<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
AMENDMENT NO. 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): AUGUST 29, 1997
LIBBEY INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-12084 34-1559357
(State of incorporation) (Commission File Number) (IRS Employer identification
No.)
</TABLE>
300 MADISON AVENUE
TOLEDO, OHIO
Address of principal executive offices)
43604
(Zip Code)
Registrant's telephone number, including area code: (419) 325-2100
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The financial statements required by Item 7(a) relative to the series of
transactions with Vitro S.A. ("Vitro") and certain of its subsidiaries described
in Item 2 of form 8-K of Libbey Inc. dated August 29, 1997 are attached hereto
as exhibits and incorporated herein by this reference.
(b) UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma consolidated financial information required by Item
7(b) relative to the series of transactions with Vitro S.A. ("Vitro") and
certain of its subsidiaries described in Item 2 of Form 8-K of Libbey Inc. dated
August 29, 1997 is attached hereto as an exhibit and incorporated herein by this
reference.
(c) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
1 Financial Statements required by Item 7(a) for Vitrocrisa, S.A. de C.V.
2 Financial Statements required by Item 7(a) for WorldCrisa Corporation and Crisa
Corporation.
3 Unaudited Pro Forma Consolidated Financial Information required by Item 7(b).
10.26 Amended and Restated Distribution Agreement dated to be effective as of August 29,
1997, by and among Vitro, S.A., Vitrocrisa, S.A. de C.V., Libbey Inc. and Libbey
Glass Inc. whereby Libbey Glass Inc. will distribute certain products.
10.27 Amended and Restated Distribution Agreement dated to be effective as of August 29,
1997, by and among Vitro, S.A., Vitrocrisa, S.A. de C.V., Libbey Inc. and Libbey
Glass Inc. whereby Vitrocrisa, S.A. de C.V. will distribute certain products.
10.28 Vitrocrisa, S.A. de C.V. Shareholders Agreement dated to be effective as of August
29, 1997, by and among Libbey Inc., LGA3 Corp., Vitro, S.A., Vitrocrisa Holding, S.A.
de C.V. and Vitrocrisa, S.A. de C.V.
10.29 Vitrocrisa Holding, S.A. de C.V. Shareholders Agreement dated to be effective as of
August 29, 1997, by and among Libbey Inc., LGA3 Corp., Vitro, S.A. and Vitrocrisa
Holding, S.A. de C.V.
10.30 Amended and Restated Covenant Not to Compete dated to be effective as of August 29,
1997, by and between Libbey Inc. and Vitro, S.A.
10.31 Crisa Libbey, S.A. de C.V. Shareholders Agreement dated to be effective as of August
29, 1997, by and among Libbey Inc., LGA3 Corp., Vitro, S.A. and Crisa Libbey, S.A. de
C.V.
10.32 Limited Liability Company Agreement of Crisa Industrial, L.L.C. dated to be effective
as of August 29, 1997, by and among Crisa Corporation, LGA4 Corp., Vitro, S.A. and
Libbey Inc.
10.33 Management Services Agreement dated to be effective August 29, 1997, by and between
Libbey Inc. and Vitrocrisa, S.A. de C.V. for services to be provided by one or more
subsidiary corporations of Libbey Inc.
10.34 Employment Agreement dated as of September 1, 1997, by and between Libbey Inc. and
Daniel P. Ibele.
</TABLE>
The Company agrees to furnish supplementally a copy of any omitted schedule
to the Commission on request.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIBBEY INC.
Registrant
<TABLE>
<S> <C> <C>
Date: October 17, 1997 /s/ KENNETH G. WILKES
----------------------------------- -----------------------------------
Kenneth G. Wilkes
Vice President, Chief Financial
Officer
and Treasurer
</TABLE>
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- --------------------------------------------------------------------------
<C> <S> <C>
1 Financial Statements required by Item 7(a) for Vitrocrisa, S.A. de C.V.
2 Financial Statements required by Item 7 (a) for WorldCrisa Corporation and
Crisa Corporation.
3 Unaudited Pro Forma Consolidated Financial Information required by Item
7(b).
10.26 Amended and Restated Distribution Agreement dated to be effective as of
August 29, 1997, by and among Vitro, S.A., Vitrocrisa, S.A. de C.V.,
Libbey Inc. and Libbey Glass Inc. whereby Libbey Glass Inc. will
distribute certain products.
10.27 Amended and Restated Distribution Agreement dated to be effective as of
August 29, 1997, by and among Vitro, S.A., Vitrocrisa, S.A. de C.V.,
Libbey Inc. and Libbey Glass Inc. whereby Vitrocrisa, S.A. de C.V. will
distribute certain products.
10.28 Vitrocrisa, S.A. de C.V. Shareholders Agreement dated to be effective as
of August 29, 1997, by and among Libbey Inc., LGA3 Corp., Vitro, S.A.,
Vitrocrisa Holding, S.A. de C.V. and Vitrocrisa, S.A. de C.V.
10.29 Vitrocrisa Holding, S.A. de C.V. Shareholders Agreement dated to be
effective as of August 29, 1997, by and among Libbey Inc., LGA3 Corp.,
Vitro, S.A. and Vitrocrisa Holding, S.A. de C.V.
10.30 Amended and Restated Covenant Not to Compete dated to be effective as of
August 29, 1997, by and between Libbey Inc. and Vitro, S.A.
10.31 Crisa Libbey, S.A. de C.V. Shareholders Agreement dated to be effective as
of August 29, 1997, by and among Libbey Inc., LGA3 Corp., Vitro, S.A. and
Crisa Libbey, S.A. de C.V.
10.32 Limited Liability Company Agreement of Crisa Industrial, L.L.C. dated to
be effective as of August 29, 1997, by and among Crisa Corporation, LGA4
Corp., Vitro, S.A. and Libbey Inc.
10.33 Management Services Agreement dated to be effective August 29, 1997, by
and between Libbey Inc. and Vitrocrisa, S.A. de C.V. for services to be
provided by one or more subsidiary corporations of Libbey Inc.
10.34 Employment Agreement dated as of September 1, 1997, by and between Libbey
Inc. and Daniel P. Ibele.
</TABLE>
<PAGE> 1
EXHIBIT 1
VITROCRISA, S.A. DE C.V.
Financial Statements for the year ended
December 31, 1996 and Independent
Auditors' Report
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Vitrocrisa, S.A. de C.V.
Monterrey, N.L.
We have audited the accompanying balance sheet of Vitrocrisa, S.A. de C.V.
(a wholly-owned subsidiary of Vitro, Sociedad Anonima) as of December 31, 1996,
and the related statements of operations, variations in stockholders' equity and
changes in financial position for the year then ended, all expressed in
thousands of constant Mexican pesos as of June 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Mexico which are substantially the same as those followed in the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement and that they are prepared in accordance with accounting
principles generally accepted in Mexico. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Vitrocrisa, S.A. de C.V. as
of December 31, 1996, and the results of its operations, variations in its
stockholders' equity and changes in its financial position for the year ended at
December 31, 1996, in conformity with accounting principles generally accepted
in Mexico.
Accounting principles generally accepted in Mexico differ in certain
significant respects from accounting principles generally accepted in the United
States. The application of the latter would have affected the determination of
net income for the year ended December 31, 1996 and the determination of
stockholders' equity at December 31, 1996 to the extent summarized in note 15.
The accompanying financial statements and the independent auditors' report
have been translated into English language for the convenience of the reader.
/s/ Deloitte & Touche
Deloitte & Touche
Monterrey, N.L. Mexico
March 20, 1997.
(August 29, 1997 as to note 14.)
1
<PAGE> 3
VITROCRISA, S.A. DE C.V.
BALANCE SHEETS
(THOUSANDS OF CONSTANT MEXICAN PESOS AS OF JUNE 30, 1997)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents..................................... Ps 10,556 Ps 7,881
Trade receivables, net of allowance for doubtful accounts of
Ps 12,130, at December 31, 1996 and Ps 14,663 at June 30,
1997 (unaudited)........................................... 190,360 186,328
Other receivables............................................. 5,290 4,994
Accounts receivable from affiliates........................... 12,802 22,608
Notes receivable from affiliates.............................. 493 9,630
Inventories (note 3).......................................... 138,046 158,234
------------ ------------
Current assets........................................ 357,547 389,675
Investment in shares.......................................... 9,278 8,621
Deferred income tax and deferred profit sharing to workers and
other assets (note 4)...................................... 108,423 104,592
Land and buildings (note 5)................................... 302,133 298,222
Machinery and equipment (note 5).............................. 696,253 648,471
Construction in progress...................................... 655 2,729
Intangible seniority premiums and pension asset............... 13,796 12,696
Amortizable expenses, net..................................... 4,589 2,613
------------ ------------
Total assets.......................................... Ps 1,492,674 Ps 1,467,619
------------ ------------
LIABILITIES
Current portion of long-term debt............................. Ps 7,796 Ps 7,242
Trade payables................................................ 98,856 107,500
Accounts payable to affiliates................................ 32,571 25,460
Notes payable to affiliates................................... 230,409 206,912
Accrued expenses payable...................................... 32,731 46,220
Other current liabilities..................................... 22,523 24,667
------------ ------------
Current liabilities................................... 424,886 418,001
------------ ------------
Long-term debt (note 6)....................................... 713,141 591,879
Seniority premium and pension plans (note 7).................. 37,580 37,031
------------ ------------
Long-term liabilities................................. 750,721 628,910
------------ ------------
Total liabilities..................................... 1,175,607 1,046,911
------------ ------------
STOCKHOLDERS' EQUITY
Capital stock: 166,682,900 shares issued and outstanding...... 2,402,931 2,402,931
Paid-in capital............................................... 63,757 63,757
Shortfall in restatement of capital........................... (1,700,678) (1,721,430)
Minimum pension liability adjustment.......................... (12,990) (11,954)
Accumulated losses............................................ (668,998) (435,953)
Net income for the period..................................... 233,045 123,357
------------ ------------
Stockholders' equity.................................. 317,067 420,708
------------ ------------
Total liabilities and stockholders' equity............ Ps 1,492,674 Ps 1,467,619
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
LIC. CARLOS TREVINO GONZALEZ
Administrative Director
LIC. CARLOS NAVARRO LEAL
Manager of Comptrollership
2
<PAGE> 4
VITROCRISA, S.A. DE C.V.
STATEMENTS OF OPERATIONS
(THOUSANDS OF CONSTANT MEXICAN PESOS AS OF JUNE 30, 1997, EXCEPT PER SHARE
AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, --------------------------
1996 1997 1996
------------ ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Net sales............................................ Ps 1,326,707 Ps 657,410 Ps 654,793
Cost of sales........................................ 857,398 392,798 425,038
General, administrative and selling expenses......... 234,456 119,048 119,342
------------ ----------- -----------
Operating income................................... 234,853 145,564 110,413
------------ ----------- -----------
Interest expense..................................... 251,611 76,333 129,737
Interest income...................................... 5,792 1,331 1,620
Exchange loss (income), net (note 8-c)............... 13,269 7,228 (23,378)
Gain from monetary position.......................... (273,956) (70,774) (166,472)
------------ ----------- -----------
Total financing cost............................... (14,868) 11,456 (61,733)
------------ ----------- -----------
Income (loss) after financing...................... 249,721 134,108 172,146
Severance payments................................... 18,000 3,838 4,773
Other income, net.................................... 4,374 715 78
------------ ----------- -----------
Income before income tax, profit sharing to workers
and extraordinary item.......................... 236,095 130,985 167,451
Income and asset tax (note 11)....................... 82,596 44,139 50,018
Workers' profit sharing.............................. 756 398 358
------------ ----------- -----------
Income before extraordinary item................... 152,743 86,448 117,075
Extraordinary item (note 12)......................... 80,302 36,909 50,437
------------ ----------- -----------
Net income......................................... Ps 233,045 Ps 123,357 Ps 167,512
------------ ----------- -----------
Earnings per common share (based on 166,682,900
outstanding shares for all periods):
Income before extraordinary item................... Ps .92 Ps .52 Ps .70
Extraordinary item................................. .48 .22 .30
------------ ----------- -----------
Net income......................................... Ps 1.40 Ps .74 Ps 1.00
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
VITROCRISA, S.A. DE C.V.
STATEMENTS OF VARIATIONS IN STOCKHOLDERS' EQUITY
(THOUSANDS OF CONSTANT MEXICAN PESOS AS OF JUNE 30, 1997)
<TABLE>
<CAPTION>
MINIMUM
PENSION SHORTFALL IN
CAPITAL PAID-IN LIABILITY RESTATEMENT ACCUMULATED NET STOCKHOLDERS'
STOCK CAPITAL ADJUSTMENT OF CAPITAL LOSSES INCOME EQUITY
------------ ---------- ---------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................. Ps 2,112,505 Ps 63,757 Ps(12,235) Ps (1,264,515) Ps(652,136) Ps (101,646) Ps 145,730
Appropriation of net
loss from prior
year................. (101,646) 101,646
Merger................. 290,426 (371,558) 84,784 3,652
Loss from non-monetary
assets............... (64,605) (64,605)
Minimum pension
liability
adjustment........... (755) (755)
Net income............. 233,045 233,045
------------ ----------- ----------- ------------ ----------- ----------- -----------
Balance at December 31,
1996................. Ps 2,402,931 Ps 63,757 Ps(12,990) Ps (1,700,678) Ps(668,998) Ps 233,045 Ps 317,067
Appropriation of net
income from prior
year................. 233,045 (233,045)
Loss from non-monetary
assets............... (20,752) (20,752)
Minimum pension
liability
adjustment........... 1,036 1,036
Net income............. 123,357 123,357
------------ ----------- ----------- ------------ ----------- ----------- -----------
Balance at June 30,
1997 (unaudited)..... Ps 2,402,931 Ps 63,757 Ps(11,954) Ps (1,721,430) Ps(435,953) Ps 123,357 Ps 420,708
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
VITROCRISA, S.A. DE C.V.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
(THOUSANDS OF CONSTANT MEXICAN PESOS AS OF JUNE 30, 1997)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -----------------------------
1996 1997 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income......................................... Ps 233,045 Ps 123,357 Ps 167,512
Add (deduct) non-cash items:
Depreciation and amortization................... 90,906 35,518 44,581
Provision for seniority premium and pension
plans......................................... (17,797) 1,588 (1,970)
Deferred income tax and profit sharing to
workers....................................... (11,039) 3,528 (12,743)
------------- ------------- -------------
295,115 163,991 197,380
Increase (decrease) in trade payables.............. 11,955 8,644 (7,215)
Decrease (increase) in trade receivables........... 56,215 (5,774) 39,173
Decrease (increase)in inventories.................. 14,431 (19,633) 12,496
Other current assets and liabilities, net.......... (56,203) (319) (86,155)
Effect of merger in operating activities........... (49,059) (49,059)
------------- ------------- -------------
Resources generated from operations............. 272,454 146,909 106,620
------------- ------------- -------------
FINANCING ACTIVITIES:
Notes payable to banks............................... 21,864 182 15,242
Notes payable to affiliates short-term............... (23,419) (23,497) (30,035)
Long-term loans...................................... 55,230 73,534 18,401
Monetary effect on liabilities with financing cost... (235,460) (57,783) (141,034)
Payment of short-term loans.......................... (114,430) (113) (17,644)
Payment of long-term loans........................... (111,867) (137,636) (4,736)
Effect of merger in financing activities............. 72,047 72,047
------------- ------------- -------------
Resources used in financing activities.......... (336,035) (145,313) (87,759)
------------- ------------- -------------
INVESTMENT ACTIVITIES:
Investment in shares................................. (3,952)
Sales of fixed assets................................ 92,396 47 97
Investment in property, machinery and equipment...... (12,123) (6,187) (10,092)
Amortizable expenses................................. 1,532 1,869 (42)
Effect of merger in investment activities............ (9,321) (9,321)
------------- ------------- -------------
Resources generated (used in) investment
activities.................................... 68,532 (4,271) (19,358)
------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents................................... 4,951 (2,675) (497)
Cash and cash equivalents at beginning of period... 5,605 10,556 5,605
------------- ------------- -------------
Cash and cash equivalents at end of period......... Ps 10,556 Ps 7,881 Ps 5,108
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 7
VITROCRISA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR INTERIM PERIODS AND SUBSEQUENT TO DECEMBER 31, 1996 IS
UNAUDITED)
(THOUSANDS OF CONSTANT MEXICAN PESOS AS OF JUNE 30, 1997)
1. ACTIVITIES OF THE COMPANY AND BASIS OF PRESENTATION:
a) Activities of the Company
Vitrocrisa, S.A. de C.V. (the "Company"), a wholly-owned subsidiary of
Vitro, Sociedad Anonima, is a company whose activity is the manufacture and
distribution of glass articles.
At the extraordinary stockholders' meeting held on March 29, 1996 it was
agreed to merge the Company with Proveedora del Hogar, S.A. de C.V. (merged
company), which was also a wholly-owned subsidiary of Vitro, Sociedad Anonima
and with Cristalerias Elefante, S.A. de C.V. (merged company). The Company
assumed all the rights and obligations of the merged companies.
On April 1, 1996 the Company consolidated the financial information of
Proveedora del Hogar, S.A. de C.V. and Cristalerias Elefante, S.A. de C.V. using
the purchase method.
The main balances at March 31, 1996 of the merged companies were as
follows:
<TABLE>
<CAPTION>
TOTAL TOTAL STOCKHOLDERS'
ASSETS LIABILITIES EQUITY
---------- ----------- -------------
<S> <C> <C> <C>
Proveedora del Hogar, S.A. de C.V.............. Ps 129,141 Ps 125,489 Ps 3,652
Cristalerias Elefante, S.A. de C.V............. 14,478 20,721 (6,243)
</TABLE>
b) Basis of presentation
The financial statements presented herein are expressed in Thousands of
constant Mexican pesos as of June 30, 1997.
2. PRINCIPAL ACCOUNTING POLICIES:
a) Accounting method for the treatment of the effects of inflation
The financial statements of the Company have been prepared in accordance
with Bulletin B-10, "Recognition of the Effects of Inflation in the Financial
Information", as amended, issued by the Mexican Institute of Public Accountants
(IMCP), which recognizes the effects of inflation. The Third Amendment to
Bulletin B-10, requires the restatement of all comparative financial statements
to constant pesos as of the date of the most recent balance sheet presented. For
that purpose, the company uses the "Indice Nacional de Precios al Consumidor"
(Mexican National Consumer Price Index: "INPC"), published by Banco de Mexico.
Bulletin B-12 sets the rules related to the statement of changes in
financial position. This statement presents the sources and uses of funds of
changes in financial position during the period measured as the differences, in
constant pesos, between the beginning and ending balances adjusted by the excess
(shortfall) in restatement of capital. As regulated by Bulletin B-12, the
monetary effect and the effect of changes in exchange rates are not considered
non-cash items in the determination of funds generated from operations due to
the fact they affect the purchasing power of the entity.
The following is a description of the items that have been restated and of
the methods used:
- Inventories and cost of sales
Inventories are valued at the price of the last purchase made during
the period, or at standard cost, without exceeding the net realizable
value. Cost of sales is determined by using the standard cost at the time
of sale.
6
<PAGE> 8
VITROCRISA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- Land, buildings, machinery and equipment
Investments in land, buildings, machinery and equipment (collectively
"fixed assets"), including expenditures for renewals and improvements which
extend useful lives, are capitalized. Until December 31, 1996, fixed assets
were restated at their current replacement cost as determined from
appraisals performed by independent appraisers. In accordance with the
Fifth Amendment to Bulletin B-10 issued by the IMCP, which is effective
January 1, 1997, the Company restates (1) machinery and equipment from
foreign origin by means of the index of inflation of the country of origin
and translating to the corresponding exchange rate at the date of the
valuation and (2) land, buildings, machinery and equipment of Mexican
origin by means of factors derived from INPC.
Depreciation is calculated using the straight-line method, taking into
consideration the useful life of the asset, in order to depreciate the
original cost and the revaluation. The depreciation begins in the month in
which the asset comes into service. The useful lives of the assets are as
follows:
<TABLE>
<CAPTION>
YEARS
--------
<S> <C>
Buildings................................................................... 27
Machinery and equipment..................................................... 4 to 14
</TABLE>
- Investment in shares
The investment in shares in which the Company holds less than 10% of
capital stock, are accounted for at their acquisition cost.
- Amortizable expenses
The balances of amortizable expenses, and the accumulated and period
amortization are restated using INPC.
- Insufficiency in restatement of capital
This item, which is an element of stockholders' equity, reflects the
accumulated effect of holding non-monetary assets and the effect of the
initial monetary position gain or loss. The accumulated effect of holding
non-monetary assets represents the increase in the specific values of
non-monetary assets in excess of or below the increase attributable to
general inflation as measured by the INPC.
- Restatement of capital stock and retained earnings
Capital stock and retained earnings are restated using the INPC from
the respective dates such capital was contributed or income generated to
the date of the most recent balance sheet presented.
- Exchange fluctuations
Exchange gains or losses included in the cost of financing are
calculated by translating monetary assets and liabilities denominated in
foreign currencies at the exchange rate in effect at the end of each month.
- Results due to monetary position
The monetary position reflects the result of holding monetary assets
and liabilities during periods of inflation. Values stated in current
monetary units represent a decreasing purchasing power as time goes by.
This means that losses are incurred by holding monetary assets over time,
whereas gains are realized by maintaining monetary liabilities. The net
effect is presented in the income statement for the year as part of the
total financing cost.
7
<PAGE> 9
VITROCRISA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
b) Maintenance expenses
Maintenance and repair expenses are recorded as costs and expenses in the
period when they are incurred.
c) Amortization of deferred charges
Amortization is calculated using the straight-line method. The rates vary
according to the type of amortizable expense.
d) Seniority premiums, pension plans and severance payments
Statutory seniority premiums and pension plans for all personnel are
considered as costs in the periods in which services are rendered. Periodic
costs are calculated in accordance with the accounting pronouncement Bulletin
D-3, issued by the IMCP, and the actuarial computations were made by independent
actuaries using estimates of the salaries that will be in effect at the time of
payment. Personnel not yet eligible for seniority premiums are also taken into
account, with any necessary adjustments made in accordance with the probability
of their acquiring the required seniority. The cost of past service is amortized
over the average period required for workers to reach their retirement age.
Severance payments are charged to expense in the year in which such
payments are made.
e) Income tax and profit sharing to workers
Income tax and profit sharing to workers expense are computed in accordance
with the partial liability method, as required by Mexican Accounting Bulletin
D-4 issued by the IMCP, under which deferred taxes are provided for
identifiable, non-recurring timing differences and that are expected to reverse
over a definite period of time, at the tax rates in effect at the end of each
period.
3. INVENTORIES:
The breakdown is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Finished products.......................................... Ps 117,623 Ps 132,819
Raw materials.............................................. 3,711 3,133
Packaging materials........................................ 2,677 3,262
---------- ----------
124,011 139,214
Spare parts................................................ 4,631 4,310
Refractory................................................. 9,404 14,710
---------- ----------
Ps 138,046 Ps 158,234
========== ==========
</TABLE>
8
<PAGE> 10
VITROCRISA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
4. DEFERRED INCOME TAX AND PROFIT SHARING TO WORKERS AND OTHER:
The balances are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Deferred income tax and profit sharing to workers.......... Ps 107,677 Ps 104,587
Other...................................................... 746 5
---------- ----------
Ps 108,423 Ps 104,592
========== ==========
</TABLE>
5. LAND, BUILDINGS, MACHINERY AND EQUIPMENT:
Land, buildings, machinery and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
Land.................................................... Ps 98,003 Ps 98,124
Buildings............................................... 381,349 379,999
Accumulated depreciation................................ (177,219) (179,901)
------------- -------------
Ps 302,133 Ps 298,222
============= =============
Machinery and equipment................................. 1,925,257 1,857,196
Accumulated depreciation................................ (1,229,004) (1,208,725)
------------- -------------
Ps 696,253 Ps 648,471
============= =============
</TABLE>
6. LONG TERM DEBT:
Long-term debt consists of the following notes payable to banks:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Unsecured guaranteed loan, in Mexican pesos, interbank
equilibrium interest rate plus 2.32 points, principal
payable in 1998.......................................... Ps 128,223 Ps 29,000
Unsecured guaranteed loan in Mexican pesos, interest based
on the unidades de inversion (UDIS) plus 10.5 points,
principal payable in 2006................................ 57,216 58,028
Secured guaranteed loan in U.S. dollars, interest based on
Libor plus 4.75 points................................... 3,898
Unsecured guaranteed loan in U.S. dollars, interest based
on Libor plus 4.0 points................................. 35,947 51,678
Unsecured guaranteed loan in U.S. dollars, interest based
on Libor plus 3.0 points................................. 487,857 453,173
---------- ----------
Ps 713,141 Ps 591,879
========== ==========
</TABLE>
9
<PAGE> 11
VITROCRISA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Maturity of long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
1998.......................... Ps 532,799
1999.......................... 41,042
2000.......................... 49,783
2001.......................... 50,579
2002.......................... 9,536
2003.......................... 9,536
2004.......................... 9,536
2005.......................... 9,536
2006.......................... 794
----------
Ps 713,141
==========
</TABLE>
As of December 31, 1996, short-term bank loans in the amount of U.S.
$57,000 thousands of dollars used to finance export sales of the Company have
been reclassified as long-term debt, because the Company expects to obtain
similar financing in the future to finance export sales. In addition, the
Company has a committed long-term standby credit line with certain commercial
banks available to finance such export sales.
In some of the Company's long-term debt agreements certain restrictions and
covenants are set forth that require the maintenance of various financial
ratios.
7. SENIORITY PREMIUMS AND PENSION PLANS:
As mentioned in note 2 d), disclosures required by Bulletin D-3 and a
summary of data based on actuarial computations is given below:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, -----------------------
1996 1997 1996
------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Accumulated benefit obligation.................. Ps 37,580 Ps 37,031 Ps 49,820
Projected benefit obligation.................... 68,770 73,890 40,116
Unrecognized transition obligation.............. 15,964 21,084 9,312
Unrecognized net (gain) or loss................. 23,556 28,676 13,741
Projected net liability......................... 29,250 24,130 17,063
Additional minimum liability.................... 8,329 11,954 6,573
Net periodic cost............................... 11,830 7,116 6,717
Assumptions (nominal rates):
Discount rate................................... 13% 13% 12.50%
Compensation increase........................... 9% 9% 8.50%
</TABLE>
10
<PAGE> 12
VITROCRISA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
8. FOREIGN CURRENCY BALANCES AND OPERATIONS:
a) Assets and liabilities denominated in foreign currency consist of the
following:
<TABLE>
<CAPTION>
THOUSANDS OF DOLLARS MEXICAN PESOS
---------------------------- ----------------------------
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1996 1997 1996 1997
------------ ----------- ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Monetary assets................... $ 6,265 $ 8,694 Ps 53,624 Ps 69,121
Fixed assets...................... 45,711 44,834 391,239 356,449
Monetary liabilities -- short
term............................ 34,174 33,736 292,492 268,216
Inventories....................... 1,162 1,947 9,945 15,427
Deferred charges.................. 266 177 2,277 1,407
Monetary liabilities -- long
term............................ 61,655 63,500 527,699 504,850
</TABLE>
b) Foreign operations during the year of 1996 and six months ended June 30,
1997 (unaudited) consisted of the following:
<TABLE>
<CAPTION>
THOUSANDS OF DOLLARS MEXICAN PESOS
---------------------------- ----------------------------
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1996 1997 1996 1997
------------ ----------- ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Exports........................... $ 45,124 $26,607 Ps 372,264 Ps 209,826
Imports........................... 12,761 7,122 105,819 56,420
Interest expense net.............. 9,001 4,433 74,756 34,999
</TABLE>
c) The exchange rates used for purposes of these financial statements were:
Ps 7.8765 per one U.S. dollar at December 31, 1996, Ps 7.9504 per one U.S.
dollar at June 30, 1997 (unaudited) and Ps 7.5853 per one U.S. dollar at June
30, 1996 (unaudited). On March 20, 1997, the date of issuance of these financial
statements, the exchange rate was Ps 7.9233 per one U.S. dollar.
9. STOCKHOLDERS' EQUITY:
a) Capital stock of the Company is represented by 166,682,900 nominal
common shares, with a par value of one peso each, divided into the following:
<TABLE>
<CAPTION>
FIXED CAPITAL VARIABLE CAPITAL TOTAL
------------- ---------------- -----------
<S> <C> <C> <C>
Series "A" shares.......................... 5,985,000 5,985,000
Series "B" shares.......................... 156,533,000 156,533,000
Series "B1" shares......................... 4,164,900 4,164,900
--------- ----------- -----------
5,985,000 160,697,900 166,682,900
</TABLE>
b) Stockholders' equity includes accrued profits and results from the
restating of assets which, in case of distribution, will be subject, under
certain circumstances, to the payment of income tax by the Company.
11
<PAGE> 13
VITROCRISA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
10. UNAMORTIZED TAX LOSSES
At December 31, 1996 the company had tax loss carry forwards in the amount
of Ps 416,654 and asset tax to be recovered in the future in the amount of Ps
34,919. The income tax benefit resulting from their utilization will be
recognized, in the period in which they are utilized. The maturities are as
follows:
<TABLE>
<CAPTION>
YEAR TAX LOSS ASSET
OF EXPIRATION CARRY FORWARDS TAX
---------------------------------------------- -------------- ---------
<S> <C> <C>
1999..................................... Ps 4,924
2000..................................... 3,616
2001..................................... 4,924
2002..................................... 3,616
2003..................................... 4,924
2004..................................... Ps 338,417 3,616
2005..................................... 78,237 3,255
2006..................................... 6,044
---------- ---------
Ps 416,654 Ps 34,919
========== =========
</TABLE>
11. INCOME AND ASSET TAX:
a) The income and asset tax included in the results are:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -----------------------
1996 1997 1996
------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Tax benefit that results from the utilization
of tax loss carry forward.................... Ps 80,302 Ps 36,909 Ps 50,437
Deferred tax:
Provision of furnace repair.................. (5,430) (622) (2,393)
Benefit from the future deduction of
inventories held on December 31, 1986..... 2,572 1,657 1,217
Tax on asset................................... 5,152 6,195 757
--------- --------- ---------
Ps 82,596 Ps 44,139 Ps 50,018
========= ========= =========
</TABLE>
b) At December 31, 1996, there were Ps 138,046 of previously deducted
inventories and Ps 37,580 of non-deductible provisions related to seniority
premium payments for which no deferred taxes have been provided in accordance
with generally accepted accounting principles.
12
<PAGE> 14
VITROCRISA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
c) The reconciliation between the company's effective income tax rate and
the statutory income tax rate is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -----------------
1996 1997 1996
------------ ------ ------
(UNAUDITED)
<S> <C> <C> <C>
Effective income tax rate......................... 34.98% 33.70% 29.87%
Add (deduct) quantity corresponding to:
Purchase deductions............................. (1.04) 8.10 .64
Difference between tax and financial accounting
for depreciation............................. (.74) 1.32 2.02
Difference between tax and financial accounting
for monetary gain............................ 4.92 (.77) 3.14
Others.......................................... (4.12) (8.35) (1.67)
----- ----- -----
Statutory income tax rate......................... 34% 34% 34%
===== ===== =====
</TABLE>
12. EXTRAORDINARY ITEM:
For the year ended December 31, 1996 and the six months ended June 30, 1997
(unaudited) and June 30, 1996 (unaudited), the Company obtained a tax benefit
from the utilization of tax loss carry forwards in the amount of Ps 80,302, Ps
36,909 and Ps 50,437, respectively.
13. BALANCES AND TRANSACTIONS WITH AFFILIATED COMPANIES:
The main balances and transactions with affiliated companies (Vitro,
Sociedad Anonima and its consolidated subsidiaries and associated companies) are
as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, -------------------------
1996 1997 1996
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Cash......................................... Ps 1,294
Unsecured long-term loan payable............. 57,216 Ps 77,905 Ps 57,798
Net sales.................................... 260,006 102,610 148,345
Other income................................. 2,689 7,628 21,362
Purchases.................................... 25,494 5,401 9,207
Operating expenses........................... 25,985 14,215 12,344
Interest expenses............................ 4,846 19,670 (24,096)
</TABLE>
14. SUBSEQUENT EVENTS:
On August 29, 1997, a series of definitive agreements were executed with
Libbey Inc. ("Libbey"), pursuant to which Libbey became a 49% joint venture
partner in the Company with Vitro, Sociedad Anonima, retaining a 51% interest.
15. DIFFERENCES BETWEEN MEXICAN AND UNITED STATES ACCOUNTING PRINCIPLES:
The Company's statements are prepared in accordance with Mexican GAAP,
which vary in certain significant respects from accounting principles generally
accepted in the United States (U.S. GAAP).
13
<PAGE> 15
VITROCRISA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
The principal differences between Mexican GAAP and U.S. GAAP and their
effects on net income and total stockholders' equity are presented below with an
explanation of the adjustments:
RECONCILIATION OF NET INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ---------------------------
1996 1997 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Net income under Mexican GAAP.................. Ps 233,045 Ps 123,357 Ps 167,512
U.S. GAAP adjustments for:
Effects of inflationary accounting........... (127,383) (33,194) (134,348)
Deferred income taxes........................ (17,630) (23,599) (7,594)
Deferred employees' profit sharing........... 28,120 1,608 24,417
Effects of merger............................ (7,406) (7,406)
----------- ----------- -----------
Net income under U.S. GAAP..................... Ps 108,746 Ps 68,172 Ps 42,581
=========== =========== ===========
</TABLE>
Adjustments for pension costs and accrued vacation cost were not material
individually or in the aggregate, for any of the periods presented.
