Closing Date will own, the
shares of Subsidiary Stock that are not Purchased Shares free and clear of any
mortgages, pledges, liens, claims, charges, encumbrances, assessments or other
adverse interests of any kind or nature whatsoever.
(e) Except as disclosed on Schedule 7.04, there are
no outstanding options, warrants, rights, privileges or, except for preemptive
rights provided by applicable law, other arrangements, preemptive, contractual
or otherwise, to acquire any shares of capital stock or other securities of the
Company or any Subsidiary.
(f) Except as disclosed on Schedule 7.04 hereto,
neither Seller or the Company nor any Controlled Subsidiary has any obligations
to make any further capital contributions to, or to otherwise advance funds to
or on behalf of, or with respect to, any Subsidiary.
7.05 (a) The Financial Statements and the Preliminary
Closing Financial Statements are, and the Closing Financial Statements when
delivered will be, (i) in accordance with the books and records of the
Gilardini Seats Group; (ii) a true and correct presentation of the financial
position, assets, liabilities and results of operations of the Company and the
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Company Subsidiaries at the dates and for the periods indicated therein; and
(iii) prepared in accordance with GAAP.
(b) The Statutory Financial Statements have been
prepared and filed in a timely manner in accordance with Italian law.
(c) The Poland Financial Statements (i) are in
accordance with the books and records of the Gilardini Seats Group, (ii) are a
true and correct presentation of the financial position, assets, liabilities
and results of operations of the business transferred to SEPI Poland and (iii)
have been prepared in accordance with GAAP. The Poland Preliminary Closing
Balance Sheet is, and the Poland Closing Balance Sheet when delivered will be,
(i) in accordance with the books and records of the Gilardini Seats Group, (ii)
a true and correct presentation of the financial position, assets and
liabilities of SEPI Poland and (iii) prepared in accordance with GAAP. Except
as described on Schedule 7.05 with respect to the period prior to November 30,
1994, and based upon its current operations SEPI Poland is a stand alone
operation that has sufficient capital to continue its operations and does not
require any financing to continue its operations.
(d) The audited balance sheet and income statement
of Industrias Cousin Freres, S. L. as of December 31, 1993 have been prepared
in accordance with Spanish generally accepted accounting principles and, based
upon the knowledge of Seller as a result of its board of director membership,
Seller
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has no knowledge of any fact that would not make the presentation therein of
the financial position, assets, liabilities and results of operations of
Industria Cousin Freres, S. L. a true and correct presentation. Based upon the
most recent financial information received by Seller from Bertrand Faure, since
the date of such financial statements, the value of the Company's investment in
Industrias Cousin Freres, S. L. has not decreased by a material amount.
(e) The consolidated financial operating statements
and data for 1994 through 1998 described on Schedule 7.05 for the Company and
the Company Subsidiaries and for SEPI Poland (the "Projections") have been
prepared by Seller in good faith and, as modified by the results reflected in
the Preliminary Closing Financial Statements and the 1995 Budget, reflect
Seller's best estimate of the Company and the Company Subsidiaries' performance
and financial condition and of SEPI Poland's performance and financial
condition for the periods presented. Other than certain differences between
the 1995 Budget and the terms of the Supply Agreement that have been settled
between Buyer and Seller by making the payment set forth in Section 14.05,
there have been no changes that have come to Seller's attention that would
cause Seller to make material changes in such Projections, however, Seller
makes no representation or warranty regarding the attainment of the results set
forth in the Projections.
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7.06 On the Balance Sheet Date and the Closing Balance
Sheet Date, neither the Company nor any Company Subsidiary had any debts,
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise), that were not fully disclosed, reflected or reserved against in
the respective Balance Sheet or Closing Balance Sheet or the notes thereto.
Except for current liabilities or obligations that have been incurred since the
Balance Sheet Date in the ordinary course of business, since the Balance Sheet
Date neither the Company nor any Company Subsidiary has incurred any debt,
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise). On the Poland Closing Balance Sheet Date, SEPI Poland had no
debts, liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that were not fully disclosed, reflected or reserved
against on the Poland Closing Balance Sheet or the notes thereto, except as
disclosed on Schedule 7.06. Except for current liabilities or obligations that
have been incurred since the Poland Closing Balance Sheet Date in the ordinary
course of business, since the Poland Closing Balance Sheet Date, SEPI Poland
has not incurred any debt, liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise). Except as disclosed on Schedule
7.06, Markol has no debts, liabilities or obligations of any kind. Markol has
no assets other than those described on Schedule 7.06.
7.07 (a) Schedule 7.07 contains a true and complete list
and brief description of all real property owned, leased or
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used by the Company and each Controlled Subsidiary, as lessor, lessee or
otherwise, including all significant structures located thereon. The Company
or the applicable Controlled Subsidiary has a valid and enforceable leasehold
interest in each parcel of real property disclosed on Schedule 7.07 as being
leased by it and has performed all the obligations required to be performed by
it to the date hereof under the leases relating thereto.
(b) With respect to each parcel of real property
owned or leased by the Company or any Controlled Subsidiary: (i) there are no
material defects or deficiencies in any of the buildings or other improvements
located upon such parcel whether above, at or below grade; (ii) all gas,
electric, water and other utility lines, sewers, and curbs which are required
in connection with the use of such real property have been installed; (iii) all
buildings, structures and improvements located on such parcel are in normal
working order and repair and of a capacity adequate for the continued use
thereof in the current conduct of the business of the Company or the Controlled
Subsidiary that has an interest therein; (iv) such parcel and all buildings and
improvements located thereon are in material compliance with all building,
zoning, environmental, air pollution, land use, health and other laws, codes,
regulations, ordinances and restrictions applicable thereto, and there are no
notices, suits or judgments relating to violations by such parcel or any other
buildings or improvements located thereon of any building, zoning,
environmental, air pollution, land use, health or other laws, codes,
regulations,
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ordinances and restrictions and there are no such violations that have not been
corrected; (v) there are no challenges or appeals pending that involve the
amount or payment of real estate taxes or assessed valuations for such owned
real property or any portion thereof, and except for the exemptions from
certain taxes described in Section 8.02(i), no special arrangement or agreement
exists with any governmental authority with respect thereto; (vi) there is no
tax assessment (except for normal, general real estate tax assessments) pending
or threatened with respect to any portion of such owned real property; and
(vii) no labor, material or services have been furnished in, on or about such
owned real property or any portion thereof as a result of which any mechanics',
laborers' or materialmen's liens or claims thereof might arise. Seller is not
aware of anything that is not disclosed herein that would materially interfere
with or materially impair the present use by the Company or any Controlled
Subsidiary of any portion of such real property.
7.08 (a) Except as disclosed on Schedule 7.08, the
Company (and the Controlled Subsidiaries) have good and marketable title to all
assets and properties reflected on the Balance Sheet, the Closing Balance Sheet
and the Poland Closing Balance Sheet and all assets and properties acquired
since the Balance Sheet Date and the Poland Closing Balance Sheet Date, in each
case free and clear of all security interests, mortgages, liens, charges and
encumbrances of any nature whatsoever (including, in the case of SEPI Poland,
any arising in relation
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to the payment of any value added taxes in relation to the acquisition of such
assets), except for (i) security interests, mortgages, liens, charges and
encumbrances reflected on the Balance Sheet, Closing Balance Sheet or the
Poland Closing Balance Sheet and (ii) sales and dispositions of inventory since
the Balance Sheet Date or the Poland Closing Balance Sheet Date, as applicable,
in the ordinary course of business.
(b) Except as disclosed on Schedule 7.08, the
Company (and the Controlled Subsidiaries) will have good and marketable title
to all assets and properties owned by them on the Closing Date free and clear
of all security interests, mortgages, liens, charges and encumbrances of any
nature whatsoever.
(c) All tangible personal property owned by the
Company and the Controlled Subsidiaries is in good operating condition and
repair, subject to normal wear and tear.
7.09 No manager or director of Seller, the Company or any
Subsidiary or, to the best knowledge of Seller without any independent
investigation, any person who would be an heir or descendant of such manager or
director if he were not now living, and, to the best knowledge of Seller, no
employee of the Company or any Subsidiary (a) has any direct or indirect
interest in (i) any entity which does business with the Company or any
Subsidiary; or (ii) any property, asset or right which is used by the Company
or any Subsidiary in the conduct of its business; or (b) has any contractual
relationship with the Company or the
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Subsidiaries other than such relationship as attaches to being such employee,
manager or director.
7.10 (a) All items of inventory reflected on the
Balance Sheet, the Closing Balance Sheet and the Poland Closing Balance Sheet
were priced at the lower of cost (on a first-in, first-out basis) or market and
were (as to classes of items, inventories and methods of account and pricing)
determined in a manner consistent with prior years and periods and in
accordance with the inventory policies set forth on Exhibit H.
(b) All items of inventory reflected on the
Balance Sheet, and the Closing Balance Sheet, excluding reserves for obsolete
inventory calculated in accordance with Exhibit H hereto, consisted at the
Balance Sheet Date, and the Closing Balance Sheet Date, respectively, and all
such items of inventory that have not been sold or otherwise disposed of in the
ordinary course of business since the Balance Sheet Date, and all other items
of inventory acquired since the Balance Sheet Date, do consist at the date
hereof, and will consist at the Closing Date, of items of a quality usable,
saleable or held as a reasonable and customary stock level in the ordinary
course of Gilardini Seats Group's businesses, as presently conducted. All items
of inventory reflected on the Poland Closing Balance Sheet consisted at the
Poland Closing Balance Sheet Date, and all such items of inventory that have
not been sold or otherwise disposed of in the ordinary course of business since
the Poland Closing Balance Sheet Date, and all other items of inventory
acquired since the
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Poland Closing Balance Sheet Date, do consist at the date hereof, and will
consist at the Closing Date, of items of a quality usable, saleable or held as
a reasonable and customary stock level in the ordinary course of Gilardini
Seats Group's businesses, as presently conducted. Neither the Company nor any
Controlled Subsidiary has any liability or obligation with respect to the
return of inventory or merchandise in the possession of customers.
(c) The accounts, notes, contracts and other
receivables that are reflected in the Balance Sheet and the Closing Balance
Sheet and that were acquired since the Balance Sheet Date were acquired by the
Gilardini Seats Group in the ordinary and regular course of their businesses
and represent the legal, valid and binding obligation of the obligor thereon,
enforceable in accordance with their terms. The accounts, notes, contracts and
other receivables that are reflected in the Poland Closing Balance Sheet and
that were acquired since the Poland Closing Balance Sheet Date were acquired by
the Gilardini Seats Group in the ordinary and regular course of their
businesses and represent the legal, valid and binding obligation of the obligor
thereon, enforceable in accordance with their terms. All such accounts, notes,
contracts and other receivables are and will be at the Closing Date collectible
in full in accordance with the terms thereof at the face amount thereof except
as reflected in the Closing Balance Sheet.
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7.11 (a) Schedule 7.11 contains a true and complete
list of all contracts, agreements, or commitments to which the Company or any
Controlled Subsidiary is a party or is bound (collectively, the "Material
Contracts"), including but not limited to, purchase, sale or other commitments,
distributorship, franchise or similar agreements, patent or trademark licensing
agreements (either as licensor or licensee), lease or sublease agreements
(either as lessor or lessee), equipment leases, employment agreements
(including, but not limited to, agreements entered into by employees of the
Gilardini Seats Group relating to the transfer and/or safeguarding of
intellectual property rights), consulting agreements and union or collective
bargaining agreements (including internal labor agreements supplementing
national agreements), guarantees, loan agreements, non-competition agreements,
severance agreements, letters of credit, joint venture or partnership
agreements, supply or requirements contracts, except those contracts,
agreements and commitments entered into in the ordinary course of business that
involve an aggregate consideration over the remaining term thereof of less than
300,000,000 Italian Lira and have a remaining term of less than one year.
(b) All Material Contracts to which the Company
and any Controlled Subsidiary is a party, or under which the Company or any
Controlled Subsidiary may be obligated, or to which the Company or any
Controlled Subsidiary or any of their respective rights, properties or assets
may be subject or bound,
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are valid, binding and enforceable in accordance with their terms.
(c) Neither the Company nor any Controlled
Subsidiary, nor to the best knowledge of Seller, any other Person is in breach
of, or default under, any Material Contract; and no event or action has
occurred, is pending, or to the best knowledge of Seller, is threatened, which
after the giving of notice, or the lapse of time, or otherwise, would
constitute or result in a breach or default by the Company or any Controlled
Subsidiary, or to the best knowledge of Seller, any other Person under any
Material Contract.
7.12 (a) For purposes of this Section 7.12, the term
"Employee Plan" includes all pension, retirement, disability, medical, dental
or other health insurance plans, life insurance or other death benefit plans,
profit sharing, deferred compensation, stock option, bonus or other incentive
plans, vacation benefit plans, severance plans, or other employee benefit plans
or arrangements, whether or not funded, to which the Company or any Controlled
Subsidiary is a party or bound or with respect to which the Company or any
Controlled Subsidiary may otherwise have any liability (including any such plan
formerly maintained by the Company or any Subsidiary under which the Company or
any Controlled Subsidiary may have any liability) or with respect to which the
Company or any Subsidiary has made any payments or contributions since January
1, 1990.
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(b) Schedule 7.12 sets forth all Employee Plans,
except those Employee Plans that are provided by the Italian government and
pursuant to which the Company has no financial obligations, other than to make
regular contributions as required by Italian law as part of its payroll cycle
and no administerial obligations in excess of those imposed upon similarly
situated Italian corporations.
(c) Except as set forth on Schedule 7.12, neither
the Company nor any Controlled Subsidiary has any liability or obligations to
current employees or retirees or their spouses to provide life or medical
insurance benefits after retirement from the Company or any Controlled
Subsidiary.
(d) All social securities and other compulsory
Employee Plan contributions due by the Company or any Controlled Subsidiary
under applicable law or otherwise, including any social security (ZUS) payments
or contributions on behalf of the Gilardini Seats Group with respect to any
Person on the SEPI Poland Employee Roster, have always been regularly paid and
provisions for TFR (i.e., severance indemnity) and other indemnities are fully
and properly made and entered in the Financial Statements, on the Closing
Financial Statements and on the Poland Closing Balance Sheet.
(e) The SEPI Poland Employee Roster contains a
true and complete list of all current employees of the Gilardini Seats Group
directly engaged in the manufacture of the Products in Poland, including
employees on maternity, military or
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disability leave, who on or prior to the Closing shall be employed by SEPI
Poland.
7.13 Schedule 7.13 contains a true and complete list and
brief description, including the jurisdiction of registration, if applicable,
of all patents, trademarks, trade names, service marks and copyrights (whether
or not such trademarks, trade names, service marks and copyrights are
registered), and all pending applications therefor, owned by the Company and
any Controlled Subsidiary, or in which the Company or any Controlled Subsidiary
has any interest, together with copies of all licenses, assignments and
agreements relating thereto. All such patents, trademarks, trade names,
service marks and copyrights are in full force and effect and the required
maintenance fees have been paid when due by the Company and any Controlled
Subsidiary.
(a) No other patents, trademarks, trade names,
service marks or copyrights are necessary for the conduct of the businesses of
the Gilardini Seats Group as presently operated.
(b) To the best knowledge of Seller after a
complete investigation in accordance with reasonable business practices there
is not now, nor has there been during the past three (3) years any
infringement, misuse or misappropriation by the Company or any Controlled
Subsidiary of any valid patent, trademark, trade name, service mark, copyright
or trade secret that relates to the businesses of the Gilardini Seats Group and
that is owned by any third party; provided that for purposes of
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this representation and warranty the Seller shall be deemed to have knowledge
of all public filings, registrations and applications for patents, trademarks,
trade names, service marks, copyrights and trade secrets made in any
jurisdiction to which the Company or the Subsidiaries ship Products or to which
Fiat Auto S.p.A. or any of its affiliates ship products which include any
Product produced by the Gilardini Seats Group. There is not now any existing,
threatened in writing or, to the knowledge of Seller, otherwise threatened
claim against the Company or any Controlled Subsidiary of infringement, misuse
or misappropriation of any patent, trademark, trade name, service mark,
copyright or trade secretary.
(c) There is no pending or threatened claim by the
Company or any Controlled Subsidiary against others for infringement, misuse or
misappropriation of any patent, trademark, trade name, service mark, copyright
or trade secret owned by the Company or any Controlled Subsidiary.
(d) Neither Seller or Fiat nor any officer or
director of, Seller, Fiat, the Company or any Subsidiary owns, directly or
indirectly, in whole or in part, any invention, patent, proprietary right,
trademark, service mark, trade names, brand name or copyright or application
therefor (i) that the Company or a Subsidiary is presently using; (ii) the use
of which is necessary for the business of the Gilardini Seats Group; or (iii)
that pertains to the business in which the Gilardini Seats Group is engaged.
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7.14 (a) Except as disclosed on Schedule 7.14, there
are no actions, suits or proceedings pending, threatened in writing or to the
knowledge of Seller, otherwise threatened against or affecting the Company or
any Subsidiary or any of their respective properties or businesses, at law or
in equity, or before or by any court or other governmental department,
commission, board, bureau, agency or instrumentality. Neither Seller nor the
Company has any knowledge of any state of facts that may reasonably be expected
to give rise to any such claim, action, suit, proceeding or investigation.
Neither the Company nor any Subsidiary is operating under, or subject to, or in
default with respect to, any order, writ, injunction or decrees of any court or
governmental agency or body.
(b) Neither the Company nor any Controlled
Subsidiary is conducting or carrying on its business or affairs in violation in
any material respect of any law, statute, ordinance, rule, regulation or court
or administrative order or process.
(c) Except as disclosed on Schedule 7.14, there is
no labor trouble, dispute, grievance, controversy, strike or request for union
representation pending, or formally threatened against the Company or any
Controlled Subsidiary relating to or affecting their respective businesses or
operations, and Seller does not know of the occurrence of any event that would
give rise to any such labor trouble, dispute, controversy, strike or request
for representation.
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(d) The Company and each Controlled Subsidiary has
all governmental and regulatory licenses, permits, authorizations and approvals
necessary to own and operate its properties and to carry on and conduct its
business as presently carried on and conducted. Schedule 7.14 contains a true,
correct, complete and accurate list of governmental and regulatory licenses,
permits, authorizations and approvals obtained by or issued to the Company and
each Controlled Subsidiary that, as a result of the transactions contemplated
by this Agreement, will require any additional filing, notice or other action
on the part of Seller, Purchaser, or any Subsidiary.
(e) All employment and agency relationships with
the Company and any of the Controlled Subsidiaries are listed, with the
indication of seniority, remuneration and qualification, on Schedule 7.14 and
are in compliance with the law and the applicable labor collective agreements
(including internal agreements) and there are no economic or legal conditions
which are not expressed. No consulting relationship exists, nor are there any
powers of attorney in effect, with the exception of those listed and described
on Schedule 7.14. Except as described on Schedule 7.14, there are no
agreements with former employees or with directors. No amounts which should
have been represented as salaries, remunerations, social contributions or
similar items have been represented as other costs and expenses.
(f) There are no outstanding warranty claims with
respect to any product produced by the Gilardini Seats Group
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(collectively "Products") or any litigation relating thereto that indicate a
repeated pattern of Product failure, Product liability or Product recall
claims. The Products conform to the standards of merchantability and safety
customary in the automotive industry and in accordance with requirements
established by its customers. None of the Products are, are threatened in
writing to be or are to Seller's knowledge otherwise threatened to be, the
subject of a product recall. The Products currently manufactured and sold by
the Gilardini Seats Group and for the last three (3) years (i) to Seller's
knowledge have no defect in the design or methods of manufacture which would
render the Products unsafe; and (ii) have had no claim in respect of personal
injury, damage to property or other damages arising from purchase use, or
resale of any of the Products.