RECONCILIATION OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------------
(UNAUDITED)
<S> <C> <C>
Total stockholders' equity reported under Mexican
GAAP.................................................. Ps 317,068 Ps 420,708
U.S. GAAP adjustments for:
Effects of inflationary accounting.................... (778,084) (791,561)
Deferred income tax................................... 207,901 184,302
Deferred employees' profit sharing.................... 42,279 43,887
----------- -----------
Stockholders' equity under U.S. GAAP............... Ps (210,836) Ps (142,664)
=========== ===========
</TABLE>
Adjustments for pension costs and accrued vacation cost were not material
individually or in the aggregate, for any of the periods presented.
a) Effects of inflationary accounting
A significant difference between Mexican and U.S. GAAP relates to the
formal adoption in Mexico of inflationary accounting, which mitigates the
effects of inflation on financial information. Under Mexican GAAP, all basic
financial statements (including those of prior years) and related notes are
presented in pesos of purchasing power at the end of the latest period
presented. Inventories and fixed assets are valued at replacement cost or are
restated by applying INPC growth factors. Stockholders' equity components are
restated by applying INPC growth factors from the date on which the component
was contributed or generated.
b) Deferred Income Tax:
Under Mexican GAAP, deferred taxes are provided only for identifiable,
nonrecurring timing differences which are expected to reverse over a definite
period of time. For U.S. GAAP purpose, the Company has applied Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
Under SFAS 109, deferred tax assets and liabilities are recognized for
future tax consequences of temporary differences between the financial statement
carrying amounts of assets and liabilities and their tax bases. Deferred
14
<PAGE> 16
VITROCRISA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
tax assets are also recognized for the estimated future effects of tax loss
carry forwards. Deferred tax assets are reduced by any tax benefits that are not
expected to be realized.
The significant components of the deferred tax assets and liabilities for
purposes of U.S. GAAP reconciliation are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------
(UNAUDITED)
<S> <C> <C>
DEFERRED TAX ASSETS
Noncurrent assets:
Reserves................................................ Ps 18,680 Ps 22,490
Tax loss carry forwards................................. 141,728 113,906
Inventories............................................. 19,128 12,271
Seniority premium and pension plans..................... 3,377 4,210
Tax on assets........................................... 34,919 38,359
Fixed assets............................................ 35,063 37,962
Other................................................... 1,194 1,380
------- -------
Total deferred tax assets............................... Ps 254,089 Ps 230,578
======= =======
</TABLE>
c) Deferred employees' profit sharing
The Company calculates a deferred employees' profit sharing liability for
U.S. GAAP purposes based on temporary differences between the financial
reporting bases and employees' profit sharing bases of assets. Under U.S. GAAP,
employee profit sharing expense would be considered as a component of operating
expenses.
The significant components of the deferred employees' profit sharing for
purposes of U.S. GAAP reconciliation are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ---------
(UNAUDITED)
<S> <C> <C>
Inventories................................................ Ps 5,626 Ps 3,609
Exchange fluctuation....................................... 43,961 45,307
Reserves................................................... 5,494 6,614
Fixed assets............................................... (5,986) (5,290)
Seniority premium and pension plan......................... 993 1,238
Other...................................................... 352 405
---------- ----------
Net deferred profit sharing assets......................... Ps 50,440 Ps 51,883
========== ==========
</TABLE>
d) Effects of merge
For U.S. GAAP purposes the business combination of Proveedora del Hogar,
S.A. de C.V. was accounted for as an enterprise under common control similar to
a pooling of interest and the financial information is consolidated as of
January 1, 1996.
e) Other Differences and Supplemental U.S. GAAP Disclosures
1) Extraordinary Items. -- Mexican GAAP requires that utilization of tax
loss carry forwards be classified as extraordinary items in the
statement of operations, whereas U.S. GAAP requires the benefit from
utilization of tax loss carry forwards to be classified as a component
of income tax expense attributable to continuing operations. The
benefits from utilization of tax loss carry forwards were Ps 80,302 for
the
15
<PAGE> 17
VITROCRISA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
year ended December 31, 1996 and Ps 36,909 (unaudited) and Ps 50,437
(unaudited) for the six months ended June 30, 1997 and 1996,
respectively.
2) Post-retirement Benefits -- Under U.S. GAAP, Statement of financial
Accounting Standards No. 106, "Employer's Accounting for Post-retirement
Benefits Other Than Pensions" (SFAS 106) requires accrual of
post-retirement benefits other than pensions (such as health care
benefits) during the years an employee provides services. The Company
does not and is not required to provide post-retirement benefits.
3) Pension Disclosures. -- The Company maintains pension plans and
seniority premium plans. The Company adopted Bulletin D-3 issued by the
IMCP, the accounting treatment for pensions set forth in this Bulletin
are substantially the same as those set forth in Statement of Financial
Accounting Standards No. 87 "Employer's Accounting For Pensions" (SFAS
87). The company records the pensions cost determined by actuarial
computations, as described in notes 2(d) and 7. The differences between
principles applied by the Company under Mexican GAAP and requirements of
SFAS No. 87 are not material.
For purposes of determining pension cost and seniority premium under U.S.
GAAP the Company applies SFAS 87. The disclosures under SFAS 87 for the Company
are presented below.
Pension and seniority premium costs are summarized below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, ---------------------
1996 1997 1996
------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Service costs........................................... Ps 1,966 Ps 2,103 Ps 1,147
Interest cost........................................... 7,999 3,018 4,666
Net amortization and deferral........................... 1,865 1,995 904
--------- -------- --------
Net period pension cost................................. Ps 11,830 Ps 7,116 Ps 6,717
========= ======== ========
</TABLE>
4) Supplement Cash flow Information Required by U.S. GAAP
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, ------------------------
1996 1997 1996
------------ --------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Net cash provided by operating activities
reflects net cash payments of interest and
income taxes as follows:
Interest....................................... Ps 200,518 Ps 46,586 Ps 110,390
Income taxes, net.............................. 4,506 4,064 1,418
</TABLE>
For the year ended December 31, 1996 and the six months ended June 30, 1997
(unaudited) and June 30, 1996 (unaudited), the Company's statement of changes in
financial position includes under the caption of "Resources generated from
operations" the exchange loss (income) occurred during such periods in the
amount of Ps 13,269, Ps 7,228 and Ps (23,378) respectively, before taxes.
For the year ended December 31, 1996 and the six months ended June 30, 1997
(unaudited) and June 30, 1996 (unaudited), the Company's statement of changes in
financial position includes under the caption of "Resources generated from
operations" the monetary gain which occurred during such periods in the amount
of Ps 273,956, Ps 70,774 and Ps 166,472, respectively. This monetary gain
includes the monetary gain of current monetary assets and current monetary
liabilities which occurred during such periods in the amounts of Ps 38,496,
16
<PAGE> 18
VITROCRISA, S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Ps 12,991 and Ps 25,438, respectively. These amounts are already included in
resources generated from operations as a change in current assets and current
liabilities.
For the year ended December 31, 1996 and the six months ended June 30, 1997
(unaudited) and June 30, 1996 (unaudited), the Company's statement of changes in
financial position includes under the caption of "Resources used in financing
activities" the restatement to constant pesos of current and long-term debt
which occurred during such periods in the amount of Ps 235,460, Ps 57,783 and Ps
141,034, respectively. The line item in the statement of changes in financial
position for this concept is "Monetary effect on liabilities with financing
cost".
The company considers all highly liquid short-term investments with
original maturity of ninety days or less, consisting primarily of Mexican
Government treasury bonds and money market instruments to be classified as cash
equivalents.
5) Fair value of financial instruments -- Statement of Financial Accounting
Standards No. 107. "Disclosures about Fair Value of Financial Instruments"
requires disclosure of the estimated fair values of certain financial
instruments. The estimated fair value amounts have been determined using
available market information or other appropriate valuation methodologies that
require considerable judgment in interpreting market data and developing
estimates. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The carrying amount of the Company's financial instruments approximate their
estimated fair values.
The fair value information presented herein is based on information
available to management as of December 31, 1996. Although management is not
aware of any factors that would significantly affect the estimated fair valued
amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date and, therefore, the current estimates
of fair value may differ significantly form the amounts presented herein.
6) Earnings Per Common share in Accordance with U.S. GAAP -- Earnings per
share in accordance with US GAAP are based on the weighted average number of
common shares outstanding during each period. Primary earnings per share are
based upon, 166,682,900 shares for the year ended December 31, 1996 and the six
months ended June 30, 1997 (unaudited) and 1996 (unaudited). Earnings per common
share computed in accordance with US. GAAP are presented below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, -----------------
1996 1997 1996
------------ ------ ------
(UNAUDITED)
<S> <C> <C> <C>
Earnings per common share (pesos)..................... Ps .65 Ps .41 Ps .25
</TABLE>
* * * * *
17
<PAGE> 1
EXHIBIT 2
WORLDCRISA CORPORATION AND CRISA CORPORATION
(WHOLLY OWNED SUBSIDIARIES OF
AMERICAN ASSETS HOLDING COMPANY)
Combined Financial Statements
Year Ended December 31, 1996,
Supplemental Schedule
Year Ended December 31, 1996, and Independent Auditors' Report
<PAGE> 2
WORLDCRISA CORPORATION AND CRISA CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Independent auditors' report......................................................... 1
Combined financial statements as of December 31, 1996, and for the year then ended:
Combined Balance Sheet............................................................. 2
Combined Statement of Operations and Accumulated Deficit........................... 3
Combined Statement of Cash Flows................................................... 4
Notes to Combined Financial Statements............................................. 5-10
Supplemental schedule for the year ended December 31, 1996:
Independent Auditors' Report on Supplemental Schedule.............................. 11
Combining Statement of Operations.................................................. 12
</TABLE>
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying combined balance sheet of WorldCrisa
Corporation and Crisa Corporation (the "Companies"), wholly owned subsidiaries
of American Assets Holding Company and indirect wholly owned subsidiaries of
Vitro, S.A., as of December 31, 1996, and the related combined statements of
operations and accumulated deficit and cash flows for the year then ended. These
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Companies as of December 31,
1996, and the results of their operations and cash flows for the year then ended
in conformity with generally accepted accounting principles.
As discussed in Note 2 to the combined financial statements, the Companies
changed their method of accounting for capitalized costs included in inventory
during 1996.
Deloitte & Touche LLP
August 22, 1997
Dallas, Texas
1
<PAGE> 4
WORLDCRISA CORPORATION AND CRISA CORPORATION
COMBINED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Accounts receivable (less allowance for uncollectible accounts of $1,440)........ $10,391
Due from affiliated companies (Note 3)........................................... 1,259
Inventory (Note 2)............................................................... 19,639
Prepaid expenses and other assets................................................ 148
--------
Total current assets.......................................................... 31,437
Property and equipment (Note 4).................................................... 578
Excess of cost over net assets of acquired business................................ 8,402
Other assets....................................................................... 635
--------
Total assets....................................................................... $41,052
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable to banks (Note 5).................................................. $16,317
Accounts payable................................................................. 4,347
Bank overdrafts.................................................................. 402
Due to affiliated companies (Note 3)............................................. 1,238
Accrued liabilities.............................................................. 3,604
Current portion of capital lease obligations (Note 7)............................ 53
--------
Total current liabilities..................................................... 25,961
Capital lease obligations (Note 7)................................................. 35
--------
Total liabilities............................................................. 25,996
Stockholder's equity:
Common stock (Class A), $.01 par value -- 510 shares authorized, issued and
outstanding
Common stock (Class B), $.01 par value -- 1,490 shares authorized, 490 shares
issued and outstanding
Common stock, $1 par value -- 3,000,000 shares authorized, 2,040,100 shares
issued and outstanding........................................................ 2,040
Paid-in capital.................................................................. 26,142
Accumulated deficit.............................................................. (13,126)
--------
Total stockholder's equity.................................................... 15,056
--------
Total liabilities and stockholder's equity......................................... $41,052
========
</TABLE>
See notes to combined financial statements.
2
<PAGE> 5
WORLDCRISA CORPORATION AND CRISA CORPORATION
COMBINED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
Net sales......................................................................... $ 79,359
Cost of goods sold................................................................ 62,066
--------
Gross profit.................................................................... 17,293
OPERATING EXPENSES:
Selling and marketing........................................................... 11,638
General and administrative...................................................... 4,620
Shipping and warehouse.......................................................... 1,981
--------
Total operating expenses..................................................... 18,239
--------
Operating loss.................................................................... (946)
OTHER EXPENSE:
Interest expense, net........................................................... (1,935)
Other, net...................................................................... (241)
--------
Total other expense.......................................................... (2,176)
--------
Loss before income taxes.......................................................... (3,122)
Income tax expense (Note 6)....................................................... (23)
--------
Net loss before cumulative effect of accounting change............................ (3,145)
Cumulative effect of accounting change (Note 2)................................... 214
--------
Net loss.......................................................................... (2,931)
Accumulated deficit, January 1, 1996.............................................. (10,195)
--------
Accumulated deficit, December 31, 1996............................................ $(13,126)
========
</TABLE>
See notes to combined financial statements.
3
<PAGE> 6
WORLDCRISA CORPORATION AND CRISA CORPORATION
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss........................................................................ $ (2,931)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization................................................ 582
Write-off of property and equipment.......................................... 523
Change in assets and liabilities:
Accounts receivable........................................................ 4,107
Due from affiliated companies.............................................. (1,176)
Inventory.................................................................. (17)
Prepaid expenses and other assets.......................................... 759
Accounts payable and accrued liabilities................................... 1,602
Bank overdrafts............................................................ 402
Due to affiliated companies................................................ (910)
--------
Net cash provided by operating activities............................... 2,941
--------
Cash flows from investing activities:
Purchases of property and equipment............................................. (154)
Cash flows from financing activities:
Net borrowings on notes payable to banks........................................ 43,324
Payments of long-term debt and capital lease obligations........................ (47,193)
--------
Net cash used in financing activities................................... (3,869)
--------
Net decrease in cash and cash equivalents......................................... (1,082)
Cash and cash equivalents, beginning of year...................................... 1,082
--------
Cash and cash equivalents, end of year............................................ $ --
========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.......................................... $ 1,778
========
Cash paid during the year for income taxes...................................... $ --
========
</TABLE>
See notes to combined financial statements.
4
<PAGE> 7
WORLDCRISA CORPORATION AND CRISA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business -- WorldCrisa Corporation ("WorldCrisa") and Crisa
Corporation ("Crisa") (the "Companies") are wholly owned subsidiaries of
American Assets Holding Company ("American"), which is a wholly owned subsidiary
of Vitro, Sociedad Anonima ("Vitro, S.A."), a Mexican publicly owned
corporation. WorldCrisa imports and markets tableware products, including china,
glass and silverware, for the food service industry, principally in the United
States. Crisa is the exclusive U.S. distributor of household glassware, glass
fixtures, leaded crystal products, enamel cookware and tableware manufactured by
Mexican subsidiaries of the Vitro consolidated group.
The primary subsidiaries of WorldCrisa are World Tableware Corporation
("WTC"); a U.S. holding company for investment in World Tableware International,
Ltd. ("WTI-Taiwan"); a Taiwan holding company for investment in World Tableware
International (Europe) S.A. ("WTI-Europe"); and a Belgian trading company with a
registered Taiwan branch providing purchasing services to WorldCrisa and
affiliates and to third parties.
Basis of Presentation -- The combined financial statements are prepared in
accordance with generally accepted accounting principles in the United States.
The combined financial statements include the accounts of Crisa, WorldCrisa and
the wholly owned subsidiaries of WorldCrisa as described above. Substantially
all transactions are denominated in U.S. dollars. All significant intercompany
accounts and transactions have been eliminated.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents -- The Companies consider all highly liquid debt
instruments and investments readily convertible to cash and with a maturity of
three months or less at the date of purchase to be cash equivalents.
Inventory -- Inventory is stated at the lower of cost or market. Cost,
which includes materials, purchased components, direct labor, import tariffs,
storage and other purchasing costs, is determined under the average cost method
of accounting. Inventory is composed primarily of finished goods.
Property and Equipment -- Property and equipment are stated at cost less
accumulated depreciation. Depreciation expense is computed using the
straight-line method over estimated useful lives of three to five years.
Replacements, renewals and significant improvements are treated as capital
additions. Maintenance and repairs are charged to expense as incurred.
Excess of Cost Over Net Assets of Acquired Business -- Excess of cost over
net assets of acquired business is being amortized on a straight-line basis over
30 years. On an annual basis, WorldCrisa compares the carrying value of this
asset to an estimate of WorldCrisa's fair value to evaluate the reasonableness
of the carrying value and remaining amortization period. Accumulated
amortization totaled $771 as of December 31, 1996.
Income Taxes -- Deferred tax assets and liabilities are recognized for
future tax consequences attributable to differences between financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. These temporary differences relate primarily to the allowance for
doubtful accounts receivable, which is not currently deductible for tax
purposes.
5
<PAGE> 8
WORLDCRISA CORPORATION AND CRISA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
Foreign Operations -- Assets of $417, liabilities of $217 and a net loss of
$100 associated with the Taiwan subsidiary as of and for the year ended December
31, 1996, are included in the accompanying combined financial statements.
The functional currency of the Taiwan subsidiary is the U.S. dollar since
cash flows and financing activities are primarily denominated in U.S. dollars.
The monetary assets and liabilities of Taiwan have been translated at year-end
exchange rates; inventories, property, and nonmonetary assets and liabilities
have been translated at historical rates. Income and expense accounts are
translated at the average rates in effect, except that depreciation and cost of
sales are translated at historical rates. All exchange gains and losses from
remeasurement of monetary assets and liabilities are recognized currently in
income.
2. CHANGE IN ACCOUNTING
In 1996, the Companies changed their method of accounting for capitalized
costs included in inventory. The Companies capitalized additional expenses
incurred during 1996 which had been incurred but were not capitalized in
previous years. In management's opinion, the capitalization of these additional
expenses better reflects the costs of obtaining and storing inventory. This
change resulted in an increase in inventory as of December 31, 1996, and a
reduction in cost of goods sold of $183 for the year ended December 31, 1996.
The cumulative effect as of January 1, 1996, of this accounting change was $214.
3. TRANSACTIONS WITH RELATED PARTIES
During 1996, Crisa purchased $26,334 in glassware and other supplies from
VitroCrisa, a wholly owned subsidiary of Vitro, S.A.
During 1996, Crisa paid $1,795 in administrative charges to VitroCrisa.
These charges represent certain administrative and other services performed on
Crisa's behalf. In the accompanying combined statement of operations, the
administrative charges are allocated as follows: $282 is included in general and
administrative, $96 is included in selling and marketing, and $1,417 is included
in shipping and warehouse.
As of December 31, 1996, due from affiliated companies includes $1,176 due
from VitroCrisa and $83 due from Vitro, S.A.
As of December 31, 1996, due to affiliated companies includes $1,182 due to
VitroCrisa and $56 due to Acero Porcelanizado, S.A. de C.V., a wholly owned
subsidiary of VitroCrisa, for enamelware purchased during 1996.
Vitro, S.A. is guarantor on certain notes payables to banks (see Note 5).
The Companies are charged a guarantor fee by Vitro, S.A. at an annual rate of
1.5% of the outstanding balances. During 1996, these charges totaled $91.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<S> <C>
Furniture and fixtures.................................................... $ 1,401
Machinery and equipment................................................... 2,217
Leasehold improvements.................................................... 138
------
3,756
Less accumulated depreciation and amortization............................ (3,178)
------
$ 578
======
</TABLE>
6
<PAGE> 9
WORLDCRISA CORPORATION AND CRISA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
5. NOTES PAYABLE TO BANKS
Notes payable to banks consist of the following:
<TABLE>
<S> <C>
Revolving credit facility from Bank of New York; interest at 1.5% above
the bank's base lending rate (8.25% at December 31, 1996); agreement
expires November 9, 1998................................................ $ 936
Note payable from Bank of New York; interest at 2% above the bank's base
lending rate (8.25% at December 31, 1996); agreement expires November 9,
1998.................................................................... 200
Note payable from Bank of New York; interest at 2.75% above the Eurodollar
rate (7.5% at December 31, 1996); agreement expires November 9, 1998.... 6,500
Revolving loan up to $7,150 from Laredo National Bank; interest at 2%
above Chase Manhattan Bank, N.A. prime rate (8.25% at December 31,
1996); agreement expires June 14, 1997; secured by 75% of Crisa accounts
receivable and 60% of Crisa inventory; guaranteed by Vitro, S.A. up to
$2,400.................................................................. 6,681
Note payable from California Commerce Bank; interest at 1.75% above the
bank's reference rate (8.75% at December 31, 1996); note is unsecured
and guaranteed by Vitro, S.A.; note matures December 5, 1997............ 2,000
-------
Total notes payable to banks -- current................................... $16,317
=======
</TABLE>
The revolving credit facility and two notes payable with the Bank of New
York are part of an overall loan agreement (the "Agreement") that permits
maximum loans in total of the lesser of $16,000, less certain adjustments,
including the aggregate amount of outstanding letters of credit, inventory
targeted by WorldCrisa as slow-moving, and additional inventory reserves or the
sum of 85% of eligible accounts receivable and 55% of eligible inventory also
adjusted for certain items. As of December 31, 1996, WorldCrisa had $2,600 in
available credit under the Agreement. The Bank of New York's advances are
secured by all receivables, equipment, inventory, general intangibles and other
rights of WorldCrisa. The Agreement also contains financial and other covenants,
including but not limited to calculation of minimum net worth, current ratio and
debt to equity ratio, and also includes limitations on capital expenditures and
new indebtedness. Vitro, S.A. has guaranteed $3,000 of any outstanding balance
under the Agreement.
As of December 31, 1996, WorldCrisa was in violation of several financial
covenants and has not received a waiver from the Bank of New York. These
violations constituted an event of default, and the bank, therefore, reserves
the right to call the outstanding balance due. Accordingly, the entire balance
of advances from the Bank of New York has been classified as current (see Note
9).
The revolving loan agreement with Laredo National Bank ("Laredo") expired
on June 14, 1997, and Crisa failed to pay off the outstanding balance as of that
date. Attempts to refinance the loan with Laredo failed, and Crisa made
arrangements for alternative financing to pay off the loan (see Note 9).
6. INCOME TAXES
In 1996, the Companies were included in the consolidated federal tax return
of certain Vitro, S.A. companies. Consequently, in 1996, the Companies
recognized income tax expense or benefit approximating that which would have
resulted from filing separate returns. The federal tax sharing policy of Vitro,
S.A. provides for the Companies to receive benefit for losses when such losses
would have been utilized on a stand-alone basis.
7
<PAGE> 10
WORLDCRISA CORPORATION AND CRISA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
Current income taxes (benefit) include the following:
<TABLE>
<S> <C>
Federal............................................................ $28
State.............................................................. (5)
Foreign............................................................
---
Total $23
===
</TABLE>
Differences between the Companies' effective tax rate and the federal
statutory rate of 34% are primarily attributable to the effects of tax-basis net
operating losses, federal taxes on certain foreign income, tax effects of
temporary differences related to purchase accounting adjustments and the effect
of certain special compensation arrangements.
At December 31, 1996, Crisa had net operating loss carryforwards of $723,
which begin expiring in 2003. In addition, Crisa had alternative minimum tax
credit carryforwards of $240, which have no expiration date.
WorldCrisa has U.S. net operating losses of $6,587, which may be carried
forward to offset future net income through 2011. Pursuant to the federal tax
sharing policy of Vitro, S.A., WorldCrisa is entitled to receive the benefit of
the current net operating loss. However, in 1995, WorldCrisa recorded a tax
liability under the tax sharing policy due to foreign dividend income. Vitro,
S.A. agreed to hold harmless the payment of the liability resulting from the
dividend income eliminating WorldCrisa's ability to carry back losses against
1995 income. Therefore, the asset generated by the net operating losses is fully
reserved as of December 31, 1996, in the combined financial statements due to
WorldCrisa's inability to utilize the losses on a stand-alone basis.
WorldCrisa also has Taiwan tax loss carryforwards of approximately $700,
which can be carried forward to offset future profits recognized in Taiwan.
Approximately $276 of such carryforwards expire in 1997, with the remaining
amounts expiring in 1998 and 1999.
The Companies' utilization of net operating losses could be limited due to
changes in ownership, including those described in Note 10.
Net current deferred income taxes included in the accompanying combined
balance sheet at December 31, 1996, consist of the following:
<TABLE>
<S> <C>
Net assets...................................................... $ 5,332
Valuation reserve............................................... (5,332)
-------
$ --
=======
</TABLE>
7. CONCENTRATIONS, COMMITMENTS AND CONTINGENCIES
Concentrations -- Crisa purchases all of its glassware and other supplies
from VitroCrisa.
As of and for the year ended December 31, 1996, WorldCrisa's top two
customers accounted for 22% of its total sales and 12% of its accounts
receivable. The loss of either of these customers could adversely affect
operating results.
As of and for the year ended December 31, 1996, Crisa's top two customers
accounted for 15% of its total sales and 5% of its accounts receivable. The loss
of either of these customers could adversely affect operating results.
Litigation -- The Companies are involved in litigation as of December 31,
1996, the outcome of which management believes will have no effect on the
financial position, results of operation or cash flows of the Companies.
8
<PAGE> 11
WORLDCRISA CORPORATION AND CRISA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
Capital Leases -- Obligations under capital leases have been recorded in
the accompanying financial statements at the present value of future minimum
lease payments, discounted at interest rates ranging from 9.04% to 9.51%. The
capitalized cost of $274 for 1996 less accumulated depreciation of $121 is
included in property and equipment in the accompanying combined financial
statements.
A summary of future minimum lease payments under capital leases together
with the present value of the net minimum lease payments is as follows:
<TABLE>
<S> <C>
Fiscal year ending December 31:
1997....................................................................... $59
1998....................................................................... 36
---
Total minimum lease payments................................................. 95
Amount representing interest................................................. 7
---
Present value of future minimum lease payments............................... $88
===
</TABLE>
Operating Leases -- The Companies were committed under operating leases in
the United States (primarily for administrative offices and warehouse space)
having an initial lease term of one year or more and expiring on various dates.
Rental expense for administrative offices and warehouse facilities under all
long-term operating leases aggregated $1,395 in 1996.
The minimum future obligations under long-term noncancelable leases in
effect are as follows:
<TABLE>
<S> <C>
Fiscal year ending December 31:
1997..................................................................... $1,093
1998..................................................................... 748
1999..................................................................... 511
2000..................................................................... 508
2001 and thereafter...................................................... 1,224
------
$4,084
======
</TABLE>
8. EMPLOYEE BENEFIT PLANS
WorldCrisa has a 401(k) defined contribution savings plan covering
substantially all U.S. hourly and salaried employees of the Companies. The
Companies contribute 2% of each eligible employee's earnings to the plans. The
Companies also match 75% of employee contributions up to a maximum of 6% of the
employee's earnings. The Companies recognized $156 of expense for contributions
to the 401(k) plan during 1996.
9. SUBSEQUENT EVENTS
On August 22, 1997, WorldCrisa entered into a commitment with Texas
Commerce Bank to borrow $16,000, maturing on September 24, 1997, to pay off all
outstanding debt to the Bank of New York (see Note 5). In conjunction with this
repayment to the Bank of New York, WorldCrisa will accelerate amortization of
$192 in outstanding deferred charges and incur $320 in prepayment penalties on
the date of funding.
On July 21, 1997, Crisa entered into an agreement with American to borrow
$10,000, maturing on October 20, 1997, to pay off all outstanding debt to Laredo
National Bank and California Commerce Bank (see Note 5).
9
<PAGE> 12
WORLDCRISA CORPORATION AND CRISA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED
10. SUBSEQUENT EVENT (UNAUDITED)
On August 29, 1997, Libbey, Inc. ("Libbey") acquired certain of Crisa's
inventory of glass tableware products along with certain other assets related to
Crisa's glass tableware business (the "Crisa Inventory Purchase") and acquired
certain assets and assumed certain liabilities of WorldCrisa. Immediately after
the Crisa Inventory Purchase, Libbey purchased a 49% interest in the Crisa
industrial and lighting business assets along with certain liabilities related
to those assets.
* * * * * *
10
<PAGE> 13
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL SCHEDULE
Our report dated August 22, 1997, was made for the purpose of forming an
opinion on the basic combined statements of operations and accumulated deficit
and of cash flows taken as a whole. The supplemental combining statement of
operations is presented for purposes of additional analysis and is not a
required part of the basic combined financial statements. This supplemental
schedule is the responsibility of the Companies' management. The supplemental
schedule has been subjected to the auditing procedures applied in our audit of
the basic combined financial statements and, in our opinion, is fairly stated in
all material respects when considered in relation to the basic combined
financial statements taken as a whole.
Deloitte & Touche LLP
August 22, 1997
Dallas, Texas
11
<PAGE> 14
WORLDCRISA CORPORATION AND CRISA CORPORATION
COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
CRISA(1)
--------------------------------------------------
WORLDCRISA RETAIL INDUSTRIAL COMBINED
---------- ------- ---------- --------
<S> <C> <C> <C> <C>
Net sales........................................ $ 39,840 $19,399 $ 20,120 $79,359
Cost of goods sold............................... 30,607 14,924 16,535 62,066
------- ------- ------- -------
Gross profit................................ 9,233 4,475 3,585 17,293
OPERATING EXPENSES:
Selling and marketing.......................... 6,592 2,233 2,813 11,638
General and administrative..................... 3,250 673 697 4,620
Shipping and warehouse......................... 1,157 406 418 1,981
------- ------- ------- -------
Total operating expenses.................... 10,999 3,312 3,928 18,239
------- ------- ------- -------
Operating income (loss).......................... (1,766) 1,163 (343) (946)
OTHER EXPENSE:
Interest expense, net.......................... (1,227) (348) (360) (1,935)
Other, net..................................... (59) (89) (93) (241)
------- ------- ------- -------
Total other expense......................... (1,286) (437) (453) (2,176)
------- ------- ------- -------
Income (loss) before income taxes................ (3,052) 726 (796) (3,122)
Income tax expense............................... (11) (12) (23)
------- ------- ------- -------
Net income (loss) before cumulative effect of
accounting change.............................. (3,052) 715 (808) (3,145)
Cumulative effect of accounting change........... 214 214
------- ------- ------- -------
Net income (loss)................................ $ (2,838) $ 715 $ (808) $(2,931)
======= ======= ======= =======
</TABLE>
- ---------------
(1) Operating and other expenses related to Crisa Retail ("Retail") and Crisa
Industrial ("Industrial") were separately identified and included in the
respective operating and other expenses for both divisions. Any remaining
operating and other expenses were allocated based on net sales of the
divisions.
12
<PAGE> 1
EXHIBIT 3
LIBBEY INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
On August 29, 1997 Libbey Inc. (the "Company") closed on a series of
transactions with Vitro S.A. ("Vitro") and certain of its subsidiaries. The
acquisition includes: (a) the Company acquiring through subsidiaries a
forty-nine percent (49%) equity interest in: (i) Vitrocrisa, S.A. de C.V.
("Vitrocrisa"), (ii) Vitrocrisa Holding, S.A. de C.V. ("Vitrocrisa Holding"),
(iii) Crisa Libbey, S.A. de C.V. ("Crisa Libbey") and (iv) Crisa Industrial,
L.L.C. ("Crisa Industrial") from Vitro and certain of its subsidiaries, with
Vitro, or its subsidiary Crisa Corporation ("Crisa") in the case of Crisa
Industrial, being the owner of the remaining fifty-one percent (51%) equity
interest in such entities; and (b) the Company acquiring through a subsidiary
certain assets and assuming certain liabilities of the business operated as
WorldCrisa Corporation from WorldCrisa Corporation ("World Tableware").
Reciprocal distribution agreements have been established, whereby the Company
becomes the distributor of Vitrocrisa glass tableware products in the United
States and Canada, and Vitrocrisa becomes the distributor of Libbey glass
tableware products in Mexico, Central and South America. The cash purchase price
is approximately $100 million plus the funding or assumption of certain
liabilities of WorldCrisa and was financed through the Company's $380 million
amended revolving credit facility, that terminates May, 2002 (filed as Exhibit
10.25 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997). The purchase price was determined through arm's length negotiations.
The following Unaudited Pro Forma Consolidated Financial Information is
based on the historical financial statements of the Company, Vitrocrisa, Crisa
and World Tableware adjusted to give effect to the transactions and the
financing thereof. The financial information of Vitrocrisa, Crisa and World
Tableware has been presented on a combined basis ("Acquired Companies") based
upon the form of the transaction as described above. Accordingly, the World
Tableware and retail business of Crisa in the U.S. have been presented on a
combined basis, while the 49% investment interests have been accounted for in
accordance with the equity method of accounting. The 49% investment interests
include Vitrocrisa and Crisa Industrial. The Unaudited Pro Forma Consolidated
Statements of Income for the year ended December 31, 1996 and six months ended
June 30, 1997 give effect to the acquisition as if it had occurred on January 1,
1996. The Pro Forma Unaudited Consolidated Balance Sheet gives effect to the
acquisition as if it had occurred on June 30, 1997. The pro forma adjustments
are based upon available information and certain assumptions that management
believes are reasonable.
The acquisition was accounted for under the purchase method of accounting.
The total purchase price for the acquisition has been allocated to tangible and
identifiable intangible assets and liabilities based upon management's estimates
of their fair value. The allocation of the purchase price for the acquisition is
subject to revision when additional information concerning asset and liability
valuation is obtained. In management's opinion, the asset and liability
valuation for the acquisition will not be materially different from the pro
forma information presented. For purposes of presenting pro forma results, no
changes in revenues or expenses have been made to reflect the results of any
modification to operations that might have been made had the acquisition been
consummated at the beginning of 1996.
The Unaudited Pro Forma Consolidated Information does not purport to
represent what the Company's results of operations would actually have been had
the acquisition actually occurred on January 1, 1996, or to project the
Company's results of operations for any future period.
<PAGE> 2
LIBBEY INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACTUAL
-----------------------
ACQUIRED PRO FORMA
COMPANY BUSINESSES ADJUSTMENTS PRO FORMA
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales...................................... $182,433 $ 29,916(c) $ (108) $212,241
Royalties and net technical assistance......... 1,620 (h) 500 2,120
-------- -------- -------- --------
Total revenues.......................... 184,053 29,916 392 214,361
Cost of sales.................................. 128,669 20,328(c) (30) 149,298
(j) 331
Selling, general and administrative expenses... 24,457 7,511(a) 126 30,034
(b) (723)
(c) (478)
(d) (392)
(e) (467)
-------- -------- -------- --------
Total costs and expenses....................... 153,126 27,839 (1,633) 179,332
-------- -------- -------- --------
Income from operations......................... 30,927 2,077 2,025 35,029
Equity earnings................................ 3,923(a) (1,031) 398
(i) (315)
(l) (2,179)
Other income (expense)......................... 44 (177)(c) 184 51
-------- -------- -------- --------
Earnings before interest and income taxes.... 30,971 5,823 (1,316) 35,478
Interest expense -- net........................ (6,744) (751)(f) (2,360) (9,855)
-------- -------- -------- --------
Income before income taxes................... 24,227 5,072 (3,676) 25,623
Provision for income taxes..................... 9,449 120(g) 642 10,211
-------- -------- -------- --------
Net income................................... $ 14,778 $ 4,952 $ (4,318) $ 15,412
======== ======== ======== ========
Net income per share........................... $0.95 $0.99
===== =====
Weighted average shares outstanding including
common share equivalents..................... 15,537 15,537
======== ========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Information
<PAGE> 3
LIBBEY INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACTUAL
-----------------------
ACQUIRED PRO FORMA
COMPANY BUSINESSES ADJUSTMENTS PRO FORMA
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales..................................... $397,656 $ 59,239(c) $ (174) $456,721
Royalties and net technical assistance........ 2,698 (h) 1,000 3,698
-------- -------- -------- --------
Total revenues......................... 400,354 59,239 826 460,419
Cost of sales................................. 288,538 45,531(c) (639) 333,663
(j) 233
Selling, general and administrative
expenses.................................... 44,620 14,311(a) 74 52,303
(b) (2,420)
(c) (2,491)
(d) (836)
(e) (955)
-------- -------- -------- --------
Total costs and expenses...................... 333,158 59,842 (7,034) 385,966
-------- -------- -------- --------
Income from operations........................ 67,196 (603) 7,860 74,453
Equity earnings............................... 6,587(a) (2,063) (35)
(c) 83
(i) (630)
(l) (4,012)
Other income (expense)........................ 1,302 (148)(c) 392 1,546
-------- -------- -------- --------
Earnings before interest and income taxes... 68,498 5,836 1,630 75,964
Interest expense -- net....................... (14,962) (1,575)(f) (4,647) (21,184)
-------- -------- -------- --------
Income before income taxes.................. 53,536 4,261 (3,017) 54,780
Provision for income taxes.................... 20,986 11(g) 1,255 22,252
-------- -------- -------- --------
Net income.................................. $ 32,550 $ 4,250 $ (4,272) $ 32,528
======== ======== ======== ========
Net income per share.......................... $2.12 $2.12
===== =====
Weighted average shares outstanding including
common share equivalents.................... 15,352 15,352
======== ========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Information
<PAGE> 4
LIBBEY INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ACTUAL
-----------------------
ACQUIRED PRO FORMA
COMPANY BUSINESSES ADJUSTMENTS PRO FORMA
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash........................................ $ 3,750 (c) $ 2 $ 3,752
Accounts receivable, net.................... 49,992 11,496(c) (5,371) 56,117
Inventories................................. 94,435 22,766(c) (5,840) 111,061
(k) (300)
Other current assets........................ 5,328 243(c) (146) 5,425
-------- -------- -------- --------
Total current assets................... 153,505 34,505 (11,655) 176,355
Other assets
Investments................................. 80,475 80,475
Other assets................................ 32,451 381(c) (247) 32,585
Goodwill.................................... 37,131 8,239(c) 774 46,476
(k) 332
-------- -------- -------- --------
Total other assets..................... 69,582 89,095 859 159,536
Net property, plant and equipment............. 116,194 378(c) (37) 116,285
(k) (250)
-------- -------- -------- --------
Total assets.................................. $339,281 $ 123,978 $ (11,083) $452,176
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable............................... $ 20,000 $ 16,958(c) $ (9,650) $ 20,000
(k) (7,308)
Accounts payable............................ 14,878 6,499(c) 1,428 22,805
Accrued liabilities......................... 26,529 4,491(c) (2,643) 28,377
Other current liabilities................... 14,584 14,584
Current portion of capital leases........... 62 62
-------- -------- -------- --------
Total current liabilities.............. 75,991 28,010 (18,173) 85,828
Long-term debt................................ 201,315 80,475(k) 22,583 304,373
Deferred taxes and other liabilities.......... 13,134 13,134
Nonpension retirement benefits................ 52,452 52,452
Total shareholders' equity.................... (3,611) 15,493(k) (15,493) (3,611)
-------- -------- -------- --------
Total liabilities and shareholders' equity.... $339,281 $ 123,978 $ (11,083) $452,176
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Information
<PAGE> 5
LIBBEY INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(a) To reflect the net increase in amortization of goodwill related to the
Vitro Transactions.
(b) To adjust for personnel expenses related to employees not retained by
Libbey at the date of the acquisition as per the acquisition agreement.
(c) To adjust for revenue and expenses related to and elimination of
certain assets and liabilities of World Tableware and Crisa not
acquired. Items consist primarily of amounts relating to contracted
services, leases, income taxes, intercompany amounts, and an outlet
store.
(d) To adjust for the elimination of the administrative fees charged to
World Tableware and Crisa by Vitrocrisa as per the acquisition
agreement.
(e) To adjust for the termination of commissions related to sales
representation agreements and royalty agreements for the sale of
glassware as a result of the acquisition of World Tableware as per the
acquisition agreement.
(f) To reflect the increase in interest expense with respect to borrowings
incurred in connection with the Vitro Transactions in the principal
amount of $103,700,000 at an assumed average annual interest rate of
6%.
(g) To adjust provision for income taxes as a result of the acquisition.
(h) To adjust for the $1,000,000 annual technical assistance fee to be paid
to Libbey from Vitrocrisa as per the acquisition agreement.
(i) To adjust for the elimination of the administrative fee paid by World
Tableware and Crisa to Vitrocrisa (see note d) and the net payment for
technical assistance fee as per the acquisition agreement.
(j) To adjust for transfer pricing as per the acquisition agreement for
retail sales from Crisa to Libbey.
(k) To record the acquisition by Libbey including purchase price
adjustments resulting from the acquisition estimated fair market values
as of June 30, 1997.
(l) To adjust equity earnings for purchase price fair market value
adjustments as of January 1, 1996.
<PAGE> 1
Exhibit 10.26
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
-------------------------------------------
This Amended and Restated Distribution Agreement, dated to be effective
as of August 29, 1997, is entered into by and between Vitro, S.A., a sociedad
anonima organized under the laws of the United Mexican States ( "VITRO"), Crisa
Corporation, a corporation organized under the laws of the State of Texas
("CRISA" or "SELLER"), and Vitrocrisa, S.A. de C.V., a sociedad anonima
organized under the laws of the United Mexican States ("VITROCRISA" or
"MANUFACTURER"), on the one part (collectively, the "VITRO PARTIES"), and Libbey
Inc., a corporation organized under the laws of the State of Delaware
("LIBBEY"), and Libbey Glass Inc., a corporation organized under the laws of the
State of Delaware ("LIBBEY GLASS" or "DISTRIBUTOR"), on the other part
(collectively, the "LIBBEY PARTIES").
PURPOSE OF AGREEMENT
Vitro, Crisa, Vitrocrisa, Libbey, and Libbey Glass entered into that
certain Distribution Agreement dated August 29, 1997 (the "DISTRIBUTION
AGREEMENT"). Vitro, Crisa, Vitrocrisa, Libbey, and Libbey Glass have agreed to
amend, restate, and supersede the Distribution Agreement by the terms and
provisions of this Agreement.
It is the expressed purpose of both Libbey Glass and Vitrocrisa to
carry out the sales plans set forth in the Vitrocrisa annual operating budgets,
which will derive from the broader guidelines of the ongoing three-year
strategic plans of Vitrocrisa, as such budgets and strategic plans may be
approved by appropriate directors action of the board of directors of
Vitrocrisa.
ARTICLE I
DEFINITIONS
Section 1.1 The term "ADJUSTED GROSS PROFIT" shall have the meaning as
set forth in SECTION 5.3.
Section 1.2 The term "AFFILIATE" shall mean, with respect to each of
the parties, any other person or party which at the relevant time, directly or
indirectly, controls, is controlled by, or is under common control with such
party. The term "CONTROL" as used with respect to any person or party means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person or party, whether
through the ownership of voting securities, by contract, or otherwise.
Section 1.3 The term "AGREEMENT" shall mean this Amended and Restated
Distribution Agreement.
Section 1.4 The term "AVERAGE OPERATING MARGIN" shall have the meaning
as set forth in SECTION 6.2(d).
Section 1.5 The term "DUTY" shall have the meaning as set forth in
SECTION 5.4.
<PAGE> 2
Section 1.6 The term "EXCLUDED PRODUCTS" shall mean coffee pots, meter
covers, glass covers for cooking ware, blender jars, and lighting fixtures sold
to OEM's. In addition, "Excluded Products" shall mean any other OEM article for
sale to OEM customers that are not in direct competition with Distributor's
products sold to the Foodservice, Industrial, Premium or Retail Channels of
Distribution and are not sold to Distributor's customers, including those in the
Foodservice, Industrial, Premium, and Retail Channels of Distribution.
Section 1.7 The term "EXPECTED SALES" shall have the meaning as set
forth in SECTION 6.2.
Section 1.8 The term "FOODSERVICE CHANNEL OF DISTRIBUTION" shall mean
sales to foodservice distributors, foodservice importers, hotels, restaurants,
chain restaurants, bars, casinos, airlines, cruise lines, breweries,
microbreweries, hospitals, health care facilities, penal institutions, colleges,
all eating and drinking establishments, independent cutters and decorators, and
warehouse clubs; internet sales in all the above segments; and all other
generally acknowledged distributor and end-user segments of the traditional
foodservice sector of the country specified.
Section 1.9 The term "FREIGHT" shall have the meaning as set forth in
SECTION 5.4.
Section 1.10 The term "GLASS TABLEWARE" shall mean those products which
are the subject of the distribution rights set forth in this Agreement and shall
mean the glass product lines illustrated in the current 1997 catalogs of Libbey
Glass or Vitrocrisa, Crisa Corporation, and WorldCrisa Corporation; all glass
products of the type sold by Libbey Glass or Vitrocrisa, other than Excluded
Products, into the Foodservice, Industrial, Premium, or Retail Channels of
Distribution; future new products, other than Excluded Products, sold by Libbey
Glass or Vitrocrisa; and new and existing products, other than Excluded
Products, sold by Libbey Glass or Vitrocrisa and specially differentiated
through packaging under the brand name, identification, or logo of the purchaser
(a "SPECIALLY DIFFERENTIATED PRODUCT"). The intent is that any glass tableware,
other than Excluded Products, that is destined for application in the
Foodservice, Industrial, Premium, and Retail Channels of Distribution are the
products intended by this Agreement to be the subject of the exclusive
distribution rights set forth herein.
Section 1.11 The term "INDUSTRIAL CHANNEL OF DISTRIBUTION" shall mean
sales to candle packers, religious candle markets, distilleries, wineries,
floral distributors, mounters and fabricators, cosmetic industry, and all other
generally acknowledged segments of the traditional industrial sector of the
country specified.
Section 1.12 The term "LANDED DUTY PAID PRICE" shall mean a price equal
to Vitrocrisa's Standard Cost allocable to the Glass Tableware sold hereunder,
including the cost of any accessories and packaging supplies supplied with, or
separately in connection with, the Glass Tableware, plus Freight plus Duty.
Section 1.13 The term "LIBBEY GLASS EXPENSE ALLOCATION" shall have the
meaning as set forth in SECTION 5.3.
<PAGE> 3
Section 1.14 The term "LOST PROFITS" shall have the meaning as set
forth in SECTION 6.2(D).
Section 1.15 The term "OEM" shall mean original equipment manufacturer.
Section 1.16 The term "PREMIUM CHANNEL OF DISTRIBUTION" shall mean
sales for use as a premium or to promote another product, including, without
limitation, sales for such purposes to customers in the fast food industry, oil
industry, soft-drink industry, supermarket continuity industry, premium
packaging, and all other generally acknowledged segments of the traditional
premium and incentive sector of the country specified.
Section 1.17 The term "RETAIL CHANNEL OF DISTRIBUTION" shall mean sales
to retail distributors, mass merchant discount stores, department stores,
specialty retail stores, craft stores, supermarkets, factory outlet stores,
dinnerware companies, flea markets, door-to-door direct sales, wholesale
outlets, gift shops, potteries, catalog showrooms, warehouse clubs, home
shopping networks, internet sales for consumer use, private label sales for any
class of retailer, importers, and all other generally acknowledged segments of
the traditional retail sector of the country specified.
Section 1.18 The term "STANDARD COST" shall have the meaning as set
forth in SECTION 5.4.
Section 1.19 The term "TERRITORY" shall mean those certain geographic
areas set forth on SCHEDULE 1 to this Agreement.
ARTICLE II
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
Section 2.1 AMENDED AND RESTATED DISTRIBUTION AGREEMENT. The terms and
provisions of the Distribution Agreement are hereby canceled and superseded by
the terms and provisions of this Agreement. All references in any other
agreement to the Distribution Agreement dated August 29, 1997 by and between
Vitro, Crisa, Vitrocrisa, Libbey, and Libbey Glass shall be deemed to refer to
this Agreement, and all references to specific provisions of such Distribution
Agreement contained in any other agreement shall refer to the corresponding
provisions of this Agreement.
ARTICLE III
APPOINTMENT OF DISTRIBUTOR
Section 3.1 APPOINTMENT OF LIBBEY GLASS. The Vitro Parties hereby
appoint Libbey Glass as the exclusive seller, distributor, and sales
representative for all sales in the Territory of the Vitro Parties' Glass
Tableware manufactured in the United Mexican States, except for Excluded
Products. Notwithstanding the foregoing, Vitrocrisa reserves the right to sell
Glass Tableware to customers in the Premium Channel of Distribution in those
certain geographic
<PAGE> 4
areas set forth on SCHEDULE 2 to this Agreement even though, to the knowledge of
the Vitro Parties, such Glass Tableware is purchased with the intention of
exporting the same to customers in the Territory, but Vitrocrisa will not
actively solicit such sales for export into the Territory.
ARTICLE IV
TERM
Section 4.1 TERM. The term of this Agreement with respect to Glass
Tableware will continue until terminated by either party on ninety (90) days
advance written notice to the other parties; provided, that the Vitro Parties
may not terminate this Agreement for any reason without Libbey's express written
consent as long as Libbey, directly or indirectly through one or more
Affiliates, maintains a minimum ownership of twenty-five percent (25%) of the
equity of Vitrocrisa or of an entity which, directly or indirectly, owns or
controls Vitrocrisa.
ARTICLE V
PRICING AND PAYMENT TERMS
Section 5.1 Vitrocrisa agrees to sell to Crisa, and Crisa agrees to
purchase from Vitrocrisa, Glass Tableware at a price equal to Vitrocrisa's
Standard Cost. In addition to the price as defined in the previous sentence, a
fee as described herein is to be paid by Crisa to Vitrocrisa for its share of
the profit achieved upon ultimate sale of the Glass Tableware by Libbey Glass or
any of its Affiliates. Payment by Crisa to Vitrocrisa for the initial portion of
the price shall be due on the fifth business day after receipt of payment by
Crisa from Libbey Glass for such Glass Tableware pursuant to SECTION 5.2, and
payment by Crisa to Vitrocrisa for the fee shall be due on the fifth business
day after receipt of payment of the fee by Crisa from Libbey Glass for such
Glass Tableware pursuant to SECTION 5.2.
Section 5.2 Crisa agrees to sell to Libbey Glass, and Libbey Glass
agrees to purchase from Crisa, Glass Tableware FOB at Laredo, Texas or at such
other location at the USA/Mexico border as is, from time to time, designated by
Libbey Glass at the Landed Duty Paid Price. In addition to the Landed Duty Paid
Price, a fee as described herein is to be paid by Libbey Glass to Crisa for its
share of the profit achieved upon the ultimate sale of the Glass Tableware by
Libbey Glass or any of its Affiliates. Title and risk of loss pass to Libbey
Glass on delivery of the Glass Tableware to Libbey Glass at its warehouse at
Laredo, Texas or such other location at the USA/Mexico border as is, from time
to time, designated by Libbey Glass. Any cost of freight in excess of the cost
of Freight, and any cost of insurance beyond the Laredo, Texas warehouse or, as
applicable, such other location at the USA/Mexico border is the responsibility
of Libbey Glass. Payment by Libbey to Crisa of the Landed Duty Paid Price shall
be due forty-five (45) days after receipt of the Glass Tableware by Libbey
Glass. Payment of the profit sharing fee by Libbey Glass shall be due on the
last business day of the calendar month following the month in which the sale
was made by Libbey Glass to its customer.
Section 5.3 The profit sharing fee to be paid by Libbey Glass to Crisa
shall be determined in accordance with the terms set forth on SCHEDULE 3 to this
Agreement.
<PAGE> 5
Section 5.4
(a) For purposes of this Agreement the term "DUTY" shall mean the
actual customs duty, import tax, or other tax, fee, or charge
required by a governmental authority for goods imported from a
foreign country into the country imposing such charge. For
purposes of this Agreement, the term "FREIGHT" shall mean the
actual cost of transportation charges incurred to move goods
from the plant of manufacture by Vitrocrisa to the warehouse
used by Libbey Glass at Laredo, Texas or such other location
at the USA/Mexico border as is, from time to time, designated
by Libbey Glass plus all taxes imposed directly upon such
cost. For purposes of this Agreement, the term "STANDARD COST"
shall mean the standard cost of production employed by
Vitrocrisa in its manufacturing operation at the time goods
are manufactured which cost shall closely approximate the
actual cost of production at the time the standards are
established for the period for which they are established in
accordance with generally accepted accounting practices
consistently applied.
(b) From the date of this Agreement until the third anniversary of
this Agreement, Standard Cost for stock SKU's shall be
expressed in United States of America dollars and shall remain
in effect for one year. After the third anniversary of this
Agreement, the Manufacturer and Distributor agree to review
the method of determining Standard Cost for SKU's and will
review the assumptions for the United States of America
dollar/Mexico peso exchange rates and the inflation rates on a
quarterly basis and will agree to consider adjustments to
pricing for material deviations from such assumptions.
Non-stock and made to order items will be priced on a case by
case basis, and such terms may include quarterly adjustments
to the assumed United States of America dollar/Mexican peso
exchange rates and inflation rates as mutually agreed. Any
estimates or assumptions, whether during the first three years
of this Agreement or thereafter, of the United States of
America dollar/Mexican peso exchange rate or inflation rate
that are included in determining Standard Cost will be
included in the discussions with Libbey and must be reasonable
in light of the then-existing market forecasts of such by
reputable third parties.
(c) Once the Standard Cost is established with respect to an item,
unless revised by mutual agreement, such Standard Cost shall
remain in effect for the balance of the calendar year and
thereafter until revised in conjunction with the adoption and
approval of the Vitrocrisa annual operating budget by its
board of directors. Notwithstanding the foregoing, the parties
may by mutual agreement from time to time, for as long as
there is mutual agreement, use a formula or methodology other
than actual cost to compute either or both Duty and Freight,
but in no case shall the charge to Libbey Glass for Duty and
Freight be increased retroactively above the amount included
in the Landed Duty Paid Price initially charged to Libbey.
<PAGE> 6
Section 5.5 With respect to Vitrocrisa Glass Tableware products listed
in catalogs and selling sheets published by Libbey Glass, the discounts given by
Libbey Glass with respect to Glass Tableware manufactured by Vitrocrisa will be
substantially the same as established by Libbey Glass for Glass Tableware
manufactured by it and listed in such catalogs and selling sheets. Other Glass
Tableware products purchased by Libbey Glass will be priced and discounted by
Libbey Glass in the manner determined by it in its sole and absolute discretion
to be appropriate and consistent with the purposes of this Agreement.
Section 5.6 Vitrocrisa shall keep, or cause to be kept, full and
accurate records and books of account of its costs and expenses relating to the
production of the Glass Tableware prepared in accordance with generally accepted
accounting principles in effect in Mexico, at its facilities in Monterrey,
Mexico. Libbey Glass, or an independent firm of certified public accountants
designated by Libbey Glass, shall at any reasonable time or times, but not more
often than twice in any calendar year, have the right to inspect, examine, and
audit all pertinent records and books in the possession of Vitrocrisa pertaining
to its operations and inspect and observe the operation of Vitrocrisa's facility
in Mexico for the purpose of verifying the calculations of the price of the
products under this Agreement, including, without limitation, Vitrocrisa's
Standard Costs, the cost of Freight, and the cost of Duty.
Section 5.7 Libbey Glass and its Affiliates that sell Glass Tableware
purchased by Crisa shall keep, or cause to be kept, full and accurate records
and books of account of its costs, expenses, sales, and rebates relating to the
sale of the Glass Tableware purchased from Crisa, prepared in accordance with
generally accepted accounting principles in effect in the United States, at its
facilities in Toledo, Ohio. Crisa, or an independent firm of certified public
accountants designated by Vitrocrisa, shall at any reasonable time or times, but
not more often than twice in any calendar year, have the right to inspect,
examine, and audit all pertinent records and books in the possession of Libbey
Glass and its Affiliates that sell Glass Tableware purchased by Crisa pertaining
to the sale of Glass Tableware purchased from Crisa for the purpose of verifying
the calculations of the profit sharing under this Agreement including, without
limitation, (a) during the first three years of this Agreement, sales and
rebates, and (b) after the third anniversary of this Agreement, sales,
marketing, distributing, general, and administrative expenses, new product
development costs paid to third parties, mold costs, and rebates paid with
respect to products sold by Crisa hereunder.
Section 5.8 Notwithstanding the foregoing, from time to time by mutual
agreement in writing, Libbey Glass, Crisa, and Vitrocrisa may agree upon special
pricing, special terms, or special profit sharing for any particular transaction
whereby Libbey Glass wishes to purchase Glass Tableware to meet a competitive
situation or otherwise obtain a particular piece of business in the Territory in
which case such mutual agreement shall supersede the pricing, terms and profit
sharing set forth above.
Section 5.9 All payments by Libbey Glass to Crisa will be in US
dollars.
Section 5.10 On and after the third anniversary of this Agreement the
amount of the Libbey Glass Expense Allocation set forth in SECTION 5.3 may be
reviewed annually at the
<PAGE> 7
request of either Vitrocrisa or Libbey Glass and changed prospectively, upward
or downward, to some other percentage or method of computation as is necessary
to more accurately compensate (but not over compensate) Libbey Glass for its
full, direct and indirect, costs of distributing Vitrocrisa Glass Tableware
hereunder, including, without limitation, the Channels of Distribution where the
Glass Tableware is sold and the sales, marketing, distributing, general, and
administrative expenses allocable to such sales, and new product development
costs paid to third parties allocable to such sales. If mold costs allocable to
such sales are paid by Vitrocrisa, amortization of such costs will be included
in the Standard Cost. If mold costs allocable to such sales are paid by Libbey
Glass, the mold amortization expense will be included as a new product
development cost.
Section 5.11 The methodology of computing the amount to be paid by
Crisa to Vitrocrisa pursuant to SECTION 5.1 and by Libbey Glass to Crisa
pursuant to SECTION 5.2 to purchase Glass Tableware hereunder sets forth the
intended sharing of profits and margins among Vitrocrisa, Crisa, and Libbey
Glass with respect to Glass Tableware sold hereunder. If any change in the
methodology of computing such prices is required in order to comply with
governmental regulations or legal requirements and such change would have a
material adverse economic effect on either Vitrocrisa, Crisa, or Libbey Glass
with respect to the profits and margins intended to be shared hereunder,
Vitrocrisa, Crisa, and Libbey Glass agree to negotiate in good faith another
methodology of computing such price to meet governmental regulations and legal
requirements and to place Vitro and Libbey in the same relative economic
position with respect to the sharing of profits and margins as is intended by
this ARTICLE V.
Section 5.12 At the date of this Agreement, as its initial purchase,
Libbey Glass agrees to purchase from Crisa, and Crisa agrees to sell to Libbey
Glass, Glass Tableware held in Crisa's warehouse at Laredo, Texas for sale to
customers in the Territory at the price set forth in SECTION 5.2. For the
initial purchase, to the extent the book value of the Glass Tableware is less
than or more than the Landed Duty Price Paid, after the time for return of such
Glass Tableware has expired, Crisa will issue a credit or debit memo, as
appropriate, to Libbey Glass for forty-nine percent (49%) of the difference. In
addition to Glass Tableware, Crisa agrees to sell to Libbey, and Libbey agrees
to purchase at book value from Crisa, any accessories and packaging supplies
held in the Laredo Warehouse which are to be assembled or repackaged with Glass
Tableware to be sold to customers in the Territory. Terms for this sale are 45
days, net, or at Libbey's option, return of all or any portion of the Glass
Tableware, accessories, and packaging supplies to Crisa at the warehouse in
Laredo, Texas for full credit. Crisa shall then repatriate those returned
products to Vitrocrisa to be sold in Mexico or any other country other than
those in the Territory.
ARTICLE VI
PERFORMANCE STANDARD
Section 6.1 Libbey Glass and Vitrocrisa agree to use their best efforts
to carry out the sales plans agreed upon in the annual operating budgets which
will derive from the broader guidelines of the ongoing three-year strategic
plans of Vitrocrisa, as such budgets and strategic plans may be approved by
extraordinary directors action of the board of directors of Vitrocrisa.
<PAGE> 8
Section 6.2 Expected sales by Distributor of Glass Tableware in the
Territory in each of the calendar years 1998, 1999, and 2000 (herein "EXPECTED
SALES") will be measured by the actual dollar sales of Glass Tableware in the
Territory in calendar year 1997 plus a growth rate as set forth on SCHEDULE 4 to
this Agreement, subject to assigned production capacity consistent with
forecasted sales, competitive and expected fill rates, inventory, product
availability, and reasonable flexibility in response to business opportunities
and subject to the absence of any currency crises or unplanned increases in
import Duty.
(a) To allow Vitrocrisa to move from current fill rates to
Distributor's standards, order fill rates defined as
quantities shipped on time as ordered shall not be less than
the amount set forth on SCHEDULE 5 to this Agreement. Order
fill rates require that Glass Tableware is shipped in the
quantities, at the times and in the manner requested in full
conformity with the order. Quantities required from Vitrocrisa
should be within the daily capacity assigned to the
Distributor for each annual operating budget unless otherwise
mutually agreed, i.e., if there is available capacity over the
minimum assigned daily capacity there would be flexibility to
assign this extra capacity to the Distributor.
(b) As part of the annual operating budget discussion, the
Expected Sales may be adjusted up or down by mutual agreement
of Distributor and Vitrocrisa if warranted by general business
conditions in the Territory, competitive conditions in the
Territory, and growth as reported in recognized indexes such
as the Restaurant and Institutions Index.
(c) In determining the payment by Distributor for a shortfall in
Expected Sales for a calendar year (i) a shortfall allowance
of fifteen percent (15%) of Expected Sales shall be allowed
before any calculation of the amount of payment is made and
(ii) Distributor and Vitrocrisa shall examine and take into
account through an appropriate adjustment in Expected Sales
any extraneous events and any events beyond the reasonable
control of the Distributor (as set forth in ARTICLE IX) which
resulted in the shortfall.
(d) In the event the Distributor fails to achieve the Expected
Sales in the Territory, Distributor will pay Crisa its share
of the Lost Profits (as defined on SCHEDULE 6 to this
Agreement) based upon (i) the Average Operating Margin
attained on sales of Glass Tableware in the Territory during
the calendar year times (ii) the shortfall in sales in excess
of fifteen percent (15%) of the Expected Sales as determined
in accordance with SECTION 6.2(c), and Crisa will pay
Vitrocrisa its share of such Lost Profits, all in accordance
with the procedures established hereunder in ARTICLE V for the
sharing of profits on sales by Distributor. The term "AVERAGE
OPERATING MARGIN" is defined as total Adjusted Gross Profit
divided by total net invoiced selling price of Glass Tableware
for a calendar year.
<PAGE> 9
(e) Distributor will pay to Crisa the Lost Profits within sixty
(60) days following the end of the calendar year, and Crisa
shall pay Vitrocrisa its share at the time established in
ARTICLE V hereof for the distribution of Vitrocrisa's share of
the Lost Profits.
Section 6.3 After the calendar year 2000, the Distributor and
management of Vitrocrisa, in connection with the preparation of the annual
operating budget for consideration and adoption by extraordinary directors
action of the board of directors of Vitrocrisa, shall review and discuss the
future direction, expectations, and strategies for sales in the Territory with
any impasses being resolved pursuant to the same procedures established for
deadlocks and impasses between the shareholders or between the directors of
Vitrocrisa in the Vitrocrisa, S.A. de C.V. Shareholders Agreement, dated of even
date, unless otherwise mutually agreed. Quantities required from Vitrocrisa
should be within the capacity assigned to the Distributor for each annual
operating budget unless otherwise mutually agreed, i.e., if there is available
capacity over the minimum assigned daily capacity there would be flexibility to
assign this extra capacity to the Distributor.
ARTICLE VII
OPERATING PROCEDURES
Section 7.1 Distributor shall maintain its own offices and places of
business and pay all of its own expenses in connection with the sale and
distribution of Glass Tableware under this Agreement, except as otherwise
provided herein.
Section 7.2 Distributor is designated to serve customers in the
Territory. Any inquiries or orders for Manufacturer's brand of Glass Tableware
from customers outside of the Territory will be referred by Distributor to
Manufacturer.
Section 7.3 Manufacturer shall furnish Distributor in connection with
the Glass Tableware to be distributed hereunder a reasonable number of catalogs
and existing sales literature which the Manufacturer may, from time to time,
have in connection with its own sales, but the Manufacturer shall not be
obligated to generate or create any catalogs or sales literature for
Distributor.
Section 7.4 The relationship between the parties hereto shall be one of
independent contractors. Neither the Distributor nor the Manufacturer shall be
empowered to have any authority to act for the other, make any commitment on
behalf of the other, make any agreement on behalf of the other, make any payment
on behalf of the other, nor otherwise obligate the other in any way. Neither
Distributor nor Manufacturer shall hold itself out as having any authority to
act in any way for the other unless otherwise specifically agreed in writing.
Section 7.5 All Glass Tableware sold hereunder shall be transferred to
Distributor free and clear of all liens and encumbrances.
<PAGE> 10
Section 7.6 Manufacturer shall secure and apply all packaging for Glass
Tableware sold hereunder and unless otherwise agreed in writing with respect to
any particular transaction the prices charged for Glass Tableware shall be
deemed to include all packaging expenses.
Section 7.7 Regular current stock items to be procured and imported
hereunder will be ordered at levels that correspond to a mutually agreed upon
level per SKU. Should the Distributor require quantities in excess of the agreed
threshold levels, a separate Make and Ship order must be processed with specific
quantities and release dates. Failure by the Distributor to honor the Make and
Ship order by the release date or within thirty (30) days thereafter will result
in shipment and invoicing of the full order, as originally specified.
Section 7.8 In some cases, Distributor may desire and request Specially
Differentiated Product to be created specifically for its customers in the
Territory, which new items are beyond the normal stock collection of the
Manufacturer. These will be private items and may require new molds and cartons.
Unless otherwise, agreed, the cost of developing new molds and cartons is the
responsibility of the Distributor and will be invoiced to the Distributor at
actual out of pocket costs paid to third party vendors in arms length
transactions. Four-color photography, artwork separations, and final layout for
any retail packaging for these items are the responsibilities of the Distributor
specifying the new package development of these "retail type" boxes. These
materials must be supplied in cooperation with the respective scheduling
department of the Manufacturer. Responsibility for the actual box itself and its
procurement will reside with the Manufacturer and will be included in the Landed
Duty Paid Price with respect to Distributor's purchases. Distributor
acknowledges receipt of minimum run per production process from Manufacturer for
non-stock items. These minimum quantities, including any subsequent
modifications, will be used as guidelines (but not the sole criteria) by
Manufacturer in rejecting orders from Distributor for production.
Section 7.9 It is the intent of all parties to keep the packaging of
Specially Differentiated Products to a minimum. No more than 150 SKU's, on a
revolving basis, will be made in the United Mexican States and carry the brand
of a Libbey Party on the box. It is expected this program of differentiation
will be phased in over a one-year period, commencing on the date of this
Agreement.
Section 7.10 Shipper carton markings, country of origin markings, and
appropriate languages to be reflected on the packaging will be the
responsibility of the Manufacturer. A close exchange and co-operative working
relationship between the new product development organization of the Distributor
and the new product development organization of the Manufacturer will be
absolutely necessary. It is expected that the Distributor will be very specific
in its requirements at the time of the order.
Section 7.11 All specifications applicable to Glass Tableware supplied
hereunder, including, but not limited to, material, packaging, property,
dimensions, limit samples, esthetics, cosmetics, inspection, acceptance quality
limits, and acceptance samples will be agreed upon by the Manufacturer, the
Seller, and the Distributor at the time an order is accepted. Once established
for an item the specifications shall remain in effect until revised by mutual
<PAGE> 11
agreement. All Glass Tableware must meet all such specifications or may be
rejected by Distributor in which case the Distributor shall receive a full
refund or credit against the purchase price as the Distributor may elect, and
the product in question shall be returned to the Manufacturer at the
Manufacturer's expense or disposed of at the Manufacturer's expense.