(g) Seller shall pay all costs and expenses
relating to product liability or warranty claims that are pending or may arise
with respect to Products manufactured by the Company or any Subsidiary on or
prior to the Closing Date. Purchaser shall pay all costs and expenses relating
to product liability or warranty claims that may arise with respect to Products
manufactured by the Company or any Subsidiary after the Closing Date.
(h) Neither Seller nor any stockholder, officer,
director, employee or agent of Seller, nor any other Person acting on its
behalf, has, directly or indirectly, given or agreed to give any gift or
similar benefit to any customer,
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supplier, government employee or other person who is or may be in a position to
help or hinder the business of the Gilardini Seats Group (or to assist in
connection with an actual or proposed transaction) which might subject the
Company or any Subsidiary to any damage or penalty in any civil, criminal or
governmental litigation or proceeding.
7.15 (a) This Section 7.15 and this Agreement contain
the complete and entire Agreement between Purchaser and Seller and states the
only responsibilities, liabilities, indemnities, rights and remedies of
Purchaser and Seller for any Environmental Damages (as hereinafter defined)
relating to or affecting the Company or any of the Controlled Subsidiaries or
any properties thereof.
(b) Except as disclosed in Schedule 7.15, the
Company and the Controlled Subsidiaries have complied in the past and currently
comply with all environmental laws, regulations, and standards of enforcement
applicable to the operations of the Company or of the Controlled Subsidiaries
or the Premises and in effect as of the date of this Agreement. For purposes
of this Agreement, the term "Premises" shall mean the real property, owned,
leased or used by, and facilities of the Company and the Controlled
Subsidiaries.
(c) Except as disclosed in Schedule 7.15, the
Company, the Controlled Subsidiaries and the conditions of the Premises are not
in violation of any environmental law or regulation as enforced as of the date
of this Agreement, and
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applicable to the Company or the Controlled Subsidiaries as a result of their
respective ownership, use, maintenance or operation of their respective
businesses or the Premises.
(d) Except as disclosed in Schedule 7.15, there
has not occurred, nor is there presently occurring, on the Premises or in the
conduct of the business or operations of the Company or the Controlled
Subsidiaries a Release of any Hazardous Substance on, into or beneath the
surface of the Premises of the Company or any Controlled Subsidiary or as a
result of the operations of the Company or any Controlled Subsidiary. For
purposes of this Section 7.15, the term "Release" shall mean releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping; and the term "Hazardous
Substance" shall mean any substance or material, whether solid, particulate,
gaseous or liquid form, which is deemed or designated as a hazardous substance
or material or as a contaminant or pollutant under any applicable law in effect
as of the date of this Agreement.
(e) Except as disclosed in Schedule 7.15: (i)
there are no orders or directives issued by any relevant authority relating to
the operations of the Company or the Controlled Subsidiaries or to the Premises
requiring any remediation, work, repairs, construction or capital expenditure
with respect to the Company or the Controlled Subsidiaries' respective
businesses or with respect to the Premises, nor have they received any notice
thereof, and (ii) there are no writs,
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injunctions, orders or judgments outstanding, no law suits, claims, proceedings
or investigations pending or threatened (collectively referred to as
"Environmental Claims"), and there are no facts, except as set forth on
Schedule 7.15, which could give rise to any Environmental Claims relating to
the violation of any environmental law or regulation.
(f) On the Closing Date, the Phase I and Phase II
reports (collectively, the "Survey") commissioned by Purchaser, prepared by ERM
Italia (the "Consultant") and delivered to Seller shall become the joint
property of Purchaser and Seller, and Seller shall reimburse Purchaser for one
half of the cost of the Survey. Based on the findings contained in the Survey,
and in consultation with Purchaser, Seller shall:
(i) conduct all appropriate remedial or
removal actions including, but not limited to, installing, repairing or
replacing of equipment, investigating and/or cleaning-up of sites ("Actions")
that are identified in the Survey or deemed by the Consultant to be necessary
in order for the Company and the Controlled Subsidiaries to be in compliance
with all environmental laws, regulations and standards of enforcement
applicable to the operations of the Company or of the Controlled Subsidiaries
and in effect as of the date of the remediation or work. Purchaser shall have
prior approval of all contractors, consultants or environmental experts who
shall perform any Actions pursuant to this Agreement. Such Actions shall be
conducted, or caused to be conducted, and completed by
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the Seller within twelve months after the Closing Date with respect to those
deficiencies described in Schedule 7.15 and under the heading "Actions to be
performed by the Seller" together with any further Actions deemed necessary by
the Consultant as a result of such Actions, giving priority to any Actions
relating to violations which might give rise to possible criminal liability,
and such Actions shall be performed in accordance with all generally accepted
professional standards and all applicable laws. In the event that Seller does
not complete such Actions within twelve months after the Closing Date or
otherwise in accordance with the Schedule, Purchaser may, but is not required
to, undertake such Actions on Seller's behalf and invoice Seller and Seller
shall promptly (and in any event within thirty (30) days) pay all costs and
expenses of such Actions;
(ii) employ and achieve investigation and
cleanup objectives and standards for such Actions that are required under the
laws and regulations of the appropriate jurisdiction and those used by the
Consultant in the Survey; in those jurisdictions where the laws and regulations
or the Survey do not specify investigation and cleanup standards or objectives,
Seller shall employ and achieve the investigation and cleanup objectives
generally applied by the Consultant in similar situations. In addition, Seller
shall obtain a certification from the consultant or contractor conducting the
Actions that such objectives and standards have been met;
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(iii) provide to Purchaser copies of all
documents, reports, filings, data, correspondence and other information or
communications received by Seller from, or sent by Seller to, any contractor,
consultant, environmental expert or relevant authority presently existing or
generated in connection with any Actions performed pursuant to this Agreement;
(iv) advise Purchaser ten days in advance
of any need to gain access to the Premises in order to conduct any Actions in
connection with this Agreement and take all necessary steps to ensure that the
performance of such Actions shall not unreasonably interfere with Purchaser's
operations. The written notice requesting access will contain the following
information: the date(s) and time(s) of access; the activities to be conducted;
and the identities of the persons who will enter the Premises and perform the
Actions. Purchaser and Seller agree to work together to schedule access to the
Premises that is convenient for both parties. Prior to commencing any Actions
on the Premises, Seller shall provide evidence of general liability insurance
and such other insurance coverage as Purchaser may reasonably request and shall
name Purchaser as an additional insured; and
(v) indemnify and hold harmless Purchaser,
its affiliates, their respective officers, directors, employees agents and any
person claiming by or through any of them ("Environmental Indemnitees"), from
and against any and all losses, liabilities, assessments, fines, penalties,
costs and
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expenses, including attorneys' fees, actually incurred or suffered by the
Purchaser, the Company, any Controlled Subsidiary or any other Environmental
Indemnitee as a result of any claims for personal injury or other loss, damage
or expense by reason of, arising out of, or in connection with the breach of
the above warranties or representations, or the failure to take timely and
appropriate actions as described in 7.15(f) above, including any fines or other
loss, cost or expense related to the environmental issues set forth on Schedule
7.15 under the heading "Actions not to be performed by Seller" (collectively
hereinafter "Environmental Damages"); provided, however, that Environmental
Damages shall not include:
(I) any Environmental Damages which arise from the
release (assuming such release is not a consequence of violations made
prior to the Closing Date) or disposal of any Hazardous Substances at
the facilities of any of the Company or the Controlled Subsidiaries
subsequent to the Closing;
(II) any damages which cannot be recovered under
applicable law, and Purchaser and Seller agree to make every effort to
limit the amount of consequential damages that may result from the
Actions; or
(III) Environmental Damages suffered by an
Environmental Indemnitee as a result of laws, regulations, ordinances
or standards enacted or which
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become applicable subsequent to the date of this Agreement.
(g) Environmental conditions arising subsequent to
the Closing Date at the facilities of the Company or any of the Controlled
Subsidiaries which have not been disclosed by the Survey shall be presumed to
have arisen subsequent to the Closing Date and in the absence of proof to the
contrary shall not be the responsibility of the Seller hereunder.
(h) With respect to Environmental Damages relating
to conditions not disclosed in the Survey which are proven to have existed on
the Premises or to be the result of operations by the Seller prior to the
Closing Date, Seller shall be responsible for such Environmental Damages of
which Purchaser has notified the Seller prior to the tenth anniversary of the
Closing Date.
(i) Notwithstanding any of the provisions of this
Section 7.15, Seller shall be responsible for the costs of any required
asbestos surveys or remediation of any and all asbestos containing materials
("ACM") in friable condition or requiring encapsulation on the Premises on the
Closing Date. Seller may choose, but shall not have the responsibility, to
remove any asbestos from any facility which is not friable. If any ACM
remaining after the Closing Date later becomes friable during the ten year
period after the Closing Date, then Seller will pay all costs of removal,
replacement and disposal. If any roofing material containing ACM must be
replaced for any reason other
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than that the ACM has become friable during the ten year period after the
Closing Date, then Seller will pay the incremental additional cost of disposal
of the ACM as a hazardous waste. For a period of ten years, Seller shall
indemnify Purchaser for any personal injury or property damage claims relating
to ACM present on the Premises on the Closing Date.
(j) The liabilities and obligations of Seller with
respect to the environmental indemnity hereinabove provided shall be subject to
the following; provided, however, no failure or delay by Purchaser in the
performance of any of the following shall reduce or otherwise affect the
obligation of Seller to indemnify and hold Purchaser harmless, except to the
extent that such failure or delay shall have materially, adversely affected
Seller's ability to defend (including because Purchaser's failure to comply did
not allow Seller sufficient preparation time) against, settle or satisfy any
liability, damage, loss, claim or demand for which Purchaser is entitled to
indemnification hereunder:
(i) If Purchaser obtains any knowledge of,
or receives any notice with respect to, the existence of any event or the
existence of any action by any person, including any formal or informal inquiry
by any governmental agency, which could form the basis for a claim for
indemnification under this provision (the "Indemnification Event"), Purchaser
shall promptly notify Seller in writing, and Purchaser shall use its best
efforts to cause the other Environmental Indemnitees to notify
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Purchaser promptly of any such event or action who shall then, in turn,
promptly notify Seller in writing.
(ii) Unless required to do so by applicable
law or regulation, Purchaser shall not, and shall use its best efforts to cause
the other Environmental Indemnitees not to, give notice to any governmental
authority of any Indemnification Event without the prior written notice to
Seller.
(iii) Unless required to do so in order to
avoid any possible criminal liability or by order of the appropriate
authorities, Purchaser shall not, and shall use its best efforts to cause the
other Environmental Indemnitees not to, undertake any preventive, remedial or
removal action with respect of any Hazardous Substances which may have been
present, released or disposed of from the facilities of the Company and the
Controlled Subsidiaries prior to the Closing Date (the "Pre-Closing
Substances") without prior notice to and the prior written consent of Seller,
which consent shall not unreasonably be withheld by Seller, and response to
which notice shall not be unreasonably delayed by Seller, and in no event be
later than ten days after notice from Purchaser is received.
(iv) If Purchaser and Seller agree, or
Seller determines in its sole judgment that any preventive, removal or remedial
action is required with respect to Pre-Closing Substances, Seller shall at its
sole expense undertake and shall have the right to control the performance of
all aspects of such preventive, remedial or removal action, provided that
Seller
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comply with the provisions of subparagraphs (f)(i), (ii), (iii) and (iv) above.
(v) Purchaser shall, and shall use its best
efforts to cause the other Environmental Indemnitees to, cooperate with Seller
in securing for Seller the right to visit, inspect and enter the facilities of
any of the Companies to conduct such environmental tests as Seller may require
in respect of an Indemnification Event and to conduct any preventive, remedial
or removal action in connection with any Pre-Closing Substance, and Purchaser
will, and will use its best efforts to cause the other Environmental
Indemnitees to, promptly deliver to Seller copies of any environmental reports,
studies, surveys, tests, data, assessments, cost estimates and similar
information available to the Environmental Indemnitees relating to an
Indemnification Event.
(k) Notwithstanding any of the provisions of this
Section 7.15, Seller shall indemnify Purchaser without limitation for any and
all third party claims for personal injury or property damage or claims, orders
or notices by or from the applicable authorities for remediation of the
Premises of the Caivano facility, which claims result from the condition of
such Premises, the operations of the Company or the Controlled Subsidiaries or
activities that are not directly attributable to Purchaser after the Closing
Date. Purchaser shall not change the current operations of the Caivano
facility to include processes
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that use Hazardous Substances without the prior approval of Seller.
(l) Payment of Environmental Damages will be made
in accordance with Section 9.05.
7.16 The use of the corporate name "SEPI" does not
infringe the right of any third party. After the Closing Date, no Person other
than the Company and the Subsidiaries will have been authorized, directly or
indirectly, to use "SEPI" as all or a part of a corporate or trade name.
7.17 Schedule 7.17 contains a list of every policy of
fire, liability or other form of insurance held by or applicable to the Company
and any Controlled Subsidiary, and such policies are in full force and effect
and, except as set forth on Schedule 7.17, will terminate as to the Company or
any Subsidiary upon the sale of the Purchased Shares. Schedule 7.17 describes
any self insurance policies of the Company and the Controlled Subsidiaries.
7.18 Since the Balance Sheet Date, the Company and each
Company Subsidiary has conducted its respective businesses only in the ordinary
course, since the Poland Closing Balance Sheet Date, SEPI Poland has conducted
its business only in the ordinary course and, except as contemplated by this
Agreement, there has not been any:
(a) adverse change in the financial condition,
assets, liabilities, business prospects or properties of the Gilardini Seats
Group, other than such changes as are expressly
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identified in the Preliminary Closing Financial Statements and in the 1995
Budget, or with respect to the Gilardini Seats Group's business relations with
any of its employees, suppliers or customers;
(b) sale, assignment, transfer, mortgage, pledge
or lease of any assets of the Company or any Subsidiary, except in the ordinary
course of business;
(c) issuance, sale or other disposition by the
Company or any Subsidiary of any stock, stock options, bonds, notes or other
securities of such company;
(d) declaration or payment of a cash dividend by
the Company, SEPI Poland or Markol or any other declaration, payment or
distribution to any stockholder of the Company, SEPI Poland or Markol of any
type or nature, whether in cash or property, or purchase or redemption of any
shares of the Company's or any Subsidiaries' capital stock;
(e) incurrence of any obligation or liability
(absolute or contingent), except for current liabilities incurred, and
obligations under contracts entered into, in the ordinary course of business;
(f) increase in the rates of direct compensation
payable or to become payable by the Company or any Controlled Subsidiary to any
officer, employees, agent or consultant, other than routine increases made in
the ordinary course of business, or any bonus, percentage compensation, service
award or other like benefit, granted, made or agreed to for any such officer,
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employee, agent or consultant, or any welfare, pension, retirement or similar
payment or arrangement made or agreed to which is greater than any such bonus,
percentage compensation, service award or other like benefit or any welfare,
pension, retirement or similar payment or arrangement existing or made pursuant
to arrangements, agreements, or plans existing at the Balance Sheet Date;
(g) discharge or satisfaction of any lien, charge
or encumbrance, or payment of any obligation or liability, absolute or
contingent, by the Company or any Controlled Subsidiary, other than current
liabilities shown on the Balance Sheet, the Closing Balance Sheet and the
Poland Closing Balance Sheet, as applicable, and current liabilities incurred
since the Balance Sheet Date in the ordinary course of business;
(h) cancellation of any debts or claims, except in
each case in the ordinary course of business;
(i) incurrence of any extraordinary losses or
waiver of any rights of substantial value;
(j) capital expenditures in excess of those
reflected in the Preliminary Closing Financial Statements;
(k) change in accounting methods or practices
(including, without limitation, any change in depreciation or amortization
policies or rates or income recognition methods) by Seller, the Company or any
Subsidiary;
(l) revaluation by the Company or any Controlled
Subsidiary of any of their respective assets;
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(m) damage, destruction or loss (whether or not
covered by insurance) adversely affecting the properties or business of the
Company or any Subsidiary;
(n) loan by the Company or any Controlled
Subsidiary to any Person, or guaranty by the Company or any Controlled
Subsidiary of any loan;
(o) change or extension in the payment terms of
(other than those effected in the ordinary and regular course of business), or
payment or collection practices with respect to, payables and receivables of
the Gilardini Seats Group; or
(p) agreement by the Company or any Controlled
Subsidiary to do any of the foregoing.
7.19 Schedule 7.19 contains a true, correct and complete
schedule setting forth the name of every bank in which the Company or any
Controlled Subsidiary has one or more accounts, savings or other certificates,
or safe deposit boxes; the names of every person authorized to draw on such
accounts, redeem such certificates or have access to such boxes; and the
principal terms of such certificates and the contents of such boxes.
7.20 All of the rights, properties and assets used by the
Gilardini Seats Group necessary for the operation of the business conducted by
the Gilardini Seats Group are either owned by the Company or a Subsidiary or
licensed or leased to the Company or a Subsidiary under one of the Material
Contracts, except that certain necessary services will be provided by Seller
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for a limited time period under the Transitional Services Agreement.
7.21 The Orbassano, Frosinone, Melfi and Novara plants are
the only plants of the Company or the Subsidiaries whose hourly workforce is
represented by the Contratto Nazionale Settore Cuoio e Pelli. All incremental
costs associated with the anticipated switch by the hourly workforce of the
Orbassano, Frosinone, Melfi and Novara plants from the Contratto Nazionale
Settore Cuoio e Pelli to the Contratto Nazionale Settore Metalmeccanico have
been fully and accurately reflected in the 1995 Budget. All unpaid bonuses to
employees of the Company and the Subsidiaries for the periods through September
30, 1994 have been fully accrued for in the Closing Financial Statements and
such accrual represents a true and correct presentation of the Company's and
Subsidiaries' bonus obligations. All bonus obligations to employees of the
Company and the Subsidiaries for the periods after September 30, 1994 have been
fully and accurately reflected in the Projections.
7.22 Seller has used its best efforts to implement a
contingency plan designed to minimize the costs, resourcing difficulties,
production interruptions and other uncertainties that may arise as a result of
the financial difficulties of Elcat S.p.A. Schedule 7.22 contains a true and
complete list and brief description of the maximum amount of incremental,
variable and fixed costs that would be incurred by the Company and/or the
Subsidiaries in 1995 as a result of the inability of Elcat S.p.A
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to serve as a supplier to the Company and/or the Subsidiaries. Seller and its
affiliates have used their best efforts to implement a support plan designed to
ensure the future viability and continued source of uninterrupted supply from
Mastal S.p.A. and certain related suppliers of the Gilardini Seats Business
("MASTAL"). The Company will incur no incremental, variable or fixed costs as
a result of its relationship with MASTAL or the financial condition of MASTAL.
If the conditions set forth in Section 11.17 have been satisfied, then
Purchaser agrees to cause the Company to comply with the MASTAL Supply
Agreement.
7.23 The Financial Statements, the Closing Financial
Statements, the Poland Financial Statements, the Poland Closing Balance Sheet,
the Schedules hereto and the underlying documents and instruments referred to
therein, the Projections and all other certificates, documents and instruments
furnished by the Company, the Subsidiaries, Seller or any of their directors,
officers or employees in connection with this Agreement, or any other
transaction contemplated by this Agreement, are true and complete in all
material respects, and neither this Agreement, the Schedules hereto and the
underlying documents and instruments referred to therein, the Financial
Statements, the Closing Financial Statements, the Poland Financial Statements,
the Poland Closing Balance Sheet nor the Projections, nor any other
certificate, document or instrument furnished by the Company, the Subsidiaries,
Seller or any of their directors, officers or employees in connection with this
Agreement, contains any untrue
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statement of a material fact or omits to state a material fact necessary in
order to make the statements included herein or therein not misleading in light
of the circumstances under which they were made.
ARTICLE VIII
Tax Matters
8.01 (a) The Company and each of the Controlled
Subsidiaries has always regularly performed within the legal terms all its Tax
obligations, such as, by way of example, but without limitation, payment of
direct and indirect taxes (in particular IRPEG, ILOR and IVA), timely and
correct filing of the relevant tax returns, payment of withholding taxes,
registration taxes, INVIM, ICI, stamp duties, any regional or local tax or fee,
fines and penalties, if any, and more generally any amount due for any reason
in connection with the foregoing.
(b) The Company and the Controlled Subsidiaries
have always regularly and correctly kept the corporate, accounting and IVA
books as provided by the Italian civil law, including fulfilling any relevant
obligation such as, by way of examples, issuing and recording invoices (and
paying the relevant IVA).
8.02 (a) For purposes of this Agreement, "Taxes" (and
in the singular, a "Tax") means all net income, capital gains, gross income,
gross receipts, sales, use, transfer, value added, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium,
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property, windfall profits or other taxes or customs duties, or any interest,
any penalties, additions to tax or additional amounts assessed or similarly
charged by any taxing authority in any jurisdiction upon the Company or any of
its Controlled Subsidiaries. For purposes of the definition of Taxes, any
interest, penalties, additions to tax or additional amounts that relate to
Taxes for any period, or a portion of any period, ended on or before the
Closing Date or to Taxes attributable to the operation of the Company or any
Subsidiary prior to the Closing Date, shall include any interest, penalties,
additions to tax, or additional amounts relating to Taxes for such periods,
regardless of whether such items are incurred, accrued, assessed or similarly
charged on, before or after the Closing Date. For purposes of this Article
VIII, the Company or a Controlled Subsidiary shall be deemed to include any
predecessor or other entity if the Company or a Controlled Subsidiary, as the
case may be, is responsible for such predecessor's or other entity's Taxes.
(b) The Company and each Controlled Subsidiary has
timely filed true, correct and complete tax returns, reports or estimates, all
prepared in accordance with applicable laws, for all years and periods (and
portions thereof) for which any such returns, reports or estimates were due.
All Taxes, as due and payable in respect of such returns, reports and
estimates, have been paid, and there is no current liability for any Taxes due
in connection with any such return.
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(c) Except as disclosed on Schedule 8.02, for all
countries in which the Company or a Controlled Subsidiary are or were required
to file tax returns, the tax returns of the Company and each Controlled
Subsidiary have been examined by the applicable revenue agency or have been
closed by the applicable statute of limitations.
(d) Neither the Company nor any Controlled
Subsidiary will have a taxable period ending on the Closing Date.
(e) Except with respect to IVA taxes which are
consolidated among the Fiat group, neither the Company nor any Controlled
Subsidiary is or has been a member of a consolidated, combined or unitary
group.
(f) Neither the Company nor any Controlled
Subsidiary has executed or filed with any taxing authority any agreement or
other document extending or having the effect of extending the period for
assessment or collection of any Taxes, and no power of attorney granted by the
Company or any Controlled Subsidiary or Seller with respect to any Taxes is
currently in force.
(g) The Company and the Controlled Subsidiaries
are not subject to taxation in any jurisdiction other than those jurisdictions
for which the Company and the Controlled Subsidiaries have filed returns, a
copy of which for the last five (5) taxable years have been provided to the
Purchaser.
(h) No Tax audits or other administrative
proceedings or court proceedings are presently pending with
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regard to any Taxes or tax returns of the Company or any Controlled Subsidiary
(other than claims for refunds that have been initiated by the Company and
disclosed on Schedule 8.02) and no additional issues are being asserted against
the Company or any Controlled Subsidiary in connection with any existing audits
of the Company or any Controlled Subsidiary.
(i) Sepi Sud SpA has a complete exemption from
IRPEG and ILOR taxes for the operation and properties of its Melfi and
Frosinone facilities through the taxable year ending December 31, 2000 (except
that the exemption for ILOR taxes for Melfi shall extend through the taxable
year ending December 31, 2004).
(j) 38.59% of the income attributable to the
Company's Pozzilli plant is exempt from ILOR tax through the taxable year
ending December 31, 1995.
(k) As of December 31, 1993, the Company had tax
loss carry forwards of 2,457,482,000 Italian Lira expiring on December 31,
1995, 2,699,367,000 Italian Lira expiring on December 31, 1996, 6,533,684,000
Italian Lira expiring on December 31, 1997, and 39,854,600,000 Italian Lira
expiring on December 31, 1998.
(l) As of December 31, 1993, the Company had
2,731,412,000 Italian Lira of IRPEG tax credit carry forwards and 273,686,000
Italian Lira of ILOR tax credit carry forwards, which tax credit carry forwards
are not limited and do not expire.
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8.03 (a) Seller shall be liable for all Taxes of the
Company and each Controlled Subsidiary for the taxable periods ending on or
before the Closing Date and for the portion of any Taxes for a period not
ending on or before the Closing Date that is attributable to the operations of
the Company and each Controlled Subsidiary prior to the Closing Date and that
exceeds the sum of the amount of such Taxes that have been fully accrued for in
the Closing Financial Statements and for the period from September 30, 1994
through the Closing Date, fully and accurately reflected in the Projections.
(b) All Taxes attributable to the operations of
the Company and each Controlled Subsidiary after the Closing Date shall be
borne by the Company, the Controlled Subsidiaries, or Purchaser, and any
refunds or credits in respect of such Taxes shall be the property of the
Company, the Controlled Subsidiaries, or Purchaser, as the case may be. For
the purposes of determining the amount of the liability for Taxes attributable
to the period from January 1, 1994 through the Closing Date, the income,
deductions, credits, allowances and other items for the taxable year that
includes the Closing Date, shall be allocated pro rata to the period in that
taxable year occurring before the Closing Date and to the period in that
taxable year occurring on or after the Closing Date.
(c) The Seller shall prepare or cause to be
prepared in an interim report the results of operations of the Company and the
Controlled Subsidiaries from January 1, 1994
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through the Closing Date, with the timely assistance of Purchaser on a basis
consistent with existing procedures for preparing Tax returns and in a manner
consistent with prior years' practice with respect to the treatment of specific
items on a Tax return. The Purchaser shall, or shall cause the Company and
each Controlled Subsidiary to be responsible for preparing and filing all Tax
returns and reports of the Company and each Controlled Subsidiary for periods
ending: (i) on or after the Closing Date and (ii) prior to the Closing Date
when the tax returns relating to such tax periods are due after the Closing
Date (after taking into account any applicable extensions of time to file),
which returns shall be prepared and filed timely and on a basis consistent with
existing procedures for preparing such returns and in a manner consistent with
prior years' practice with respect to the treatment of specific items on the
return. Any deficiency for Taxes for which the Seller is liable as provided in
Section 8.03(a) hereof in connection with the returns described in the
immediately preceding sentence, shall be paid to the Purchaser as an adjustment
to the Purchase Price at least three (3) days prior to the filing of such
returns.
(d) Purchaser, the Company, the Controlled
Subsidiaries and Seller (and its tax, accounting and legal service provider)
shall provide each other with such assistance as may reasonably be requested by
any of them in connection with the preparation of any return or report of
Taxes, any audit or other examination by any taxing authority, or any judicial
or
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administrative proceedings relating to liability for Taxes. Purchaser, the
Company, the Controlled Subsidiaries, and Seller (and its tax, accounting and
legal service provider) will retain for the full period of any statute of
limitations and provide the others with any records or information which may be
relevant to such preparation, audit, examination, proceeding or determination.
Such assistance shall include making employees available on a mutually
convenient basis to provide additional information or explanation of material
provided hereunder and shall include making employees available on a mutually
convenient basis to provide additional information or explanation of material
provided hereunder and shall include providing copies of any relevant returns
of Taxes and supporting work schedules. The party requesting assistance
hereunder shall reimburse the assisting party for reasonable out-of-pocket
expenses incurred in providing such assistance.
(e) Purchaser and Seller hereby agree that in the
event a claim with respect to Taxes is made pursuant to this Agreement, each
party shall furnish or cause to be furnished to any of them all books, records,
tax returns and other information reasonably requested by such other party that
relate to such claims, and each party agrees to file on behalf of the other
party any returns, forms or other statements that relate to such claims. For
the purpose of this Section 8.03(e), a claim with respect to Taxes shall
include a request for a determination relating to a refund or credit.
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(f) Prior to the Closing, Seller shall provide
that any and all tax (or similar) agreements, arrangements or undertakings
between Seller and/or its Affiliates, on the one hand, and the Company and/or
the Controlled Subsidiaries, on the other hand, that relate to any payment or
liability by the Company or any Subsidiary for its Taxes shall terminate as of
the Closing Date and any rights or obligations resulting from such agreements
shall be eliminated as of the Closing Date.
(g) Except as provided below, if in connection
with any examination, investigation, audit or other proceeding of any tax
return for a taxable period ending prior to the Closing Date, any governmental
body or authority issues to Purchaser a written notice of deficiency, a
proposed adjustment, an assertion of claim or demand concerning the tax period
covered by such return, Purchaser shall notify Seller of its receipt of such
communication from the governmental body or authority within fifteen (15)
business days after receiving such notice of deficiency, adjustment or
assertion of claim or demand. No failure or delay of Purchaser in the
performance of the foregoing shall reduce or otherwise affect the obligations
of Seller pursuant to this Article VIII, except to the extent that such failure
or delay shall have adversely affected Seller's ability to defend (including
because Purchaser's failure to give notice promptly did not allow Seller
sufficient preparation time) against, settle or satisfy any liability or claim
for Taxes that Seller is obligated to pay hereunder. Except as provided below,
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Seller shall, at its expense, have the sole and exclusive right, power and
authority to contest any such assessment, proposal, claim, demand or other
proceeding and to represent and act for and on behalf of the Company or any
Controlled Subsidiary in connection with any notice, proposal, investigation,
assessment, audit, examination or any other proceeding of any kind whatsoever
in connection with any tax return for a taxable period of the Company or any
Controlled Subsidiary ending prior to the Closing Date. Except as provided
below, Seller shall, at its expense, have full right, power and authority to
take any and all actions and to do any and all things on behalf of themselves,
the Company or any Controlled Subsidiary which they deem necessary or
appropriate in connection with any of such proceedings, including without
limitation, litigating any claims, settling any claims or waiving the
provisions of any applicable statutes of limitation as such may apply to the
assessment of any Taxes for any such periods ending prior to the Closing Date.
Seller agrees to keep Purchaser informed of the progress of any such proceeding
and to consult with Purchaser in good faith in connection therewith. Seller
further agrees that they will not settle or resolve any issue related to Taxes
which, if so settled or resolved, would have an effect on the Company, any
Controlled Subsidiary or Purchaser for periods ending after the Closing Date,
unless Seller agrees in writing with Purchaser, in terms reasonably
satisfactory to Purchaser, to indemnify Purchaser, the Company and the
Controlled Subsidiary from any cost, damage or loss
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relating to such settlement or resolution. Notwithstanding anything in this
Agreement to the contrary, if any examination, investigation, audit or other
proceeding relates to a tax return for a period that begins before and ends
after the Closing Date, Purchaser shall control and resolve such examination,
investigation, audit or other proceeding.
(h) If there is an adjustment to any return or
report of Taxes for the Company or any Controlled Subsidiary that creates a
deficiency in any Taxes for which Seller is liable under the provisions of
Section 8.03(a) hereof, or if Seller shall receive a refund with respect to
Taxes which is the property of Purchaser, the Company or any Controlled
Subsidiary under the provisions of Section 8.03(b) hereof, Seller shall pay to
Purchaser as an adjustment to the Purchase Price either (i) the amount of such
deficiency in Taxes paid by Purchaser, or (ii) the refund received by Seller
(plus any interest thereon actually received from any governmental agency). If
there is an adjustment to any return or report of taxes for the Company or any
Controlled Subsidiary which results in a refund realized by Purchaser which is
the property of Seller under the provisions of Section 8.03(a), Purchaser shall
pay the amount of such refund to Seller as an adjustment to the Purchase Price
(plus any interest thereon actually received from any governmental agency). No
liability of Seller or Purchaser, as the case may be, under this Section
8.03(h) shall be payable until the occurrence of any action by any tax
authority that is final or, if not final, is
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acquiesced in by the party subject to liability under this Section 8.03(h)
during the course of any audit or any proceeding relating to Taxes. All
payments required to be made by either Seller or Purchaser pursuant to this
Section 8.03(h) shall be made within ten (10) days of receipt, in the case of a
refund, and within ten (10) days of the occurrence of the event described in
the immediately preceding sentence in all other cases.
8.04 The terms and provisions of Sections 8.03(g) and (h)
shall control and govern with respect to the matters covered thereby
notwithstanding any terms and provisions of Sections 9.03 through 9.05 to the
contrary.
ARTICLE IX
Indemnification of Purchaser
9.01 Seller agrees to indemnify and hold Purchaser
harmless against any loss, damage or expense (including reasonable attorneys'
fees) suffered by Purchaser, the Company or any Subsidiary resulting from (a)
any breach by Seller of this Agreement; (b) any inaccuracy in or breach of any
of the representations, warranties or covenant made by Seller herein (including
on the Schedules hereto); (c) any inaccuracy or misrepresentation in the
Schedules hereto or in any certificate or affidavit delivered by Seller at the
Closing in accordance with the provisions of this Agreement; (d) any of the
matters disclosed on Schedule 7.14, and (e) the following matters: (i) the
costs and any other liabilities associated with the closings of the Chivasso
and Casalnouvo plants (including any liability
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for lease payments if the leases cannot be terminated and for relocating or
terminating employees), (ii) the costs and any other liabilities of the
Gilardini Seats Group relating to Elcat S.p.A. or MASTAL arising out of or
relating to periods prior to the Closing Date or as a result of any breach of
the representations and warranties set forth in Section 7.22, including
liabilities arising in any bankruptcy, reorganization or similar proceeding
with respect to such supplier and liabilities arising from actions taken by
Gilardini, or, prior to Closing, SEPI or any other Person in the Gilardini
Seats Group and any requirement to find other sources of supplies because of
these problems, (iii) any costs or liabilities associated within Cousin
Italiana, and (iv) any liability for customs duties arising from the transfer
of assets to SEPI Poland.
9.02 Purchaser's right to indemnification pursuant to
Section 9.01 hereof is subject to the following specific limitations:
(a) Purchaser shall not be entitled to assert any right
of indemnification hereunder for any loss, damage or expense suffered by
Purchaser, the Company or any Subsidiary arising from a breach of the
warranties, representations and covenants contained in Article VIII ("Tax
Claims") after the expiration of the statute of limitations (including any
extensions thereof) imposed by applicable law with respect to liability for
Taxes for all taxable years or periods ending on or prior to the Closing Date,
except that if there shall then be
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pending any dispute, claim, proceeding or action involving a Tax Claim under
this Agreement, Purchaser shall continue to have the right to be indemnified
with respect to such Tax Claim.
(b) Purchaser shall not be entitled to assert any right
of indemnification hereunder for any loss, damage or expense suffered by
Purchaser, the Company or any Subsidiary arising from a breach by the Company
or Seller of any covenant, agreement, warranty or representation set forth in
Articles V and VII, respectively ("General Warranty Claims"), after the third
anniversary date of the Closing Date, except that (i) if there shall then be
pending any dispute, claim, proceeding or action involving a General Warranty
Claim under this Agreement, Purchaser shall continue to have the right to be
indemnified with respect thereto, (ii) claims for a breach by Seller of any of
the covenants, warranties or representations set forth in Section 7.15 shall
survive until the later of (A) the tenth anniversary of the Closing Date or (B)
if such a claim is pending on the tenth anniversary of the Closing Date, until
such claim is resolved, and (iii) claims for a breach by the Company or Seller
of any of the warranties or representations set forth in Section 7.01 or 7.04
hereof or of the covenants set forth in Section 5.09 and 7.14(g) shall survive
without limitation.
(c) Purchaser shall not be entitled to indemnification
hereunder for General Warranty Claims until the aggregate losses, damages or
expenses suffered by Purchaser, the Company or any Subsidiary with respect
thereto exceed four hundred million
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Italian Lira (Lit 400,000,000) (said amount is hereinafter sometimes referred
to as the "Threshold"), whereupon Purchaser shall be entitled to
indemnification hereunder for General Warranty Claims from Seller for the
aggregate losses, damages or expenses suffered by Purchaser with respect to all
General Warranty Claims in excess of the Threshold, provided, however, Seller
shall in no event be liable to Purchaser hereunder for General Warranty Claims
in an amount exceeding sixty five billion Italian Lira (Lit 65,000,000,000) in
aggregate; provided, further, that the limitations set forth in this Section
9.02(c) shall not apply to claims for breaches of the covenants, warranties or
representations set forth in Sections 5.09, 7.14(g) or 7.15.
(d) The provisions of Sections 9.02(a) and (b) hereof
shall not limit or restrict any indemnification claims of Purchaser with
respect to any covenants, agreements, warranties or representations of Seller
set forth in this Agreement other than those constituting Tax Claims and
General Warranty Claims, respectively. In addition, Section 9.02(c) shall
apply solely to General Warranty Claims and not to Tax Claims or other claims.
9.03 Upon obtaining knowledge of any claim or demand
which has given rise to, or could reasonably give rise to, a claim for
indemnification hereunder, Purchaser shall promptly give written notice of such
claim or demand to Seller ("Notice of Claim"). Purchaser shall furnish to
Seller in reasonable detail such information as Purchaser may have with respect
to such
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indemnification claim (including copies of any summons, complaint or other
pleading which may have been served on it, the Company or any Subsidiary and
any written claim, demand, invoice, billing or other document evidencing or
asserting the same). Subject to the limitations set forth in Sections 9.02(a)
or 9.02(b) hereof, no failure or delay by Purchaser in the performance of the
foregoing shall reduce or otherwise affect the obligation of Seller to
indemnify and hold Purchaser harmless, except to the extent that such failure
or delay shall have adversely affected Seller's ability to defend (including
because Purchaser's failure to give notice promptly did not allow Seller
sufficient preparation time) against, settle or satisfy any liability, damage,
loss, claim or demand for which Purchaser is entitled to indemnification
hereunder.
9.04 (a) If the claim or demand set forth in the Notice
of Claim given by Purchaser pursuant to Section 9.03 hereof is a claim or
demand asserted by a third party, Seller shall have fifteen (15) business days
after the Date of the Notice of Claim to notify Purchaser in writing of its
election to defend such third party claim or demand on behalf of the Purchaser,
the Company or any Subsidiary. If Seller elects to defend such third party
claim or demand, Purchaser shall make available to Seller and his agents and
representatives all records and other materials that are reasonably required in
the defense of such third party claim or demand and shall otherwise cooperate
with, and assist Seller in the defense of, such third
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party claim or demand, and so long as Seller is defending such third party
claim in good faith, Purchaser shall not pay, settle or compromise such third
party claim or demand. If Seller elects to defend such third party claim or
demand, Purchaser shall have the right to participate in the defense of such
third party claim or demand, at Purchaser's own expense. If Seller does not
elect to defend such third party claim or demand or does not defend such third
party claim or demand in good faith, Purchaser shall have the right, in
addition to any other right or remedy it may have hereunder, at Seller's
expense, to defend such third party claim or demand; provided, however, that
(a) Purchaser shall not have any obligation to participate in the defense of,
or defend, any such third party claim or demand; and (b) Purchaser's defense of
or its participation in the defense of any such third party claim or demand
shall not in any way diminish or lessen the obligations of Seller under the
agreements of indemnification set forth in Section 9.01 hereof.