Section 7.12 In special situations where clearly identified in advance
at the time an order is accepted by the Manufacturer, Glass Tableware may be
ordered for a customer of the Distributor where timely, complete delivery of
Glass Tableware conforming to the specifications is required. In such cases, any
penalty paid by the Distributor for any failure to meet the requirements of the
order will be reimbursed by the Manufacturer unless such failure was not the
fault of the Manufacturer as set forth in ARTICLE IX.
Section 7.13 Claims for breakage, shortages, overages, wrong-ware
shipped, and all other distribution related errors must be sent to the
Manufacturer by the Distributor within seven (7) days from the date of receipt
of shipment.
Section 7.14 Claims for quality issues will be sent by the Distributor
to the Manufacturer on or before thirty (30) days following notification to the
Distributor from its customer of such issues. Resolution of such claims must be
within ninety (90) days of receipt by the Manufacturer of the quality claim.
Section 7.15 Product liability claims and all associated legal costs
and any settlement costs will be the final responsibility of the Manufacturer.
The Manufacturer will defend and hold harmless at its expense the Distributor
from and against any and all cost, expense, and liability resulting from any
claim by a third party for bodily injury or damage to property alleging that any
Glass Tableware supplied hereunder is defective or fails to conform to the
specifications, from any claim by a governmental authority that the Glass
Tableware does not meet applicable legal requirements, and from any claim by a
governmental authority that Glass Tableware must be recalled due to a safety
condition or defect. The Manufacturer's obligations under this SECTION 7.15 are
subject to timely notice (unless failure to give timely notice does not
materially adversely affect the Manufacturer) and the right to control the
defense and settlement of the claim if so desired by the Manufacturer. The
Manufacturer's obligations under this SECTION 7.15 do not apply to any cost,
expense, or liability caused by the negligent or wrongful act or omission of the
Distributor; provided, however, the simple purchase and resale shall not be
deemed to be the negligent or wrongful act or omission of the Distributor.
Section 7.16 Libbey Glass will work to maintain and perpetuate the
Crisa brand name in the United States of America in market niches such as floral
ware, tempered glass plates, and the "Impressions" line of tumblers and other
areas where in Libbey Glass's reasonable opinion the name has continued
strength.
<PAGE> 12
ARTICLE VIII
ADDITIONAL PRODUCTS OTHER THAN GLASS TABLEWARE
Section 8.1 It is anticipated that by mutual agreement, from time to
time, the Libbey Parties and the Vitro Parties may authorize the other to
distribute additional products other than Glass Tableware in all or part of the
Territory. Such agreements with respect to products other than Glass Tableware
shall be on such terms and conditions as may be agreed upon by the parties at
the time, including, without limitation, pricing, products, territories,
duration, and terms and conditions of sale, all of which may be different or the
same as set forth herein and unless specifically otherwise agreed in writing
shall be subject to change and the agreement subject to termination, on written
notice from either Vitrocrisa or Libbey Glass to the other. All such agreements
shall be separate and distinct agreements from this Agreement and in no event
shall additional products other than Glass Tableware be subject to the
provisions of this Agreement.
ARTICLE IX
FORCE MAJEURE
Section 9.1 Except for an obligation for the payment of money when due,
neither party shall be liable for any failure or delay in the performance of its
obligations under this Agreement when such failure or delay is caused by acts of
God, riot or civil commotion, strike, lockout or other labor disturbance, fire,
act or any order of government (whether or not valid), flood, war, peril of sea,
breakdown of machinery, delay in supply and/or transit of materials, components,
parts or assemblies from suppliers or sub-contractors, or any other matter or
peril; provided, however, that in all cases such cause is beyond the reasonable
control of the party who failed or was delayed in performance and such party
could not have prevented the failure or delay through reasonable action and has
taken reasonable action to mitigate the effect of the delay or failure. With
respect to an obligation for the payment of money, if by any regulation or order
of an applicable governmental authority a party is precluded from transmitting a
payment due under or by reason of this Agreement, the party owing the payment
shall make the payment in accordance with its obligations hereunder if it places
the sum due to the credit of the party to whom the payment is due in a bank
located in the country of paying party or if it effects payment by some other
method then authorized by the applicable governmental authority.
ARTICLE X
ENFORCEMENT; NON-WAIVER
Section 10.1. The parties hereby acknowledge and agree that Libbey
Glass and Vitrocrisa would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with its specific
terms or otherwise is breached. Accordingly, the parties hereto agree that,
subject to the provisions of SECTION 11.14, Vitrocrisa and Libbey Glass shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States of
America (or of any state thereof) or of the
<PAGE> 13
United Mexican States having jurisdiction over Vitro, in addition to any other
remedy to which Libbey Glass or Vitrocrisa may be entitled, at law or in equity.
Section 10.2 A failure by the Vitro Parties or the Libbey Parties to
exercise or enforce any right conferred upon them by this Agreement shall not be
deemed to be a waiver of any right or operate so as to bar the exercise or
enforcement thereof at any subsequent time or times and all express rights
granted to any Vitro Party and any Libbey Party hereunder shall be in addition
to any right that the Vitro Parties and the Libbey Parties may have under the
general law in respect of a breach hereof. No waiver by either the Vitro Parties
or the Libbey Parties of any condition or the breach of any term, covenant,
representation, warranty, or undertaking contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition or deemed to be or construed as a waiver of the
breach of any other term, covenant, representation, warranty, or undertaking
contained in this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 GOVERNING LANGUAGE. Notwithstanding the translation of
this Agreement or any of its Schedules or Exhibits into Spanish or any other
language, the English language version of this Agreement and any of its
Schedules and Exhibits shall be controlling and shall govern in any legal
proceeding or arbitration.
Section 11.2 COMMUNICATIONS. All correspondence, information,
specifications, reports, notices, and other written or oral communications
between the parties with respect to this Agreement and the transactions
contemplated hereunder shall be in the English language.
Section 11.3 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
Section 11.4 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties related to the subject matter hereof and supersedes
any prior understandings, agreements, or representations by or among the
parties, written or oral, that may have related in any way to the subject matter
hereof.
Section 11.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns.
Section 11.6 ASSIGNMENT. No party may assign or otherwise transfer any
of its rights or obligations under this Agreement, by operation of law or
otherwise, without the prior written consent of the other parties, which consent
shall not be unreasonably withheld. Any purported or attempted assignment
contrary to the terms hereof shall be null and void and of no force or effect.
Notwithstanding the foregoing, Libbey Glass may permit its Affiliates to
purchase Glass Tableware from Vitrocrisa and distribute such Glass Tableware in
the Territory provided that
<PAGE> 14
Libbey and Libbey Glass each shall be responsible to cause such Affiliates of
Libbey Glass to perform the obligations of Libbey Glass hereunder.
Section 11.7 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 11.8 HEADINGS. The article and section headings contained in
this Agreement are inserted for convenience only and are not part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 11.9 NOTICES. All notices, demands, requests, and other
communications to be given or made under this Agreement shall be in writing in
English and shall be:
(a) personally delivered with signed receipt obtained
acknowledging delivery;
(b) transmitted by postage prepaid registered mail, return receipt
requested (air mail if international);
(c) transmitted by telex or facsimile, subject to confirmation of
receipt by the addressee; or
(d) sent by overnight express mail to the parties at their
addresses set forth below:
If to a Libbey Party, such notices shall be addressed to:
Libbey Inc.
300 Madison Avenue
Toledo, Ohio 43604
USA
Attn.: General Counsel Fax No.: 419-325-2585
or to any subsequent address of which Libbey Glass may notify Vitrocrisa in
writing.
If to a Vitro Party, such notices shall be addressed to:
Vitrocrisa, S.A. de C.V.
Doblado 1627 Nte.
Col. Terminal
Monterrey, N.L. 64580
Mexico
Attn.: Director General Fax No.: 528-329-3009
or at any subsequent address of which Vitrocrisa or Vitro may notify Libbey
Glass in writing.
<PAGE> 15
Any notice, demand, request, or other communication shall be effective only if
and when it is received by the addressee.
SECTION 11.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, UNITED
STATES OF AMERICA, WITHOUT GIVING EFFECT TO ANY CONFLICTS-OF-LAW RULES OR
PRINCIPLE THAT MIGHT REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
Section 11.11 AMENDMENTS AND WAVIER. This Agreement may be amended,
modified, superseded, or canceled and any of its terms, covenants,
representations, warranties, undertakings, or conditions may be waived only by
an instrument in writing signed by (or by some person duly authorized by) all of
the parties hereto or, in the case of a waiver, by the party waiving compliance.
Section 11.12 SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
Section 11.13 NO VIOLATION OF LAW. Any obligation of any party hereto
is subject to the approval of all applicable governmental authorities,
including, without limitation, any export or import license required by the
government of any country. Nothing in this Agreement shall be construed to
require any party to disclose to the other any information, to take any action
or refrain from taking any action or remain in any situation in violation of any
law or regulation, rule, or requirement of any applicable governmental authority
to which such party is subject. Subject to the foregoing, in performing its
distribution functions hereunder, Libbey Glass agrees to use reasonable efforts,
and to cause its customers to use reasonable efforts, to furnish such
information and do such acts to enable Vitrocrisa to comply with any
requirement, restriction, or condition imposed upon any export out of the
country of manufacture or upon Vitrocrisa by any applicable governmental
authority of the United Mexican States, and Vitrocrisa agrees to use reasonable
efforts, and to cause its suppliers to use reasonable efforts, to furnish such
information and do such acts to enable Libbey Glass to comply with any
requirement, restriction, or condition imposed upon any import into the
Territory or upon Libbey Glass by any applicable governmental authority.
<PAGE> 16
Section 11.14 Arbitration.
-----------
(a) The parties to this Agreement shall exert good faith efforts
promptly to resolve any controversy or claim arising out of or
related to this Agreement or the breach thereof within fifteen
(15) days of receipt of notice by one party from another party
that such a controversy or claim exists. If the parties fail
to resolve such controversy or claim within such fifteen (15)
day period, they shall, unless otherwise provided in this
Agreement, give notice in writing to the Chief Executive
Officers of Libbey and Vitro (the "CEOS"), who will meet
within fifteen (15) days of receipt of such notice at a
mutually acceptable time and place to attempt to resolve any
such controversy or claim. Notwithstanding the foregoing, the
parties hereby agree that either party can seek injunctive
relief as contemplated by SECTION 10.1. In the event the CEOs
fail to meet or to resolve the controversy or claim arising
out of or related to this Agreement or the breach thereof
within such fifteen (15) day period, the controversy or claim
(other than business and operational decisions customarily
exercised by management in entities similar to Vitrocrisa and
Libbey Glass, which are to be resolved by the CEOs) shall be
settled by arbitration in accordance with the then existing
International Arbitration Rules of the American Arbitration
Association (the "AAA"), which shall commence upon one party
providing the other parties with a written demand for
arbitration (the "DEMAND FOR ARBITRATION"). The arbitrators
may determine the appropriate monetary damages for any breach
or other appropriate remedy, but may not cause this Agreement
to be terminated. Notwithstanding the foregoing, the parties
hereby agree that if either party seeks injunctive relief as
contemplated by SECTION 10.1 such party does not thereby waive
its rights to arbitration under this SECTION 11.14.
(b) The arbitral tribunal shall be composed of three arbitrators
with Libbey Glass and Vitrocrisa each appointing one
arbitrator. If either Libbey Glass or Vitrocrisa fails to
appoint an arbitrator within thirty (30) days after the date
the claimant's Demand for Arbitration is communicated to the
other party (hereinafter the "NOTIFICATION DATE"), the AAA
shall make such appointment. The two arbitrators thus
appointed shall attempt to agree upon the appointment of a
third arbitrator to serve as chairman of the arbitral
tribunal. If said two arbitrators fail to agree upon the
appointment of such third arbitrator within sixty (60) days
after the Notification Date, the AAA shall make such
appointment. The place of arbitration shall be Dallas, Texas,
United States of America. The arbitral proceeding shall be
conducted in the English language.
(c) To the extent that they may validly so agree, the parties
hereby exclude any right of appeal to any court in connection
with the arbitral award. Judgment upon the arbitral award may
be entered in any court having jurisdiction thereof or having
jurisdiction over any party or any party's assets.
<PAGE> 17
(d) The validity of this SECTION 11.14 shall be governed by the
United Nations Convention on the Recognition and Enforcement
of Foreign Arbitral Awards or the Inter-American Convention on
International Commercial Arbitration, to which Mexico and the
United States of America have adhered.
(e) All costs of arbitration and enforcement thereof, including
reasonable attorney's fees and court costs, costs of expert
witnesses, transportation, lodging and meal costs of the
parties and witnesses, costs of transcript preparation, and
other reasonable and necessary direct and incidental costs
shall be apportioned to one or more of the parties by a
majority of the arbitrators as they deem appropriate. In the
event any party to this Agreement commences legal proceedings
to enforce the arbitral award, the expense of such litigation
(including reasonable attorneys' fees and costs of court)
shall be borne by the party or parties not prevailing therein.
Section 11.15 SCHEDULES AND EXHIBITS. The Schedules and Exhibits
attached hereto and referenced herein constitute a part of this Agreement and
are specifically incorporated by reference herein.
[remainder of page intentionally left blank]
<PAGE> 18
IN WITNESS WHEREOF, the parties have hereunto have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
LIBBEY GLASS INC.,
a Delaware corporation
By: /s/ Kenneth G. Wilkes
---------------------------------
Title: CFO - VP
---------------------------------
LIBBEY INC.,
a Delaware corporation
By: /s/ Kenneth G. Wilkes
---------------------------------
Title: CFO - VP
---------------------------------
VITRO, S.A.,
a sociedad anonima organized under the
laws of the United Mexican States
By: /s/ Claudio Del Ville
---------------------------------
Title: Attorney in Fact
---------------------------------
CRISA CORPORATION,
a Texas corporation
By: /s/ Roberto B. Rubio
---------------------------------
Title: General Manager
---------------------------------
VITROCRISA S.A. DE C.V.,
a sociedad anonima with variable capital
organized under the laws of the United
Mexican States
By: /s/ Roberto B. Rubio
---------------------------------
Title: President
---------------------------------
<PAGE> 1
Exhibit 10.27
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
-------------------------------------------
This Amended and Restated Distribution Agreement, dated to be effective
as of August 29, 1997, is entered into by and between Vitro, S.A., a sociedad
anonima organized under the laws of the United Mexican States ("VITRO"), and
Vitrocrisa, S.A. de C.V., a sociedad anonima with variable capital organized
under the laws of the United Mexican States ("VITROCRISA" or "DISTRIBUTOR"), on
the one part (collectively, the "VITRO PARTIES"), and Libbey Inc., a corporation
organized under the laws of the State of Delaware ("LIBBEY"), and Libbey Glass
Inc., a corporation organized under the laws of the State of Delaware ("LIBBEY
GLASS" or "MANUFACTURER"), on the other part (collectively, the "LIBBEY
PARTIES").
PURPOSE OF AGREEMENT
Vitro, Vitrocrisa, Libbey, and Libbey Glass entered into that certain
Distribution Agreement dated August 29, 1997 (the "DISTRIBUTION AGREEMENT").
Vitro, Vitrocrisa, Libbey, and Libbey Glass have agreed to amend, restate, and
supersede the Distribution Agreement by the terms and provisions of this
Agreement.
It is the expressed purpose of both Libbey Glass and Vitrocrisa to
carry out the sales plans agreed set forth in the Vitrocrisa annual operating
budgets, which will derive from the broader guidelines of the ongoing three-year
strategic plans of Vitrocrisa, as such budgets and strategic plans may be
approved by appropriate directors action of the board of directors of
Vitrocrisa.
ARTICLE I
DEFINITIONS
Section 1.1 The term "AFFILIATE" shall mean, with respect to each of
the parties, any other person or party which at the relevant time, directly or
indirectly, controls, is controlled by, or is under common control with such
party. The term "CONTROL", as used with respect to any person or party, means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person or party, whether
through the ownership of voting securities, by contract, or otherwise.
Section 1.2 The term "AGREEMENT" shall mean this Amended and Restated
Distribution Agreement.
Section 1.3 The term "EXCLUDED PRODUCTS" shall mean coffee pots, meter
covers, glass covers for cooking ware, blender jars, and lighting fixtures sold
to OEMs. In addition, "Excluded Products" shall mean any other OEM article for
sale to OEM customers that are not in direct competition with Distributor and
are not sold to Distributor's customers, including those in the Foodservice,
Industrial, Premium, and Retail Channels of Distribution.
<PAGE> 2
Section 1.4 The term "FOODSERVICE CHANNEL OF DISTRIBUTION" shall mean
sales to foodservice distributors, foodservice importers, hotels, restaurants,
chain restaurants, bars, casinos, airlines, cruise lines, breweries,
microbreweries, hospitals, health care facilities, penal institutions, colleges,
all eating and drinking establishments, independent cutters and decorators,
warehouse clubs; internet sales in all the above segments; and all other
generally acknowledged distributor and end-user segments of the traditional
foodservice sector of the country specified.
Section 1.5 The term "GLASS TABLEWARE" shall mean those products which
are the subject of the distribution rights set forth in this Agreement and shall
mean the glass product lines illustrated in the current 1997 catalogs of Libbey
Glass or Vitrocrisa, Crisa Corporation, a Texas corporation, and WorldCrisa
Corporation, a Delaware corporation; all glass products of the type sold by
Libbey Glass or Vitrocrisa, other than Excluded Products, into the Foodservice,
Industrial, Premium, or Retail Channels of Distribution; future new products,
other than Excluded Products, of Libbey Glass or Vitrocrisa; and new and
existing products manufactured by Libbey Glass or Vitrocrisa and specially
differentiated through packaging under the brand name, identification, or logo
of the purchaser (a "SPECIALLY DIFFERENTIATED PRODUCT"). The intent is that any
glass tableware, other than Excluded Products, that is destined for application
in the Foodservice, Industrial, Premium, and Retail Channels of Distribution are
the products intended by this Agreement to be the subject of the exclusive
distribution rights set forth herein.
Section 1.6 The term "INDUSTRIAL CHANNEL OF DISTRIBUTION" shall mean
sales to candle packers, religious candle markets, distilleries, wineries,
floral distributors, mounters and fabricators, cosmetic industry, and all other
generally acknowledged segments of the traditional industrial sector of the
country specified.
Section 1.7 The term "OEM" shall mean original equipment manufacturer.
Section 1.8 The term "PREMIUM CHANNEL OF DISTRIBUTION" shall mean sales
for use as a premium or to promote another product, including, without
limitation, sales for such purposes to customers in the fast food industry, oil
industry, soft-drink industry, supermarket continuity industry, premium
packaging, and all other generally acknowledged segments of the traditional
premium and incentive sector of the country specified.
Section 1.9 The term "RETAIL CHANNEL OF DISTRIBUTION" shall mean sales
to retail distributors, mass merchant discount stores, department stores,
specialty retail stores, craft stores, supermarkets, factory outlet stores,
dinnerware companies, flea markets, door-to-door direct sales, wholesale
outlets, gift shops, potteries, catalog showrooms, warehouse clubs, home
shopping networks, internet sales for consumer use, private label sales for any
class of retailer, importers, and all other generally acknowledged segments of
the traditional retail sector of the country specified.
Section 1.10 The term "TERRITORY" shall mean those certain geographic
areas set forth on SCHEDULE 1 to this Agreement.
<PAGE> 3
ARTICLE II
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
Section 2.1 AMENDED AND RESTATED DISTRIBUTION AGREEMENT. The terms and
provisions of the Distribution Agreement are hereby canceled and superseded by
the terms and provisions of this Agreement. All references in any other
agreement to the Distribution Agreement dated August 29, 1997 by and between
Vitro, Vitrocrisa, Libbey, and Libbey Glass shall be deemed to refer to this
Agreement, and all references to specific provisions of such Distribution
Agreement contained in any other agreement shall refer to the corresponding
provisions of this Agreement.
ARTICLE III
APPOINTMENT OF VITROCRISA AS DISTRIBUTOR
Section 3.1 APPOINTMENT OF VITROCRISA AS DISTRIBUTOR. The Libbey
Parties hereby appoint Vitrocrisa as the exclusive seller, distributor, and
sales representative for all sales in the Territory of the Libbey Parties' Glass
Tableware manufactured in the United States of America and Canada, except for
Excluded Products. Notwithstanding the foregoing, the Libbey Parties reserve the
right to sell Glass Tableware to customers in the Premium Channel of
Distribution in the United States of America and Canada even though, to the
knowledge of the Libbey Parties, such Glass Tableware is purchased with the
intention of exporting the same to customers in the Territory, but the Libbey
Parties will not actively solicit such sales for export into the Territory.
ARTICLE IV
TERM
Section 4.1 TERM. The term of this Agreement with respect to Glass
Tableware will continue until terminated by either party on ninety (90) days
advance written notice to the other parties; provided, that the Libbey Parties
may not terminate this Agreement for any reason without Vitro's express written
consent as long as Libbey and Vitro each, directly or indirectly through one or
more Affiliates, maintains a minimum ownership of twenty five percent (25%) of
the equity of Vitrocrisa or of an entity which, directly or indirectly, owns or
controls Vitrocrisa.
ARTICLE V
PRICING AND PAYMENT TERMS
Section 5.1 Libbey Glass agrees to sell to Vitrocrisa, and Vitrocrisa
agrees to purchase from Libbey Glass, Glass Tableware listed on the then current
Libbey Glass Southern Foodservice Price List for bulk items for sale in the
Territory assigned to Vitrocrisa at a price equal to the price set forth on
SCHEDULE 2 to this Agreement. Libbey Glass will agree to adjust its discounts
offered to Vitrocrisa to provide for the same relative pricing advantage as
compared to its published discount structure as at Closing for similar volumes
of the same products, as and when Libbey's published discount structure changes.
Special discounts offered selectively to address competitive situations will not
be considered a change in the published discount
<PAGE> 4
structure. Payment by Vitrocrisa to Libbey Glass shall be due on the sixtieth
(60th) day from receipt of the Glass Tableware by Vitrocrisa.
Section 5.2 Libbey Glass agrees to sell to Vitrocrisa, and Vitrocrisa
agrees to purchase from Libbey Glass, Glass Tableware listed on the then current
Libbey Glass USA Retail Price List for Libbey Glass branded, four color packaged
products for sale in the Territory assigned to Vitrocrisa at a price equal to
the price set forth on SCHEDULE 3 to this Agreement. Libbey Glass will agree to
adjust its discounts offered to Vitrocrisa to provide for the same relative
pricing advantage as compared to its published discount structure as at Closing
for similar volumes of the same products, as and when Libbey's published
discount structure changes. Special discounts offered selectively to address
competitive situations will not be considered a change in the published discount
structure. Payment by Vitrocrisa to Libbey Glass shall be due on the sixtieth
(60th) day from the date of receipt of the Glass Tableware by Vitrocrisa.
Section 5.3 Pricing for the Vitrocrisa Specially Differentiated
Products manufactured by Libbey Glass for shipment to the Territory assigned to
Vitrocrisa will be on a quoted basis.
Section 5.4 All prices for delivery to Vitrocrisa for shipment to
Mexico by rail or truck will be FOB the USA/Mexico border. Title and risk of
loss will pass to Vitrocrisa on delivery of the Glass Tableware at such border.
Section 5.5 All prices for delivery to Vitrocrisa for shipment by ship
to customers in the Territory assigned to Vitrocrisa will be FAS the
transporting ship at the port of Miami, Florida or Houston, Texas or New
Orleans, Louisiana or with respect to Libbey Glass' foodservice items only, Los
Angeles, California. Title and risk of loss will pass to Vitrocrisa on delivery
of the Glass Tableware at the dock.
Section 5.6 Notwithstanding the foregoing, from time to time by mutual
agreement in writing, Libbey Glass and Vitrocrisa may agree upon special pricing
or special terms for any particular transaction whereby Vitrocrisa wishes to
purchase Glass Tableware to meet a competitive situation or otherwise obtain a
particular piece of business in the Territory in which case such mutual
agreement shall supersede the pricing and terms set forth above.
Section 5.7 All payments by Vitrocrisa to Libbey Glass will be in US
dollars.
Section 5.8 The methodology of computing the amount to be paid by
Vitrocrisa to Libbey Glass pursuant to SECTIONS 5.1 (and SCHEDULE 2) and 5.2
(and SCHEDULE 3) to purchase Glass Tableware hereunder sets forth the intended
sharing of profits and margins among Vitrocrisa and Libbey Glass with respect to
Glass Tableware sold hereunder. If any change in the methodology of computing
such prices is required in order to comply with governmental regulations or
legal requirements and such change would have a material adverse economic effect
on either Vitrocrisa or Libbey Glass with respect to the profits and margins
intended to be shared hereunder, Vitrocrisa and Libbey Glass agree to negotiate
in good faith another methodology of computing such price to meet governmental
regulations and legal requirements
<PAGE> 5
and to place Vitro and Libbey in the same relative economic position with
respect to the sharing of profits and margins as is intended by ARTICLE V.
ARTICLE VI
PERFORMANCE STANDARD
Section 6.1 Libbey Glass and Vitrocrisa agree to use their best efforts
to carry out the sales plans agreed upon in the annual operating budgets which
will derive from the broader guidelines of the ongoing three-year strategic
plans of Vitrocrisa, as such budgets and strategic plans may be approved by
extraordinary directors action of the board of directors of Vitrocrisa.
ARTICLE VII
OPERATING PROCEDURES
Section 7.1 Distributor shall maintain its own offices and places of
business and pay all of its own expenses in connection with the sale and
distribution of Glass Tableware under this Agreement, except as otherwise
provided herein.
Section 7.2 Distributor is designated to serve customers in the
Territory. Any inquiries or orders for Manufacturer's brand of Glass Tableware
from customers outside of the Territory will be referred by Distributor to
Manufacturer.
Section 7.3 Manufacturer shall furnish Distributor in connection with
the Glass Tableware to be distributed hereunder a reasonable number of catalogs
and existing sales literature which the Manufacturer may, from time to time,
have in connection with its own sales, but the Manufacturer shall not be
obligated to generate or create any catalogs or sales literature for
Distributor.
Section 7.4 The relationship between the parties hereto shall be one of
independent contractors. Neither the Distributor nor the Manufacturer shall be
empowered to have any authority to act for the other, make any commitment on
behalf of the other, make any agreement on behalf of the other, make any payment
on behalf of the other, or otherwise obligate the other in any way. Neither
Distributor nor Manufacturer shall hold itself out as having any authority to
act in any way for the other unless otherwise specifically agreed in writing.
Section 7.5 All Glass Tableware sold hereunder shall be transferred to
Distributor free and clear of all liens and encumbrances.
Section 7.6 Manufacturer shall secure and apply all packaging for Glass
Tableware sold hereunder and unless otherwise agreed in writing with respect to
any particular transaction the prices charged for Glass Tableware shall be
deemed to include all packaging expenses.
Section 7.7 Regular current stock items to be procured and imported
hereunder will be ordered at levels that correspond to a mutually agreed upon
level per SKU. Should the Distributor require quantities in excess of the agreed
threshold levels, a separate Make and Ship
<PAGE> 6
order must be processed with specific quantities and release dates. Failure by
the Distributor to honor the Make and Ship order by the release date or within
thirty (30) days thereafter will result in shipment and invoicing of the full
order as originally specified.
Section 7.8 In some cases Distributor may desire and request Specially
Differentiated Product to be created specifically for its customers in the
Territory, which new items are beyond the normal stock collection of the
Manufacturer. These will be private items and may require new molds and cartons.
Unless otherwise agreed, the cost of developing new molds and cartons is the
responsibility of the Distributor and will be invoiced to the Distributor at
actual out of pocket costs paid to third party vendors in arms length
transactions. Four-color photography, artwork separations, and final layout for
any retail packaging for these new items are the responsibilities of the
Distributor specifying the new package development of these "retail type" boxes.
These materials must be supplied in cooperation with the respective scheduling
department of the Manufacturer. The actual box itself, and its procurement, will
reside with the Manufacturer and will be included in the purchase price of the
Glass Tableware with respect to Distributor's purchases. These minimum
quantities, including any subsequent modifications, will be used as guidelines
(but not the sole criteria) by Manufacturer in rejecting order from Distributor
for production.
Section 7.9 It is the intent of all parties to keep the packaging of
Specially Differentiated Products to a minimum. No more than 150 SKU's, on a
revolving basis, will be made in the United States and Canada and carry the
brand of a Vitro Party on the box. It is expected this program of
differentiation will be phased in over a one-year period, commencing on the date
of this Agreement. Distributor acknowledges receipt of minimum run per
production process from Manufacturer for non-stock items.
Section 7.10 Shipper carton markings, country of origin markings, and
appropriate languages to be reflected on the packaging will be the
responsibility of the Manufacturer. A close exchange and co-operative working
relationship between the new product development organization of the Distributor
and the new product development organization of the Manufacturer will be
absolutely necessary. It is expected that the Distributor will be very specific
in its requirements at the time of the order.
Section 7.11 All specifications applicable to Glass Tableware supplied
hereunder, including, but not limited to, material, packaging, property,
dimensions, limit samples, esthetics, cosmetics, inspection, acceptance quality
limits, and acceptance samples will be agreed upon by the Manufacturer and the
Distributor at the time an order is accepted. Once established for an item the
specifications shall remain in effect until revised by mutual agreement. All
Glass Tableware must meet all such specifications or may be rejected by
Distributor in which case the Distributor shall receive a full refund or credit
against the purchase price, as the Distributor may elect, and the product in
question shall be returned to the Manufacturer at the Manufacturer's expense or
disposed of at the Manufacturer's expense.
Section 7.12 In special situations where clearly identified in advance
at the time an order is accepted by the Manufacturer, Glass Tableware may be
ordered for a customer of the
<PAGE> 7
Distributor where timely, complete delivery of Glass Tableware conforming to the
specifications is required. In such cases, any penalty paid by the Distributor
for any failure to meet the requirements of the order will be reimbursed by the
Manufacturer unless such failure was not the fault of the Manufacturer as set
forth in ARTICLE IX.
Section 7.13 Claims for breakage, shortages, overages, wrong-ware
shipped, and all other distribution related errors must be sent to the
Manufacturer by the Distributor within seven (7) days from the date of receipt
of shipment.
Section 7.14 Claims for quality issues will be sent by the Distributor
to the Manufacturer on or before thirty (30) days following notification to the
Distributor from its customer of such issues. Resolution of such claims must be
within ninety (90) days of receipt by the Manufacturer of the quality claim.
Section 7.15 Product liability claims and all associated legal costs
and any settlement costs will be the final responsibility of the Manufacturer.
The Manufacturer will defend and hold harmless at its expense the Distributor
from and against any and all cost, expense, and liability resulting from any
claim by a third party for bodily injury or damage to property alleging that any
Glass Tableware supplied hereunder is defective or fails to conform to the
specifications, from any claim by a governmental authority that the Glass
Tableware does not meet applicable legal requirements, and from any claim by a
governmental authority that Glass Tableware must be recalled due to a safety
condition or defect. The Manufacturer's obligations under this SECTION 7.15 is
subject to timely notice (unless failure to give timely notice does not
materially adversely affect the Manufacturer) and the right to control the
defense and settlement of the claim if so desired by the Manufacturer. The
Manufacturer's obligations under this SECTION 7.15 do not apply to any cost,
expense, or liability caused by the negligent or wrongful act or omission of the
Distributor; provided, however, the simple purchase and resale shall not be
deemed to be the negligent or wrongful act or omission of the Distributor.
ARTICLE VIII
ADDITIONAL PRODUCTS OTHER THAN GLASS TABLEWARE
Section 8.1 It is anticipated that by mutual agreement from time to
time the Libbey Parties and the Vitro Parties may authorize the other to
distribute additional products other than Glass Tableware in all or part of the
Territory. Such agreements with respect to products other than Glass Tableware
shall be on such terms and conditions as may be agreed upon by the parties at
the time, including, without limitation, pricing, products, territories,
duration, and terms and conditions of sale, all of which may be different or the
same as set forth herein and, unless specifically otherwise agreed in writing,
shall be subject to change and the agreement subject to termination on written
notice from either Vitrocrisa or Libbey Glass to the other. All such agreements
shall be separate and distinct agreements from this Agreement and in no event
shall additional products other than Glass Tableware be subject to the
provisions of this Agreement.
<PAGE> 8
ARTICLE IX
FORCE MAJEURE
Section 9.1 Except for an obligation for the payment of money when due,
neither party shall be liable for any failure or delay in the performance of its
obligations under this Agreement when such failure or delay is caused by as acts
of God, riot or civil commotion, strike, lockout or other labor disturbance,
fire, act or any order of government (whether or not valid), flood, war, peril
of sea, breakdown of machinery, delay in supply and/or transit of materials,
components, parts or assemblies from suppliers or sub-contractors, or any other
matter or peril provided that in all cases such cause is beyond the reasonable
control of the party who failed or was delayed in performance and such party
could not have prevented the failure or delay through reasonable action and has
taken reasonable action to mitigate the effect of the delay or failure. With
respect to an obligation for the payment of money, if by any regulation or order
of an applicable governmental authority a party is precluded from transmitting a
payment due under or by reason of this Agreement, the party owing the payment
shall make the payment in accordance with its obligations hereunder if it places
the sum due to the credit of the party to whom the payment is due in a bank
located in the country of paying party or if it effects payment by some other
method then authorized by the applicable governmental authority.
ARTICLE X
ENFORCEMENT; NON-WAIVER
Section 10.1 The parties hereby acknowledge and agree that Libbey Glass
and Vitrocrisa would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with its specific terms or
otherwise is breached. Accordingly, the parties hereto agree that, subject to
the provisions of SECTION 11.14, Vitrocrisa and Libbey Glass shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States of
America (or of any state thereof) or of the United Mexican States having
jurisdiction over Vitro, in addition to any other remedy to which Libbey Glass
or Vitrocrisa may be entitled, at law or in equity.