Notwithstanding the foregoing, if Purchaser shall determine in its sole
discretion that the outcome of a third party claim or demand pursuant to
Section 9.04 hereof could have a material effect on the ongoing business of the
Gilardini Seats Group after the Closing Date, Purchaser shall have fifteen (15)
business days to notify Seller of its superseding right to defend such third
party claim or demand. Purchaser's defense of a claim or demand described in
the preceding sentence shall be at Purchaser's expense, however, any loss or
damage arising therefrom shall be covered by Seller's
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indemnification obligation to Purchaser under this Article IX, provided,
however, Purchaser shall not settle any such action or proceeding without the
prior written consent of Seller, which consent will not be unreasonably
withheld, and Seller agrees to indemnify and hold Purchaser harmless from and
against any loss, claim, damage, liability or expense by reason of such
settlement.
(b) If the claim or demand set forth in the Notice
of Claim given by Purchaser pursuant to Section 9.03 hereof involves an
accounting issue challenging the amount or treatment of an item appearing on or
excluded from the financial statements of any of the Gilardini Seats Group
referred to in this Agreement, Seller shall have fifteen (15) business days
after the Date of the Notice of Claim to notify Purchaser in writing of its
objection to the treatment of such accounting issue by Purchaser in the Notice
of Claim and shall simultaneously submit to Purchaser a written report setting
forth in reasonable detail its proposed resolution of such accounting issue.
In the event Seller and the Purchaser fail to agree on any resolution of any
such accounting issue within thirty (30) days after Purchaser receives such
notice of objection, then Seller and Purchaser mutually agree that the Milan,
Italy office of Ernst & Young, certified public accountants ("Independent
Auditors"), shall make the final determination with respect to such accounting
issue. The decision of the Independent Auditors shall be final and binding on
Seller and Purchaser. The costs and expenses of the Independent Auditors and
their services
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rendered pursuant to this Section 9.04(b) shall be borne equally by Seller and
the Purchaser. Notwithstanding any other provision of this Section 9.04(b), if
Seller and Purchaser are unable to agree that the claim or demand set forth on
the Notice of Claim involves an accounting issue, such dispute shall be
governed by the arbitration provisions set forth in Section 15.10 hereof.
9.05 Except for (i) third party claims being defended in
good faith and (ii) claims involving accounting issues that Seller has objected
to pursuant to Section 9.04(b) hereof, Seller shall satisfy its obligations
hereunder within thirty (30) days after the Date of Notice of Claim. Seller
shall satisfy all claims being resolved pursuant to Section 9.04(b) hereof
within fifteen (15) business days after the earlier of (i) the date upon which
Seller and Purchaser agree on the resolution of the accounting issues, or (ii)
the date of Independent Auditors determination of the resolution of the
accounting issues. Notwithstanding the foregoing, in the event a third party
claim or demand is asserted against Purchaser, the Company or any Subsidiary
pursuant to which Purchaser, the Company or any Subsidiary is required to make
payment prior to the expiration of such 30 day period, Seller shall satisfy its
indemnification obligation with respect to such claim or demand no later than
24 hours prior to the time such third party claim or demand is required to be
paid by Purchaser, the Company or any Subsidiary.
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9.06 With respect to Tax Claims, to the extent Sections
9.03 through 9.05 are inconsistent with Article VIII hereof, Article VIII shall
govern and control.
9.07 The term "Date of the Notice of Claim" as used in
this Article IX shall mean the date the Notice of Claim is effective pursuant
to Section 15.11(c) of this Agreement.
ARTICLE X
Warranties and Representations of
Purchaser
Purchaser warrants and represents to and covenants with Seller
as follows:
10.01 Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with corporate power and authority to own its properties and to
conduct its business as now conducted.
10.02 Prior to the Closing Purchaser shall have taken all
requisite corporate action to approve this Agreement.
10.03 The execution and delivery of this Agreement by
Purchaser and the performance of its respective obligations hereunder will not
conflict with or constitute a default under its Charter or By-laws or, upon the
satisfaction of the condition set forth in Section 11.09, under any note, debt
instrument, security agreement or mortgage, or any other agreement or
commitment binding upon Purchaser or upon any of its properties.
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10.04 The Purchaser confirms that it is acquiring the
Purchased Shares for investment for its own account and not with a view to the
sale or distribution of any part thereof.
ARTICLE XI
Conditions of Closing Applicable to Purchaser
The obligations of Purchaser hereunder (including the
obligation of Purchaser to close the transactions herein contemplated) are
subject to the following conditions precedent:
11.01 Neither Purchaser nor Seller shall have terminated
this Agreement pursuant to Section 13.01 hereof.
11.02 The warranties and representations made by Seller
herein to Purchaser shall be true and correct in all material respects on and
as of the Closing Date with the same effect as if such warranties and
representations had been made on and as of the Closing Date and Seller shall
have performed and complied with all agreements, covenants and conditions on
their part required to be performed or complied with on or prior to the Closing
Date (including making all deliveries required by Sections 3.02(a), 5.03, 5.07
and 5.08 hereof); and at the Closing, Purchaser shall have received a
certificate executed by a duly authorized Managing Director or other duly
authorized executive officer of Seller to the foregoing effect.
11.03 Between the Closing Balance Sheet Date and the
Closing Date and between the date hereof and the Closing Date there shall have
been no materially adverse change in the position, financial or otherwise, or
the operations, prospects,
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assets, liabilities or results of operations of the Gilardini Seats Group.
11.04 The Italian Antitrust Approval shall have been
obtained on terms reasonably satisfactory to Purchaser and shall include
approval of the Supply Agreement and of the Non-Solicitation, Confidentiality
and Non-Compete Agreement.
11.05 No investigation, action, suit or proceeding by any
governmental or regulatory commission, agency, body or authority, and no
action, suit or proceeding by any other Person, shall be pending on the Closing
Date that challenges, or might result in a challenge to, this Agreement or any
transactions contemplated hereby, or which claims, or might give rise to a
claim for, damages in a material amount as a result of the consummation of this
Agreement.
11.06 All consents, approvals or authorizations of any
governmental authority or other Person required on the part of the Company or
any Subsidiary in connection with the performance by the Company and Seller of
their respective obligations under this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, the consent of
the Seller's joint venture partners and their parent corporations, if
applicable, in Industrias Cousin Freres, S. L. and Markol to continue such
joint ventures on a basis consistent with past practices and in accordance with
the terms of the existing agreements between such joint venture parties, on
terms satisfactory to Purchaser, shall have been duly obtained and
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shall be in full force and effect as of the Closing Date, and the Company and
the Subsidiaries shall have complied with any applicable provisions of law
requiring any notification, declaration, filing, registration and/or
qualification with any governmental authority in connection with such
performance and consummation.
11.07 Purchaser shall have entered into employment
arrangements or agreements with certain key management of SEPI on terms
satisfactory to Purchaser.
11.08 The Closing Balance Sheet shall show (a) that the
Financial Debts of the Company and the Company Subsidiaries as of September 30,
1994 did not exceed one hundred billion Italian lira (Lit 100,000,000,000) and
were not lower than eighty billion Italian lira (Lit 80,000,000,000) and (b)
the aggregate amount of the Shareholders' Equity plus the Financial Debts of
the Company and the Company Subsidiaries as of September 30, 1994 (i) was not
less than eighty billion Italian lira (Lit 80,000,000,000) and (ii) is
consistent with the attainment of the 1994 budget previously provided to the
Purchaser.
11.09 Purchaser shall have entered into an amendment to its
Amended and Restated Credit Agreement dated as of October 25, 1993 which will
permit the consummation of the transactions contemplated by this Agreement.
11.10 (a) Within five (5) business days after the
execution of this agreement Bertrand Faure shall have reaffirmed on terms
acceptable to Purchaser (i) its waiver of its right of
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first refusal under the Bylaws of SEPI with respect to the transactions
contemplated by this Agreement and (ii) that the BF Company Shares are subject
to a call option of Seller in the event of a sale of Seller's stock of the
Company; and (b) at least five (5) business days prior to the Closing Date
Bertrand Faure shall have delivered the BF Company Shares to an escrow agent to
be held in escrow, together with irrevocable instructions to sell the BF
Company Shares to Seller upon the consummation of the sale of the Purchased
Shares pursuant to this Agreement.
11.11 The Board of Directors of the Purchaser shall have
approved this Agreement.
11.12 The results of the due diligence investigation
conducted by Purchaser and its representatives shall not have, in Purchaser's
judgment, revealed circumstances that materially detrimentally affect the
Gilardini Seats Business as represented by the Financial Statements,
Projections or other business information delivered by Seller to Purchaser in
connection with Purchaser's due diligence investigation and Purchaser shall
otherwise be satisfied with the results of its due diligence investigation.
11.13 An increase in the authorized capital stock of SEPI
Poland shall have been approved and registered by the appropriate court and
title to all of the assets reflected in the Poland Balance Sheet shall have
been acquired by SEPI Poland. All agreements and understandings required by
Section 5.08 hereof
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shall have been mutually agreed and executed and delivered by the parties
thereto.
11.14 The Closing Financial Statements and the Poland
Closing Balance Sheet shall not differ in any material respect from the
Preliminary Financial Statements and the Poland Preliminary Closing Balance
Sheet, respectively.
11.15 The parties hereto, the Company and the Company
Subsidiaries shall have complied with the Article 47 Procedure.
11.16 Seller shall have delivered to Purchaser completed
Schedules to this Agreement and those Schedules shall be acceptable to
Purchaser.
11.17 The Company shall have entered into a three year
supply agreement with MASTAL (the "MASTAL Supply Agreement") on terms and
conditions approved in writing by Purchaser, and the Company shall not have
entered into the MASTAL Supply Agreement without obtaining such approval from
Purchaser.
Purchaser shall have the right to waive any of the
foregoing conditions precedent.
ARTICLE XII
Conditions to Closing Applicable to Seller
The obligations of Seller hereunder (including the obligation
of Seller to close the transactions herein contemplated) are subject to the
following conditions precedent:
12.01 Neither Purchaser nor Seller shall have terminated
this Agreement pursuant to Section 13.01 hereof.
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12.02 All warranties and representations made by Purchaser
herein to Seller shall be true and correct in all material respects on and as
of the Closing Date with the same effect as if such warranties and
representations had been made on and as of the Closing Date, and Purchaser
shall have performed and complied with all agreements, covenants and conditions
on its part required to be performed or complied with on or prior to the
Closing Date (including making all deliveries required by Section 3.02(b)
hereof) and at the Closing, Seller shall have received a certificate executed
by the President or any Vice President of Purchaser to the foregoing effect.
12.03 The Italian Antitrust Approval shall have been
obtained.
12.04 No investigation, action, suit or proceeding by any
governmental or regulatory commission, agency, body or authority, and no
action, suit or proceeding by any other Person shall be pending on the Closing
Date that challenges or might result in a challenge to this Agreement or any
transaction contemplated hereby, or which claims, or might give rise to a claim
for, damages in a material amount as a result of the consummation of the
transactions contemplated hereby.
Seller shall have the right to waive any of the foregoing
conditions precedent.
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ARTICLE XIII
Termination
13.01 This Agreement may be terminated at any time prior to
the Closing as follows, and in no other manner:
(a) by mutual consent of Purchaser and Seller;
(b) by Purchaser or by Seller, if at or before the Closing
any conditions set forth herein for the benefit of the Purchaser or Seller,
respectively, shall not have been timely met or cannot be timely met;
(c) by Purchaser or by Seller if the Closing of the
transactions contemplated by this Agreement shall not have occurred on or
before November 30, 1994, or such later date as may have been agreed upon in
writing by the parties hereto;
(d) by Purchaser or by Seller if any representation or
warranty made herein for the benefit of Purchaser or Seller, respectively, or
in any certificate, schedule or documents furnished to Purchaser or Seller,
respectively, pursuant to this Agreement is untrue in any material respect; or
(e) by Purchaser if Seller shall have defaulted in any
material respect in the performance of any material obligation under this
Agreement, and by Seller if Purchaser shall have defaulted in any material
respect in the performance of any material obligation under this Agreement.
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<PAGE> 90
ARTICLE XIV
Certain Understandings and Agreements
14.01 Purchaser covenants and agrees that within one month
of the Closing Date, the Company will replace, or Purchaser will cause the
Company to replace, all the existing indebtedness owed to Fiat S.p.A. and other
short-term bank debt procured by Fiat S.p.A., which indebtedness is to be
identified by Seller in writing five (5) business days following Closing and
which is preliminarily estimated to be eighty eight billion Italian Lira (Lit
88,000,000,000) as of November 30, 1994, with third- party bank credit lines.
Seller covenants and agrees to assist Purchaser in obtaining the most favorable
conditions for such financing according to the then prevailing financial market
situation.
14.02 Seller shall use its best efforts to assist the
Purchaser in obtaining the grants of nine billion five hundred million (Lit
9,500,000,000) Italian Lira (the "Financial Accommodation"), and low interest
rate loans of approximately twenty-seven billion Italian Lira (Lit
27,000,000,000) applied for with the Italian Ministry for Investments in the
South of Italy. Seller represents and warrants to Purchaser that the
applications for the Financial Accommodation and such loans comply with
applicable law and other requirements, and Seller is not aware of any reason
why the Financial Accommodation and such loans will not be granted. If the
Financial Accommodation has not been received by the Company or SEPI SUD by
December 31,
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1996, Seller hereby guarantees 70% of the Financial Accommodation and agrees to
pay to the Company or SEPI SUD, as directed by Purchaser, three equal annual
installments of 2,216,666,666 Italian Lira on each of December 31, 1996, 1997
and 1998. In the event the Company or SEPI SUD receives the Financial
Accommodation after December 31, 1996, Purchaser agrees to repay, or cause to
be repaid, without interest, to Seller an amount representing all such
installment payments received from Seller to date, but in no event shall such
repayment from Purchaser to Seller exceed the amount of the Financial
Accommodation received by Purchaser. Seller represents and warrants that 80%
of such investment required to be made in Melfi for purposes of being entitled
to the entire Financial Accommodation has been made or committed and that
regardless of any future investment to be made in Melfi, the Financial
Accommodation that Purchaser is eligible to receive will be at least
7,600,000,000 Italian Lira.
14.03 In order to assist Purchaser, the Company and the
Subsidiaries with certain severance, productivity and other costs associated
with the continuing rationalization of certain facilities of the Company and
the Subsidiaries, Seller agrees, as a final settlement with respect to certain
of such identified costs, to pay to Purchaser or the Company, as the Purchaser
shall direct, 11,000,000,000 Italian Lira, without interest thereon, payable as
follows (i) 3,750,000,000 Italian Lira on December 31, 1995, (ii) 3,750,000,000
Italian Lira on December 31, 1996, (iii)
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1,750,000,000 Italian Lira on December 31, 1997, and (iv) 1,750,000,000 Italian
Lira on December 31, 1998.
14.04 Within five (5) business days of a request by
Purchaser, Seller shall deliver to Purchaser its most recently available
financial statements, which financial statements shall show Seller's net worth
determined in accordance with GAAP.
14.05 As a final settlement with respect to certain
differences between the 1995 Budget and the terms of the Supply Agreement,
Seller agrees to pay to Purchaser or the Company, as the Purchaser shall
direct, nine billion Italian Lira (Lit 9,000,000,000) in the aggregate, without
interest thereon, payable in six equal installments of one and one-half billion
Italian Lira (Lit 1,500,000,000) on December 31, 1994, January 31, 1995,
February 28, 1995, March 31, 1995, April 30, 1995 and May 31, 1995.
ARTICLE XV
Miscellaneous
15.01 (a) If this Agreement is consummated, Seller shall
pay the costs and expenses (including attorneys' fees and other legal costs and
expenses and accounting fees and other accounting costs and expenses) incurred
by the Company, any Subsidiaries and Seller in connection with this Agreement
and the transactions contemplated hereby.
(b) If this Agreement is not consummated, Seller shall,
or shall cause the Company or the Subsidiaries to, pay the costs and expenses
(including attorneys' fees and other legal
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costs and expenses and accountant's fees and other accounting costs and
expenses) incurred by the Company, any Subsidiaries and Seller in connection
with this Agreement and the transactions contemplated hereby.
(c) Whether or not this Agreement is consummated,
Purchaser shall pay all of the costs and expenses (including attorneys' fees
and other legal costs and expenses and accountants' fees and other accounting
costs and expenses) incurred by it in connection with this Agreement and the
transactions contemplated hereby.
(d) Except as otherwise provided herein, Seller and
Purchaser shall each pay one-half of all stamp duty, transfer, sales, use or
similar taxes applicable to, imposed upon or arising as a result of the
purchase and sale of the Purchased Shares pursuant to this Agreement, as well
as one-half of any notary fees relating to the confirmation of the title to the
real property owned by the Company or the Controlled Subsidiaries, pursuant to
this Agreement.
15.02 (a) Neither the Company nor Seller has retained
any broker, finder, investment banker or financial advisor in connection with
this Agreement or the transactions contemplated hereby, nor has Fiat, Seller,
the Company or any Subsidiary entered into any agreement or understanding with
any employee or agent of Fiat, Seller, the Company or any Subsidiary pursuant
to which such employee or agent would be entitled to a bonus, success fee or
other payment as a result of the consummation of
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any of the transactions contemplated hereby; and the Company has not incurred
or paid, and neither Purchaser nor the Company or any Subsidiary will incur or
be required to pay, any broker's, finder's, investment banker's, financial
advisor's or similar fee in connection with this Agreement or any transactions
contemplated hereby to any Person acting as broker, finder, investment banker,
financial advisor or in any similar capacity on behalf of the Company or
Seller.
(b) The Purchaser has not retained any broker, finder,
investment banker or financial advisor in connection with this Agreement or the
transactions contemplated hereby; except that Purchaser has retained certain
financial advisors and shall be solely responsible for payment of their fees;
and neither the Company nor Seller will incur or be required to pay any
broker's, finder's, investment banker's, financial advisor's or similar fee in
connection with this Agreement or the transactions contemplated hereby to any
Person acting as broker, finder, investment banker, financial advisor or in any
similar capacity on behalf of Purchaser.
(c) Purchaser and Seller agree to hold each other harmless
from any loss, damage or expense resulting from a breach by such party of their
respective warranties set forth in this Section 15.02.
15.03 All warranties, representations, agreements and
covenants made by the respective parties hereto in this Agreement
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<PAGE> 95
shall survive the Closing Date, subject to the limitations set forth in
Sections 9.02(a) and (b) hereof.
15.04 This Agreement (including the Exhibits and Schedules
hereto) contains the entire agreement between the parties hereto with respect
to the transactions contemplated hereunder, and supersedes all negotiations,
representations, warranties, commitments, offers, contracts and writings prior
to the date hereof including, without limitation, the letter agreements dated
July 14, 1994, July 24, 1994 and August 10, 1994 and the Memorandum of
Understanding dated August 25, 1994 between Seller and Purchaser. No waiver
and no modification or amendment of any provisions of this Agreement shall be
effective unless specifically made in writing and duly signed by the party to
be bound thereby.
15.05 Prior to the Closing Date, all notices to third
parties and other publicity relating to the transaction contemplated by this
Agreement shall be jointly planned, coordinated and agreed to by Purchaser and
Seller. Prior to the Closing Date none of the parties hereto shall act
unilaterally in this regard without the prior written approval of the others;
however, such approval shall not be unreasonably withheld.
15.06 This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which,
together, shall constitute one and the same instrument.
15.07 If any provision hereof shall be held invalid or
unenforceable by any court of competent jurisdiction or as a
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<PAGE> 96
result of future legislative action, such holding or action shall be strictly
construed and shall not affect the validity or effect of any other provision
hereof.