Section 10.2 A failure by the Vitro Parties or Libbey Parties to
exercise or enforce any right conferred upon them by this Agreement shall not be
deemed to be a waiver of any right or operate so as to bar the exercise or
enforcement thereof at any subsequent time or times, and all express rights
granted to any Vitro Party and any Libbey Party hereunder shall be in addition
to any right that the Vitro Parties and the Libbey Parties may have under the
general law in respect of a breach hereof. No waiver by either the Vitro Parties
or the Libbey Parties of any condition or the breach of any term, covenant,
representation, warranty, or undertaking contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition or deemed to be or construed as a waiver of the
breach of any other term, covenant, representation, warranty, or undertaking
contained in this Agreement.
<PAGE> 9
ARTICLE XI
MISCELLANEOUS
Section 11.1 GOVERNING LANGUAGE. Notwithstanding the translation of
this Agreement or any of its Schedules or Exhibits into Spanish or any other
language, the English language version of this Agreement and any of its
Schedules and Exhibits shall be controlling and shall govern in any legal
proceeding or arbitration.
Section 11.2 COMMUNICATIONS. All correspondence, information,
specifications, reports, notices, and other written or oral communications
between the parties with respect to this Agreement and the transactions
contemplated hereunder shall be in the English language.
Section 11.3 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
Section 11.4 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties related to the subject matter hereof and supersedes
any prior understandings, agreements, or representations by or among the
parties, written or oral, that may have related in any way to the subject matter
hereof.
Section 11.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns.
Section 11.6 ASSIGNMENT. No party may assign or otherwise transfer any
of its rights or obligations under this Agreement, by operation of law or
otherwise, without the prior written consent of the other parties, which consent
shall not be unreasonably withheld. Any purported or attempted assignment
contrary to the terms hereof shall be null and void and of no force or effect.
Notwithstanding the foregoing, Vitrocrisa may permit its Affiliates to purchase
Glass Tableware from Libbey Glass and distribute such Glass Tableware in the
Territory assigned hereunder to Vitrocrisa, provided that Vitro and Vitrocrisa
each shall be responsible to cause such Affiliates of Vitrocrisa to perform the
obligations of Vitrocrisa hereunder.
Section 11.7 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 11.8 HEADINGS. The article and section headings contained in
this Agreement are inserted for convenience only and are not part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 11.9 NOTICES. All notices, demands, requests, and other
communications to be given or made under this Agreement shall be in writing in
English and shall be:
(a) personally delivered with signed receipt obtained
acknowledging delivery;
<PAGE> 10
(b) transmitted by postage prepaid registered mail, return receipt
requested (air mail if international);
(c) transmitted by telex or facsimile, subject to confirmation of
receipt by the addressee; or
(d) sent by overnight express mail to the parties at their
addresses set forth below:
If to a Libbey Party, such notices shall be addressed to:
Libbey Inc.
300 Madison Avenue
Toledo, Ohio 43604
USA
Attn.: General Counsel Fax No.: 419-325-2585
or to any subsequent address of which Libbey Glass may notify
Vitrocrisa in writing.
If to a Vitro Party, such notices shall be addressed to:
Vitro Corporativo, S.A. de C.V.
Av. del Roble 660
Col. Valle del Campestre
Garza Garcia, N.L. 66225
Mexico
Attn.: Director Juridico Internacional
Fax No.: 528-329-1372
or at any subsequent address of which Vitrocrisa or Vitro may
notify Libbey Glass in writing.
Any notice, demand, request, or other communication shall be effective only if
and when it is received by the addressee.
SECTION 11.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, UNITED
STATES OF AMERICA, WITHOUT GIVING EFFECT TO ANY CONFLICTS-OF-LAW RULES OR
PRINCIPLE THAT MIGHT REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
Section 11.11 AMENDMENTS AND WAVIER. This Agreement may be amended,
modified, superseded, or canceled and any of its terms, covenants,
representations, warranties, undertakings, or conditions may be waived only by
an instrument in writing signed by (or by some person duly authorized by) all of
the parties hereto or, in the case of a waiver, by the party waiving compliance.
<PAGE> 11
Section 11.12 SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
Section 11.13 NO VIOLATION OF LAW. Any obligation of any party hereto
is subject to the approval of all applicable governmental authorities,
including, without limitation, any export license or import license required by
the government of any country. Nothing in this Agreement shall be construed to
require any party to disclose to the other any information, to take any action
or refrain from taking any action or remain in any situation in violation of any
law or regulation, rule or requirement of any applicable governmental authority
to which such party is subject. Subject to the foregoing, in performing its
distribution functions hereunder, Vitrocrisa agrees to use reasonable efforts,
and to cause its customers to use reasonable efforts, to furnish such
information and do such acts to enable Libbey Glass to comply with any
requirement, restriction, or condition imposed upon any export out of the
country of manufacture or upon Libbey Glass by any applicable governmental
authority of the United States, and Libbey Glass agrees to use reasonable
efforts, and to cause its suppliers to use reasonable efforts, to furnish such
information and do such acts to enable Vitrocrisa to comply with any
requirement, restriction, or condition imposed upon any import into the
Territory or upon Vitrocrisa by any applicable governmental authority.
Section 11.14 Arbitration.
-----------
(a) The parties to this Agreement shall exert good faith
efforts promptly to resolve any controversy or claim arising out of or related
to this Agreement or the breach thereof within fifteen (15) days of receipt of
notice by one party from another party that such a controversy or claim exists.
If the parties fail to resolve such controversy or claim within such fifteen
(15) day period, they shall, unless otherwise provided in this Agreement, give
notice in writing to the Chief Executive Officers of Libbey and Vitro (the
"CEOs"), who will meet within fifteen (15) days of receipt of such notice at a
mutually acceptable time and place to attempt to resolve any such controversy or
claim. Notwithstanding the foregoing, the parties hereby agree that either party
can seek injunctive relief as contemplated by SECTION 10.1. In the event the
CEOs fail to meet or to resolve the controversy or claim arising out of or
related to this Agreement or the breach thereof within such fifteen (15) day
period, the controversy or claim (other than business and operational decisions
customarily exercised by management in entities similar to Vitrocrisa and Libbey
Glass, which are to be resolved by the CEOs) shall be settled by arbitration in
accordance with the then existing International Arbitration Rules of the
American
<PAGE> 12
Arbitration Association (the "AAA"), which shall commence upon one party
providing the other parties with a written demand for arbitration (the "DEMAND
FOR ARBITRATION"). The arbitrators may determine the appropriate monetary
damages for any breach or other appropriate remedy, but may not cause this
Agreement to be terminated. Notwithstanding the foregoing, the parties hereby
agree that if either party seeks injunctive relief as contemplated by SECTION
10.1, such party does not thereby waive its rights to arbitration under this
SECTION 11.14.
(b) The arbitral tribunal shall be composed of three
arbitrators and Libbey Glass and Vitrocrisa shall each appoint one Arbitrator.
If either Libbey Glass or Vitrocrisa fails to appoint an arbitrator within
thirty (30) days after the date the claimant's Demand for Arbitration is
communicated to the other party (the "NOTIFICATION DATE"), the AAA shall make
such appointment. The two arbitrators thus appointed shall attempt to agree upon
the appointment of a third arbitrator to serve as chairman of the arbitral
tribunal. If said two arbitrators fail to agree upon the appointment of such
third arbitrator within sixty (60) days after the Notification Date, the AAA
shall make such appointment. The place of arbitration shall be Dallas, Texas,
United States of America. The arbitral proceeding shall be conducted in the
English language.
(c) To the extent that they may validly so agree, the parties
hereby exclude any right of appeal to any court in connection with the arbitral
award. Judgment upon the arbitral award may be entered in any court having
jurisdiction thereof or having jurisdiction over any party or any party's
assets.
(d) The validity of this SECTION 11.14 shall be governed by
the United Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards or the InterAmerican Convention on International Commercial
Arbitration, to which Mexico and the United States of America have adhered.
(e) All costs of arbitration and enforcement thereof,
including reasonable attorney's fees and court costs, costs of expert witnesses,
transportation, lodging and meal costs of the parties and witnesses, costs of
transcript preparation, and other reasonable and necessary direct and incidental
costs shall be apportioned to one or more of the parties by a majority of the
arbitrators as they deem appropriate. In the event any party to this Agreement
commences legal proceedings to enforce the arbitral award, the expense of such
litigation (including reasonable attorneys' fees and costs of court) shall be
borne by the party or parties not prevailing therein.
Section 11.15 SCHEDULES AND EXHIBITS. The Schedules and Exhibits
attached hereto and referenced herein constitute a part of this Agreement and
are specifically incorporated by reference herein.
[remainder of page intentionally left blank]
<PAGE> 13
IN WITNESS WHEREOF, the parties have hereunto have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
LIBBEY GLASS INC.,
a Delaware corporation
By: /s/ A. H. Smith
--------------------------------
Title: Vice President
------------------------------
LIBBEY INC.,
a Delaware corporation
By: /s/ A. H. Smith
--------------------------------
Title: Vice President
------------------------------
VITRO, S.A.,
a sociedad anonima organized under the
laws of the United Mexican States
By: /s/ Claudio Del Ville
--------------------------------
Title: Attorney in Fact
------------------------------
VITROCRISA, S.A. DE C.V.,
a sociedad anonima with variable capital
organized under the laws of the United
Mexican States
By: /s/ Roberto B. Rubio
--------------------------------
Title: President
------------------------------
<PAGE> 1
Exhibit 10.28
VITROCRISA, S.A. DE C.V.
SHAREHOLDERS AGREEMENT
THIS AGREEMENT is made and entered effective as of August 29, 1997, by
and among LIBBEY INC., a corporation organized under the laws of the State of
Delaware ("LIBBEY"), LGA3 CORP., a corporation organized under the laws of the
State of Delaware and a wholly-owned subsidiary of Libbey ("LGA3"), VITRO, S.A.,
a sociedad anonima organized under the laws of the United Mexican States
("VITRO"), VITROCRISA HOLDING, S.A. DE C.V., a sociedad anonima with variable
capital organized under the laws of the United Mexican States ("VC HOLDING"),
and VITROCRISA, S.A. DE C.V., a sociedad anonima with variable capital organized
under the laws of the United Mexican States ("VITROCRISA"). LGA3, VC Holding,
and Vitro are sometimes singularly referred to herein as a "Shareholder" and
collectively referred to herein as the "SHAREHOLDERS," and LGA3 and Vitro are
sometimes singularly referred to herein as a "VOTING SHAREHOLDER" and
collectively referred to herein as the "VOTING SHAREHOLDERS."
Introduction
------------
Libbey and Vitro desire to establish a joint business venture to
manufacture in Mexico and to market, distribute, and sell glass tableware and
related industrial glass products in North America, Central America, and South
America. To achieve these goals, Libbey (and certain of its subsidiaries) and
Vitro (and certain of its subsidiaries) entered into that certain Master
Investment Agreement dated of even date (the "MASTER INVESTMENT AGREEMENT").
Pursuant to the Master Investment Agreement, (a) all of the issued and
outstanding capital stock of Vitrocrisa owned of record by Vitro Corporativo,
S.A. de C.V. was purchased by VC Holding, (b) all of the issued and outstanding
capital stock of Vitrocrisa owned of record by VC Holding was converted into
999,900 Series C Shares, which are nonvoting shares, (c) Vitro purchased 51
Series A Shares, which represents fifty-one percent (51%) of the issued and
outstanding voting capital stock of Vitrocrisa, and (d) LGA3 purchased 49 Series
B Shares, which represents forty-nine percent of the voting capital stock of
Vitrocrisa.
Libbey, LGA3, Vitro, VC Holding, and Vitrocrisa each desire to enter
into this Agreement for the purpose of setting forth the principles for the
adoption of decisions in Vitrocrisa. Therefore, in consideration of the mutual
promises contained herein, together with other consideration, the adequacy and
receipt of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
Basic Structure of Vitrocrisa
-----------------------------
1.1. FORM. Vitrocrisa was incorporated pursuant to public deed number
247, dated August 18, 1936, granted before Mr. Hector Gonzalez, a Notary Public
for Monterrey, Nuevo Leon, recorded with the Public Registry of Commerce for the
District of Monterrey, State of Nuevo Leon, under number 138, Volume 82, Book
Three, Second, on September 25, 1936. A copy of the Revised Vitrocrisa Estatutos
is attached hereto as EXHIBIT A.
-1-
<PAGE> 2
1.2. NAME. The name of Vitrocrisa shall continue to be Vitrocrisa, S.A.
de C.V.
1.3. PLACE OF BUSINESS. The corporate domicile and principal place of
business of Vitrocrisa shall continue to be located in Monterrey, Nuevo Leon, or
such other place as the Shareholders may from time to time designate.
1.4. PURPOSE. The purposes for which Vitrocrisa has been and will
continue to be organized include, but are not limited to, the following: (a) the
manufacture, distribution, and sale of glass tableware and certain related
industrial products, including coffee pots, meter covers, glass covers for
cooking ware, blender jars, and lighting fixtures sold to original equipment
manufacturers, and (b) to engage in such other activities as are lawful and
approved by unanimous vote of the Voting Shareholders.
1.5. ENDORSEMENT OF CERTIFICATES. At the Closing (as defined in the
Master Investment Agreement), Vitrocrisa shall issue new stock certificates and
deliver them to its Shareholders in exchange for their existing certificates,
which shall be immediately canceled. All certificates representing shares of
Vitrocrisa stock issued after the date of this Agreement shall comply with the
terms of the Revised Vitrocrisa Estatutos and shall contain substantially the
following legend:
"The shares represented by this certificate are subject to and are
transferable only in compliance with a Shareholders Agreement by and
among Libbey Inc., a corporation organized under the laws of the State
of Delaware, LGA3 Corp., a corporation organized under the laws of the
State of Delaware, Vitro, S.A., a sociedad anonima organized under the
laws of the United Mexican States, Vitrocrisa Holding, S.A. de C.V., a
sociedad anonima with variable capital organized under the laws of the
United Mexican States, and Vitrocrisa, S.A. de C.V., a sociedad anonima
with variable capital organized under the laws of the United Mexican
States, as the same may be amended from time to time, dated August 29,
1997. Title to the shares represented hereby can be transferred only in
accordance with the terms of said Shareholders Agreement. Any purported
transfer of title other than in the manner provided in the Shareholders
Agreement is void, without force and effect, and will not be recognized
by Vitrocrisa, S.A. de C.V."
Vitrocrisa shall not transfer any shares or issue or reissue any certificates
except as provided in this Agreement.
ARTICLE II
----------
Financial Arrangements
----------------------
2.1. CAPITAL STOCK OF VITROCRISA. The capital stock of Vitrocrisa will
be divided into Class I and Class II shares, representing the fixed and variable
portions of such capital, respectively. In addition, both Class I and Class II
shares will be divided into Series A Shares, Series B Shares, and Series C
Shares, initially representing 0.0051%, 0.0049%, and 99.99% of the capital
stock, respectively. The Series A Shares, Series B Shares, and Series C Shares
will be free subscription shares. The Series A Shares and the Series B Shares
will be voting shares, and the Series C Shares
-2-
<PAGE> 3
will be nonvoting shares. Vitro will initially own all of the issued and
outstanding Series A Shares, LGA3 will initially own all of the issued and
outstanding Series B Shares, and VC Holding will initially own all of the issued
and outstanding Series C Shares. The Series A Shares, Series B Shares, and
Series C Shares will be deemed to constitute separate classes of shares for
purposes as are specifically provided herein or in the Revised Vitrocrisa
Estatutos, but otherwise shall rank PARI PASSU in all respects as if they
constituted one class of shares.
2.2. CAPITAL EXPENDITURES, REPAIRS, AND MAINTENANCE FOR VITROCRISA.
Attached hereto as EXHIBIT B is a three-year capital expenditure, repairs, and
maintenance plan for Vitrocrisa (the "CAPITAL EXPENDITURE, REPAIRS, AND
MAINTENANCE PLAN"). Each of the Voting Shareholders shall cause their respective
members on the board of directors of Vitrocrisa (the "VITROCRISA BOARD") to vote
for the Capital Expenditure, Repairs, and Maintenance Plan, such vote to be
conducted in accordance with the terms of this Agreement. Expenditures made by
Vitrocrisa pursuant to the Capital Expenditure, Repairs, and Maintenance Plan
shall be made at such times and for such amounts and purposes as the Vitrocrisa
Board shall from time to time approve, subject to the limitations set forth in
SECTION 3.2(d). At any time and from time to time, the Vitrocrisa Board may
waive or otherwise alter certain expenditures set forth in the Capital
Expenditure, Repairs, and Maintenance Plan, subject to the limitations set forth
in SECTION 3.2(d). Additional capital expenditures, repairs, and maintenance
must be approved by the Vitrocrisa Board in accordance with the terms of SECTION
3.2(d).
2.3. STRATEGIC PLAN FOR VITROCRISA. As soon as possible, the Managing
Director shall prepare a three-year strategic plan for Vitrocrisa (the "INITIAL
STRATEGIC PLAN"), which shall contain (a) working capital requirements,
including a breakout of accounts receivable, inventory, and accounts payable,
(b) sources of revenue (by geographic area, ware type, trade areas, established
areas of distribution, etc.), (c) SGA expense detail, (d) interest expense and
income, (e) repairs and maintenance expense, (f) capital expenditures, (g)
manufacturing objectives, including yield objectives by ware type and planned
capacity, (h) distribution objectives, (i) information technology objectives,
(j) engineering objectives, (k) sales plan, (l) marketing plan, including
marketing programs, (m) finance goals, (n) general administrative goals, and (o)
income statement, balance sheet, and statement of cash flows. Upon preparation
of the Initial Strategic Plan, the Managing Director shall promptly submit the
Initial Strategic Plan to the Vitrocrisa Board for approval by Extraordinary
Directors Action (as defined below). If the Initial Strategic Plan is not
approved by Extraordinary Directors Action, the Managing Director will revise
the Initial Strategic Plan as soon as possible and resubmit it to the Vitrocrisa
Board for approval by Extraordinary Directors Action and shall continue to do so
until the Initial Strategic Plan is so approved; provided, however, that failure
to approve the Initial Strategic Plan by Extraordinary Directors Action within
one hundred eighty (180) days of the date of this Agreement shall constitute a
Final Impasse (as defined below) and each Voting Shareholder shall be entitled
to immediately invoke the provisions of SECTION 6.4. Expenditures made by
Vitrocrisa pursuant to the Initial Strategic Plan shall be made at such times
and for such amounts and purposes as the Vitrocrisa Board shall from time to
time approve, subject to the limitations set forth in SECTION 3.2(d). At any
time and from time to time, the Vitrocrisa Board may waive or otherwise alter
certain expenditures set forth in the Initial Strategic Plan, subject to the
limitations set forth in SECTION 3.2(d).
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2.4. CASH REMITTANCE TO SHAREHOLDERS. Attached hereto as EXHIBIT D is a
policy of cash remittance, dividends, and other remuneration to be paid no less
than annually by Vitrocrisa to the holders of Series A Shares, Series B Shares,
and Series C Shares (the "DIVIDEND POLICY"). Each of the Voting Shareholders
will cause their respective Members (as defined below) of the Vitrocrisa Board
to vote for the Dividend Policy and cause monies to be paid to the Shareholders
in accordance with the Dividend Policy.
ARTICLE III
-----------
Management of Vitrocrisa
------------------------
3.1. THE SHAREHOLDERS MEETINGS; QUORUM. The shareholders meeting is the
supreme authority of Vitrocrisa. The shareholders meetings may be ordinary (an
"ORDINARY SHAREHOLDERS MEETING") or extraordinary (an "EXTRAORDINARY
SHAREHOLDERS MEETING"), depending on the matters to be discussed at each
meeting. They will be held at the corporate domicile of Vitrocrisa in accordance
with the call for the meeting made pursuant to the Revised Vitrocrisa Estatutos.
According to the General Law of Mercantile Companies of Mexico, resolutions may
be adopted outside of a shareholders meeting by unanimous vote of the Voting
Shareholders, provided that the Voting Shareholders subsequently confirm the
adoption of such resolutions in writing to the Chairman or the Secretary of the
Vitrocrisa Board. An Ordinary Shareholders Meeting will be held at least once a
year within the four (4) months following the closing of each fiscal period.
Ordinary Shareholders Meetings may be those called to discuss any of the matters
that are not expressly reserved by law or this Agreement to the Extraordinary
Shareholders Meeting. The matters reserved for Extraordinary Shareholders
Meetings are:
(a) any matter that is required to be resolved by the
Extraordinary Shareholders Meeting according to Article 182 of
the General Law of Mercantile Companies;
(b) the declaration or payment of dividends pursuant to the
Dividend Policy; and
(c) any matter specified in SECTION 3.2(d) that is referred to the
Shareholders by the Vitrocrisa Board.
An Ordinary Shareholders Meeting shall take place by virtue of a first
call of any Shareholder if the holders of fifty-five percent (55%) of the voting
capital stock are present or duly represented thereat. If such a quorum does not
exist for the holding of the meeting by virtue of the first call, the call shall
be repeated, and the meeting shall be considered validly held whatever number of
Voting Shareholders are present or represented. Resolutions in Ordinary
Shareholders Meetings shall be adopted by the affirmative vote of the majority
of the shares entitled to vote that are present or represented thereat.
An Extraordinary Shareholders Meeting shall be held by virtue of the
first call if the Shareholders holding at least seventy-five percent (75%) of
the voting capital stock are present or represented thereat. If such a quorum
does not exist for such meeting, the call shall be repeated, and the meeting
shall be considered validly held only with the attendance of Shareholders or
their proxies representing at least fifty-five percent (55%) of the voting
capital stock of Vitrocrisa.
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Resolutions in Extraordinary Shareholders Meetings held either in first or
subsequent calls shall be adopted by the affirmative vote of Shareholders or
their representatives holding at least fifty-five percent (55%) of the voting
capital stock of Vitrocrisa.
If holders of seventy-five percent (75%) of the voting capital stock
are not present or represented at the first call of any Extraordinary
Shareholders Meeting and if holders of fifty-five percent (55%) of the voting
capital stock are not present or represented at any repeated call of such
meeting, either Voting Shareholder shall have the right, but shall not be
obligated, to declare the occurrence of a Deadlock Event under SECTION 6.1.
In addition to any other requirement imposed by Mexican law, calls for
an Ordinary Shareholders Meeting of Vitrocrisa and calls for an Extraordinary
Shareholders Meeting of Vitrocrisa must be in writing and must be delivered to
each Voting Shareholder at least fifteen (15) days prior to such meeting, unless
such notice is waived by the Voting Shareholders in writing.
3.2. Board of Directors.
------------------
(a) COMPOSITION AND APPOINTMENT. The Vitrocrisa Board shall consist of
seven (7) members (hereinafter referred to singularly as a "MEMBER" and
collectively as "MEMBERS"). The Members shall not be required to be Mexican
nationals. As the owner of Series A Shares of Vitrocrisa, Vitro shall be
entitled, in its sole and absolute discretion, to designate four (4) Members
(and their alternates) to the Vitrocrisa Board (hereinafter referred to
singularly as a "VITRO MEMBER" and collectively as "VITRO MEMBERS"), provided
that each such designee is also a member or alternate, as the case may be, of
the Board of Directors of VC Holding. As the owner of Series B Shares of
Vitrocrisa, LGA3 shall be entitled, in its sole and absolute discretion, to
designate three (3) Members (and their alternates) to the Vitrocrisa Board
(hereinafter referred to singularly as a "LIBBEY MEMBER" and collectively as
"LIBBEY MEMBERS"), provided that each such designee is also a member or
alternate, as the case may be, of the Board of Directors of VC Holding. The
owner of Series C Shares shall not be entitled to designate any Member or
alternate to the Vitrocrisa Board. The names of the Members of the Vitrocrisa
Board as at the date of this Agreement and their alternates are set out in
EXHIBIT E attached hereto.
(b) REMOVAL. Each Voting Shareholder, in its sole and absolute
discretion, may remove and, in conjunction therewith, shall replace any or all
of the Members and alternates it has designated. Notwithstanding the foregoing,
each Voting Shareholder hereby agrees to consult with the other Voting
Shareholder in connection with the designation, removal, and replacement of any
Member and alternate of the Vitrocrisa Board and to consider reasonable
objections of any Voting Shareholder to the designation, removal, and
replacement of any Member and alternate of the Vitrocrisa Board; provided,
however, such consultation shall not affect the sole and absolute discretion of
each Voting Shareholder to designate, remove, or replace the Members and
alternates it has designated. Any alternate may substitute for any Member
designated by such Voting Shareholder at any meeting of the Vitrocrisa Board. No
Member or alternate of the Vitrocrisa Board shall be removed or replaced other
than by the Voting Shareholder that designated such Member or alternate.
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(c) POWER AND AUTHORITY OF THE VITROCRISA BOARD. Except for those
matters set forth in SECTION 3.1 requiring approval of the Voting Shareholders
at an Extraordinary Shareholders Meeting, the Shareholders shall, and do hereby,
delegate all power and authority for the operations of Vitrocrisa to the
Vitrocrisa Board, which, by way of illustration and not limitation, shall
include the power and authority to:
(i) direct, manage, control, and operate Vitrocrisa;
(ii) set strategic direction for Vitrocrisa;
(iii) direct all of Vitrocrisa's business and management
policies and specific business and operational
decisions in the ordinary course of business;
(iv) acquire and dispose of assets of Vitrocrisa;
(v) control litigation and administrative proceedings of
Vitrocrisa;
(vi) enter into contracts on behalf of Vitrocrisa; and
(vii) assume all other responsibilities not specifically
reserved to the Shareholders by this Agreement or by
law, including powers under Article 2554 of the Civil
Code for the Federal District and Articles 9 and 85
of the General Law of Negotiable Instruments and
Credit Operations.
(d) EXTRAORDINARY DIRECTORS ACTIONS. Notwithstanding anything contained
herein to the contrary, the following matters, except for those matters already
included in the Initial Strategic Plan, shall not be deemed approved by the
Vitrocrisa Board unless (i) approved by a majority of the Members of the
Vitrocrisa Board, and (ii) such approving majority shall have consisted of at
least one Libbey Member and at least one Vitro Member (hereinafter singularly
referred to as an "EXTRAORDINARY DIRECTORS ACTION" and collectively referred to
as "EXTRAORDINARY DIRECTORS ACTIONS"). Such Extraordinary Directors Actions are
as follows:
(i) Approval of any cash remittance, dividend, or other
remuneration from Vitrocrisa to any Shareholder in
accordance with SECTION 2.4;
(ii) Approval of any loan or series of loans for
Vitrocrisa that are made following the date of this
Agreement in an amount in excess of US$1,500,000;
(iii) Approval of the acquisition, sale, or transfer in any
single transaction or series of related transactions
of assets by Vitrocrisa in excess of US$1,500,000;
(iv) Approval of transactions that would dilute any
Shareholder's interest in Vitrocrisa;
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<PAGE> 7
(v) The granting by Vitrocrisa of guarantees in favor of
third parties such that the aggregate amount of money
guaranteed by Vitrocrisa at any time exceeds
US$1,500,000;
(vi) The granting by Vitrocrisa of loans in an aggregate
amount in excess of US$100,000 to third parties,
including, without limitation, employee loans;
(vii) The entering by Vitrocrisa of agency, distribution,
or commission agreements other than in the ordinary
course of business;
(viii) The approval by the Vitrocrisa Board of annual
operating budgets and three-year strategic plans
pursuant to ARTICLE VII;
(ix) The approval of any expenditures in excess of 120% of
the allotment for such expenditures as set forth in
the annual operating budget for Vitrocrisa as
determined in accordance with ARTICLE VII;
(x) The adoption of employee benefit plans and policies
for Vitrocrisa after the date of this Agreement,
except for benefit plans and policies substantially
similar to benefit plans and policies adopted by
other members of the Vitro 100% Group (as defined in
ARTICLE IV) applicable to all "workers" (known as
trabajadores in Vitrocrisa) or all "salaried
employees" (known as empleados in Vitrocrisa) or all
"executives" (known as ejecutivos in Vitrocrisa;
approximately thirty (30) in number) of Vitrocrisa,
provided further that such benefit plans and policies
under this exception are subject to the majority
approval of the Vitrocrisa Board;
(xi) Entering into any contract, agreement, or
understanding with a fair market value in excess of
US$1,500,000;
(xii) Formation of a partnership or joint venture between
Vitrocrisa and another business entity;
(xiii) Submittal to the Ordinary Shareholders Meeting of the
financial statements and report for approval;
(xiv) Any change to the personnel policy attached hereto as
EXHIBIT F;
(xv) Any increase or decrease in the compensation or rates
payable to Vitro or Libbey under the terms of the
Management and Administrative Services Agreements set
forth in SECTION 3.5;
(xvi) Any increase or decrease in the fees or rates payable
to any of the Shareholders in connection with the
guarantee of Vitrocrisa loans as set forth in SECTION
3.6; and
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<PAGE> 8
(xvii) The establishment of compensation or policies
therefor for management, including, but not limited
to, executive officers and key employees, except as
provided by SECTION 3.2(d)(x) above.
Notwithstanding any provision of the foregoing to the contrary, to the
extent a contract or other agreement has previously been approved by
Extraordinary Directors Action, the subsequent expenditure pursuant to such
contract or other agreement need not be approved by Extraordinary Directors
Action. The amount in United States dollars to be attributed to any matter in
this SECTION 3.2(d) shall be determined, if necessary, by reference to the
exchange rate for the purchase of dollars, as announced by Banca Serfin, S.A.,
on the date of the Vitrocrisa Board's vote on such matter.
(e) MEETINGS. The Vitrocrisa Board shall meet at least twice annually,
the first meeting being within thirty (30) days after year-end audited financial
statements have been delivered to all Members of the Vitrocrisa Board, but in no
event more than four (4) months after the end of each fiscal year, or more
frequently at the request of any Shareholder or any Member. Notice of each
meeting of the Vitrocrisa Board shall be delivered to all Members at least
fifteen (15) days in advance of the date of such meeting. At least four (4)
Members of the Vitrocrisa Board or their alternates must be present to transact
business. Each meeting of the Vitrocrisa Board shall take place at 10:00 a.m. on
the fifteenth (15th) day after notice has been delivered to all Members, or at a
time and place mutually agreed upon by the Members. If Members sufficient to
transact business are not present at the meeting, the date of the meeting shall
be postponed for one (1) day, and if Members sufficient to transact business are
not present at that meeting, the date of the meeting shall be postponed for an
additional day. If Members sufficient to transact business are not present at
that meeting, either Voting Shareholder shall have the right, but shall not be
obligated, to declare the occurrence of a Deadlock Event under SECTION 6.1
hereof.
(f) WAIVER OF NOTICE; VOTING. The Members can waive the requirement of
the written call, and same will not be required, when all of the Members or
their alternates are present at the meeting. Except as otherwise provided
herein, all decisions of the Vitrocrisa Board shall require the approval of a
majority of its Members. All decisions of the Members on any matters requiring
their approval, consent, or action may be made by the Members in each of their
sole and absolute discretion.
(g) ACTION WITHOUT MEETING. Whenever the Vitrocrisa Board is required
or permitted to take any action pursuant to a meeting of the Vitrocrisa Board,
such action may be taken without a meeting upon a written consent setting forth
the action so taken that is signed by each of the Members.
3.3. INDEMNIFICATION OF THE VITROCRISA BOARD. Each Member shall be
indemnified by Vitrocrisa against all liability for any claim, demand, loss,
damage, liability, or expense (including, without limitation, amounts paid in
settlement, reasonable costs of investigation, and reasonable legal expenses)
resulting from any threatened, pending, or completed action, suit, or proceeding
naming any of them as defendant by reason of acts or omissions made or omitted
in good faith within the scope of their authority as set forth in this Agreement
to the maximum extent permitted by law.
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3.4. TRANSACTIONS WITH SHAREHOLDERS OR THEIR AFFILIATES. Vitrocrisa may
enter into contracts and agreements with a Shareholder or its affiliates in the
ordinary course of business, provided, however, that any contract or agreement
not in the ordinary course of business must be approved by Extraordinary
Directors Action.
3.5. MANAGEMENT AND ADMINISTRATIVE SERVICE AGREEMENTS WITH VITRO AND
LIBBEY. The Vitrocrisa Board shall cause Vitrocrisa to enter into a Management
and Administrative Service Agreement with each of Vitro and Libbey,
substantially in the form of EXHIBIT G-1 and EXHIBIT G 2. The aggregate annual
fees to be paid to Vitro in connection with the Management and Administrative
Service Agreement will initially be equal to 1-1/2% of the gross sales of
Vitrocrisa, and the aggregate annual fees to be paid to Libbey in connection
with the Management and Administrative Service Agreement will initially be
US$1,000,000.
3.6. CORPORATE GUARANTEES. The Shareholders hereby agree that any
Shareholder may charge and collect from Vitrocrisa monthly a fee for all
Vitrocrisa loans guaranteed by such Shareholder in an amount equal to 1-1/2% per
annum of the average daily balances of such loans.
3.7. CORPORATE OPPORTUNITY. No person or entity of the Libbey 100%
Group (as defined in ARTICLE IV) and no person or entity of the Vitro 100% Group
(as defined in ARTICLE IV) has any duty to communicate or offer any Corporate
Opportunity (as defined below) to Vitrocrisa, and neither the Libbey 100% Group
nor the Vitro 100% Group shall be liable to Vitrocrisa or any Shareholder for
breach of any fiduciary duty or duty of loyalty to Vitrocrisa by reason of the
fact that it pursues or acquires a Corporate Opportunity for itself or directs a
Corporate Opportunity to another person or entity. For purposes of this section,
"CORPORATE OPPORTUNITY" means a business or other opportunity that Vitrocrisa is
or could reasonably be expected to become financially able to undertake, which
relates to Vitrocrisa's line of business and in which Vitrocrisa has or would
have an interest or a reasonable expectancy of interest. To the extent this
SECTION 3.7 contradicts any term or provision in the Distribution Agreement,
dated of even date, by and among Vitro, Vitrocrisa, Libbey, and Libbey Glass
Inc., the Distribution Agreement, dated of even date, by and among Vitro, Crisa
Corporation, Vitrocrisa, Libbey, and Libbey Glass Inc. (together, the
"DISTRIBUTION AGREEMENTS"), or the Covenant Not to Compete, dated of even date,
by and between Libbey and Vitro (the "COVENANT NOT TO COMPETE"), the terms and
provisions of the Distribution Agreements or the Covenant Not to Compete shall
control.
ARTICLE IV
----------
Transfers, Withdrawals and Admission of Additional Shareholders
---------------------------------------------------------------
4.1. Transfers and Encumbrance of Interests.
---------------------------------------
(a) TRANSFERS. No Shareholder shall transfer all or any portion of its
interest in Vitrocrisa or its rights under this Agreement, or agree to do so,
without the written consent of each of Libbey and Vitro. Notwithstanding the
foregoing, no Shareholder may transfer all or any portion of its interest in
Vitrocrisa or its rights under this Agreement, or agree to do so, for a period
of four
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(4) years from the date of this Agreement. After such four-year period, any
Shareholder may transfer all, but not less than all, of its interest in
Vitrocrisa pursuant to the terms of SECTION 4.2. A Shareholder may transfer or
otherwise sell its shares pursuant to this ARTICLE IV for any reason.
(b) ENCUMBRANCE. Except as otherwise provided in this Agreement, no
Shareholder may encumber, mortgage, pledge, hypothecate, or place a lien or make
any disposition similar thereto (collectively an "ENCUMBRANCE") upon all or any
portion of its interest in Vitrocrisa or its rights under this Agreement, or
agree to do so, without the prior written consent of the other Shareholder,
which consent shall not be unreasonably withheld but may be subject to such
reasonable conditions as Libbey and Vitro may require.
(c) VIOLATION. Any purported transfer or Encumbrance in violation of
the terms of this Agreement shall be null and void and shall not be recognized
by Vitrocrisa.
4.2. Shareholders First Option to Purchase Joint Venture Interest.
-------------------------------------------------------------
(a) DEFINITIONS. In this SECTION 4.2, the following words shall bear
the following meanings:
"JOINT VENTURE INTEREST" in the case of LGA3, (a) shares of
Vitrocrisa capital stock held, directly
or indirectly, by LGA3, (b) shares of
VC Holding capital stock held, directly
or indirectly, by LGA3, (c) shares of
Crisa Libbey, S.A. de C.V., a sociedad
anonima with variable capital organized
under the laws of the United Mexican
States ("NEWCO FINANCE"), capital stock
held, directly or indirectly, by LGA3,
and (d) membership interests in Crisa
Industrial, L.L.C., a Delaware limited
liability company (the "LLC"), owned,
directly or indirectly, by LGA4 Corp.,
a Delaware corporation and wholly-owned
subsidiary of Libbey; and in the case
of Vitro, (a) shares of Vitrocrisa
capital stock held, directly or
indirectly, by Vitro, (b) shares of VC
Holding capital stock held, directly or
indirectly, by Vitro, (c) shares of
Newco Finance capital stock held,
directly or indirectly, by Vitro, and
(d) membership interests in the LLC
owned, directly or indirectly, by
Vitro;
"PRESCRIBED PRICE" the price for the Joint Venture
Interest specified in the Transfer
Notice;
"PROPOSING TRANSFEROR" a Voting Shareholder proposing to
transfer or dispose of all of its Joint
Venture Interest;
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"PURCHASER" a Voting Shareholder willing to
purchase all of the Joint Venture
Interest comprised in, or offered for
purchase pursuant to the serving of, a
Transfer Notice;
"TRANSFER NOTICE" a written notice served by a Voting
Shareholder;
"100% GROUP" in the case of the Vitro, Vitro or any
other person or entity that directly or
indirectly controls, is controlled by,
or is under common control with Vitro,
but excluding VC Holding (the "VITRO
100% GROUP"), and in the case of LGA3,
LGA3 or any other person or entity that
directly or indirectly controls, is
controlled by, or is under common
control with LGA3 (the "LIBBEY 100%
GROUP").
(b) LIMITATION ON TRANSFERS. The right to transfer or dispose of shares
of Vitrocrisa or any interest therein shall (save in respect of transfers made
pursuant to SECTION 4.2(i) hereof) be subject to the restrictions set forth in
this SECTION 4.2. A Voting Shareholder may not transfer or dispose of its shares
in Vitrocrisa unless it transfers or disposes of all of its Joint Venture
Interest. Except as provided otherwise herein, no Voting Shareholder may
transfer or dispose of its Joint Venture Interest (save in respect of transfers
made pursuant to SECTION 4.2(i)) without the prior written consent of the other
Voting Shareholder.
(c) FIRST OPTION. Before transferring or disposing of its Joint Venture
Interest (or any interest therein), the Proposing Transferor shall serve a
Transfer Notice on the other Voting Shareholder stipulating the Prescribed
Price. Upon receipt of a Transfer Notice, the other Voting Shareholder shall
have the right and first option for a period of thirty (30) days to purchase the
Joint Venture Interest at the Prescribed Price.
(d) TRANSFER ON EXERCISE OF OPTION. If the Proposing Transferor is
given notice under SECTION 4.2(c) that the other Voting Shareholder has
exercised its option to purchase all, but not less than all, of the Joint
Venture Interest, the Proposing Transferor shall be bound, on payment of the
Prescribed Price, to transfer the Joint Venture Interest to the Purchaser or its
designees. The sale and purchase shall be completed at the office of Vitrocrisa,
or at such other place as the Proposing Transferor and the other Voting
Shareholder shall agree, during normal business hours on the first business day
after the expiration of ninety (90) days after the expiration of the option
period set forth in SECTION 4.2(c).
(e) TRANSFER ON EXPIRATION OR TERMINATION OF OPTION. If the option
granted by SECTION 4.2(c) is not exercised as to all of the Joint Venture
Interest, then such option shall become void AB INITIO and the Proposing
Transferor may sell all of the Joint Venture Interest to any third party free of
the restrictions set forth in this ARTICLE IV, subject to the following
restrictions: (i) the Joint Venture Interest may not be sold after the
expiration of one hundred eighty (180) days after the expiration of the option
period set forth in SECTION 4.2(c), (ii) the Joint Venture Interest must be sold
in a bona fide sale at a price not being less that the Prescribed Price, and
(iii) the third party
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<PAGE> 12
transferee of the Joint Venture Interest must execute and deliver an undertaking
under which such third party shall become a party hereto, to the Vitrocrisa
Holding, S.A. de C.V. Shareholders Agreement dated of even date (the "VC HOLDING
SHAREHOLDERS AGREEMENT"), to the Crisa Libbey, S.A. de C.V. Shareholders
Agreement dated of even date (the "NEWCO FINANCE SHAREHOLDERS AGREEMENT"), and
to the Limited Liability Company Agreement of Crisa Industrial, L.L.C. dated of
even date (the "LLC AGREEMENT," and collectively with this Agreement, the VC
Holding Shareholders Agreement, and the Newco Finance Shareholders Agreement,
the "JOINT VENTURE SHAREHOLDERS AGREEMENTS") in place of the Proposing
Transferor.
(f) EXERCISE. An option granted by SECTION 4.2(c) may be exercised only
by the holder thereof and only by the delivery of a written notice of exercise
to the Proposing Transferor prior to the expiration of the relevant option
period.
(g) WAIVER. The restrictions imposed by this ARTICLE IV may be waived
in relation to any proposed transfer of a Voting Shareholder's Joint Venture
Interest with the consent of all Shareholders who would otherwise have been
entitled to have such Joint Venture Interest offered to them in accordance
herewith.
(h) FAILURE TO TIMELY EXERCISE. Failure of a Voting Shareholder to
exercise an option granted by SECTION 4.2(C) prior to the expiration of the
option period shall be deemed to be a waiver of that option as of the date the
option period expired. The waiver of an option granted by SECTION 4.2(c) will
not constitute a waiver of any subsequent option granted by SECTION 4.2(c).
(i) INTRA-GROUP TRANSFERS. Notwithstanding the foregoing, all, but not
less than all, of a Voting Shareholder's Joint Venture Interest may be
collectively transferred to any member of the Vitro 100% Group (in the case of
Vitro) and to any member of the Libbey 100% Group (in the case of LGA3), but
only (i) if the transferee is already a party to each of the Joint Venture
Shareholders Agreements or shall have first agreed to adhere to and be bound by
the provisions of each of the Joint Venture Shareholders Agreements by executing
and delivering in favor of the other parties to each of the Joint Venture
Shareholders Agreements an undertaking to the intent and with the effect that
from the date of such undertaking, or, if later, the date of the transfer, the
transferee shall become a party to each of the Joint Venture Shareholders
Agreements, in place of the transferor, to the extent that the transferor ceases
to hold shares in Vitrocrisa, VC Holding, Newco Finance, and the LLC as a result
of such transfer; and (ii) on terms that the transferee shall re-transfer the
relative Joint Venture Interest to a member of the Vitro 100% Group (in the case
of Vitro) or to a member of the Libbey 100% Group (in the case of LGA3) on the
same terms as set forth in this SECTION 4.2(i), prior to such transferee ceasing
to be a member of the Vitro 100% Group or the Libbey 100% Group (as the case may
be).
(j) OPTION TO PARTICIPATE IN SALE. In lieu of exercising the option
granted in SECTION 4.2(c), a Voting Shareholder may elect to participate in any
sale by the Proposing Transferor contemplated by SECTION 4.2 at the Prescribed
Price. Upon such election, the Voting Shareholder will be entitled to sell all,
but not less than all, of its Joint Venture Interest. The election to
participate in a sale must be in writing and must be delivered to the selling
Shareholder within thirty (30) days of receipt of the Transfer Notice. Failure
to timely deliver a written election
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<PAGE> 13
to participate in a sale within thirty (30) days of the Transfer Notice will
constitute a waiver of such Voting Shareholder's right to participate in the
sale.
ARTICLE V
---------
Termination
-----------
5.1. CAUSES OF TERMINATION. Except as otherwise provided in this
Agreement, this Agreement shall terminate:
(a) upon the unanimous written consent of the parties hereto;
(b) if Vitrocrisa is declared bankrupt, has a receiver appointed
over all or substantially all of its assets, or is dissolved;
(c) by decree of a court of competent jurisdiction; or
(d) upon the merger of Vitrocrisa into VC Holding; provided,
however, that the parties agree that, upon the consummation of
such merger, the parties shall enter into a new agreement
having terms substantially similar to, and with the same
intent of, the terms of this Agreement.
5.2. EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an event of default ("EVENT OF DEFAULT") hereunder on the part
of the Shareholder with respect to whom such event occurs (the "DEFAULTING
PARTY") without any requirement of notice or passage of time except as
specifically set forth in any such subparagraph:
(a) the violation by a Shareholder of any of the restrictions set
forth in ARTICLE IV;
(b) failure of a Voting Shareholder's Member of the Vitrocrisa
Board to (i) vote for and use reasonable efforts to implement
the Capital Expenditure, Repairs, and Maintenance Plan as set
forth in SECTION 2.2 or (ii) use reasonable efforts to
implement the Initial Strategic Plan as set forth in SECTION
2.3;
(c) failure of a Voting Shareholder's Member of the Vitrocrisa
Board to vote for and use reasonable efforts to implement the
Dividend Policy as set forth in SECTION 2.4;
(d) the institution by a Shareholder or Libbey of a case or other
proceeding in bankruptcy;
(e) the institution against a Shareholder or Libbey of a case or
other proceeding in bankruptcy, which proceeding is not
dismissed, stayed, or discharged within a period of sixty (60)
days after the filing thereof;
(f) a proposed plan of arrangement or other action by a
Shareholder's or Libbey's creditors taken as a result of a
general meeting of the creditors of a Shareholder or
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<PAGE> 14
Libbey, respectively, which arrangement or other action is not
dismissed, stayed, or discharged within a period of sixty (60)
days after such general meeting;
(g) the appointment of a receiver, custodian, trustee, or like
officer, to take possession of the assets of a Shareholder or
Libbey if the pendency of said receivership would reasonably
tend to have a materially adverse effect upon the performance
by the Shareholder or Libbey, respectively, of its obligations
under this Agreement, which receivership remains undischarged
for a period of sixty (60) days from the date of its
imposition;
(h) attachment, execution, or other judicial seizure of all or any
substantial part of a Shareholder's or Libbey's assets or of a
Shareholder's or Libbey's shares of Vitrocrisa, or any part
thereof, such attachment, execution, or seizure remaining
undismissed or undischarged for a period of sixty (60) days
after the levy thereof, if the occurrence of such attachment,
execution, or other judicial seizure would reasonably tend to
have a materially adverse effect upon the performance by the
Shareholder or Libbey, respectively, of its obligations under
this Agreement; provided, however, that said attachment,
execution, or seizure shall not constitute an Event of Default
hereunder if the Shareholder or Libbey, respectively, posts a
bond sufficient to fully satisfy the amount of such claim or
judgment within sixty (60) days after the levy thereof and the
respective Shareholder's or Libbey's assets are thereby
released from the lien of such attachment;
(i) material default in performance of or a failure to comply with
any obligations or undertakings of a Shareholder or Libbey
under the Covenant Not to Compete dated of even date by and
between Vitro and Libbey, and such default continues for a
period of thirty (30) days following notice of such default by
another Shareholder;
(j) the occurrence of an Event of Default (as defined therein)
under ARTICLE V of the VC Holding Shareholders Agreement; and
(k) the occurrence of a Libbey Change of Control or a Vitro Change
of Control (both as defined in SECTION 5.6 below);
(l) during fiscal years 1998, 1999, and 2000, the wrongful failure
of a member of the Libbey 100% Group to maintain the rights of
Vitrocrisa to distribute Libbey Glass' glass tableware under
the Distribution Agreement (as defined in the Master
Investment Agreement) in which Vitrocrisa is the distributor;
provided, however, that an adjustment of the price to be paid
for the glass tableware to be purchased by the distributor in
accordance with the Distribution Agreement shall not
constitute an Event of Default;
(m) during fiscal years 1998, 1999, and 2000, the wrongful failure
of a member of the Vitro 100% Group to maintain the rights of
Libbey Glass to distribute Vitrocrisa's glass tableware under
the Distribution Agreement (as defined in the Master
Investment Agreement); provided, however, that an adjustment
of the price to be
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<PAGE> 15
paid for the glass tableware to be purchased by the
distributor in accordance with the Distribution Agreement
shall not constitute an Event of Default;
(n) the inability, occurring on or before the third anniversary of
this Agreement, of Vitrocrisa's auditors to provide a clean
opinion on its financial statements pursuant to generally
accepted accounting principles of the United Mexican States
for any reason (other than due to the difference in standards
imposed by Mexican legislation) that could have a material
adverse effect on the proper recording of the financial
statements of Vitrocrisa;
(o) the violation, occurring on or before the third anniversary of
this Agreement, of the principles under the section titled
"Debt" set forth on EXHIBIT C;
(p) the violation, occurring on or before the third anniversary of
this Agreement, of the principles in the personnel policy
attached hereto as EXHIBIT F; and
(q) the failure, occurring on or before the third anniversary of
this Agreement, of Vitrocrisa to use reasonable efforts to
maintain the glass tableware production capacity as outlined
in the section titled "Glass Tableware Production Capacity"
set forth on EXHIBIT C.
5.3. REMEDY ON DEFAULT. If an Event of Default is declared by a Voting
Shareholder pursuant to (a) SECTION 5.2(b), (b) SECTION 5.2(c) with respect to
dividends to be paid for the performance of Vitrocrisa during fiscal years 1998,
1999, or 2000, (c) SECTION 5.2(k) with respect to a Libbey Change of Control or
a Vitro Change of Control occurring on or before the third anniversary of this
Agreement, (d) SECTION 5.2(l), (e) SECTION 5.2(m), (f) SECTION 5.2(n), (g)
SECTION 5.2(o), (h) SECTION 5.2(P), or (i) SECTION 5.2(q), then such Voting
Shareholder may, in addition to any other remedy at law or in equity, invoke the
provisions of SECTION 5.5. If an Event of Default is declared at any time (a) by
a Voting Shareholder pursuant to SECTIONS 5.2(a), (d), (e), (f), (g), (h), (i),
or (j), or (b) by any party to this Agreement pursuant to SECTION 5.2(c) with
respect to dividends to be paid for the performance of Vitrocrisa after fiscal
year 2000, or (c) by a Voting Shareholder pursuant to SECTION 5.2(k) with
respect to a Libbey Change of Control or a Vitro Change of Control occurring
after the third anniversary of this Agreement, then such Voting Shareholder may,
in addition to any other remedy at law or in equity, invoke the provisions of
SECTION 5.4.
5.4. BUY/SELL PROVISION. Within forty-five (45) days of an Event of
Default, the non-defaulting party (the "OFFERING SHAREHOLDER") may deliver a
written offer (the "OFFER") to purchase all, but not less than all, of the other
Voting Shareholder's Joint Venture Interest at a cash purchase price (the "OFFER
PRICE"), fully payable on or before sixty (60) days after notice of the Offer.
Within thirty (30) days after receipt of the Offer, the other Voting Shareholder
may notify the Offering Shareholder in writing that it will either (i) sell to
the Offering Shareholder all, but not less than all, of its Joint Venture
Interest at the Offer Price, on or before the sixtieth day after receipt of the
Offer or (ii) buy from the Offering Shareholder all, but not less than all, of
the Offering Shareholder's Joint Venture Interest at (A) if Vitro is the
Offering Shareholder, 51/49 of the Offer Price or (B) if LGA3 is the Offering
Shareholder, 49/51 of the Offer Price (the "ADJUSTED OFFER Price"), on or
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<PAGE> 16
before the sixtieth day after receipt of the Offer. If the other Voting
Shareholder fails to notify the Offering Shareholder within the thirty (30) day
period that it will (i) sell all of its Joint Venture Interest to the Offering
Shareholder at the Offer Price or (ii) buy all of the Joint Venture Interest
from the Offering Shareholder at the Adjusted Offer Price, then the Offering
Shareholder must purchase in cash all, but not less than all, of the other
Voting Shareholder's Joint Venture Interest at the Offer Price and the other
Voting Shareholder must sell all, but not less than all, of its Joint Venture
Interest at the Offer Price, on or before the sixtieth day after notice of the
Offer. Upon the purchase or sale of shares pursuant to this SECTION 5.4, this
Agreement and the VC Holding Shareholders Agreement shall automatically
terminate without further action by either Voting Shareholder. Failure by the
non-defaulting party to deliver an Offer within forty-five (45) days of notice
of an Event of Default shall constitute a waiver of such party's rights under
this SECTION 5.4 with respect to the particular Event of Default.
5.5. Dispute Resolution; Put/Call Option.
------------------------------------
(a) DISPUTE RESOLUTION. If an Event of Default is declared by a Voting
Shareholder pursuant to (i) SECTION 5.2(B), (ii) SECTION 5.2(c) with respect to
dividends to be paid for the performance of Vitrocrisa during fiscal years 1998,
1999, or 2000, (iii) SECTION 5.2(k) with respect to a Libbey Change of Control
or a Vitro Change of Control occurring on or before the third anniversary of
this Agreement, (iv) SECTION 5.2(l), (v) SECTION 5.2(m), (vi) SECTION 5.2(n),
(vii) SECTION 5.2(o), (viii) SECTION 5.2(p), or (ix) SECTION 5.2(q), such Voting
Shareholder shall promptly (but in no event later than thirty (30) days after
such Voting Shareholder's knowledge of such Event of Default) send notice of
such Event of Default to the other Voting Shareholder (the "DEFAULT NOTICE").
Upon receipt of the Default Notice, the alleged defaulting party will have
thirty (30) days to cure such default. If the default is not cured within such
thirty (30) day period or if the party receiving the Default Notice contests
that a default has occurred, the chief executive officers of Libbey and Vitro
(collectively, the "CEOS") shall meet within ninety (90) days of the expiration
of the cure period in a good faith effort to resolve the Event of Default. If
the Event of Default is not resolved within such ninety (90) day period, the
CEOs may select an independent mediator and subject the dispute to non-binding
mediation, which must take place within thirty (30) days of the expiration of
such ninety (90) day period. If both CEOs do not consent to non-binding
mediation or if the mediation fails to resolve the Event of Default, the Event
of Default shall be submitted to binding arbitration to be conducted in
accordance with the provisions of SECTION 8.10(b), (c), (d), and (e), the sole
purpose of which is to decide whether a default exists and, if so, which Voting
Shareholder is in default. The arbitrators will consider all issues currently in
dispute between the Voting Shareholders and must certify their ruling in writing
to each Voting Shareholder (the date of such certification is referred to herein
as the "CERTIFICATION DATE"). If the arbitrators determine and certify that one
Voting Shareholder is in default, then such Voting Shareholder shall have thirty
(30) days from the Certification Date to cure the default. If the Event of
Default is not cured within such thirty (30) day period, the non-defaulting
party may invoke the provisions of SECTION 5.5(b). If the arbitrators cannot
resolve which party has caused the Event of Default or determine that both
Voting Shareholders have caused the Event of Default and so certify, then either
of the Voting Shareholders may invoke the provisions of SECTION 5.4 within
thirty (30) days of the Certification Date.
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<PAGE> 17
(b) Put/Call Option With Penalty.
-----------------------------
(i) PUT/CALL OPTION WITH PENALTY. If the arbitrators determine
that Vitro or any member of the Vitro 100% Group is in default and such
default shall not be cured within thirty (30) days of the Certification
Date, then Libbey shall have the right to sell to Vitro, and Vitro
shall be obligated to purchase from Libbey, all, but not less than all,
of Libbey's Joint Venture Interest at forty-nine percent (49%) of the
Joint Venture Value (as defined below) multiplied by one hundred twenty
percent (120%) (the "PUT OPTION"). If the arbitrators determine that
Libbey or any member of the Libbey 100% Group is in default, then Vitro
shall have the right to buy from Libbey, and Libbey shall be obligated
to sell to Vitro, all, but not less than all, of Libbey's Joint Venture
Interest at forty-nine percent (49%) of the Joint Venture Value (as
defined below) multiplied by eighty percent (80%) (the "CALL Option").
The Put Option and the Call Option are collectively referred to herein
as the "OPTION."
(ii) VALUATION OF THE JOINT VENTURE. If the party in default
does not cure the Event of Default within thirty (30) days of the
Certification Date, the non-defaulting party may request a valuation of
the joint venture as a going concern, which will include a valuation of
the combined businesses of Vitrocrisa, VC Holding, Newco Finance, and
the LLC (collectively, the "JOINT VENTURE"), within thirty (30) days of
the expiration of the cure period. Within thirty (30) days of the date
of such request, the CEOs will meet, and each CEO will select one
investment banker, and the two selected investment bankers will then
select a third investment banker, for the purpose of establishing a
value for the Joint Venture as a going concern. Upon selection, each of
the three investment bankers will independently determine the value for
the Joint Venture as a going concern, the average of which will be
deemed to be the joint venture value (the "JOINT VENTURE VALUE").
(iii) EXERCISING OPTION. The non-defaulting party may exercise
the Option by giving the defaulting party written notice of its intent
to exercise the Option within thirty (30) days of the date that the
Joint Venture Value is determined by the investment bankers.
(iv) CLOSING OF OPTION. The closing of the Option will take
place at a time and place mutually agreed upon by Libbey and Vitro;
provided, however, that in no event will the closing take place more
than sixty (60) days from the date of the notice of exercise set forth
in SECTION 5.5(b)(iii).
(v) INVESTMENT BANKER FEES. Fees and expenses incurred in
connection with the determination of the Joint Venture Value,
including, without limitation, investment banker fees, will be paid by
the party in default as certified by the arbitrators; provided,
however, that all such fees and expenses will be paid by the
non-defaulting party if the non-defaulting party fails to exercise the
Option.
5.6. DEFINITION OF CHANGE OF CONTROL. In this ARTICLE V, the following
words shall bear the following meanings:
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<PAGE> 18
(a) "LIBBEY CHANGE OF CONTROL" shall be deemed to have occurred when
(i) any person or entity, together with any group of controlled companies not in
the Libbey 100% Group, acquires beneficial ownership, directly or indirectly, of
shares of stock of Libbey entitling such person or entity to exercise more than
50% of the total voting power of all classes of stock of Libbey entitled to vote
in elections of directors, or (ii) Libbey sells, leases or otherwise transfers
all or substantially all of its assets to any person or entity not in the Libbey
100% Group.
(b) "VITRO CHANGE OF CONTROL" shall be deemed to have occurred when (i)
any person or entity, together with any group of controlled companies not in the
Vitro 100% Group, acquires beneficial ownership, directly or indirectly, of
shares of stock of Vitro entitling such person or entity to exercise more than
50% of the total voting power of all classes of stock of Vitro entitled to vote
in elections of directors, or (ii) Vitro sells, leases or otherwise transfers
all or substantially all of its assets to any person or entity not in the Vitro
100% Group.
ARTICLE VI
----------
Deadlock and Impasse
--------------------
6.1. DEADLOCK. A "DEADLOCK EVENT" shall be deemed to occur at such time
as a Voting Shareholder (the "NOTIFYING SHAREHOLDER") delivers to the other
Voting Shareholder a notification in writing (the "DEADLOCK NOTICE") stating
that, in the opinion of the Notifying Shareholder, (a) the other Voting
Shareholder's chief executive officer ("CEO") failed to meet with the Notifying
Shareholder's CEO to resolve a controversy or claim regarding a business and
operational decision customarily exercised by the management of Vitrocrisa
within the time limits set forth in SECTION 8.10(a), (b) the other Voting
Shareholder has, or the other Voting Shareholder's Members of the Vitrocrisa
Board have, deliberately prevented the occurrence of a quorum as set forth in
SECTION 3.1 or SECTION 3.2(e), respectively, or (c) the Voting Shareholders or
the Vitrocrisa Board are unable to reach agreement on any of the actions set
forth in SECTION 3.1(a), (b), or (c) or SECTION 3.2(d), respectively, and
setting out the reasons therefor, and there is no resolution or agreement that
has been approved by both Voting Shareholders (which approval may be given or
withheld, or made subject to such conditions, as are determined by the Voting
Shareholders in their respective sole and absolute discretion) within seven (7)
days after delivery of the Deadlock Notice. A Deadlock Event shall be resolved
in accordance with the provisions of this ARTICLE VI.
6.2. RESOLUTION OF DEADLOCK. In the event of a Deadlock Event, either
Voting Shareholder may deliver notice of a meeting of the Shareholders (an
"EMERGENCY NOTICE") to the other Voting Shareholder, and they shall immediately
meet at a time and place mutually agreed upon or, if no time and place is
agreeable, at Vitrocrisa's principal place of business at 10:00 a.m. on the
fifteenth (15th) day after the date of such Emergency Notice. Notwithstanding
anything in this Agreement to the contrary, if either Voting Shareholder does
not attend such meeting, either Voting Shareholder may immediately invoke the
provisions of SECTION 6.4.
6.3. DECLARATION OF IMPASSE. If, at the meeting contemplated in SECTION
6.2, the Voting Shareholders are unable to agree on a course of action to
address the reason for the meeting, any Voting Shareholder may declare an
impasse ("IMPASSE") by giving written notice to the other Voting Shareholder (an
"IMPASSE NOTICE"). Within twenty (20) days after receipt of such Impasse
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<PAGE> 19
Notice, the CEOs shall meet in a good faith effort to reach accords that will
end the Impasse. If a decision is not made by common accord that ends the
Impasse within thirty (30) days after the date that the CEOs meet, either Voting
Shareholder may declare a final Impasse ("FINAL IMPASSE") by written notice to
the other Voting Shareholder. Notwithstanding anything in this Agreement to the
contrary, if either CEO refuses to meet with the other CEO, either Voting
Shareholder may immediately invoke the provisions of SECTION 6.4.
6.4. FINAL IMPASSE. Within forty-five (45) days of notice of Final
Impasse (or pursuant to the provisions of SECTION 2.3 or of SECTIONS 6.2 or
6.3), either Voting Shareholder (the "OFFERING SHAREHOLDER") may deliver a
written Offer to purchase all, but not less than all, of the Joint Venture
Interest held by the other Voting Shareholder at a cash Offer Price, fully
payable on or before sixty (60) days after notice of the Offer. Within thirty
(30) days after receipt of the Offer, the other Voting Shareholder may notify
the Offering Shareholder in writing that it will either (a) sell to the Offering
Shareholder all, but not less than all, of its Joint Venture Interest at the
Offer Price on or before the sixtieth day after receipt of the Offer or (b) buy
from the Offering Shareholder all, but not less than all, of the Offering
Shareholder's Joint Venture Interest at the Adjusted Offer Price on or before
the sixtieth day after receipt of the Offer. If the other Voting Shareholder
fails to notify the Offering Shareholder within the thirty (30) day period that
it will (a) sell all of its Joint Venture Interest to the Offering Shareholder
at the Offer Price or (b) buy all of the Joint Venture Interest from the
Offering Shareholder at the Adjusted Offer Price, then the Offering Shareholder
must purchase in cash all, but not less than all, of the other Voting
Shareholder's Joint Venture Interest at the Offer Price and the other Voting
Shareholder must sell all, but not less than all, of its Joint Venture Interest
at the Offer Price, on or before the sixtieth day after notice of the Offer.
Upon the purchase or sale of shares pursuant to this SECTION 6.4, this Agreement
and the VC Holding Shareholders Agreement shall automatically terminate without
further action. Failure by either Voting Shareholder to deliver an Offer within
forty-five (45) days of notice of a Final Impasse shall constitute a waiver of
each Voting Shareholder's rights under this SECTION 6.4 with respect to the
particular Final Impasse.
ARTICLE VII
-----------
Annual Operating Budgets for Vitrocrisa
---------------------------------------
7.1. SUBMISSION OF ANNUAL OPERATING BUDGET. At least forty-five (45)
days prior to the end of the calendar year beginning with November 16, 1997, the
Managing Director of Vitrocrisa shall prepare a report on Vitrocrisa's working
capital requirements and operating budget for the succeeding calendar year,
which will substantially contain an estimate or projection of (a) working
capital requirements, including a breakout of accounts receivable, inventory,
and accounts payable, (b) sources of revenue (by geographic area, ware type,
trade areas, or established areas of distribution), (c) the cost of goods sold,
(d) selling, general, and administrative expense detail, (e) interest expense,
(f) an income statement, balance sheet, and statement of cash flows, all on a
quarterly basis, (g) funding requirements, capital expenditures, and repairs and
maintenance expense, (h) manufacturing objectives, including yield objectives by
ware type and planned capacity, (i) distribution objectives, (j) information
technology objectives, (k) engineering objectives, (l) sales plan, (m) marketing
plan, including marketing programs, (n) finance goals, (o) general
administrative goals, and (p) all expenditures proposed to be
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<PAGE> 20
undertaken by Vitrocrisa for such year (the "PROPOSED BUDGET"). Upon preparation
of the Proposed Budget, the Managing Director shall promptly submit the Proposed
Budget to the Vitrocrisa Board for consideration.
7.2. PREPARATION OF THREE-YEAR STRATEGIC PLAN. In addition to the
annual preparation of the Proposed Budget, the Managing Director shall prepare a
strategic plan for the next succeeding three fiscal years (the "THREE-YEAR
STRATEGIC PLAN"), which shall substantially contain the three-year estimates or
projections of the following items for Vitrocrisa: (a) working capital
requirements, including accounts receivable, inventory, and accounts payable,
(b) sources of revenue (by geographic area, ware type, trade areas, etc.), (c)
selling, general, and administrative expense detail, (d) interest income and
interest expense, (e) repairs and maintenance expense, (f) capital expenditures,
(g) manufacturing objectives, including yield objectives by ware type and
planned capacity, (h) distribution objectives, (i) information technology
objective, (j) engineering objectives, (k) sales plan, (l) marketing plan,
including marketing programs, (m) finance goals, (n) general administrative
goals, and (o) income statement, balance sheet, and statements of cash flow. The
Managing Director shall distribute the Three-Year Strategic Plan to the
Vitrocrisa Board along with the Proposed Budget.
7.3. APPROVAL OF ANNUAL OPERATING BUDGET. Promptly after receipt of the
Proposed Budget and the Three-Year Strategic Plan, but in any event not less
than thirty (30) days prior to the end of the calendar year, the Vitrocrisa
Board shall meet to review the Proposed Budget and the Three-Year Strategic
Plan. Upon such review, the Vitrocrisa Board will vote on the Proposed Budget
and the Three-Year Strategic Plan. If the Proposed Budget is approved by
Extraordinary Directors Action, the Proposed Budget shall become Vitrocrisa's
operating budget for the next succeeding calendar year. If the Proposed Budget
is not approved by Extraordinary Directors Action, the Managing Director will
revise the Proposed Budget as soon as possible and resubmit it to the Vitrocrisa
Board for consideration by Extraordinary Directors Action. The operating budget
for the previous calendar year shall continue to govern the operations of
Vitrocrisa (but (a) revised to the extent the parties agree and (b) in any
event, adjusted for inflation provided that such adjustment does not affect
Libbey's Expected Sales target (as defined in the Distribution Agreement, dated
of even date, by and among Vitro, Crisa Corporation, Vitrocrisa, Libbey, and
Libbey Glass Inc.)) until such time as a Proposed Budget is approved by the
Vitrocrisa Board by Extraordinary Directors Action. If the Three-Year Strategic
Plan is approved by Extraordinary Directors Action, the Three-Year Strategic
Plan shall become Vitrocrisa's strategic plan for the next succeeding three
fiscal years. If the Three-Year Strategic Plan is not approved by Extraordinary
Directors Action, the Managing Director will revise the Three-Year Strategic
Plan as soon as possible and resubmit it to the Vitrocrisa Board for
consideration by Extraordinary Directors Action.