15.08 None of the parties hereto shall transfer or assign
(by designation or otherwise) any of their rights or obligations hereunder
without the prior written consent of the other parties hereto; provided,
however, that (i) in the event of the anticipated merger of Magneti Marelli
S.p.A. into Seller, no such written consent shall be required and the survivor
of such merger shall succeed to all rights and obligations of Seller hereunder
and (ii) Purchaser may transfer or assign (by designation of another Person
pursuant to Section 1401 of the Italian Civil Code or otherwise) at any time
before or after the Closing any or all of its rights and obligations hereunder
to a third Person in which Purchaser, directly or indirectly, owns 50% or more
of the voting capital stock and in each case no consent of any other party
hereto shall be required. In the case of a transfer or assignment described in
the foregoing proviso the transferee, assignee or surviving corporation shall
be the "Purchaser" or "Seller", as the case may be for all purposes hereunder,
however, Lear Seating Corporation shall remain jointly and severally liable for
all obligations of Purchaser hereunder. This Agreement shall be binding upon
and inure to the benefit of the heirs, personal representatives, successors and
assigns of the parties hereto.
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<PAGE> 97
15.09 The captions of the various Articles of this
Agreement have been inserted only for convenience and shall not be deemed to
modify, explain, enlarge or restrict any of the provisions of this Agreement.
15.10 This Agreement shall be governed by Italian law. Any
disputes arising out of or in connection with this Agreement or a related
agreement, in particular any disputes as to their existence, validity,
interpretation performance or non- performance, whether arising before or after
the expiration of this Agreement, shall be referred to and finally resolved by
arbitration under the Rules of the London Court of International Arbitration.
The place of arbitration shall be London, England and the English language
shall be the language of the arbitration. The arbitral tribunal shall be
composed of three arbitrators, with one arbitrator designated by the Seller and
one designated by the Purchaser. The arbitrators shall be fluent in the
English language and shall have significant experience with contracts for the
acquisition of companies at an international level. The arbitrators shall
decide any dispute and shall render their award in accordance with the terms of
this Agreement and Italian law. The parties agree that any such award
hereunder may be submitted to a court of competent jurisdiction for enforcement
thereof.
15.11 (a) All notices, requests, demands and other
communications under this Agreement shall be in writing and
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<PAGE> 98
delivered in person or sent by courier or facsimile and properly addressed as
follows:
To Purchaser:
Lear Seating Corporation
21557 Telegraph Road
Southfield, Michigan USA 48034
Facsimile No.: (810) 746-1593
Confirm No.: (810) 746-1513
Attention: Mr. James H. Vandenberghe
With Copies to:
Lear Seating Corporation
21557 Telegraph Road
Southfield, Michigan USA 48034
Facsimile No.: (810) 746-1677
Confirm No.: (810) 746-1003
Attention: Joseph F. McCarthy
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Facsimile No: (312) 558-5700
Confirm No.: (312) 558-5600
Attention: John L. MacCarthy
To the Company:
Gilardini S.p.A.
Corso Giulio Cesare, 300
10154 Turin, Italy
Facsimile No.: (11) 242-0938
Confirm No.: (11) 268-3413
Attention: Mr. Piero Maritano
With a Copy to:
Gilardini S.p.A.
Corso Giulio Cesare, 300
10154 Turin, Italy
Facsimile No.: (11) 242-0938
Confirm No.: (11) 268-3413
Attention: General Counsel
(b) Any party may from time to time change its address for
the purpose of notices to that party by a similar notice specifying a new
address, but no such change shall be deemed to
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<PAGE> 99
have been given until it is actually received by the party sought to be charged
with its contents.
(c) All notices and other communications required or
permitted under this Agreement which are addressed as provided in this Section
15.11 if delivered personally, shall be effective upon receipt; if delivered by
courier, shall be effective upon receipt; and if delivered by facsimile, shall
be effective upon confirmation of receipt.
15.12 Whenever a representation, warranty or other
statement is made to the knowledge of a party in this Agreement, such
representation, warranty or statement shall be deemed made to the best of such
party's knowledge after due investigation.
15.13 Except as otherwise expressly provided herein, all
amounts expressed in this Agreement and all payments required by this Agreement
are in Italian Lira.
15.14 In connection with the creation of SEPI Poland,
Seller and Purchaser acknowledge that all representations and warranties
pertaining to SEPI Poland shall be exclusively provided for in, and enforceable
according to, the provisions of this Agreement.
15.15 Although this Agreement is dated as of November 15,
1994, it shall be effective only from and after the actual time of its
execution and delivery by Seller and Purchaser set forth on the following
signature pages.
[Signature pages to follow]
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<PAGE> 100
IN WITNESS WHEREOF, the parties hereto have duly executed this
Stock Purchase Agreement as of the day and year set forth following the
signatures of the parties hereto.
LEAR SEATING CORPORATION
By:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
STATE OF MICHIGAN )
) SS.
COUNTY OF OAKLAND )
I, ___________________________, a Notary Public in and for
said County, in the State aforesaid, DO HEREBY CERTIFY that James H.
Vandenberghe, personally known to me to be the Executive Vice President and
Chief Financial Officer of Lear Seating Corporation, and personally known to me
to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person and acknowledged that he signed and
delivered said instrument as Executive Vice President and Chief Financial
Officer of said corporation, as his free and voluntary act, and as the free and
voluntary act and deed of said corporation, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 15th day of
November.
--------------------------------------------
Notary Public
My Commission Expires:
----------------------
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<PAGE> 101
GILARDINI S.p.A.
By:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
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<PAGE> 102
EXHIBITS
Section
Exhibit Description Reference
- ------- ----------- ---------
A Financial Debts 1.02
B Financial Statements 1.02
C Preliminary Poland Closing
Balance Sheet 1.02
D Poland Financial Statements 1.02
E Preliminary Closing
Financial Statements 1.02
F List of Subsidiaries 1.02
G Purchase Price Allocation 2.02(c)
H Accounting and Inventory Policies 2.03(b)
I SEPI Poland Share Purchase
Agreement 3.02(a)(ii)
J Opinion of Altheimer & Grey 3.02(a)(xii)
K Supply Agreement 3.02(a)(xiii)
L Non-Solicitation, Confidentiality
and Non-Compete Agreement 3.02(a)(xiv)
M Authorized Purchaser
Representative 5.02
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<PAGE> 103
LEAR SEATING CORPORATION
21557 TELEGRAPH ROAD
SOUTHFIELD, MICHIGAN - USA 48034
November 30, 1994
GILARDINI S.p.A.
Corso Giulio CeSare, 300
10154 Turin, Italy
Ladies and Gentlemen:
Reference is made to that certain Stock Purchase Agreement dated as of
November 15, 1994 (the "Purchase Agreement") by and between Gilardini S.p.A., a
corporation organized under the laws of Italy ("Seller"), and Lear Seating
Corporation, a Delaware corporation ("Purchaser"). This letter confirms and
evidences the agreement between Seller and Purchaser (i) to change the date of
the Closing (as defined in the Purchase Agreement) of the transactions
contemplated by the Purchase Agreement and the Closing Date (as defined in the
Purchase Agreement) from November 30, 1994 to December 13, 1994; (ii) to
replace "November 30, 1994" with "December 13, 1994" in Sections 3.01 and
13.01(c) of the Purchase Agreement and (iii) to add the following section
immediately after Section 11.17:
"11.18 The Purchaser and Seller shall have entered into a letter
agreement or agreements to resolve the issues raised by the Closing Financial
Statements on terms acceptable to Purchaser and Seller.".
As amended as set forth above the Purchase Agreement shall continue in
full force and effect.
Sincerely,
LEAR SEATING CORPORATION
By: /s/
------------------------
------------------------
Accepted and Agreed this
30th day of November, 1994
GILARDINI S.p.A.
By: /s/
-------------------------
Its: Chief Operating Officer
----------------------------
<PAGE> 104
[LEAR SEATING CORPORATION LETTERHEAD]
ANNEX B
December 13, 1994
GILARDINI S.p.A.
Corso Giulio Cesare, 300
10154 Turin, Italy
Ladies and Gentlemen:
Reference is made to that certain Stock Purchase Agreement dated as of
November 15, 1994, and amended on November 30, 1994 (the "Purchase Agreement")
by and between Gilardini S.p.A., a corporation organized under the laws of
Italy ("Seller"), and Lear Seating Corporation, a Delaware corporation
("Purchaser"). This letter confirms and evidences the agreement between Seller
and Purchaser (i) to change the date of the Closing (as defined in the
Purchase Agreement) of the transactions contemplated by the Purchase Agreement
and the Closing Date (as defined in the Purchase Agreement) from December 13,
1994 to December 15, 1994; (ii) to replace "December 13, 1994" with "December
15, 1994" in Sections 3.01 and 13.01(c) of the Purchase Agreement; and (iii) to
delete Section 14.05 and replace it with the following:
"14.05 As a final settlement with respect to certain differences
between the 1995 Budget and the terms of the Supply Agreement and the Side
Letter attached thereto relating to Italian supplies, Seller agrees to pay to
Purchaser or the Company, as the Purchaser shall direct, fourteen billion
Italian Lira (Lit. 14,000,000,000) in the aggregate, without interest thereon,
payable in six equal installments of one and one half billion Italian Lira (Lit.
1,500,000,000) on December 31, 1994, January 31, 1995, February 28, 1995, March
31, 1995, April 30, 1995 and May 31, 1995 and in one final installment of five
billion Italian Lira (Lit. 5,000,000,000) on December 31, 1995."
As amended as set forth above the Purchase Agreement shall continue in
full force and effect.
Sincerely,
LEAR SEATING CORPORATION
By:/s/
-----------------------------
Its: Vice President - Secretary
---------------------------
Accepted and Agreed this
13th day of December, 1994
GILARDINI S.p.A.
By:/s/
-----------------------------
Its: Chief Operating Officer
---------------------------
<PAGE> 105
EXHIBITS
Section
Exhibit Description Reference
- ------- ----------- ---------
A Financial Debts 1.02
B Financial Statements 1.02
C Preliminary Poland Closing
Balance Sheet 1.02
D Poland Financial Statements 1.02
E Preliminary Closing
Financial Statements 1.02
F List of Subsidiaries 1.02
G Purchase Price Allocation 2.02(c)
H Accounting and Inventory
Policies 2.03(b)
I SEPI Poland Share Purchase
Agreement 3.02(a)(ii)
J Opinion of Altheimer & Grey 3.02(a)(xii)
K Supply Agreement 3.02(a)(xiii)
L Non-Solicitation, Confidentiality
and Non-Compete Agreement 3.02(a)(xiv)
M Authorized Purchaser
Representative 5.02
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<PAGE> 106
EXHIBIT A
Financial Debts
Financial Debts shall mean the algebraic sum of the following items included in
the SEPI S.p.A. and SEPI Sud S.p.A. financial statements:
A) - Cash on hand and at bank (inclusive of related interest)
- Financial receivables due from FIAT S.p.A. and subsidiaries'
centralized treasury management services (inclusive of related
interest), including:
FIAT S.p.A.
FIAT GeVa S.p.A.
SICIND
SAPAV
- Financial receivables due from FIAT S.p.A. for VAT
B) + Short-term bank debt (current accounts, advances, overdrafts, all
inclusive of related interest)
+ Long-term bank debt (inclusive of related interest)
+ Financial payables due to FIAT S.p.A. and subsidiaries' centralized
treasury management services (inclusive of related interest),
including:
Fiat S.p.A.
Fiat GeVa S.p.A.
SICIND
SAPAV
+ Financial payables due to FIAT S.p.A. for VAT
<PAGE> 107
EXHIBIT 99.1
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1993 AND SEPTEMBER 30, 1994,
TOGETHER WITH REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
<PAGE> 108
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Gilardini S.p.A.:
We have audited the combined balance sheets of the Fiat Seat Business (an
operating unit of Gilardini S.p.A. as described in Note 1 to the financial
statements) at December 31, 1993 and September 30, 1994, and the related
combined statements of operations, changes in shareholders' investments and
cash flows for the years ended December 31, 1992 and 1993 and for the nine
months ended September 30, 1994. These financial statements are the
responsibility of the combined entity's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Fiat Seat
Business at December 31, 1993 and September 30, 1994 and the results of its
operations and its cash flows for the years ended December 31, 1992 and 1993
and for the nine months ended September 30, 1994, in conformity with United
States generally accepted accounting principles.
ARTHUR ANDERSEN & CO. s.a.s.
Turin, Italy
November 30, 1994
<PAGE> 109
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND SEPTEMBER 30, 1994, (Note 1)
(In millions of Italian Lire)
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
ASSETS 1993 1994
------ ---------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash 4,184 1,759
Financial receivables due from related parties (Note 4) 17,126 13,351
Trade receivables-
Related parties (Note 4) 214,529 210,874
Other customers (net of allowances for doubtful accounts of
Lire 2,017 and Lire 2,404 respectively) 12,003 40,758
Inventories (Note 5) 25,367 31,320
Other receivables and prepayments (Note 6) 16,559 23,643
------- -------
Total current assets 289,768 321,705
------- -------
PLANT, PROPERTY AND EQUIPMENT:
Land and buildings 27,261 35,946
Machinery and equipment 59,001 77,554
Construction in progress and advances 18,310 4,606
------- -------
104,572 118,106
Less- Accumulated depreciation (24,432) (32,513)
------- -------
Total plant, property and equipment, net 80,140 85,593
------- -------
OTHER ASSETS:
Investments in affiliates (Note 7) 7,531 7,333
Intangibles and deferred charges, net 1,465 823
------- -------
Total other assets 8,996 8,156
------- -------
Total assets 378,904 415,454
======= =======
</TABLE>
The notes to the combined financial statements
form an integral part of these balance sheets.
<PAGE> 110
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND SEPTEMBER 30, 1994, (Note 1)
(In millions of Italian Lire)
<TABLE>
<CAPTION>
LIABILITIES AND Dec. 31, Sept. 30,
SHAREHOLDERS' INVESTMENTS 1993 1994
------------------------- ----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings (Note 8):
Related parties (Note 4) 108,904 90,215
Other - 94
Current portion of long-term debt (Note 9) 885 913
Trade payables-
Related parties (Note 4) 77,246 110,801
Other suppliers 125,815 142,390
Other payables and accrued expenses 21,809 29,737
------- -------
Total current liabilities 334,659 374,150
------- -------
LONG-TERM LIABILITIES:
Long-term debt (Note 9) 3,790 3,290
Reserve for employee termination indemnities 30,215 27,898
Deferred income taxes (Note 10) 1,833 1,756
------- -------
Total long-term liabilities 35,838 32,944
------- -------
Total liabilities 370,497 407,094
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENTS (Note 11):
Capital acccounts 56,122 48,880
Retained deficit (47,483) (39,314)
Cumulative translation adjustment (232) (1,206)
------- -------
Total shareholders' investments 8,407 8,360
------- -------
Total liabilities and shareholders' investments 378,904 415,454
======= =======
</TABLE>
The notes to the combined financial statements
form an integral part of these balance sheets.
<PAGE> 111
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1992 AND 1993 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1994 (Note 1)
(In millions of Italian Lire)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, NINE MONTHS
----------------------------- ENDED
1992 1993 SEPT. 30 1994
----------- ----------- -------------
<S> <C> <C> <C>
Net sales and revenues (Notes 4 and 12) 655,371 571,761 524,075
Cost of sales (620,614) (571,446) (513,043)
Selling, administrative and other expenses (29,904) (35,388) (36,773)
-------- ------- -------
Operating income (loss) 4,853 (35,073) (25,741)
Equity in losses of affiliate - (413) (54)
Interest income (expense), net (6,944) (6,986) (6,783)
Foreign exchange gains (losses), net (911) (441) (1,067)
-------- ------- -------
Loss before provision for income taxes (3,002) (42,913) (33,645)
Provision for income taxes (Note 10) 50 103 77
-------- ------- -------
Net loss (2,952) (42,810) (33,568)
======== ======= =======
</TABLE>
The notes to the combined financial statements form
an integral part of these statements of operations.
<PAGE> 112
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENTS
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1993 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1994 (Note 1)
(In millions of Italian Lire)
<TABLE>
<CAPTION>
Cumulative
Capital Retained Translation
Accounts Deficit Adjustment Total
-------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Balances as of December 31, 1991 4,000 (3,853) 147
Cancellation of shares in Sepi S.p.A. to
partially offset deficit (2,132) 2,132 - -
Issuance of shares by Sepi S.p.A. for
payment 2,132 - - 2,132
Issuance of shares by Sepi S.p.A. for
acquisition of Sicam S.p.A. (Note 3) 47,300 - - 47,300
Net loss for the year - (2,952) - (2,952)
------ -------- ------ -------
Balances as of December 31, 1992 51,300 (4,673) - 46,627
Investment in FSB Poland (Note 1) 4,822 - - 4,822
Net loss for the year - (42,810) - (42,810)
Foreign currency translation - - (232) (232)
------ -------- ------ -------
Balances as of December 31, 1993 56,122 (47,483) (232) 8,407
Investment in FSB Poland 1,492 - - 1,492
Cancellation of shares and additional
paid-in capital in Sepi S.p.A. to
partially offset deficit (41,737) 41,737 - -
Issuance of additional shares by Sepi
S.p.A. for payment 33,003 - - 33,003
Net loss for the period - (33,568) - (33,568)
Foreign currency translation - - (974) (974)
------ -------- ------ -------
Balances as of September 30, 1994 48,880 (39,314) (1,206) 8,360
====== ======== ====== =======
</TABLE>
The notes to the combined financial statements
form an integral part of these statements.
<PAGE> 113
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1993 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 (Note 1)
(In millions of Italian Lire)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, NINE MONTHS
---------------------------- ENDED
1992 1993 SEPT. 30 1994
----------- ----------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period (2,952) (42,810) (33,568)
Adjustments to reconcile net loss to net cash flow from
operating activities-
Depreciation and amortization 8,453 14,386 12,118
Net change in working capital items (26,859) 39,134 19,534
Net change in reserve for employee termination
indemnities (1,402) 1,722 (2,317)
Other, net 374 707 (226)
------- ------- -------
Net cash provided (used) by operating activities (22,386) 13,139 (4,459)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment and
other assets (19,199) (39,953) (17,564)
Disposals of property, plant and equipment and
other assets 3,631 1,779 834
Net cash acquired with Sicam S.p.A. (Note 3) 1,825 - -
------- ------- -------
Net cash used by investing activities (13,743) (38,174) (16,730)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital increases 2,132 4,822 34,495
(Increase) decrease in financial receivables 165 (9,872) 3,775
Increase (decrease) in short-term borrowings 35,939 34,545 (18,595)
Repayment of long-term debt - (2,994) (550)
------- ------- -------
Net cash flow provided by financing activities 38,236 26,501 19,125
------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
- 225 (361)
------- ------- -------
NET INCREASE (DECREASE) IN CASH 2,107 1,691 (2,425)
------- ------- -------
CASH - BEGINNING OF PERIOD 386 2,493 4,184
------- ------- -------
CASH - END OF PERIOD 2,493 4,184 1,759
======= ======= =======
</TABLE>
The notes to the combined financial statements
form an integral part of these statements
<PAGE> 114
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The Fiat Seat Business ("FSB") is an operating unit of Gilardini
S.p.A. ("Gilardini", a majority-owned subsidiary of Fiat S.p.A.
operating in the auto components sector) and represents the combined
operations of Gilardini's Italian subsidiaries Sepi S.p.A. and Sepi
Sud S.p.A., and of the Seat division of its Polish subsidiary,
Gilardini Poland sp.z.oo. This combined entity is referred to as
"FSB" or "the Companies" in the following notes to the financial
statements, while the Polish business alone is referred to as "FSB
Poland".
These combined financial statements include the results of operating
activities, transactions and assets and liabilities associated with
the business of FSB in Italy and Poland. They also include Sepi
S.p.A.'s 49% interest in Industrias Cousin Freres S.L., a Spanish
company also operating in the Seat business, which is accounted for
under the equity method of accounting.