ARTICLE VIII
------------
Miscellaneous Provisions
------------------------
8.1. GOVERNING LANGUAGE. Notwithstanding the translation of this
Agreement or any of its Exhibits into Spanish or any other language, the English
language version of this Agreement and any of its Schedules and Exhibits shall
be controlling and shall govern in any legal proceeding;
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<PAGE> 21
provided, however, that with respect to the Revised Vitrocrisa Estatutos the
Spanish language version shall control.
8.2. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
8.3. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties related to the subject matter hereof and supersedes any prior
understandings, agreements, or representations by or among the parties, written
or oral, that may have related in any way to the subject matter hereof.
8.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective successors
and permitted assigns.
8.5. ASSIGNMENT. No party may assign or otherwise transfer any of its
rights or obligations under this Agreement by operation of law or otherwise,
without the prior written consent of the other parties, which consent shall not
be unreasonably withheld. Any purported or attempted assignment contrary to the
terms hereof shall be null and void and of no force or effect.
8.6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
8.7. HEADINGS. The article and section headings contained in this
Agreement are inserted for convenience only and are not part of this Agreement
and shall not affect in any way the meaning or interpretation of this Agreement.
8.8. NOTICES. All notices, demands, requests, and other communications
given hereunder shall be made in writing in English and shall be delivered in
person or by courier or overnight delivery service (delivery charge prepaid) or
telecopy (provided that the telecopy is confirmed by notice by certified mail,
courier, or overnight delivery service). Any notice, demand, request, or other
communication shall be effective only if and when it is received by the
addressee. For the purposes of the foregoing, the addresses and telecopier
numbers of the parties hereto are as follows:
If to Libbey or to LGA3, such notices shall be addressed to:
Libbey Inc.
300 Madison Avenue
Toledo, Ohio 43604
USA
Attn: General Counsel Fax No. (419) 325-2585
or to any subsequent address of which Libbey may notify the other parties in
writing.
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<PAGE> 22
If to Vitro, such notices shall be addressed to:
Vitro Corporativo, S.A. de C.V.
Av. del Roble 660
Col. Valle del Campestre
Garza Garcia, N.L.
Mexico 66225
Attn: Director Juridico Internacional
Fax No. (528) 329-1372
or at any subsequent address of which Vitro may notify the other parties in
writing.
If to Vitrocrisa or VC Holding, such notices shall be
addressed to:
Vitrocrisa, S.A. de C.V.
Doblado 1627 Nte.
Col. Terminal
Monterrey, N.L. 64580
Attn: Director General Fax No. (528) 329-3009
or at any subsequent address of which Vitrocrisa may notify the other parties
in writing.
Any party hereto may change its address or telecopier number for the purposes
hereof by giving notice thereof to the other parties in the manner provided
herein.
8.9. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the substantive laws of the United Mexican States.
8.10. Dispute Resolution.
-------------------
(a) The parties to this Agreement shall exert good faith efforts to
promptly resolve any controversy or claim arising out of or related to this
Agreement or the breach thereof within fifteen (15) days of receipt of notice by
one party from another party that such a controversy or claim exists. If the
parties fail to resolve such controversy or claim within such fifteen (15) day
period, they shall, unless otherwise provided in this Agreement, give notice in
writing to the CEOs, who will meet within fifteen (15) days of receipt of such
notice at a mutually acceptable time and place to attempt to resolve any such
controversy or claim. In the event the CEOs fail to meet or to resolve the
controversy or claim within such fifteen (15) day period, the controversy or
claim (other than business and operational decisions customarily exercised by
management in entities similar to Vitrocrisa) shall be settled by arbitration in
accordance with the then existing International Arbitration Rules of the
American Arbitration Association (hereinafter "AAA"), which shall commence upon
one party providing the other parties with a written demand for arbitration (the
"DEMAND FOR ARBITRATION").
(b) The arbitral tribunal shall be composed of three arbitrators, and
Libbey and Vitro shall each appoint one arbitrator. If Libbey or Vitro fail to
appoint an arbitrator within thirty (30) days after the date the claimant's
Demand for Arbitration is communicated to the other parties
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<PAGE> 23
(hereinafter the "NOTIFICATION DATE"), the AAA shall make such appointment. The
two arbitrators thus appointed shall attempt to agree upon the appointment of a
third arbitrator to serve as chairman of the arbitral tribunal. If said two
arbitrators fail to agree upon the appointment of such third arbitrator within
sixty (60) days after the Notification Date, the AAA shall make such
appointment. The place of arbitration shall be Dallas, Texas, United States of
America. The arbitral proceeding shall be conducted in the English language.
(c) To the extent that they may validly so agree, the parties hereby
exclude any right of appeal to any court in connection with the arbitral award.
Judgment upon the arbitral award may be entered in any court having jurisdiction
thereof or having jurisdiction over any party or any party's assets.
(d) The validity of this SECTION 8.10 shall be governed by the United
Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards
or the Inter-American Convention on International Commercial Arbitration, to
which Mexico and the United States of America have adhered.
(e) All costs of arbitration and enforcement thereof, including
reasonable attorneys' fees and court costs, costs of expert witnesses,
transportation, lodging, and meal costs of the parties and witnesses, costs of
transcript preparation, and other reasonable and necessary direct and incidental
costs shall be apportioned to one or more of the parties by a majority of the
arbitrators as they deem appropriate. In the event any party to this Agreement
commences legal proceedings to enforce the arbitral award, the expense of such
litigation (including reasonable attorneys' fees and costs of court) shall be
borne by the party or parties not prevailing therein.
(f) This SECTION 8.10 will not apply to any matter that is to be
resolved pursuant to ARTICLE V or pursuant to ARTICLE VI.
8.11 CONFIDENTIALITY.
----------------
8.11.1. Each Shareholder shall use best efforts to maintain in
confidence and protect the confidentiality of all Confidential Information and
shall not disclose any Confidential Information to any third party not
affiliated with a Shareholder without the prior written consent of the other
Shareholder, provided that each Shareholder shall be entitled to use the
Confidential Information for any and all lawful purposes relating to its
business, operations and activities, including the financing and auditing
thereof. For purposes of this Agreement "Confidential Information" shall mean
all confidential or proprietary information of Vitrocrisa relating to its
business or operations or of a Shareholder which is provided for or in
connection with the business or operations of Vitrocrisa, which is provided to a
Shareholder or any of their respective Representatives (as defined below) by
Vitrocrisa or by any other Shareholder or any of its Representatives and
identified as confidential or proprietary as required by Section 8.11.6;
provided, however, that the term shall not include (i) information known to the
recipient prior to receipt thereof from the other Shareholder or from Vitrocrisa
in connection with this Agreement, (ii) information which, at the time of
disclosure hereunder, is already in the public domain, (iii) information which,
after disclosure hereunder, becomes part of the public domain by publication or
otherwise through no fault of the recipient, (iv) information obtained by a
recipient from a
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<PAGE> 24
third party (not Affiliated with a Shareholder) in lawful possession of such
information which is not under a confidentiality obligation to the Person (as
defined below) from whom such information originated or (v) information that is
independently developed without the benefit of the Confidential Information.
8.11.2. Notwithstanding the provisions of Section 8.11.1, each
Shareholder may disclose Confidential Information to its or its Affiliates'
respective Representatives, provided that (a) such Representative has a need to
receive such Confidential Information to perform its duties, (b) the disclosing
Shareholder advises such Representative of the confidential nature of the
disclosed Confidential Information, and (c) the disclosing Shareholder uses all
reasonable efforts to cause such Representative to protect and maintain the
confidentiality of the disclosed Confidential Information as provided herein.
8.11.3. Notwithstanding the provisions of Section 8.11.1, each
Shareholder may disclose Confidential Information (i) in connection with reports
of earnings of a Shareholder, (ii) to the extent, in the opinion of such
Shareholder's legal counsel, required by the laws applicable to such
Shareholder, including without limitation, all securities laws, or (iii) in
cases involving dispute resolution under the procedures set forth in 8.10.
8.11.4 For purposes of this Section 8.11, the following terms
shall have the meanings given them below:
"Representatives" shall mean, with respect to any Person, such Person's owners,
stockholders, partners, directors, officers, employees, agents, consultants,
advisors (including, without limitation, auditors, engineers, financial
analysts, financial managers and attorneys), and lenders;
"Person" shall mean any natural person, any corporation, partnership, limited
liability company, trust or other entity, and any governmental or judicial
authority, body or entity;
"Affiliate" shall mean, with respect to any Person, the following: (i) any other
Person that directly, or indirectly through one or more intermediaries, controls
such Person, (ii) any other Person that is controlled by or is under common
control with such Person, or (iii) any subsidiary of such Person.
8.11.5. The obligations of the Shareholders under this Section
8.11 shall survive the expiration or termination of this Agreement to the
maximum extent permitted by applicable law.
8.11.6. To be Confidential Information, all information
disclosed in tangible form shall be conspicuously marked confidential or
proprietary at the time of initial disclosure to the recipient and information
conveyed orally shall be identified as confidential or proprietary at the time
of initial disclosure to the recipient and summarized in writing, conspicuously
marked confidential or proprietary and given to the recipient within thirty days
after the initial disclosure. Information not so identified will not be deemed
to be Confidential Information.
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<PAGE> 25
8.11.7 In the event any Shareholder is requested or required
(by deposition, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or similar process), in
connection with any proceeding, to disclose any Confidential Information, the
Shareholder that is requested or required will give Vitrocrisa and the other
Shareholder written notice of such request or requirement so that the
Shareholder receiving the notice or Vitrocrisa may seek an appropriate
protective order or other remedy. In the event such protective order or other
remedy is not obtained in a timely manner, the Shareholder to whom such request
or requirement is directed will furnish only that portion of the Confidential
Information that, in the opinion of counsel to such Shareholder, is legally
required to be disclosed and, upon the request of the other Shareholder or
Vitrocrisa, use its best efforts to obtain assurances that confidential
treatment will be accorded to such information.
8.12. AMENDMENTS AND WAIVERS. This Agreement may be amended, modified,
superseded, or canceled and any of its terms, covenants, representations,
warranties, undertakings, or conditions may be waived only by an instrument in
writing signed by (or by some person duly authorized by) all of the parties
hereto or, in the case of a waiver, by the party waiving compliance.
8.13. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
8.14. EXHIBITS AND SCHEDULES. The Exhibits and Schedules identified in
this Agreement are incorporated herein by reference and made a part hereof.
8.15. PRESS RELEASES AND ANNOUNCEMENTS. No party shall issue any press
release or announcement relating to the subject matter of this Agreement without
the prior written approval of the other parties hereto; provided, however, that
any party may make any public disclosure it believes in good faith is required
by law or regulation (in which case the disclosing party will advise the other
party prior to making the disclosure).
8.16. NO VIOLATION OF LAW. This Agreement shall not be construed to
require either party to be compelled, and no party will compel Vitrocrisa, to do
any act or remain in any situation in violation of any law of a governmental
authority applicable to such party.
8.17. VITRO UNDERTAKING. Vitro agrees to do such things and take such
actions so as to enable VC Holding and Vitrocrisa to fulfill its obligations
under this Agreement.
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<PAGE> 26
8.18. LIBBEY UNDERTAKING. Libbey agrees to do such things and take such
actions so as to enable LGA3, VC Holding, and Vitrocrisa to fulfill its
obligations under this Agreement.
[The remainder of this page intentionally left blank.]
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<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
LIBBEY INC.,
a Delaware corporation
By: /s/ A. H. Smith
---------------------------------------
Name:A. H. Smith
------------------------------------------
Title: Vice President
-----------------------------------
LGA3 CORP.,
a Delaware corporation
By: /s/ A. H. Smith
---------------------------------------
Name:A. H. Smith
------------------------------------------
Title: Vice President
-----------------------------------
VITRO, S.A., a sociedad anonima organized
under the laws of the United Mexican States
By: /s/ Claudio Del Ville
--------------------------------------
Name: Claudio Del Ville
------------------------------------
Title: Attorney in Fact
-----------------------------------
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<PAGE> 28
VITROCRISA HOLDING, S.A. DE C.V., a sociedad
anonima with variable capital organized under
the laws of the United Mexican States
By: /s/ Roberto B. Rubio
--------------------------------------
Name: Roberto B. Rubio
------------------------------------
Title: Director General
-----------------------------------
VITROCRISA, S.A. DE C.V.,
a sociedad anonima with variable capital
organized under the laws of the United
Mexican States
By: /s/ Roberto B. Rubio
--------------------------------------
Name: Roberto B. Rubio
------------------------------------
Title: Director General
-----------------------------------
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<PAGE> 1
Exhibit 10.29
VITROCRISA HOLDING, S.A. DE C.V.
SHAREHOLDERS AGREEMENT
THIS AGREEMENT is made and entered effective as of August 29, 1997, by
and among LIBBEY INC., a corporation organized under the laws of the State of
Delaware ("LIBBEY"), LGA3 CORP., a corporation organized under the laws of the
State of Delaware and a wholly-owned subsidiary of Libbey ("LGA3"), VITRO, S.A.,
a sociedad anonima organized under the laws of the United Mexican States
("VITRO"), and VITROCRISA HOLDING, S.A. DE C.V., a sociedad anonima with
variable capital organized under the laws of the United Mexican States ("VC
HOLDING"). LGA3 and Vitro are sometimes singularly referred to herein as a
"SHAREHOLDER" and collectively referred to herein as the "SHAREHOLDERS."
Introduction
------------
Libbey and Vitro desire to establish a joint business venture to
manufacture in Mexico and to market, distribute, and sell glass tableware and
related industrial products in North America, Central America, and South
America. To achieve these goals, Libbey (and certain of its subsidiaries) and
Vitro (and certain of its subsidiaries) entered into that certain Master
Investment Agreement dated of even date (the "MASTER INVESTMENT AGREEMENT").
Pursuant to the Master Investment Agreement, LGA3 acquired all of the Series B
Shares of VC Holding, which represents forty-nine percent (49%) of the total
issued and outstanding capital stock of VC Holding. Vitro owns all of the Series
A Shares of VC Holding, which represents fifty-one percent (51%) of the total
issued and outstanding capital stock of VC Holding.
Libbey, LGA3, Vitro, and VC Holding each desire to enter into this
Agreement for the purpose of setting forth the principles for the adoption of
decisions in Vitrocrisa, S.A. de C.V., a sociedad anonima with variable capital
organized under the laws of the United Mexican States and wholly-owned by VC
Holding, Vitro, and LGA3 ("VITROCRISA"). Therefore, in consideration of the
mutual promises contained herein, together with other consideration, the
adequacy and receipt of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
---------
Basic Structure of VC Holding
-----------------------------
1.1. FORM. VC Holding was incorporated pursuant to public deed number
5,750, dated October 16, 1970, granted before Mr. Hector Ruben Garza Moreno, a
Notary Public for Monterrey, Nuevo Leon, recorded with the Public Registry of
Commerce for the District of Monterrey, State of Nuevo Leon, under number 380,
Volume 192, Book III, Second, on November 5, 1970. A copy of the Revised VC
Holding Estatutos is attached hereto as EXHIBIT A.
1.2. NAME. The name of VC Holding shall continue to be Vitrocrisa
Holding, S.A. de C.V.
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<PAGE> 2
1.3. PLACE OF BUSINESS. The corporate domicile and principal place of
business of VC Holding shall continue to be located in Monterrey, Nuevo Leon, or
such other place as the Shareholders may from time to time designate.
1.4. PURPOSE. The purposes for which VC Holding is organized include,
but are not limited to, the following: (a) to own the nonvoting capital stock of
Vitrocrisa and (b) to engage in such activities as are lawful and approved by
the unanimous vote of the Shareholders.
1.5. ENDORSEMENT OF CERTIFICATES. At the Closing (as defined in the
Master Investment Agreement), VC Holding shall issue new stock certificates and
deliver them to its Shareholders in exchange for their existing certificates,
which shall be immediately canceled. All certificates representing shares of VC
Holding stock issued after the date of this Agreement shall comply with the
terms of the Revised VC Holding Estatutos and shall contain substantially the
following legend:
"The shares represented by this certificate are subject to and are
transferable only in compliance with a Shareholders Agreement by and
among Libbey Inc., a corporation organized under the laws of the State
of Delaware, LGA3 Corp., a corporation organized under the laws of the
State of Delaware, Vitro, S.A., a sociedad anonima organized under the
laws of the United Mexican States, and Vitrocrisa Holding, S.A. de
C.V., a sociedad anonima with variable capital organized under the laws
of the United Mexican States, as the same may be amended from time to
time, dated August 29, 1997. Title to the shares represented hereby can
be transferred only in accordance with the terms of said Shareholders
Agreement. Any purported transfer of title other than in the manner
provided in the Shareholders Agreement is void, without force and
effect, and will not be recognized by the corporation."
VC Holding shall not transfer any shares or issue or reissue any certificates
except as provided in this Agreement.
ARTICLE II
----------
Financial Arrangements
----------------------
2.1. CAPITAL STOCK OF VC HOLDING. The capital stock of VC Holding will
be divided into Class I and Class II shares, representing the fixed and variable
portions of such capital, respectively. In addition, both Class I and Class II
shares will be divided into Series A Shares and Series B Shares, initially
representing 51% and 49% of the capital stock, respectively. Both Series A
Shares and Series B Shares will be free subscription shares. Vitro will
initially own all of the issued and outstanding Series A Shares, and LGA3 will
initially own all of the issued and outstanding Series B Shares. The Series A
Shares and Series B Shares will be deemed to constitute separate classes of
shares for purposes as are specifically provided herein or in the Revised VC
Holding Estatutos, but otherwise shall rank PARI PASSU in all respects as if
they constituted one class of shares.
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<PAGE> 3
2.2. CASH REMITTANCE TO SHAREHOLDERS. Attached hereto as EXHIBIT B is a
policy of cash remittance, dividends, and other remuneration to be paid no less
than annually by VC Holding to the Shareholders (the "DIVIDEND POLICY"). Each of
the Shareholders will cause their respective members of the board of directors
of VC Holding (the "VC HOLDING BOARD") to vote for the Dividend Policy and cause
monies to be paid to the Shareholders in accordance with the Dividend Policy.
ARTICLE III
-----------
Management of VC Holding
------------------------
3.1. THE SHAREHOLDERS MEETINGS; QUORUM. The shareholders meeting is the
supreme authority of VC Holding. The shareholders meetings may be ordinary (an
"ORDINARY SHAREHOLDERS MEETING") or extraordinary (an "EXTRAORDINARY
SHAREHOLDERS MEETING"), depending on the matters to be discussed at each
meeting. They will be held at the corporate domicile of VC Holding in accordance
with the call for the meeting made pursuant to the Revised VC Holding Estatutos.
According to the General Law of Mercantile Companies of Mexico, resolutions may
be adopted outside of a shareholders meeting by unanimous vote of the
Shareholders, provided that the Shareholders subsequently confirm the adoption
of such resolutions in writing to the Chairman or the Secretary of the VC
Holding Board. An Ordinary Shareholders Meeting will be held at least once a
year within the four (4) months following the closing of each fiscal period.
Ordinary Shareholders Meetings may be those called to discuss any of the matters
that are not expressly reserved by law or this Agreement to the Extraordinary
Shareholders Meeting. The matters reserved for Extraordinary Shareholders
Meetings are:
(a) any matter that is required to be resolved by the
Extraordinary Shareholders Meeting according to Article 182 of
the General Law of Mercantile Companies;
(b) the declaration or payment of dividends pursuant to the
Dividend Policy; and
(c) any matter specified in SECTION 3.2(d) that is referred to the
Shareholders by the VC Holding Board.
An Ordinary Shareholders Meeting shall take place by virtue of a first
call of any Shareholder if the holders of fifty-five percent (55%) of the
capital stock are present or duly represented thereat. If such a quorum does not
exist for the holding of the meeting by virtue of the first call, the call shall
be repeated, and the meeting shall be considered validly held whatever number of
Shareholders are present or represented. Resolutions in Ordinary Shareholders
Meetings shall be adopted by the affirmative vote of the majority of the shares
entitled to vote that are present or represented thereat.
An Extraordinary Shareholders Meeting shall be held by virtue of the
first call if the Shareholders holding at least seventy-five percent (75%) of
the capital stock are present or represented thereat. If such a quorum does not
exist for such meeting, the call shall be repeated, and the meeting shall be
considered validly held only with the attendance of Shareholders or their
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<PAGE> 4
proxies representing at least fifty-five percent (55%) of the capital stock of
VC Holding. Resolutions in Extraordinary Shareholders Meetings held either in
first or subsequent calls shall be adopted by the affirmative vote of
Shareholders or their representatives holding at least fifty-five percent (55%)
of the capital stock of VC Holding.
If holders of seventy-five percent (75%) of the capital stock are not
present or represented at the first call of any Extraordinary Shareholders
Meeting and if holders of fifty-five percent (55%) of the capital stock are not
present or represented at any repeated call of such meeting, either Shareholder
shall have the right, but shall not be obligated, to declare the occurrence of a
Deadlock Event under SECTION 6.1.
In addition to any other requirement imposed by Mexican law, calls for
an Ordinary Shareholders Meeting of VC Holding and calls for an Extraordinary
Shareholders Meeting of VC Holding must be in writing and must be delivered to
each Shareholder at least fifteen (15) days prior to such meeting, unless such
notice is waived by the Shareholders in writing.
3.2. Board of Directors.
-------------------
(a) COMPOSITION AND APPOINTMENT. The VC Holding Board shall consist of
seven (7) members (hereinafter referred to singularly as a "MEMBER" and
collectively as "MEMBERS"). The Members shall not be required to be Mexican
nationals. As the owner of Series A Shares of VC Holding, Vitro shall be
entitled, in its sole and absolute discretion, to designate four (4) Members
(and their alternates) to the VC Holding Board (hereinafter referred to
singularly as a "VITRO MEMBER" and collectively as "VITRO MEMBERS"), provided
that each such designee is also a member or alternate, as the case may be, of
the Board of Directors of Vitrocrisa. As the owner of Series B Shares of VC
Holding, LGA3 shall be entitled, in its sole and absolute discretion, to
designate three (3) Members (and their alternates) to the VC Holding Board
(hereinafter referred to singularly as a "LIBBEY MEMBER" and collectively as
"LIBBEY MEMBERS"), provided that each such designee is also a member or
alternate, as the case may be, of the Board of Directors of Vitrocrisa. The
names of the Members of the VC Holding Board as at the date of this Agreement
and their alternates are set out in EXHIBIT C attached hereto.
(b) REMOVAL. Each Shareholder, in its sole and absolute discretion, may
remove and, in conjunction therewith, shall replace any or all of the Members
and alternates it has designated. Notwithstanding the foregoing, each
Shareholder hereby agrees to consult with the other Shareholder in connection
with the designation, removal, and replacement of any Member and alternate of
the VC Holding Board and to consider reasonable objections of any Shareholder to
the designation, removal, and replacement of any Member and alternate of the VC
Holding Board; provided, however, such consultation shall not affect the sole
and absolute discretion of each Shareholder to designate, remove, or replace the
Members and alternates it has designated. Any alternate may substitute for any
Member designated by such Shareholder at any meeting of the VC Holding Board. No
Member or alternate of the VC Holding Board shall be removed or replaced other
than by the Shareholder that designated such Member or alternate.
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<PAGE> 5
(c) POWER AND AUTHORITY OF THE VC HOLDING BOARD. Except for those
matters set forth in SECTION 3.1 requiring approval of the Shareholders at an
Extraordinary Shareholders Meeting, the Shareholders shall, and do hereby,
delegate all power and authority for the operations of VC Holding to the VC
Holding Board, which, by way of illustration and not limitation, shall include
the power and authority to:
(i) direct, manage, control, and operate VC Holding;
(ii) set strategic direction for VC Holding;
(iii) direct all of VC Holding's business and management
policies and specific business and operational
decisions in the ordinary course of business;
(iv) acquire and dispose of assets of VC Holding;
(v) control litigation and administrative proceedings of
VC Holding;
(vi) enter into contracts on behalf of VC Holding; and
(vii) assume all other responsibilities not specifically
reserved to the Shareholders by this Agreement or by
law, including powers under Article 2554 of the Civil
Code for the Federal District and Articles 9 and 85
of the General Law of Negotiable Instruments and
Credit Operations.
(d) EXTRAORDINARY DIRECTORS ACTIONS. Notwithstanding anything contained
herein to the contrary, the following matters, except for those matters already
included in the Initial Strategic Plan (as defined in ARTICLE VII), shall not be
deemed approved by the VC Holding Board unless (i) approved by a majority of the
Members of the VC Holding Board, and (ii) such approving majority shall have
consisted of at least one Libbey Member and at least one Vitro Member
(hereinafter singularly referred to as an "EXTRAORDINARY DIRECTORS ACTION" and
collectively referred to as "EXTRAORDINARY DIRECTORS ACTIONS"). Such
Extraordinary Directors Actions are as follows:
(i) Approval of any cash remittance, dividend, or other
remuneration from VC Holding to any Shareholder in
accordance with SECTION 2.2;
(ii) Approval of any proposal to change the corporate
purpose of VC Holding;
(iii) Approval of any resolution regarding the manner in
which the shares owned by VC Holding in any other
corporation, or equity participation in a limited
liability company, or any other interest in any other
entity, whether or not incorporated, are to be voted
or regarding the transfer of such shares, equity
participation, or interest;
(iv) Approval of transactions that would dilute any
Shareholder's interest in VC Holding;
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<PAGE> 6
(v) The approval by the VC Holding Board of annual
operating budgets pursuant to ARTICLE VII;
(vi) The approval of any expenditures in excess of 120% of
the allotment for such expenditures as set forth in
any annual operating budget for VC Holding as
determined in accordance with ARTICLE VII;
(vii) Formation of a partnership or joint venture between
VC Holding and another business entity; and
(viii) Submittal to the Ordinary Shareholders Meeting of the
financial statements and report for approval.
(e) MEETINGS. The VC Holding Board shall meet at least twice annually,
the first meeting being within thirty (30) days after year-end audited financial
statements have been delivered to all Members of the VC Holding Board, but in no
event more than four (4) months after the end of each fiscal year, or more
frequently at the request of any Shareholder or any Member. Notice of each
meeting of the VC Holding Board must be delivered to all Members at least
fifteen (15) days in advance of the date of such meeting. At least four (4)
Members of the VC Holding Board or their alternates must be present to transact
business. Each meeting of the VC Holding Board shall take place at 10:00 a.m. on
the fifteenth (15th) day after notice has been delivered to all Members, or at a
time and place mutually agreed upon by the Members. If Members sufficient to
transact business are not present at the meeting, the date of the meeting shall
be postponed for one (1) day, and if Members sufficient to transact business are
not present at that meeting, the date of the meeting shall be postponed for an
additional day. If Members sufficient to transact business are not present at
that meeting, either Shareholder shall have the right, but shall not be
obligated, to declare the occurrence of a Deadlock Event under SECTION 6.1
hereof.
(f) WAIVER OF NOTICE; VOTING. The Members can waive the requirement of
the written call, and same will not be required, when all of the Members or
their alternates are present at the meeting. Except as otherwise provided
herein, all decisions of the VC Holding Board shall require the approval of a
majority of its Members. All decisions of the Members on any matters requiring
their approval, consent, or action may be made by the Members in each of their
sole and absolute discretion.
(g) ACTION WITHOUT MEETING. Whenever the VC Holding Board is required
or permitted to take any action pursuant to a meeting of the VC Holding Board,
such action may be taken without a meeting upon a written consent, setting forth
the action so taken that is signed by each of the Members.
3.3. INDEMNIFICATION OF THE VC HOLDING BOARD. Each Member shall be
indemnified by VC Holding against all liability for any claim, demand, loss,
damage, liability, or expense (including, without limitation, amounts paid in
settlement, reasonable costs of investigation, and reasonable legal expenses)
resulting from any threatened, pending, or completed action, suit, or
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<PAGE> 7
proceeding naming any of them as defendant by reason of acts or omissions made
or omitted in good faith within the scope of their authority as set forth in
this Agreement to the maximum extent permitted by law.
3.4. MANAGEMENT AND ADMINISTRATIVE SERVICES BY VITRO AND LIBBEY.
Neither Shareholder shall be entitled to a fee for any management or
administrative services provided to VC Holding by such Shareholder unless
mutually agreed by both Shareholders.
3.5. CORPORATE OPPORTUNITY. No person or entity of the Libbey 100%
Group (as defined in ARTICLE IV) and no person or entity of the Vitro 100% Group
(as defined in ARTICLE IV) has any duty to communicate or offer any Corporate
Opportunity (as defined below) to VC Holding, and neither the Libbey 100% Group
nor the Vitro 100% Group shall be liable to VC Holding or any Shareholder for
breach of any fiduciary duty or duty of loyalty to VC Holding by reason of the
fact that it pursues or acquires a Corporate Opportunity for itself or directs a
Corporate Opportunity to another person or entity. For purposes of this section,
"CORPORATE OPPORTUNITY" means a business or other opportunity that VC Holding is
or could reasonably be expected to become financially able to undertake, which
relates to VC Holding's line of business and in which VC Holding has or would
have an interest or a reasonable expectancy of interest. To the extent this
SECTION 3.5 contradicts any term or provision in the Distribution Agreement,
dated of even date, by and among Vitro, Vitrocrisa, Libbey, and Libbey Glass
Inc., the Distribution Agreement, dated of even date, by and among Vitro, Crisa
Corporation, Vitrocrisa, Libbey, and Libbey Glass Inc. (together, the
"DISTRIBUTION AGREEMENTS"), or the Covenant Not to Compete, dated of even date,
by and between Libbey and Vitro (the "COVENANT NOT TO COMPETE"), the terms and
provisions of the Distribution Agreements or the Covenant Not to Compete shall
control.
ARTICLE IV
----------
Transfers, Withdrawals, and Admission of Additional Shareholders
----------------------------------------------------------------
4.1. Transfers and Encumbrance of Interests.
---------------------------------------
(a) TRANSFERS. No Shareholder shall cause VC Holding to transfer all or
any portion of its interest in Vitrocrisa, or agree to do so, without the
written consent of each of Libbey and Vitro. No Shareholder shall transfer all
or any portion of its interest in VC Holding or its rights under this Agreement,
or agree to do so, for a period of four (4) years from the date of this
Agreement. After such four-year period, either Shareholder may transfer all, but
not less than all, of its interest in VC Holding pursuant to the terms of
SECTION 4.2. A Shareholder may transfer or otherwise sell its shares pursuant to
this ARTICLE IV for any reason.
(b) ENCUMBRANCE. Except as otherwise provided in this Agreement, no
Shareholder may encumber, mortgage, pledge, hypothecate, or place a lien or make
any disposition similar thereto (collectively an "ENCUMBRANCE") upon all or any
portion of its interest in VC Holding or its rights under this Agreement, or
agree to do so, without the prior written consent of the other Shareholder,
which consent shall not be unreasonably withheld but may be subject to such
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<PAGE> 8
reasonable conditions as the other Shareholder may require. Except as otherwise
provided in this Agreement, no Shareholder shall cause VC Holding to place an
Encumbrance upon all or any portion of its interest in Vitrocrisa or its rights
under this Agreement, or agree to do so, without the prior written consent of
Libbey and Vitro, which consent shall not be unreasonably withheld but may be
subject to such reasonable condition as the other Shareholder may require.
(c) VIOLATION. Any purported transfer or Encumbrance in violation of
the terms of this Agreement shall be null and void and shall not be recognized
by VC Holding.
4.2. Shareholders First Option to Purchase Joint Venture Interest.
-------------------------------------------------------------
(a) DEFINITIONS. In this SECTION 4.2, the following words shall bear
the following meanings:
"JOINT VENTURE INTEREST" in the case of LGA3, (a) shares of VC
Holding capital stock held, directly
or indirectly, by LGA3, (b) shares of
Vitrocrisa capital stock held,
directly or indirectly, by LGA3, (c)
shares of Crisa Libbey, S.A. de C.V.,
a sociedad anonima with variable
capital organized under the laws of
the United Mexican States ("NEWCO
FINANCE"), capital stock held,
directly or indirectly, by LGA3, and
(d) membership interests in Crisa
Industrial, L.L.C., a Delaware
limited liability company (the
"LLC"), owned, directly or
indirectly, by LGA4 Corp., a Delaware
corporation and wholly-owned
subsidiary of Libbey; and in the case
of Vitro, (a) shares of VC Holding
capital stock held, directly or
indirectly, by Vitro, (b) shares of
Vitrocrisa capital stock held,
directly or indirectly, by Vitro, (c)
shares of Newco Finance capital stock
held, directly or indirectly, by
Vitro, and (d) membership interests
in the LLC owned, directly or
indirectly, by Vitro;
"PRESCRIBED PRICE" the price for the Joint Venture
Interest specified in the Transfer
Notice;
"PROPOSING TRANSFEROR" a Shareholder proposing to transfer
or dispose of all of its Joint
Venture Interest;
"PURCHASER" a Shareholder willing to purchase all
of the Joint Venture Interest
comprised in, or offered for purchase
pursuant to the serving of, a
Transfer Notice;
"TRANSFER NOTICE" a written notice served by a
Shareholder;
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<PAGE> 9
"100% GROUP" in the case of Vitro, Vitro or any
other person or entity that directly
or indirectly controls, is controlled
by, or is under common control with
Vitro, excluding Vitrocrisa (the
"VITRO 100% GROUP"), and in the case
of LGA3, Libbey or any other person
or entity that directly or indirectly
controls, is controlled by, or is
under common control with Libbey (the
"LIBBEY 100% GROUP").
(b) LIMITATION ON TRANSFERS. The right to transfer or dispose of shares
of VC Holding or any interest therein shall (save in respect of transfers made
pursuant to SECTION 4.2(i)) be subject to the restrictions set forth in this
SECTION 4.2. A Shareholder may not transfer or dispose of its shares in VC
Holding unless it transfers or disposes of all of its Joint Venture Interest.
Except as provided otherwise herein, no Shareholder may transfer or dispose of
its Joint Venture Interest (save in respect of transfers made pursuant to
SECTION 4.2(i) hereof) without the prior written consent of the other
Shareholder.
(c) FIRST OPTION. Before transferring or disposing of all of its Joint
Venture Interest (or any interest therein), the Proposing Transferor shall serve
a Transfer Notice on the other Shareholder stipulating the Prescribed Price.
Upon receipt of a Transfer Notice, the other Shareholder shall have the right
and first option for a period of thirty (30) days to purchase all of the Joint
Venture Interest at the Prescribed Price.
(d) TRANSFER ON EXERCISE OF OPTION. If the Proposing Transferor is
given notice under SECTION 4.2(c) that the other Shareholder has exercised its
option to purchase all, but not less than all, of the Joint Venture Interest,
the Proposing Transferor shall be bound, on payment of the Prescribed Price, to
transfer the Joint Venture Interest to the other Shareholder or its designees.
The sale and purchase shall be completed at the office of VC Holding, or at such
other place as the Proposing Transferor and the other Shareholder shall agree,
during normal business hours on the first business day after the expiration of
ninety (90) days after the expiration of the option period set forth in SECTION
4.2(c).
(e) TRANSFER ON EXPIRATION OR TERMINATION OF OPTION. If the option
granted by SECTION 4.2(c) is not exercised as to all of the Joint Venture
Interest, then such option shall become void AB INITIO and the Proposing
Transferor may sell all of the Joint Venture Interest to any third party free of
the restrictions set forth in this ARTICLE IV, subject to the following
restrictions: (i) the Joint Venture Interest may not be sold after the
expiration of one hundred eighty (180) days after the expiration of the option
period set forth in SECTION 4.2(c), (ii) the Joint Venture Interest must be sold
in a bona fide sale at a price not being less that the Prescribed Price, and
(iii) the third party transferee of the Joint Venture Interest must execute and
deliver an undertaking under which such third party shall become a party hereto,
to the Vitrocrisa, S.A. de C.V. Shareholders Agreement dated of even date (the
"VITROCRISA SHAREHOLDERS AGREEMENT"), to the Crisa Libbey, S.A. de C.V.
Shareholders Agreement dated of even date (the "NEWCO FINANCE SHAREHOLDERS
AGREEMENT"), and to the Limited Liability Company Agreement of Crisa Industrial,
L.L.C. dated of even date (the
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<PAGE> 10
"LLC AGREEMENT," and collectively with this Agreement, the Vitrocrisa
Shareholders Agreement, and the Newco Finance Shareholders Agreement, the "JOINT
VENTURE SHAREHOLDERS AGREEMENTS") in place of the Proposing Transferor.
(f) EXERCISE. An option granted by SECTION 4.2(c) may be exercised only
by the holder thereof and only by the delivery of a written notice of exercise
to the Proposing Transferor prior to the expiration of the relevant option
period.
(g) WAIVER. The restrictions imposed by this ARTICLE IV may be waived
in relation to any proposed transfer of a Shareholder's Joint Venture Interest
with the consent of all Shareholders who would otherwise have been entitled to
have such Joint Venture Interest offered to them in accordance herewith.
(h) FAILURE TO TIMELY EXERCISE. Failure of a Shareholder to exercise an
option granted by SECTION 4.2(c) prior to the expiration of the option period
shall be deemed to be a waiver of that option as of the date the option period
expired. The waiver of an option granted by SECTION 4.2(c) will not constitute a
waiver of any subsequent option granted by SECTION 4.2(c).
(i) INTRA-GROUP TRANSFERS. Notwithstanding the foregoing, all, but not
less than all, of a Shareholder's Joint Venture Interest may be transferred to
any member of the Vitro 100% Group (in the case of Vitro) and to any member of
the Libbey 100% Group (in the case of LGA3), but only (i) if the transferee is
already a party to each of the Joint Venture Shareholders Agreements or shall
have first agreed to adhere to and be bound by the provisions of each of the
Joint Venture Shareholders Agreements by executing and delivering in favor of
the other parties to each of the Joint Venture Shareholders Agreements an
undertaking to the intent and with the effect that from the date of such
undertaking, or, if later, the date of the transfer, the transferee shall become
a party to each of the Joint Venture Shareholders Agreements, in place of the
transferor, to the extent that the transferor ceases to hold shares in VC
Holding, Vitrocrisa, Newco Finance, and the LLC as a result of such transfer;
and (ii) on terms that the transferee shall re-transfer the relative Joint
Venture Interest to a member of the Vitro 100% Group (in the case of Vitro) or
to a member of the Libbey 100% Group (in the case of LGA3) on the same terms as
set forth in SECTION 4.2(i), prior to such transferee ceasing to be a member of
the Vitro 100% Group or the Libbey 100% Group (as the case may be).
(j) OPTION TO PARTICIPATE IN SALE. In lieu of exercising the option
granted in SECTION 4.2(c), a Shareholder may elect to participate in any sale by
the Proposing Transferor contemplated by SECTION 4.2 at the Prescribed Price.
Upon such election, the Shareholder will be entitled to sell all of its Joint
Venture Interest. The election to participate in a sale must be in writing and
must be delivered to the Proposing Transferor within thirty (30) days of receipt
of the Transfer Notice. Failure to timely deliver a written election to
participate in a sale within thirty (30) days of the Transfer Notice will
constitute a waiver of such Shareholder's right to participate in the sale.
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<PAGE> 11
ARTICLE V
---------
Termination
-----------
5.1. CAUSES OF TERMINATION. Except as otherwise provided in this
Agreement, this Agreement shall terminate:
(a) upon the unanimous written consent of the parties hereto;
(b) if VC Holding is declared bankrupt, has a receiver appointed
over all or substantially all of its assets, or is dissolved;
(c) by decree of a court of competent jurisdiction; or
(d) upon the merger of VC Holding into Vitrocrisa; provided,
however, that the parties expressly agree that, upon the
occurrence of such merger, the parties shall enter into a new
agreement having terms substantially similar to, and with the
same intent of, the terms of the Vitrocrisa Shareholders
Agreement.
5.2. EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an event of default ("EVENT OF DEFAULT") hereunder on the part
of the Shareholder with respect to whom such event occurs (the "DEFAULTING
PARTY") without any requirement of notice or passage of time except as
specifically set forth in any such subparagraph:
(a) the violation by a Shareholder or Libbey of any of the
restrictions set forth in ARTICLE IV;
(b) failure of a Shareholder's Member of the VC Holding Board to
vote for and use reasonable efforts to implement the Dividend
Policy as set forth in SECTION 2.2;
(c) the institution by a Shareholder or Libbey of a case or other
proceeding in bankruptcy;
(d) the institution against a Shareholder or Libbey of a case or
other proceeding in bankruptcy, which proceeding is not
dismissed, stayed, or discharged within a period of sixty (60)
days after the filing thereof;
(e) a proposed plan of arrangement or other action by a
Shareholder's or Libbey's creditors taken as a result of a
general meeting of the creditors of a Shareholder or Libbey,
respectively, which arrangement or other action is not
dismissed, stayed, or discharged within a period of sixty (60)
days after such general meeting;
(f) the appointment of a receiver, custodian, trustee, or like
officer, to take possession of the assets of a Shareholder or
Libbey if the pendency of said receivership would reasonably
tend to have a materially adverse effect upon the performance
by the
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<PAGE> 12
Shareholder or Libbey, respectively, of its obligations under
this Agreement, which receivership remains undischarged for a
period of sixty (60) days from the date of its imposition;
(g) attachment, execution, or other judicial seizure of all or any
substantial part of a Shareholder's or Libbey's assets or of a
Shareholder's or Libbey's shares of VC Holding, or any part
thereof, such attachment, execution, or seizure remaining
undismissed or undischarged for a period of sixty (60) days
after the levy thereof, if the occurrence of such attachment,
execution, or other judicial seizure would reasonably tend to
have a materially adverse effect upon the performance by the
Shareholder or Libbey, respectively, of its obligations under
this Agreement; provided, however, that said attachment,
execution, or seizure shall not constitute an Event of Default
hereunder if the Shareholder or Libbey, respectively, posts a
bond sufficient to fully satisfy the amount of such claim or
judgment within sixty (60) days after the levy thereof and the
respective Shareholder's or Libbey's assets are thereby
released from the lien of such attachment;
(h) material default in performance of or a failure to comply with
any obligations or undertakings of a Shareholder or Libbey
under the Covenant Not to Compete dated of even date by and
between Vitro and Libbey, and such default continues for a
period of thirty (30) days following notice of such default by
another Shareholder;
(i) the occurrence of an Event of Default (as defined therein)
under ARTICLE V of the Vitrocrisa Shareholders Agreement; and
(j) the occurrence of a Libbey Change of Control or a Vitro Change
of Control (both as defined in SECTION 5.6 below).
5.3. REMEDY ON DEFAULT. If an Event of Default is declared pursuant to
(a) SECTION 5.2(b) with respect to dividends to be paid for the performance of
VC Holding during fiscal years 1998, 1999, and 2000 or (b) SECTION 5.2(j) with
respect to a Libbey Change of Control or a Vitro Change of Control occurring on
or before the third anniversary of this Agreement, then such Shareholder may, in
addition to any other remedy at law or in equity, invoke the provisions of
SECTION 5.5. If an Event of Default is declared at any time (a) by a Shareholder
pursuant to any other subsection of SECTION 5.2, (b) by any party to this
Agreement pursuant to SECTION 5.2(b) with respect to dividends to be paid for
the performance of VC Holding after fiscal year 2000, or (c) by a Shareholder
pursuant to SECTION 5.2(j) with respect to a Libbey Change of Control or a Vitro
Change of Control occurring after the third anniversary of this Agreement, then
such Shareholder may, in addition to any other remedy at law or in equity,
invoke the provisions of SECTION 5.4.
5.4. BUY/SELL PROVISION. Within forty-five (45) days of an Event of
Default the non-defaulting party (the "OFFERING SHAREHOLDER") may deliver a
written offer (the "OFFER") to purchase all, but not less than all, of the other
Shareholder's Joint Venture Interest at a cash purchase price (the "OFFER
PRICE"), fully payable on or before sixty (60) days after notice of the Offer.
Within thirty (30) days after receipt of the Offer, the other Shareholder may
notify the Offering
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<PAGE> 13
Shareholder in writing that it will either (i) sell to the Offering Shareholder
all, but not less than all, of its Joint Venture Interest at the Offer Price on
or before the sixtieth day after receipt of the Offer or (ii) buy from the
Offering Shareholder all, but not less than all, of the Offering Shareholder's
Joint Venture Interest at (A) if Vitro is the Offering Shareholder, 51/49 of the
Offer Price or (B) if LGA3 is the Offering Shareholder, 49/51 of the Offer Price
(the "ADJUSTED OFFER PRICE"), on or before the sixtieth day after receipt of the
Offer. If the other Shareholder fails to notify the Offering Shareholder within
the thirty (30) day period that it will (i) sell all of its Joint Venture
Interest to the Offering Shareholder at the Offer Price or (ii) buy all of the
Joint Venture Interest from the Offering Shareholder at the Adjusted Offer
Price, then the Offering Shareholder must purchase in cash all, but not less
than all, of the other Shareholder's Joint Venture Interest at the Offer Price
and the other Shareholder must sell all, but not less than all, of its Joint
Venture Interest at the Offer Price, on or before the sixtieth day after notice
of the Offer. Upon the purchase or sale of shares pursuant to this SECTION 5.4,
this Agreement shall automatically terminate without further action by either
Shareholder. Failure by the non-defaulting party to deliver an Offer within
forty-five (45) days of notice of an Event of Default shall constitute a waiver
of such party's rights under this SECTION 5.4 with respect to the particular
Event of Default.
5.5. Dispute Resolution; Put/Call Option.
------------------------------------
(a) DISPUTE RESOLUTION. If an Event of Default is declared by a
Shareholder pursuant to (i) SECTION 5.2(b) with respect to dividends to be paid
for the performance of VC Holding during fiscal years 1998, 1999 and 2000 or
(ii) SECTION 5.2(j) with respect to a Libbey Change of Control or a Vitro Change
of Control occurring on or before the third anniversary of this Agreement, such
Shareholder shall promptly (but in no event later than thirty (30) days after
such Shareholder's knowledge of such Event of Default) send notice of such Event
of Default to the other Shareholder (the "DEFAULT NOTICE"). Upon receipt of the
Default Notice, the alleged defaulting party will have thirty (30) days to cure
such default. If the default is not cured within such thirty (30) day period or
if the party receiving the Default Notice contests that a default has occurred,
the chief executive officers of Libbey and Vitro (collectively, the "CEOS")
shall meet within ninety (90) days of the expiration of the cure period in a
good faith effort to resolve the Event of Default. If the Event of Default is
not resolved within such ninety (90) day period, the CEOs may select an
independent mediator and subject the dispute to non-binding mediation, which
must take place within thirty (30) days of the expiration of such ninety (90)
day period. If both CEOs do not consent to non-binding mediation or if the
mediation fails to resolve the Event of Default, the Event of Default shall be
submitted to binding arbitration to be conducted in accordance with the
provisions of SECTION 8.10(b), (c), (d), and (e), the sole purpose of which is
to decide whether a default exists and, if so, which Shareholder is in default.
The arbitrators will consider all issues currently in dispute between the
Shareholders and must certify their ruling in writing to each Shareholder (the
date of such certification is referred to herein as the "CERTIFICATION DATE").
If the arbitrators determine and certify that one Shareholder is in default,
then such Shareholder shall have thirty (30) days from the Certification Date to
cure the default. If the Event of Default is not cured within such thirty (30)
day period, the non-defaulting party may invoke the provisions of SECTION
5.5(b). If the arbitrators cannot resolve which party has caused the Event of
Default or determine that both Shareholders have caused the Event of Default and
so certify, then either of the Shareholders may invoke the provisions of SECTION
5.4 within thirty (30) days of the Certification Date.
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<PAGE> 14
(B) Put/Call Option with Penalty.
-----------------------------
(i) PUT/CALL OPTION WITH PENALTY. If the arbitrators determine
that Vitro or any member of the Vitro 100% Group is in default and such
default shall not be cured within thirty (30) days of the Certification
Date, then Libbey shall have the right to sell to Vitro, and Vitro
shall be obligated to purchase from Libbey, all, but not less than all,
of Libbey's Joint Venture Interest at forty-nine percent (49%) of the
Joint Venture Value (as defined below) multiplied by one hundred twenty
percent (120%) (the "PUT OPTION"). If the arbitrators determine that
Libbey or any member of the Libbey 100% Group is in default, then Vitro
shall have the right to buy from Libbey, and Libbey shall be obligated
to sell to Vitro, all, but not less than all, of Libbey's Joint Venture
Interest at forty-nine percent (49%) of the Joint Venture Value (as
defined below) multiplied by eighty percent (80%) (the "CALL OPTION").
The Put Option and the Call Option are collectively referred to herein
as the "OPTION."
(ii) VALUATION OF THE JOINT VENTURE. If the party in default
does not cure the Event of Default within thirty (30) days of the
Certification Date, the non-defaulting party may request a valuation of
the joint venture as a going concern, which will include a valuation of
the combined businesses of Vitrocrisa, VC Holding, Newco Finance, and
the LLC (collectively, the "JOINT VENTURE"), within thirty (30) days of
the expiration of the cure period. Within thirty (30) days of the date
of such request, the CEOs will meet, and each CEO will select one
investment banker, and the two selected investment bankers will then
select a third investment banker, for the purpose of establishing a
value for the Joint Venture as a going concern. Upon selection, each of
the three investment bankers will independently determine the value for
the Joint Venture as a going concern, the average of which will be
deemed to be the joint venture value (the "JOINT VENTURE VALUE").
(iii) EXERCISING OPTION. The non-defaulting party may exercise
the Option by giving the defaulting party written notice of its intent
to exercise the Option within thirty (30) days of the date that the
Joint Venture Value is determined by the investment bankers.
(iv) CLOSING OF OPTION. The closing of the Option will take
place at a time and place mutually agreed upon by Libbey and Vitro;
provided, however, that in no event will the closing take place more
than sixty (60) days from the date of the notice of exercise set forth
in SECTION 5.5(b)(iii).
(v) INVESTMENT BANKER FEES. Fees and expenses incurred in
connection with the determination of the Joint Venture Value,
including, without limitation, investment banker fees, will be paid by
the party in default as certified by the arbitrators; provided,
however, that all such fees and expenses will be paid by the
non-defaulting party if the non-defaulting party fails to exercise the
Option.
5.6. DEFINITION OF CHANGE OF CONTROL. In this ARTICLE V, the following
words shall bear the following meanings:
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<PAGE> 15
(a) "LIBBEY CHANGE OF CONTROL" shall be deemed to have occurred when
(i) any person or entity, together with any group of controlled companies not in
the Libbey 100% Group, acquires beneficial ownership, directly or indirectly, of
shares of stock of Libbey entitling such person or entity to exercise more than
50% of the total voting power of all classes of stock of Libbey entitled to vote
in elections of directors, or (ii) Libbey sells, leases or otherwise transfers
all or substantially all of its assets to any person or entity not in the Libbey
100% Group.
(b) "VITRO CHANGE OF CONTROL" shall be deemed to have occurred when (i)
any person or entity, together with any group of controlled companies not in the
Vitro 100% Group, acquires beneficial ownership, directly or indirectly, of
shares of stock of Vitro entitling such person or entity to exercise more than
50% of the total voting power of all classes of stock of Vitro entitled to vote
in elections of directors, or (ii) Vitro sells, leases or otherwise transfers
all or substantially all of its assets to any person or entity not in the Vitro
100% Group.
ARTICLE VI
----------
Deadlock and Impasse
--------------------
6.1. DEADLOCK. A "DEADLOCK EVENT" shall be deemed to occur at such time
as a Shareholder (the "NOTIFYING SHAREHOLDER") delivers to the other Shareholder
a notification in writing (the "DEADLOCK NOTICE") stating that, in the opinion
of the Notifying Shareholder, (a) the other Shareholder's chief executive
officer ("CEO") failed to meet with the Notifying Shareholder's CEO to resolve a
controversy or claim regarding a business and operational decision customarily
exercised by the management of VC Holding within the time limits set forth in
SECTION 8.10(a), (b) the other Shareholder has, or the other Shareholder's
Members of the VC Holding Board have, deliberately prevented the occurrence of a
quorum as set forth in SECTION 3.1 or SECTION 3.2(e), respectively, or (c) the
Shareholders or the VC Holding Board are unable to reach agreement on any of the
actions set forth in SECTION 3.1(a), (b), or (c) or SECTION 3.2(d),
respectively, and setting out the reasons therefor, and there is no resolution
or agreement that has been approved by both Shareholders (which approval may be
given or withheld, or made subject to such conditions, as are determined by the
Shareholders in their respective sole and absolute discretion) within seven (7)
days after delivery of the Deadlock Notice. A Deadlock Event shall be resolved
in accordance with the provisions of this ARTICLE VI.
6.2. RESOLUTION OF DEADLOCK. In the event of a Deadlock Event, either
Shareholder may deliver notice of a meeting of the Shareholders (an "EMERGENCY
NOTICE") to the other Shareholder, and they shall immediately meet at a time and
place mutually agreed upon or, if no time and place is agreeable, at VC
Holding's principal place of business at 10:00 a.m. on the fifteenth (15th) day
after the date of such Emergency Notice. Notwithstanding anything in this
Agreement to the contrary, if either Shareholder does not attend such meeting,
either Shareholder may immediately invoke the provisions of SECTION 6.4.
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<PAGE> 16
6.3. DECLARATION OF IMPASSE. If, at the meeting contemplated in SECTION
6.2, the Shareholders are unable to agree on a course of action to address the
reason for the meeting, any Shareholder may declare an impasse ("IMPASSE") by
giving written notice to the other Shareholder (an "IMPASSE NOTICE"). Within
twenty (20) days after receipt of such Impasse Notice, the CEO of each
Shareholder shall meet in a good faith effort to reach accords that will end the
Impasse. If a decision is not made by common accord that ends the Impasse within
thirty (30) days after the date that the CEOs meet, either Shareholder may
declare a final Impasse ("FINAL IMPASSE") by written notice to the other
Shareholder. Notwithstanding anything in this Agreement to the contrary, if
either CEO refuses to meet with the other CEO, either Shareholder may
immediately invoke the provisions of SECTION 6.4.
6.4. FINAL IMPASSE. Within forty-five (45) days of notice of Final
Impasse (or pursuant to the provisions of SECTIONS 6.2 or 6.3), either
Shareholder (the "OFFERING SHAREHOLDER") may deliver a written Offer to purchase
all, but not less than all, of the Joint Venture Interest held by the other
Shareholder at a cash Offer Price, fully payable on or before sixty (60) days
after notice of the Offer. Within thirty (30) days after receipt of the Offer,
the other Shareholder may notify the Offering Shareholder in writing that it
will either (a) sell to the Offering Shareholder all, but not less than all, of
its Joint Venture Interest at the Offer Price on or before the sixtieth day
after receipt of the Offer or (b) buy from the Offering Shareholder all, but not
less than all, of the Offering Shareholder's Joint Venture Interest at the
Adjusted Offer Price on or before the sixtieth day after receipt of the Offer.
If the other Shareholder fails to notify the Offering Shareholder within the
thirty (30) day period that it will (a) sell all of its Joint Venture Interest
to the Offering Shareholder at the Offer Price per share or (b) buy all of the
Joint Venture Interest from the Offering Shareholder at the Adjusted Offer
Price, then the Offering Shareholder must purchase in cash all, but not less
than all, of the other Shareholder's Joint Venture Interest at the Offer Price
and the other Shareholder must sell all, but not less than all, of its Joint
Venture Interest at the Offer Price, on or before the sixtieth day after notice
of the Offer. Upon the purchase or sale of shares pursuant to this SECTION 6.4,
this Agreement shall automatically terminate without further action. Failure by
either Shareholder to deliver an Offer within forty-five (45) days of notice of
a Final Impasse shall constitute a waiver of each Shareholder's rights under
this SECTION 6.4 with respect to the particular Final Impasse.
ARTICLE VII
-----------
Annual Operating Budgets for VC Holding
---------------------------------------
7.1. INITIAL STRATEGIC PLAN. The Shareholders agree that the Initial
Strategic Plan for VC Holding will be as set forth on EXHIBIT D to this
Agreement. This plan shall govern the operations of VC Holding for the first
fiscal year following the execution of this Agreement and until otherwise
modified in accordance with this ARTICLE VII.
7.2. SUBMISSION OF ANNUAL OPERATING BUDGET. At least forty-five (45)
days prior to the end of the calendar year following the expiration of the
Initial Strategic Plan and at least forty-
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<PAGE> 17
five (45) days prior to the end of each subsequent calendar year, the Managing
Director of VC Holding shall prepare a report on VC Holding's working capital
requirements and operating budget for the next succeeding calendar year, which
will contain an itemized estimate of the sources of revenue, the cost of goods
sold, selling, general, and administrative expenses, interest expense, net
income, and all expenditures proposed to be undertaken by VC Holding for such
year (the "PROPOSED BUDGET"). Upon preparation of the Proposed Budget, the
Managing Director shall promptly submit the Proposed Budget to the VC Holding
Board for consideration.
7.3. APPROVAL OF ANNUAL OPERATING BUDGET. Promptly after receipt of the
Proposed Budget, but in any event not less than thirty (30) days prior to the
end of the calendar year, the VC Holding Board shall meet to review the Proposed
Budget. Upon such review, the VC Holding Board will vote on the Proposed Budget.
If the Proposed Budget is approved by Extraordinary Directors Action, the
Proposed Budget shall become VC Holding's operating budget for the next
succeeding calendar year. If the Proposed Budget is not approved by
Extraordinary Directors Action, the Managing Director will revise the Proposed
Budget as soon as possible and resubmit it to the VC Holding Board for
consideration by Extraordinary Directors Action. The operating budget for the
previous calendar year shall continue to govern the operations of VC Holding
(but (a) revised to the extent the Shareholders agree and (b) in any event,
adjusted for inflation provided that such adjustment does not affect Libbey's
Expected Sales target (as defined in the Distribution Agreement, dated of even
date, by and among Vitro, Crisa Corporation, Vitrocrisa, Libbey and Libbey Glass
Inc.)) until such time as a Proposed Budget is approved by the VC Holding Board
by Extraordinary Directors Action.
ARTICLE VIII
------------
Miscellaneous Provisions
------------------------
8.1. GOVERNING LANGUAGE. Notwithstanding the translation of this
Agreement or any of its Exhibits into Spanish or any other language, the English
language version of this Agreement and any of its Schedules and Exhibits shall
be controlling and shall govern in any legal proceeding; provided, however, that
with respect to the Revised VC Holding Estatutos the Spanish language version
shall control.
8.2. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
8.3. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties related to the subject matter hereof and supersedes any prior
understandings, agreements, or representations by or among the parties, written
or oral, that may have related in any way to the subject matter hereof.
8.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective successors
and permitted assigns.
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<PAGE> 18
8.5. ASSIGNMENT. No party may assign or otherwise transfer any of its
rights or obligations under this Agreement by operation of law or otherwise,
without the prior written consent of the other parties, which consent shall not
be unreasonably withheld. Any purported or attempted assignment contrary to the
terms hereof shall be null and void and of no force or effect.
8.6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
8.7. HEADINGS. The article and section headings contained in this
Agreement are inserted for convenience only and are not part of this Agreement
and shall not affect in any way the meaning or interpretation of this Agreement.
8.8. NOTICES. All notices, demands, requests, and other communications
given hereunder shall be made in writing in English and shall be delivered in
person or by courier or overnight delivery service (delivery charge prepaid) or
telecopy (provided that the telecopy is confirmed by notice by certified mail,
courier, or overnight delivery service). Any notice, demand, request, or other
communication shall be effective only if and when it is received by the
addressee. For the purposes of the foregoing, the addresses and telecopier
numbers of the parties hereto are as follows:
If to Libbey or to LGA3, such notices shall be addressed to:
Libbey Inc.
300 Madison Avenue
Toledo, Ohio 43604
USA
Attn: General Counsel Fax No. (419) 325-2585
or to any subsequent address of which Libbey may notify the other parties in
writing.
If to Vitro, such notices shall be addressed to:
Vitro Corporativo, S.A. de C.V.
Av. del Roble 660
Col. Valle del Campestre
Garza Garcia, N.L.
Mexico 66225
Attn: Director Juridico Internacional Fax No. (528) 329-1272
or at any subsequent address of which Vitro may notify the other parties in
writing.
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<PAGE> 19
If to VC Holding, such notices shall be addressed to:
Vitrocrisa Holding, S.A. de C.V.
Doblado 1627 Nte.
Col. Terminal
Monterrey, N.L. 64580
Attn: Director General Fax No. (528) 329-3009
or at any subsequent address of which VC Holding may notify the other parties in
writing.
Any party hereto may change its address or telecopier number for the purposes
hereof by giving notice thereof to the other parties in the manner provided
herein.
8.9. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the substantive laws of the United Mexican States.
8.10. Dispute Resolution.
------------------
(a) The parties to this Agreement shall exert good faith
efforts to promptly resolve any controversy or claim arising out of or related
to this Agreement or the breach thereof within fifteen (15) days of receipt of
notice by one party from another party that such a controversy or claim exists.
If the parties fail to resolve such controversy or claim within such fifteen
(15) day period, they shall, unless otherwise provided in this Agreement, give
notice in writing to the CEOs, who will meet within fifteen (15) days of receipt
of such notice at a mutually acceptable time and place to attempt to resolve any
such controversy or claim. In the event the CEOs fail to meet or to resolve the
controversy or claim within such fifteen (15) day period, the controversy or
claim (other than business and operational decisions customarily exercised by
management in entities similar to Vitrocrisa) shall be settled by arbitration in
accordance with the then existing International Arbitration Rules of the
American Arbitration Association (hereinafter "AAA"), which shall commence upon
one party providing the other parties with a written demand for arbitration (the
"DEMAND FOR ARBITRATION").
(b) The arbitral tribunal shall be composed of three
arbitrators, and Libbey and Vitro shall each appoint one arbitrator. If Libbey
or Vitro fail to appoint an arbitrator within thirty (30) days after the date
the claimant's Demand for Arbitration is communicated to the other parties
(hereinafter the "NOTIFICATION DATE"), the AAA shall make such appointment. The
two arbitrators thus appointed shall attempt to agree upon the appointment of a
third arbitrator to serve as chairman of the arbitral tribunal. If said two
arbitrators fail to agree upon the appointment of such third arbitrator within
sixty (60) days after the Notification Date, the AAA shall make such
appointment. The place of arbitration shall be Dallas, Texas, United States of
America. The arbitral proceeding shall be conducted in the English language.
(c) To the extent that they may validly so agree, the parties
hereby exclude any right of appeal to any court in connection with the arbitral
award. Judgment upon the arbitral award
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<PAGE> 20
may be entered in any court having jurisdiction thereof or having jurisdiction
over any party or any party's assets.
(d) The validity of this SECTION 8.10 shall be governed by the
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral
Awards or the Inter-American Convention on International Commercial Arbitration,
to which Mexico and the United States of America have adhered.
(e) All costs of arbitration and enforcement thereof,
including reasonable attorneys' fees and court costs, costs of expert witnesses,
transportation, lodging, and meal costs of the parties and witnesses, costs of
transcript preparation, and other reasonable and necessary direct and incidental
costs shall be apportioned to one or more of the parties by a majority of the
arbitrators as they deem appropriate. In the event any party to this Agreement
commences legal proceedings to enforce the arbitral award, the expense of such
litigation (including reasonable attorneys' fees and costs of court) shall be
borne by the party or parties not prevailing therein.
(f) This SECTION 8.10 will not apply to any matter that is to
be resolved pursuant to ARTICLE V or pursuant to ARTICLE VI.
8.11. Confidentiality.
----------------
8.11.1. Each Shareholder shall use best efforts to maintain in
confidence and protect the confidentiality of all Confidential Information and
shall not disclose any Confidential Information to any third party not
affiliated with a Shareholder without the prior written consent of the other
Shareholder, provided that each Shareholder shall be entitled to use the
Confidential Information for any and all lawful purposes relating to its
business, operations and activities, including the financing and auditing
thereof. For purposes of this Agreement "Confidential Information" shall mean
all confidential or proprietary information of VC Holding relating to its
business or operations or of a Shareholder which is provided for or in
connection with the business or operations of VC Holding, which is provided to a
Shareholder or any of their respective Representatives (as defined below) by VC
Holding or by any other Shareholder or any of its Representatives and identified
as confidential or proprietary as required by Section 8.11.6; provided, however,
that the term shall not include (i) information known to the recipient prior to
receipt thereof from the other Shareholder or from VC Holding in connection with
this Agreement, (ii) information which, at the time of disclosure hereunder, is
already in the public domain, (iii) information which, after disclosure
hereunder, becomes part of the public domain by publication or otherwise through
no fault of the recipient, (iv) information obtained by a recipient from a third
party (not Affiliated with a Shareholder) in lawful possession of such
information which is not under a confidentiality obligation to the Person (as
defined below) from whom such information originated or (v) information that is
independently developed without the benefit of the Confidential Information.
8.11.2. Notwithstanding the provisions of Section 8.11.1, each
Shareholder may disclose Confidential Information to its or its Affiliates'
respective Representatives, provided that (a) such Representative has a need to
receive such Confidential Information to perform its
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<PAGE> 21
duties, (b) the disclosing Shareholder advises such Representative of the
confidential nature of the disclosed Confidential Information, and (c) the
disclosing Shareholder uses all reasonable efforts to cause such Representative
to protect and maintain the confidentiality of the disclosed Confidential
Information as provided herein.
8.11.3. Notwithstanding the provisions of Section 8.11.1, each
Shareholder may disclose Confidential Information (i) in connection with reports
of earnings of a Shareholder, (ii) to the extent, in the opinion of such
Shareholder's legal counsel, required by the laws applicable to such
Shareholder, including without limitation, all securities laws, or (iii) in
cases involving dispute resolution under the procedures set forth in 8.10.
8.11.4 For purposes of this Section 8.11, the following terms
shall have the meanings given them below:
"Representatives" shall mean, with respect to any Person, such Person's owners,
stockholders, partners, directors, officers, employees, agents, consultants,
advisors (including, without limitation, auditors, engineers, financial
analysts, financial managers and attorneys), and lenders;
"Person" shall mean any natural person, any corporation, partnership, limited
liability company, trust or other entity, and any governmental or judicial
authority, body or entity;
"Affiliate" shall mean, with respect to any Person, the following: (i) any other
Person that directly, or indirectly through one or more intermediaries, controls
such Person, (ii) any other Person that is controlled by or is under common
control with such Person, or (iii) any subsidiary of such Person.
8.11.5. The obligations of the Shareholders under this Section
8.11 shall survive the expiration or termination of this Agreement to the
maximum extent permitted by applicable law.
8.11.6. To be Confidential Information, all information
disclosed in tangible form shall be conspicuously marked confidential or
proprietary at the time of initial disclosure to the recipient and information
conveyed orally shall be identified as confidential or proprietary at the time
of initial disclosure to the recipient and summarized in writing, conspicuously
marked confidential or proprietary and given to the recipient within thirty days
after the initial disclosure. Information not so identified will not be deemed
to be Confidential Information.
8.11.7 In the event any Shareholder is requested or required
(by deposition, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or similar process), in
connection with any proceeding, to disclose any Confidential Information, the
Shareholder that is requested or required will give VC Holding and the other
Shareholder written notice of such request or requirement so that the
Shareholder receiving the notice or VC Holding may seek an appropriate
protective order or other remedy. In the event such protective order or other
remedy is not obtained in a timely manner, the Shareholder to whom such request
or requirement is directed will furnish only that portion of the
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<PAGE> 22
Confidential Information that, in the opinion of counsel to such Shareholder, is
legally required to be disclosed and, upon the request of the other Shareholder
or VC