The combined financial statements have been prepared in conformity
with accounting principles generally accepted in the United States and
reflect certain adjustments and reclassifications to the financial
statements prepared by the Companies for legal and tax purposes in
their respective countries.
The combined financial statements have been prepared on a historical
accounting basis and do not reflect adjustments which may arise
related to the transaction described in Note 15.
The Companies' fiscal year end is December 31. Accordingly, the
combined financial statements for the period ended September 30, 1994
are for a nine month interim period.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Principles of Combination
Transactions and balances among the Companies have been eliminated in
the combined financial statements, including unrealized intercompany
profits and losses, where appropriate.
<PAGE> 115
- 2 -
Foreign Currency Translation and Transactions
The accompanying financial statements are presented in Italian Lira.
The balance sheet of the Polish entity and of the Spanish affiliate
accounted for under the equity method are translated into Italian Lira
applying the exchange rates in effect at period-end and the income
statements are translated at the average exchange rates for the
period. Translation gains or losses are reflected in combined
shareholders' investments.
Balances related to transactions denominated in currencies other than
the local currency of the combined entities are translated at the
exchange rate in effect at the end of the period and exchange rate
gains or losses are included in the statements of operations.
Revenue Recognition
Revenue relating to the sale of products is recognized at the time
that products are shipped to the customer.
Receivables and payables
Receivables and payables are recorded at face value. Receivables are
written down to their expected realizable value by recording
allowances for doubtful accounts and for customer returns and
allowances when appropriate. Amounts related to retroactive
adjustment of the values of sales and purchases are recorded when such
adjustments are subject to reasonable estimation.
Inventories
Inventories are valued at the lower of cost, substantially determined
using the first-in, first-out method (FIFO), or market. The cost of
inventory includes direct materials, labor and indirect manufacturing
costs.
Obsolete and slow-moving or excess inventories are stated at their
estimated realizable value by recording a valuation allowance when
appropriate.
<PAGE> 116
- 3 -
Plant, property and equipment,
depreciation and capital
investment grants
Plant, property and equipment are stated at purchase price or
production cost.
Depreciation is provided on a straight line basis, applying rates
which are considered representative of the estimated useful lives of
the related assets, as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Industrial buildings 10 - 33
Machinery and equipment 4 - 10
Leasehold improvements Period of lease
</TABLE>
Repairs and maintenance costs are charged to income in the year in
which they are incurred.
Government grants and customer payments towards capital expenditures
are recognized when their collectibility is reasonably assured and are
credited to income over the lives of the related assets.
Investments in affiliates
The investment in the affiliate Industrias Cousin Freres S.L. (Spain)
is accounted for under the equity method of accounting.
The investment in the Italian affiliate Cousin Italiana S.p.A. in
liquidazione is valued under the cost method at the lower of cost and
estimated net realizable value, since this is a non-operating company
in liquidation.
Income taxes
Income taxes are accounted for under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Deferred income taxes are provided for differences between the
carrying value of assets and liabilities for financial reporting and
tax purposes and for the future tax benefits related to tax loss
carry-forwards. A valuation allowance is recorded on all deferred tax
assets for which realization is questionable.
<PAGE> 117
- 4 -
Reserve for employee
termination indemnities
Italian law provides for an indemnity to be paid to all employees upon
termination of employment. The related reserves reflect the amounts
to be accrued according to the terms of the law and the labor
contracts by FSB's Italian entities. The law requires that the
provision for each period reflect both the indemnity accruing based
upon the compensation for that period, and the revaluation of prior
period accruals on the basis of an index which represents a
significant percentage of the annual increase in the Official Italian
Cost of Living Index. Provisions to the reserve in the years ended
December 31, 1993 and in the nine months ended September 30, 1994
amounted to Lire 5,637 million and Lire 6,312 million, respectively;
payments from the reserve in the same periods amounted to Lire 4,814
million and Lire 6,744 million, respectively.
In the opinion of the management, the amount of the reserve as of
December 31, 1993 and September 30, 1994, determined applying the
methodology required by Italian law described above, was higher than
that which would have been obtained applying the methodology set out
in Statement of Financial Accounting Standards No. 87 "Employers'
Accounting for Pensions". In these circumstances, the Emerging Issues
Task Force of the Financial Accounting Standards Board has indicated
that recording the Italian-basis liability is considered as being in
accordance with general accepted accounting principles.
Research and development
Research and development costs are charged to the statement of
operations in the accounting period in which they are incurred. Where
applicable, research-related revenue grants provided by the Italian
Government are credited to the statement of operations when their
collectibility is reasonably assured. In the year ended December 31,
1993 and in the nine months ended September 30, 1994 such costs
amounted to Lire 15,092 million and Lire 9,695 million, respectively.
Accruals for plant closure
and restructuring
Accruals are established for the costs incurred and expected to be
incurred related to plants closed and employees terminated prior to
the date of preparation of the financial statements.
<PAGE> 118
- 5 -
3. ACQUISITION OF SICAM S.p.A.
Effective June 1992, Sepi S.p.A. acquired a 100% interest in Sicam
S.p.A., ("Sicam"), which was an Italian subsidiary of the French group
Bertrand Faure S.A. and a supplier of Sepi, in exchange for the issue
of 166,660 new shares in Sepi S.p.A. with a par value of Lire 10
thousand per share.
This acquisition was accounted for as a purchase and, accordingly, the
results of Sicam have been included in the accompanying financial
statements since the date of acquisition. The purchase price has been
determined as Lire 47,300 million, representing the fair value at that
date attributed by the seller to the shares issued, and was allocated
to the purchased assets as follows (in millions of Italian Lire):
<TABLE>
<S> <C>
Property, plant and equipment 33,580
Net non-cash working capital 20,503
Other assets purchased and liabilities assumed, net (8,608)
------
45,475
Cash acquired 1,825
------
Total purchase price allocation 47,300
======
</TABLE>
Assuming the acquisition had taken place effective January 1, 1992,
the consolidated pro-forma results of operation of the Company would
have been approximately as follows (unaudited; in millions of Italian
Lire):
<TABLE>
<CAPTION>
Year ended
December 31, 1992
-----------------
<S> <C>
Net sales 665,500
Net loss for the period (6,200)
=======
</TABLE>
4. RELATED PARTY TRANSACTIONS
The Companies have significant transactions with other Fiat group
subsidiaries. In particular, they sell the majority of their finished
products to Fiat Auto S.p.A. and subsidiaries and receive certain
administrative and treasury management services from Gilardini and
from other Fiat group finance companies. The following tables
summarize the balances included in the consolidated financial
statements as of and for the periods ended December 31, 1992 and 1993
and September 30, 1994, which result from these transactions (in
millions of Italian Lire):
<PAGE> 119
- 6 -
<TABLE>
<CAPTION>
Dec. 31, Dec. 31, Sept. 30,
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Financial receivables
---------------------
Gilardini 6,815 10,534 -
Other 20 6,592 13,351
------- ------- -------
6,835 17,126 13,351
======= ======= =======
Trade receivables
-----------------
Fiat Auto 220,905 210,367 209,916
Other 7,846 4,162 958
------- ------- -------
228,751 214,529 210,874
======= ======= =======
Financial payables
------------------
Fiat Geva S.p.A. - 53,284 86,175
Sogespar S.p.A. 55,000 51,101 -
Other 18,568 4,519 4,040
------- ------- -------
73,568 108,904 90,215
======= ======= =======
Trade payables
--------------
Savafactoring S.p.A. 38,264 49,288 85,433
Fiat Auto 22,159 15,904 13,115
Comau S.p.A. - 4,955 7,475
Other 3,345 7,099 4,778
------- ------- -------
63,768 77,246 110,801
======= ======= =======
Net sales and revenues
----------------------
Fiat Auto 571,236 514,499 472,540
Others 43,846 18,083 1,543
------- ------- -------
615,082 532,582 474,083
======= ======= =======
</TABLE>
Management believes that the related party transactions referred to
above are carried on in the normal course of business and on an arms'
length basis.
<PAGE> 120
- 7 -
5. INVENTORIES
Inventories as of December 31, 1993 and September 30, 1994 (net of
related write-down reserves of Lire 1,786 million and Lire 2,786
million, respectively) are comprised of the following (in millions of
Italian Lire):
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1993 1994
--------- ---------
<S> <C> <C>
Materials 16,066 21,794
Work in process 5,483 6,845
Finished products 3,818 2,681
------ ------
25,367 31,320
====== ======
</TABLE>
6. OTHER RECEIVABLES AND
PREPAYMENTS
At December 31, 1993 and September 30, 1994, other receivables and
prepayments comprised the following (in millions of Italian Lire)
<TABLE>
<CAPTION>
Dec. 31, Sep. 30,
1993 1994
--------- ---------
<S> <C> <C>
VAT recoverable 1,291 16,606
Due from tax authorities 3,956 3,632
Due from social security institutions 5,479 55
Other receivables and prepayments 5,833 3,350
------ ------
16,559 23,643
====== ======
</TABLE>
7. INVESTMENTS IN AFFILIATES
Investments in affiliates at December 31, 1993 and September 30, 1994
and include the following (in millions of Italian Lire):
<PAGE> 121
- 8 -
<TABLE>
<CAPTION>
Percent Dec. 31, Sept. 30,
Ownership 1993 1994
--------- -------- ---------
<S> <C> <C> <C>
Industrias Cousin Freres S.L. (Spain) 49.99 7,321 7,133
Cousin Italiana S.p.A. in liquidazione 50.00 200 200
Others - 10 -
----- -----
7,531 7,333
===== =====
</TABLE>
Industrias Cousin Freres S.L. is a manufacturer of car seating
components, controlled by the French group Bertrand Faure S.A.
Condensed financial statements of this affiliate as of and for the
periods ended December 31, 1993 and September 30, 1994 translated to
Italian Lire on the basis described in Note 2, are as follows (in
millions of Italian Lire):
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1993 1994
---------- ---------
Balance sheets
--------------
<S> <C> <C>
Property, plant and equipment and other assets 11,833 12,809
Current assets 14,687 14,423
Current liabilities (6,556) (7,659)
Long-term liabilities (6,127) (5,956)
------ ------
Shareholders' equity 13,837 13,617
====== ======
</TABLE>
<TABLE>
<CAPTION>
12 months 9 months
ended ended
Dec. 31, 1993 Sep. 30, 1994
------------- --------------
Statements of operations
------------------------
<S> <C> <C>
Net sales and revenues 28,018 25,582
Operating profit (loss) (459) 413
Interest and other income (expense), net (161) (366)
------ ------
Net income (loss) for the period (620) 47
====== ======
</TABLE>
<PAGE> 122
- 9 -
8. SHORT-TERM BORROWINGS
Short-term borrowings consist of term loans and current accounts with
finance subsidiaries of Fiat S.p.A., which operate a centralized
treasury function for the Fiat Group. Interest rates on such
borrowings ranged from 6.6 percent to 14.1 percent in the year ended
December 31, 1993 and from 5.8 percent to 9.6 percent in the nine
months ended September 30, 1994.
9. LONG-TERM DEBT WITH
FINANCIAL INSTITUTIONS
Long-term debt with financial institutions at September 30, 1994
refers to the following loans (in millions of Lire):
<TABLE>
<S> <C>
Banca Nazionale del Lavoro, 1992-1998, original amount Lire 5,520
million, repayable in half-yearly installments, interest 4.75 per cent
per year 3,593
Italian Ministry of Industry, 1985-2000, original amount Lire 845
million, repayable in annual installments from 1990, interest 11.28 per
cent per year 610
-----
4,203
=====
</TABLE>
The analysis of the outstanding balance by repayment date is as
follows (in millions of Lire):
<TABLE>
<S> <C>
1995 913
1996 961
1997 1,013
1998 1,068
After 1998 248
-----
4,203
Less- Current portion (913)
-----
3,290
=====
</TABLE>
The above loans are collateralized by plant, property and equipment.
<PAGE> 123
- 10 -
10. INCOME TAXES
The taxable profits (losses) reported by Sepi S.p.A. and Sepi Sud
S.p.A. for Italian corporate income taxes ("IRPEG", for which the
standard rate is 36%) in each of the fiscal years open for inspection
by the tax authorities is as follows (in millions of Italian Lire):
<TABLE>
<CAPTION>
Reported taxable
income (loss)
----------------------------- Year of expiration
Sepi Sud of tax loss
Tax year Sepi S.p.A. S.p.A. carry forwards
-------- ----------- ---------- --------------------
<S> <C> <C> <C>
1989 2,349 - -
1990 (2,457) - 1995
1991 (2,699) (1,627) 1996
1992 (6,534) (6,435) 1997
1993 (39,855) (11,592) 1998
</TABLE>
In addition, taxable income generated by certain of the Companies'
facilities located in Southern Italy is exempt from corporate (IRPEG)
and local (ILOR) income taxes for various future periods, in
accordance with the applicable Italian tax regulations.
Deferred income taxes represent temporary differences in the
recognition of certain items for income tax and financial reporting
purposes. The components of the net deferred income tax liability are
summarized as follows (in millions of Italian Lire):
<TABLE>
<CAPTION>
Sept. 30, 1994 Dec. 31, 1993
-------------- -------------
<S> <C> <C>
Deferred income tax liabilities
Depreciation and basis differences 2,190 2,267
Other 402 402
------- -------
2,592 2,669
------- -------
Deferred income tax assets:
Tax loss carryforwards (37,827) (25,631)
Other (645) (882)
------- -------
(38,472) (26,513)
Valuation allowance 37,636 25,677
------- -------
(836) (836)
------- -------
Net deferred income tax liability 1,756 1,833
======= =======
</TABLE>
<PAGE> 124
- 11 -
11. SHAREHOLDERS' INVESTMENTS
CAPITAL ACCOUNTS--
Capital accounts at September 30, 1994 include the following (in
millions of Lire):
<TABLE>
<S> <C>
Share capital of Sepi S.p.A. 34,485
Additional paid in capital recorded by Sepi S.p.A. 7,721
Capital invested in FSB Poland 6,314
------
48,880
======
</TABLE>
The share capital of Sepi S.p.A.at September 30, 1994, consisted of
3,484,538 ordinary shares with a par value of Lire 10 thousand each,
held by the following shareholders:
<TABLE>
<CAPTION>
No. of shares %
------------- ------
<S> <C> <C>
Gilardini S.p.A. 3,176,508 91.16
Bertrand Faure S.A. 43,348 1.24
Societe Industrielle Pankert "Sip" S.A. (a subsidiary of
Bertrand Faure S.A.) 264,682 7.60
--------- ------
3,484,538 100.00
========= ======
</TABLE>
RETAINED DEFICIT OF SEPI S.P.A. AS OF
SEPTEMBER 30, 1994 AND SUBSEQUENT
CAPITAL CONTRIBUTIONS --
Because of the operating losses reported by Sepi S.p.A. in the period
ending September 30, 1994, the accumulated losses at that date
exceeded one third of share capital and required action under art.
2446 of the Italian Civil Code.
On November 28, 1994, Gilardini S.p.A. paid in additional capital of
Lire 9,000 million as a payment on account for the subscription of a
further 900,000 shares in the common stock of Sepi S.p.A.
12. SEGMENT INFORMATION
The Companies manufacture and sell car-seating systems to vehicle
manufacturers, represented primarily by Fiat Auto group companies
(Note 4) located in Italy.
<PAGE> 125
- 12 -
13. CAPITAL EXPENDITURE GRANTS
AND SUBSIDIES RECEIVABLE
The combined entity Sepi Sud S.p.A. is engaged in the construction and
start-up of new manufacturing facilities at Melfi in Southern Italy
which are eligible for investment subsidies (in the form of capital
expenditure and revenue grants and low interest rate loans) available
under the terms of Italian law n. 64/1986 and specific agreements
between the Fiat Group and the Italian government, dated November 5,
1991.
In connection with this project, Sepi Sud has presented to the
authorities an investment plan for the period 1992-1995 totalling
approximately Lire 50 billion which, under existing regulations, would
qualify for cash grants of approximately Lire 10 billion and low
interest rate loans for approximately Lire 27 billion.
As of September 30, 1994, the expenditures incurred under this
investment plan included in construction in progress at that date,
approximated Lire 23 billion, which would qualify for cash grants of
approximately Lire 5 billion and low interest rate loans for
approximately Lire 13 billion. However, no amounts have been recorded
in these consolidated financial statements related to these items as
such amounts are considered as contingent assets and will not be
accounted for until the investment plan is approved by the authorities
and it is reasonably assured that government funding is available for
payment of the subsidies.
14. COMMITMENTS, GUARANTEES AND
CONTINGENT LIABILITIES
The combined entities are involved in various commercial disputes and
legal actions arising in the normal course of business; however, the
outcomes of these actions are not expected to have a material effect
on FSB's financial position or future results of operations.
As of September 30, 1994, the Companies had commitments for the
purchase of property, plant and equipment ordered by not yet delivered
for approximately Lire 5,200 million.
Outstanding commitments under operating leases at the same date were
not material.
The Companies have in process a survey, being carried out by
independent expert consultants, to verify their past and current
compliance with applicable environmental regulations and standards of
enforcement. Although the results of this survey are not yet known,
they are not expected to have a significant impact on the combined
financial position or future results of operations of the Companies.
<PAGE> 126
- 13 -
15. AGREEMENT WITH LEAR SEATING
CORPORATION
On November 15, 1994, Gilardini entered into an agreement with Lear
Seating Corporation for the sale of FSB to Lear Seating Corporation.
<PAGE> 127
EXHIBIT F
"Subsidiary" and "Subsidiary Stock" shall mean:
1) The following entities and all share interests of the Company therein,
respectively:
Number of
Shares
Owned by Percentage
Entity the Company Ownership
- ------ ----------- ----------
SEPI SUD S.p.A. 520,000 100%
Industrias Cousin Freres, S. L. 63,747 49.9%
2) The following entities and all share interest of the Seller therein,
respectively:
Number of
Shares
Owned by Percentage
Entity Seller Ownership
- ------ ----------- ----------
SEPI Poland Sp. Z o.o. 40 100%
Markol Otomotiv Yan Sanayi Ve 10,500,000 35%
Ticaret Anonim Sirketi
<PAGE> 128
EXHIBIT G
Purchase Price Allocation
The 250 billion Italian Lira Purchase Price shall be allocated among
the Purchased Shares as follows:
1) The Markol Shares shall be valued at their paid-in capital value
of 13.125 billion Turkish Lira;
2) The SEPI Poland Shares shall be valued based upon the net asset
value of SEPI Poland as reflected on the Poland Closing Balance Sheet,
which is preliminarily estimated to be 81 billion Polish zloty; and
3) The remainder of the Purchase Price shall be allocated to the Company
Shares.
<PAGE> 1
EXHIBIT 2.2
LEAR SEATING CORPORATION
AGREEMENT TO FURNISH COPIES OF OMITTED
SCHEDULES AND EXHIBITS TO STOCK PURCHASE AGREEMENT
Pursuant to Item 601(b)(2) of Regulation S-K, Lear Seating
Corporation ("Registrant") is not filing as exhibits to its Current Report on
Form 8-K/A copies of the Exhibits and Schedules, other than Exhibits A, F and
G, identified on page 100 of the Stock Purchase Agreement which is so filed as
Exhibit 2.1 thereto.
Registrant agrees to furnish to the Securities and Exchange Commission upon
request copies of such Exhibit and Schedules.
LEAR SEATING CORPORATION
(Registrant)
/s/ James H. Vandenberghe
-------------------------
James H. Vandenberghe
Executive Vice President
Chief Financial Officer
Dated: February 28, 1995
<PAGE> 1
EXHIBIT 99.1
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1993 AND SEPTEMBER 30, 1994,
TOGETHER WITH REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Gilardini S.p.A.:
We have audited the combined balance sheets of the Fiat Seat Business (an
operating unit of Gilardini S.p.A. as described in Note 1 to the financial
statements) at December 31, 1993 and September 30, 1994, and the related
combined statements of operations, changes in shareholders' investments and
cash flows for the years ended December 31, 1992 and 1993 and for the nine
months ended September 30, 1994. These financial statements are the
responsibility of the combined entity's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Fiat Seat
Business at December 31, 1993 and September 30, 1994 and the results of its
operations and its cash flows for the years ended December 31, 1992 and 1993
and for the nine months ended September 30, 1994, in conformity with United
States generally accepted accounting principles.
ARTHUR ANDERSEN & CO. s.a.s.
Turin, Italy
November 30, 1994
<PAGE> 3
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND SEPTEMBER 30, 1994, (Note 1)
(In millions of Italian Lire)
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
ASSETS 1993 1994
------ ---------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash 4,184 1,759
Financial receivables due from related parties (Note 4) 17,126 13,351
Trade receivables-
Related parties (Note 4) 214,529 210,874
Other customers (net of allowances for doubtful accounts of
Lire 2,017 and Lire 2,404 respectively) 12,003 40,758
Inventories (Note 5) 25,367 31,320
Other receivables and prepayments (Note 6) 16,559 23,643
------- -------
Total current assets 289,768 321,705
------- -------
PLANT, PROPERTY AND EQUIPMENT:
Land and buildings 27,261 35,946
Machinery and equipment 59,001 77,554
Construction in progress and advances 18,310 4,606
------- -------
104,572 118,106
Less- Accumulated depreciation (24,432) (32,513)
------- -------
Total plant, property and equipment, net 80,140 85,593
------- -------
OTHER ASSETS:
Investments in affiliates (Note 7) 7,531 7,333
Intangibles and deferred charges, net 1,465 823
------- -------
Total other assets 8,996 8,156
------- -------
Total assets 378,904 415,454
======= =======
</TABLE>
The notes to the combined financial statements
form an integral part of these balance sheets.
<PAGE> 4
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND SEPTEMBER 30, 1994, (Note 1)
(In millions of Italian Lire)
<TABLE>
<CAPTION>
LIABILITIES AND Dec. 31, Sept. 30,
SHAREHOLDERS' INVESTMENTS 1993 1994
------------------------- ----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings (Note 8):
Related parties (Note 4) 108,904 90,215
Other - 94
Current portion of long-term debt (Note 9) 885 913
Trade payables-
Related parties (Note 4) 77,246 110,801
Other suppliers 125,815 142,390
Other payables and accrued expenses 21,809 29,737
------- -------
Total current liabilities 334,659 374,150
------- -------
LONG-TERM LIABILITIES:
Long-term debt (Note 9) 3,790 3,290
Reserve for employee termination indemnities 30,215 27,898
Deferred income taxes (Note 10) 1,833 1,756
------- -------
Total long-term liabilities 35,838 32,944
------- -------
Total liabilities 370,497 407,094
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENTS (Note 11):
Capital acccounts 56,122 48,880
Retained deficit (47,483) (39,314)
Cumulative translation adjustment (232) (1,206)
------- -------
Total shareholders' investments 8,407 8,360
------- -------
Total liabilities and shareholders' investments 378,904 415,454
======= =======
</TABLE>
The notes to the combined financial statements
form an integral part of these balance sheets.
<PAGE> 5
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1992 AND 1993 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1994 (Note 1)
(In millions of Italian Lire)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, NINE MONTHS
----------------------------- ENDED
1992 1993 SEPT. 30 1994
----------- ----------- -------------
<S> <C> <C> <C>
Net sales and revenues (Notes 4 and 12) 655,371 571,761 524,075
Cost of sales (620,614) (571,446) (513,043)
Selling, administrative and other expenses (29,904) (35,388) (36,773)
-------- ------- -------
Operating income (loss) 4,853 (35,073) (25,741)
Equity in losses of affiliate - (413) (54)
Interest income (expense), net (6,944) (6,986) (6,783)
Foreign exchange gains (losses), net (911) (441) (1,067)
-------- ------- -------
Loss before provision for income taxes (3,002) (42,913) (33,645)
Provision for income taxes (Note 10) 50 103 77
-------- ------- -------
Net loss (2,952) (42,810) (33,568)
======== ======= =======
</TABLE>
The notes to the combined financial statements form
an integral part of these statements of operations.
<PAGE> 6
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENTS
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1993 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1994 (Note 1)
(In millions of Italian Lire)
<TABLE>
<CAPTION>
Cumulative
Capital Retained Translation
Accounts Deficit Adjustment Total
-------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Balances as of December 31, 1991 4,000 (3,853) 147
Cancellation of shares in Sepi S.p.A. to
partially offset deficit (2,132) 2,132 - -
Issuance of shares by Sepi S.p.A. for
payment 2,132 - - 2,132
Issuance of shares by Sepi S.p.A. for
acquisition of Sicam S.p.A. (Note 3) 47,300 - - 47,300
Net loss for the year - (2,952) - (2,952)
------ -------- ------ -------
Balances as of December 31, 1992 51,300 (4,673) - 46,627
Investment in FSB Poland (Note 1) 4,822 - - 4,822
Net loss for the year - (42,810) - (42,810)
Foreign currency translation - - (232) (232)
------ -------- ------ -------
Balances as of December 31, 1993 56,122 (47,483) (232) 8,407
Investment in FSB Poland 1,492 - - 1,492
Cancellation of shares and additional
paid-in capital in Sepi S.p.A. to
partially offset deficit (41,737) 41,737 - -
Issuance of additional shares by Sepi
S.p.A. for payment 33,003 - - 33,003
Net loss for the period - (33,568) - (33,568)
Foreign currency translation - - (974) (974)
------ -------- ------ -------
Balances as of September 30, 1994 48,880 (39,314) (1,206) 8,360
====== ======== ====== =======
</TABLE>
The notes to the combined financial statements
form an integral part of these statements.
<PAGE> 7
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1993 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 (Note 1)
(In millions of Italian Lire)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, NINE MONTHS
---------------------------- ENDED
1992 1993 SEPT. 30 1994
----------- ----------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period (2,952) (42,810) (33,568)
Adjustments to reconcile net loss to net cash flow from
operating activities-
Depreciation and amortization 8,453 14,386 12,118
Net change in working capital items (26,859) 39,134 19,534
Net change in reserve for employee termination
indemnities (1,402) 1,722 (2,317)
Other, net 374 707 (226)
------- ------- -------
Net cash provided (used) by operating activities (22,386) 13,139 (4,459)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment and
other assets (19,199) (39,953) (17,564)
Disposals of property, plant and equipment and
other assets 3,631 1,779 834
Net cash acquired with Sicam S.p.A. (Note 3) 1,825 - -
------- ------- -------
Net cash used by investing activities (13,743) (38,174) (16,730)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital increases 2,132 4,822 34,495
(Increase) decrease in financial receivables 165 (9,872) 3,775
Increase (decrease) in short-term borrowings 35,939 34,545 (18,595)
Repayment of long-term debt - (2,994) (550)
------- ------- -------
Net cash flow provided by financing activities 38,236 26,501 19,125
------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
- 225 (361)
------- ------- -------
NET INCREASE (DECREASE) IN CASH 2,107 1,691 (2,425)
------- ------- -------
CASH - BEGINNING OF PERIOD 386 2,493 4,184
------- ------- -------
CASH - END OF PERIOD 2,493 4,184 1,759
======= ======= =======
</TABLE>
The notes to the combined financial statements
form an integral part of these statements
<PAGE> 8
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The Fiat Seat Business ("FSB") is an operating unit of Gilardini
S.p.A. ("Gilardini", a majority-owned subsidiary of Fiat S.p.A.
operating in the auto components sector) and represents the combined
operations of Gilardini's Italian subsidiaries Sepi S.p.A. and Sepi
Sud S.p.A., and of the Seat division of its Polish subsidiary,
Gilardini Poland sp.z.oo. This combined entity is referred to as
"FSB" or "the Companies" in the following notes to the financial
statements, while the Polish business alone is referred to as "FSB
Poland".
These combined financial statements include the results of operating
activities, transactions and assets and liabilities associated with
the business of FSB in Italy and Poland. They also include Sepi
S.p.A.'s 49% interest in Industrias Cousin Freres S.L., a Spanish
company also operating in the Seat business, which is accounted for
under the equity method of accounting.
The combined financial statements have been prepared in conformity
with accounting principles generally accepted in the United States and
reflect certain adjustments and reclassifications to the financial
statements prepared by the Companies for legal and tax purposes in
their respective countries.
The combined financial statements have been prepared on a historical
accounting basis and do not reflect adjustments which may arise
related to the transaction described in Note 15.
The Companies' fiscal year end is December 31. Accordingly, the
combined financial statements for the period ended September 30, 1994
are for a nine month interim period.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Principles of Combination
Transactions and balances among the Companies have been eliminated in
the combined financial statements, including unrealized intercompany
profits and losses, where appropriate.
<PAGE> 9
- 2 -
Foreign Currency Translation and Transactions
The accompanying financial statements are presented in Italian Lira.
The balance sheet of the Polish entity and of the Spanish affiliate
accounted for under the equity method are translated into Italian Lira
applying the exchange rates in effect at period-end and the income
statements are translated at the average exchange rates for the
period. Translation gains or losses are reflected in combined
shareholders' investments.
Balances related to transactions denominated in currencies other than
the local currency of the combined entities are translated at the
exchange rate in effect at the end of the period and exchange rate
gains or losses are included in the statements of operations.
Revenue Recognition
Revenue relating to the sale of products is recognized at the time
that products are shipped to the customer.
Receivables and payables
Receivables and payables are recorded at face value. Receivables are
written down to their expected realizable value by recording
allowances for doubtful accounts and for customer returns and
allowances when appropriate. Amounts related to retroactive
adjustment of the values of sales and purchases are recorded when such
adjustments are subject to reasonable estimation.
Inventories
Inventories are valued at the lower of cost, substantially determined
using the first-in, first-out method (FIFO), or market. The cost of
inventory includes direct materials, labor and indirect manufacturing
costs.
Obsolete and slow-moving or excess inventories are stated at their
estimated realizable value by recording a valuation allowance when
appropriate.
<PAGE> 10
- 3 -
Plant, property and equipment,
depreciation and capital
investment grants
Plant, property and equipment are stated at purchase price or
production cost.
Depreciation is provided on a straight line basis, applying rates
which are considered representative of the estimated useful lives of
the related assets, as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Industrial buildings 10 - 33
Machinery and equipment 4 - 10
Leasehold improvements Period of lease
</TABLE>
Repairs and maintenance costs are charged to income in the year in
which they are incurred.
Government grants and customer payments towards capital expenditures
are recognized when their collectibility is reasonably assured and are
credited to income over the lives of the related assets.
Investments in affiliates
The investment in the affiliate Industrias Cousin Freres S.L. (Spain)
is accounted for under the equity method of accounting.
The investment in the Italian affiliate Cousin Italiana S.p.A. in
liquidazione is valued under the cost method at the lower of cost and
estimated net realizable value, since this is a non-operating company
in liquidation.
Income taxes
Income taxes are accounted for under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Deferred income taxes are provided for differences between the
carrying value of assets and liabilities for financial reporting and
tax purposes and for the future tax benefits related to tax loss
carry-forwards. A valuation allowance is recorded on all deferred tax
assets for which realization is questionable.
<PAGE> 11
- 4 -
Reserve for employee
termination indemnities
Italian law provides for an indemnity to be paid to all employees upon
termination of employment. The related reserves reflect the amounts
to be accrued according to the terms of the law and the labor
contracts by FSB's Italian entities. The law requires that the
provision for each period reflect both the indemnity accruing based
upon the compensation for that period, and the revaluation of prior
period accruals on the basis of an index which represents a
significant percentage of the annual increase in the Official Italian
Cost of Living Index. Provisions to the reserve in the years ended
December 31, 1993 and in the nine months ended September 30, 1994
amounted to Lire 5,637 million and Lire 6,312 million, respectively;
payments from the reserve in the same periods amounted to Lire 4,814
million and Lire 6,744 million, respectively.
In the opinion of the management, the amount of the reserve as of
December 31, 1993 and September 30, 1994, determined applying the
methodology required by Italian law described above, was higher than
that which would have been obtained applying the methodology set out
in Statement of Financial Accounting Standards No. 87 "Employers'
Accounting for Pensions". In these circumstances, the Emerging Issues
Task Force of the Financial Accounting Standards Board has indicated
that recording the Italian-basis liability is considered as being in
accordance with general accepted accounting principles.
Research and development
Research and development costs are charged to the statement of
operations in the accounting period in which they are incurred. Where
applicable, research-related revenue grants provided by the Italian
Government are credited to the statement of operations when their
collectibility is reasonably assured. In the year ended December 31,
1993 and in the nine months ended September 30, 1994 such costs
amounted to Lire 15,092 million and Lire 9,695 million, respectively.
Accruals for plant closure
and restructuring
Accruals are established for the costs incurred and expected to be
incurred related to plants closed and employees terminated prior to
the date of preparation of the financial statements.
<PAGE> 12
- 5 -
3. ACQUISITION OF SICAM S.p.A.
Effective June 1992, Sepi S.p.A. acquired a 100% interest in Sicam
S.p.A., ("Sicam"), which was an Italian subsidiary of the French group
Bertrand Faure S.A. and a supplier of Sepi, in exchange for the issue
of 166,660 new shares in Sepi S.p.A. with a par value of Lire 10
thousand per share.
This acquisition was accounted for as a purchase and, accordingly, the
results of Sicam have been included in the accompanying financial
statements since the date of acquisition. The purchase price has been
determined as Lire 47,300 million, representing the fair value at that
date attributed by the seller to the shares issued, and was allocated
to the purchased assets as follows (in millions of Italian Lire):
<TABLE>
<S> <C>
Property, plant and equipment 33,580
Net non-cash working capital 20,503
Other assets purchased and liabilities assumed, net (8,608)
------
45,475
Cash acquired 1,825
------
Total purchase price allocation 47,300
======
</TABLE>
Assuming the acquisition had taken place effective January 1, 1992,
the consolidated pro-forma results of operation of the Company would
have been approximately as follows (unaudited; in millions of Italian
Lire):
<TABLE>
<CAPTION>
Year ended
December 31, 1992
-----------------
<S> <C>
Net sales 665,500
Net loss for the period (6,200)
=======
</TABLE>
4. RELATED PARTY TRANSACTIONS
The Companies have significant transactions with other Fiat group
subsidiaries. In particular, they sell the majority of their finished
products to Fiat Auto S.p.A. and subsidiaries and receive certain
administrative and treasury management services from Gilardini and
from other Fiat group finance companies. The following tables
summarize the balances included in the consolidated financial
statements as of and for the periods ended December 31, 1992 and 1993
and September 30, 1994, which result from these transactions (in
millions of Italian Lire):
<PAGE> 13
- 6 -
<TABLE>
<CAPTION>
Dec. 31, Dec. 31, Sept. 30,
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Financial receivables
---------------------
Gilardini 6,815 10,534 -
Other 20 6,592 13,351
------- ------- -------
6,835 17,126 13,351
======= ======= =======
Trade receivables
-----------------
Fiat Auto 220,905 210,367 209,916
Other 7,846 4,162 958
------- ------- -------
228,751 214,529 210,874
======= ======= =======
Financial payables
------------------
Fiat Geva S.p.A. - 53,284 86,175
Sogespar S.p.A. 55,000 51,101 -
Other 18,568 4,519 4,040
------- ------- -------
73,568 108,904 90,215
======= ======= =======
Trade payables
--------------
Savafactoring S.p.A. 38,264 49,288 85,433
Fiat Auto 22,159 15,904 13,115
Comau S.p.A. - 4,955 7,475
Other 3,345 7,099 4,778
------- ------- -------
63,768 77,246 110,801
======= ======= =======
Net sales and revenues
----------------------
Fiat Auto 571,236 514,499 472,540
Others 43,846 18,083 1,543
------- ------- -------
615,082 532,582 474,083
======= ======= =======
</TABLE>
Management believes that the related party transactions referred to
above are carried on in the normal course of business and on an arms'
length basis.
<PAGE> 14
- 7 -
5. INVENTORIES
Inventories as of December 31, 1993 and September 30, 1994 (net of
related write-down reserves of Lire 1,786 million and Lire 2,786
million, respectively) are comprised of the following (in millions of
Italian Lire):
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1993 1994
--------- ---------
<S> <C> <C>
Materials 16,066 21,794
Work in process 5,483 6,845
Finished products 3,818 2,681
------ ------
25,367 31,320
====== ======
</TABLE>
6. OTHER RECEIVABLES AND
PREPAYMENTS
At December 31, 1993 and September 30, 1994, other receivables and
prepayments comprised the following (in millions of Italian Lire)
<TABLE>
<CAPTION>
Dec. 31, Sep. 30,
1993 1994
--------- ---------
<S> <C> <C>
VAT recoverable 1,291 16,606
Due from tax authorities 3,956 3,632
Due from social security institutions 5,479 55
Other receivables and prepayments 5,833 3,350
------ ------
16,559 23,643
====== ======
</TABLE>
7. INVESTMENTS IN AFFILIATES
Investments in affiliates at December 31, 1993 and September 30, 1994
and include the following (in millions of Italian Lire):
<PAGE> 15
- 8 -
<TABLE>
<CAPTION>
Percent Dec. 31, Sept. 30,
Ownership 1993 1994
--------- -------- ---------
<S> <C> <C> <C>
Industrias Cousin Freres S.L. (Spain) 49.99 7,321 7,133
Cousin Italiana S.p.A. in liquidazione 50.00 200 200
Others - 10 -
----- -----
7,531 7,333
===== =====
</TABLE>
Industrias Cousin Freres S.L. is a manufacturer of car seating
components, controlled by the French group Bertrand Faure S.A.
Condensed financial statements of this affiliate as of and for the
periods ended December 31, 1993 and September 30, 1994 translated to
Italian Lire on the basis described in Note 2, are as follows (in
millions of Italian Lire):
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1993 1994
---------- ---------
Balance sheets
--------------
<S> <C> <C>
Property, plant and equipment and other assets 11,833 12,809
Current assets 14,687 14,423
Current liabilities (6,556) (7,659)
Long-term liabilities (6,127) (5,956)
------ ------
Shareholders' equity 13,837 13,617
====== ======
</TABLE>
<TABLE>
<CAPTION>
12 months 9 months
ended ended
Dec. 31, 1993 Sep. 30, 1994
------------- --------------
Statements of operations
------------------------
<S> <C> <C>
Net sales and revenues 28,018 25,582
Operating profit (loss) (459) 413
Interest and other income (expense), net (161) (366)
------ ------
Net income (loss) for the period (620) 47
====== ======
</TABLE>
<PAGE> 16
- 9 -
8. SHORT-TERM BORROWINGS
Short-term borrowings consist of term loans and current accounts with
finance subsidiaries of Fiat S.p.A., which operate a centralized
treasury function for the Fiat Group. Interest rates on such
borrowings ranged from 6.6 percent to 14.1 percent in the year ended
December 31, 1993 and from 5.8 percent to 9.6 percent in the nine
months ended September 30, 1994.
9. LONG-TERM DEBT WITH
FINANCIAL INSTITUTIONS
Long-term debt with financial institutions at September 30, 1994
refers to the following loans (in millions of Lire):
<TABLE>
<S> <C>
Banca Nazionale del Lavoro, 1992-1998, original amount Lire 5,520
million, repayable in half-yearly installments, interest 4.75 per cent
per year 3,593
Italian Ministry of Industry, 1985-2000, original amount Lire 845
million, repayable in annual installments from 1990, interest 11.28 per
cent per year 610
-----
4,203
=====
</TABLE>
The analysis of the outstanding balance by repayment date is as
follows (in millions of Lire):
<TABLE>
<S> <C>
1995 913
1996 961
1997 1,013
1998 1,068
After 1998 248
-----
4,203
Less- Current portion (913)
-----
3,290
=====
</TABLE>
The above loans are collateralized by plant, property and equipment.
<PAGE> 17
- 10 -
10. INCOME TAXES
The taxable profits (losses) reported by Sepi S.p.A. and Sepi Sud
S.p.A. for Italian corporate income taxes ("IRPEG", for which the
standard rate is 36%) in each of the fiscal years open for inspection
by the tax authorities is as follows (in millions of Italian Lire):
<TABLE>
<CAPTION>
Reported taxable
income (loss)
----------------------------- Year of expiration
Sepi Sud of tax loss
Tax year Sepi S.p.A. S.p.A. carry forwards
-------- ----------- ---------- --------------------
<S> <C> <C> <C>
1989 2,349 - -
1990 (2,457) - 1995
1991 (2,699) (1,627) 1996
1992 (6,534) (6,435) 1997
1993 (39,855) (11,592) 1998
</TABLE>
In addition, taxable income generated by certain of the Companies'
facilities located in Southern Italy is exempt from corporate (IRPEG)
and local (ILOR) income taxes for various future periods, in
accordance with the applicable Italian tax regulations.
Deferred income taxes represent temporary differences in the
recognition of certain items for income tax and financial reporting
purposes. The components of the net deferred income tax liability are
summarized as follows (in millions of Italian Lire):
<TABLE>
<CAPTION>
Sept. 30, 1994 Dec. 31, 1993
-------------- -------------
<S> <C> <C>
Deferred income tax liabilities
Depreciation and basis differences 2,190 2,267
Other 402 402
------- -------
2,592 2,669
------- -------
Deferred income tax assets:
Tax loss carryforwards (37,827) (25,631)
Other (645) (882)
------- -------
(38,472) (26,513)
Valuation allowance 37,636 25,677
------- -------
(836) (836)
------- -------
Net deferred income tax liability 1,756 1,833
======= =======
</TABLE>
<PAGE> 18
- 11 -
11. SHAREHOLDERS' INVESTMENTS
CAPITAL ACCOUNTS--
Capital accounts at September 30, 1994 include the following (in
millions of Lire):
<TABLE>
<S> <C>
Share capital of Sepi S.p.A. 34,485
Additional paid in capital recorded by Sepi S.p.A. 7,721
Capital invested in FSB Poland 6,314
------
48,880
======
</TABLE>
The share capital of Sepi S.p.A.at September 30, 1994, consisted of
3,484,538 ordinary shares with a par value of Lire 10 thousand each,
held by the following shareholders:
<TABLE>
<CAPTION>
No. of shares %
------------- ------
<S> <C> <C>
Gilardini S.p.A. 3,176,508 91.16
Bertrand Faure S.A. 43,348 1.24
Societe Industrielle Pankert "Sip" S.A. (a subsidiary of
Bertrand Faure S.A.) 264,682 7.60
--------- ------
3,484,538 100.00
========= ======
</TABLE>
RETAINED DEFICIT OF SEPI S.P.A. AS OF
SEPTEMBER 30, 1994 AND SUBSEQUENT
CAPITAL CONTRIBUTIONS --
Because of the operating losses reported by Sepi S.p.A. in the period
ending September 30, 1994, the accumulated losses at that date
exceeded one third of share capital and required action under art.
2446 of the Italian Civil Code.
On November 28, 1994, Gilardini S.p.A. paid in additional capital of
Lire 9,000 million as a payment on account for the subscription of a
further 900,000 shares in the common stock of Sepi S.p.A.
12. SEGMENT INFORMATION
The Companies manufacture and sell car-seating systems to vehicle
manufacturers, represented primarily by Fiat Auto group companies
(Note 4) located in Italy.
<PAGE> 19
- 12 -
13. CAPITAL EXPENDITURE GRANTS
AND SUBSIDIES RECEIVABLE
The combined entity Sepi Sud S.p.A. is engaged in the construction and
start-up of new manufacturing facilities at Melfi in Southern Italy
which are eligible for investment subsidies (in the form of capital
expenditure and revenue grants and low interest rate loans) available
under the terms of Italian law n. 64/1986 and specific agreements
between the Fiat Group and the Italian government, dated November 5,
1991.
In connection with this project, Sepi Sud has presented to the
authorities an investment plan for the period 1992-1995 totalling
approximately Lire 50 billion which, under existing regulations, would
qualify for cash grants of approximately Lire 10 billion and low
interest rate loans for approximately Lire 27 billion.
As of September 30, 1994, the expenditures incurred under this
investment plan included in construction in progress at that date,
approximated Lire 23 billion, which would qualify for cash grants of
approximately Lire 5 billion and low interest rate loans for
approximately Lire 13 billion. However, no amounts have been recorded
in these consolidated financial statements related to these items as
such amounts are considered as contingent assets and will not be
accounted for until the investment plan is approved by the authorities
and it is reasonably assured that government funding is available for
payment of the subsidies.
14. COMMITMENTS, GUARANTEES AND
CONTINGENT LIABILITIES
The combined entities are involved in various commercial disputes and
legal actions arising in the normal course of business; however, the
outcomes of these actions are not expected to have a material effect
on FSB's financial position or future results of operations.
As of September 30, 1994, the Companies had commitments for the
purchase of property, plant and equipment ordered by not yet delivered
for approximately Lire 5,200 million.
Outstanding commitments under operating leases at the same date were
not material.
The Companies have in process a survey, being carried out by
independent expert consultants, to verify their past and current
compliance with applicable environmental regulations and standards of
enforcement. Although the results of this survey are not yet known,
they are not expected to have a significant impact on the combined
financial position or future results of operations of the Companies.
<PAGE> 20
- 13 -
15. AGREEMENT WITH LEAR SEATING
CORPORATION
On November 15, 1994, Gilardini entered into an agreement with Lear
Seating Corporation for the sale of FSB to Lear Seating Corporation.
<PAGE> 21
EXHIBIT F
"Subsidiary" and "Subsidiary Stock" shall mean:
1) The following entities and all share interests of the Company therein,
respectively:
Number of
Shares
Owned by Percentage
Entity the Company Ownership
- ------ ----------- ----------
SEPI SUD S.p.A. 520,000 100%
Industrias Cousin Freres, S. L. 63,747 49.9%
2) The following entities and all share interest of the Seller therein,
respectively:
Number of
Shares
Owned by Percentage
Entity Seller Ownership
- ------ ----------- ----------
SEPI Poland Sp. Z o.o. 40 100%
Markol Otomotiv Yan Sanayi Ve 10,500,000 35%
Ticaret Anonim Sirketi
<PAGE> 22
EXHIBIT G
Purchase Price Allocation
The 250 billion Italian Lira Purchase Price shall be allocated among
the Purchased Shares as follows:
1) The Markol Shares shall be valued at their paid-in capital value
of 13.125 billion Turkish Lira;
2) The SEPI Poland Shares shall be valued based upon the net asset
value of SEPI Poland as reflected on the Poland Closing Balance Sheet,
which is preliminarily estimated to be 81 billion Polish zloty; and
3) The remainder of the Purchase Price shall be allocated to the Company
Shares.
<PAGE> 1
EXHIBIT 99.2
PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated statements of operations and
consolidated balance sheet (collectively, the "Pro Forma Statements") of the
Company were prepared to illustrate the estimated effects of (i) the
acquisition of certain assets of Giliardini S.p.A., an Italian Corporation, and
Gilardini Poland Sp.Z.0.0., as well as all of the outstanding common stock of
Sepi S.p.A., an Italian Corporation (collectively, the Fiat Seat Business, or
"FSB") and the related incurrence of debt to finance such acquisition, (ii) the
acquisition of certain assets of the Plastic and Trim Products Division of Ford
Motor Company as well as all of the outstanding common stock of Favesa, S.A. de
C.V., a Mexican Corporation (collectively, the North American Business, or
"NAB") and the related incurrence of debt to finance such acquisition, (iii)
refinancings of the Company's Original Credit Agreement and the incurrence of
indebtedness under the Credit Agreement to retire the GECC Mortgage Loan
and to refinance the term loans outstanding under the Company's Original Credit
Agreement, (iv) the issuance of $145 million of 8 1/4% Subordinated Notes and
the application of the net proceeds therefrom to redeem the 14% Subordinated
Debentures, (v) the issuance of 7,187,500 shares of common stock and the
application of the net proceeds to the Company therefrom to repay indebtedness
outstanding under the Credit Agreement and (vi) the elimination of a one-time
charge for incentive stock and other compensation expense (collectively, the
"Pro Forma Transactions"), as if the Pro Forma Transactions had occurred on the
date or as of the beginning of each period presented.
The Pro Forma Statements do not purport to represent what the Company's
financial position or results of operations would actually have been if such
transactions in fact had occurred on the date or at the beginning of the
periods indicated or to project the Company's financial position or results of
operations for any future period.
The pro forma adjustments are based upon available information and upon certain
assumptions that management believes are reasonable. The Pro Forma Statements
and accompanying notes should be read in conjunction with the historical
financial statements of the Company, the FSB and the NAB, including the notes
thereto.
<PAGE> 2
PRO FORMA STATEMENTS OF OPERATIONS
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended October 1, 1994
----------------------------------
Company FSB Operations Financing
Historical Combined (1) Adjustments (2) Adjustments Pro Forma
---------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $2,207,370 $323,903 $3,600 $ - $2,534,873
Cost of sales 2,029,843 317,085 (1,135) - 2,345,793
---------- -------- ------- ---------- ----------
Gross profit 177,527 6,818 4,735 - 189,080
Selling, general
and administrative
expenses 58,091 22,727 (4,125) - 76,693
Amortization 8,603 - 1,977 - 10,580
---------- -------- ------- ---------- ----------
Operating income (loss) 110,833 (15,909) 6,883 - 101,807
Interest expense 35,215 4,192 - (1,224) (5) 38,183
Other expense 6,411 693 - - 7,104
---------- -------- ------- ---------- ----------
Income (loss) before
provision for
income taxes 69,207 (20,794) 6,883 1,224 56,520
Provision for
income taxes 35,241 (48) - 441 35,634
---------- -------- ------- ---------- ----------
Net income (loss) $33,966 ($20,746) $6,883 $783 $20,886
========== ======== ======= ========== ==========
Net income
per share $ .73 $ .42
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended December 31, 1993
-------------------------------------
Consolidation
and
Company FSB Operations NAB Financing
Historical Combined (1) Adjustments (2) Acquisition(3) Adjustments Pro Forma
---------- --------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales $1,950,288 $363,023 $4,000 $411,134 $ - $2,728,445
Cost of sales 1,780,073 362,823 (1,900) 362,404 - 2,503,400
---------- -------- ------ -------- ----------- ----------
Gross profit 170,215 200 5,900 48,730 - 225,045
Selling, general
and administrative
expenses 62,717 22,469 (5,900) 16,857 - 96,143
Incentive stock and
other compensation
expense 18,016 - - - (18,016) (4) -
Amortization 9,929 - 2,708 2,070 - 14,707
---------- -------- ------ -------- ----------- ----------
Operating income (loss) 79,553 (22,269) 9,092 29,803 18,016 114,195
Interest expense 45,656 4,436 - 2,251 (2,137) (5) 50,206
Other expense 9,180 542 - 2,122 - 11,844
---------- -------- ------ -------- ----------- ----------
Income (loss) before
provision for
income taxes 24,717 (27,247) 9,092 25,430 20,153 52,145
Provision for
income taxes 26,864 (65) - 9,206 774 36,779
---------- -------- ------ -------- ----------- ----------
Income (loss) before
extraordinary items (2,147) (27,182) 9,092 16,224 19,379 15,366
Extraordinary loss
on early extinguishment
of debt 11,684 - - - (11,684) (6) -
---------- -------- ------ -------- ----------- ----------
Net income (loss) ($13,831) ($27,182) $9,092 $16,224 $31,063 $15,366
========== ======== ====== ======== =========== ==========
Net income (loss)
per share ($ .39) $ .32
========== ==========
</TABLE>
(See footnotes on following page)
<PAGE> 3
(1) The FSB historical information represents the audited results of operations
of the FSB translated from Lira to U.S. Dollars at exchange rates of 1618 and
1575 Lira to one U.S. Dollar for the nine months ended October 1, 1994 and the
twelve months ended December 31, 1993, respectively.
(2) Operations adjustments consist of pro forma adjustments to the historical
revenues and expenses of the FSB to reflect (i) the Company's estimate of the
impact of product pricing arrangements negotiated as part of the FSB
Acquisition, (ii) the elimination of management fees charged to FSB by the
seller, (iii) the elimination of charges incurred by FSB relating to
plant closings for which costs are being assumed by the seller,
(iv) estimated engineering savings as a result of consolidating the Lear
technical center with the FSB technical center, and (v) estimated adjustments
to amortization and depreciation expense resulting from the revaluation of the
FSB assets. The adjustments include the following:
<TABLE>
<CAPTION>
TWELVE MONTHS
NINE MONTHS ENDED
ENDED DECEMBER 31,
OCTOBER 1, 1994 1993
----------------- -----------
<S> <C> <C>
Effects of product pricing agreements negotiated between the Company and Fiat
in the FSB Acquisition......................................................... $3,600 $4,000
Elimination of management fees charged by seller................................ 1,500 2,400
Elimination of charges being assumed by the seller.............................. 1,500 2,400
On-going savings as a result of consolidating technical centers................. 2,625 3,500
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Increase in FSB depreciation expense due to revaluation of fixed assets ................... (365) (500)
Amortization of goodwill resulting from the FSB Acquisition................................ (1,977) (2,708)
------ ------
$6,883 $9,092
====== ======
</TABLE>
(3) The NAB Acquisition information represents the NAB historical information
derived from the unaudited financial statements of the NAB adjusted for (i) the
elimination of the operating results of a non-seating product line which was
phased out in the third quarter of 1994, (ii) the Company's estimates of the
impact of product pricing reductions negotiated as part of the NAB Acquisition,
(iii) the elimination in consolidation of sales from the NAB to other Lear
locations, (iv) estimated expenses associated with ongoing engineering
activities in support of Ford seating programs, (v) incremental ongoing
overhead and administrative expenses associated with the NAB Acquisition,
including amounts to be paid to Ford for continuation of certain support
functions, (vi) estimated adjustments to amortization and depreciation expense
resulting from the revaluation of the NAB assets, and (vii) the estimated
income tax effects of these items. No information is included for periods
after November 1, 1993 because the Company acquired the NAB on that date.
(4) Reflects the elimination of the one-time charge for incentive stock and
other compensation expense.
(5) Reflects interest expense changes as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
NINE MONTHS ENDED
ENDED DECEMBER 31,
OCTOBER 1, 1994 1993
--------------- --------------
<S> <C> <C>
Estimated interest on borrowings under the credit agreement to
finance the FSB Acquisition ........................................... $ 3,017 $ 4,058
Estimated interest on borrowings under the credit agreement to
finance the NAB Acquisition ........................................... - 5,348
Reduction in interest due to application of proceeds from the Stock
Offering .............................................................. (1,120) (3,976)
Net reduction in interest expense due to the refinancings of the
Original Credit Agreement and retirement of the GECC Mortgage Loan ... (981) (1,736)
Elimination of interest expense on the 14% Subordinated debentures ...... (3,255) (18,900)
Interest expense on 8 1/4% Subordinated Notes ........................... 1,063 11,963
Interest expense on short-term notes payable used to finance the NAB
Acquisition, at 8% .................................................... - 1,000
Elimination of interest expense on Favesa note payable prepaid in
connection with the NAB Acquisition ................................... - (1,230)
Difference between interest expense on Favesa note payable at 6% prior
to acquisition, 11.5% subsequent ...................................... - 913
Interest on borrowings under the Credit Agreement to finance fees and
expenses related to the pro forma transactions ........................ - 331
Change in deferred finance fee amortization due to refinancing of the
Original Credit Agreement, issuance of the 8 1/4% Subordinated
Notes retirement of the GECC Mortgage Loan and redemption of the 14%
Subordinated Debentures ............................................... 52 92
------- -------
($1,224) ($2,137)
======= =======
</TABLE>
(6) Reflects the elimination of the extraordinary losses on the refinancing of
the Original Credit Agreement, the GECC Mortgage Loan and the 14% Debentures
which were recorded in the third and fourth quarters of the twelve months ended
December 31, 1993. Such loss would have been incurred in the prior period on
a pro forma basis.
<PAGE> 5
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED, DOLLARS IN THOUSANDS)
AS OF OCTOBER 1, 1994
<TABLE>
<CAPTION>
Acquisition and
Company FSB Valuation of
Historical Historical (1) FSB Pro Forma
ASSETS ------------ --------------- ------------------ -----------
<S> <C> <C> <C> <C>
Current Assets:
Cash $38,897 $1,128 $ - $40,025
Accounts receivable, net 373,396 169,907 - 543,303
Inventories 89,333 20,082 - 109,415
Other current assets 63,710 15,160 - 78,870
---------- ----------- --------- -----------
565,336 206,277 - 771,613
---------- ----------- --------- -----------
Property, Plant and Equipment:
Land 26,001 1,141 8,890 36,032
Buildings and Improvements 109,400 21,908 955 132,263
Machinery and equipment 263,016 52,681 (9,074) 306,623
---------- ----------- --------- -----------
Less: Accumulated depreciation 398,417 75,730 771 474,918
(142,148) (20,847) 20,847 (142,148)
---------- ----------- --------- -----------
256,269 54,883 21,618(2) 332,770
---------- ----------- --------- -----------
Other Assets:
Goodwill, net 401,817 - 106,581(2) 508,398
Deferred finance fees and other 22,226 5,230 - 27,456
---------- ----------- --------- -----------
424,043 5,230 106,581 535,854
---------- ----------- --------- -----------
$1,245,648 $266,390 $128,199 $1,640,237
========== =========== ========= ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $16,422 $57,846 $ - $74,268
Cash overdrafts 63,357 - - 63,357
Accounts payable 356,783 162,346 - 519,129
Accrued liabilities 155,885 19,129 10,413(2) 185,427
Current portion of long-term debt 1,270 585 - 1,855
---------- ----------- --------- -----------
593,717 239,906 10,413 844,036
---------- ----------- --------- -----------
Long-Term Liabilities:
Long-term debt 15,222 2,110 99,098(2) 116,430
Deferred national income taxes 402,572 1,126 11,224(2) 414,922
Other 42,340 17,888 12,824(3) 73,052
---------- ----------- --------- -----------
460,134 21,124 123,146 604,404
---------- ----------- --------- -----------
Stockholder's Equity
191,797 5,360 (5,360)(4) 191,797
---------- ----------- --------- -----------
$1,245,648 $266,390 $128,199 $1,640,237
========== =========== ========= ===========
</TABLE>
- -----------------------------------------------------------
(1) Represents the historical financial statements of FSB translated
at the October 1, 1994 exchange rate of 1560 Lira to one U.S. Dollar.
(2) The purchase price of $169,768 consists of $99,098 in cash (including
estimated fees and expenses of $4,200), $57,846 of FSB short-term borrowings
assumed and deferred purchase price of $12,824. The cash portion of the
purchase was financed with borrowings under the Company's credit agreement. The
FSB Acquisition was accounted for using the purchase method of accounting and
the total purchase cost was allocated first to assets and liabilities based on
their respective estimated fair values, with the remainder allocated to
goodwill. The allocation of the purchase price above is based on appraisals and
management's estimates and may differ from the final allocation.
(3) Represents the portion of the purchase price for which payment is deferred
until 1998.
(4) Reflects the elimination of historical FSB equity for purposes of the pro
forma consolidated balance sheet.
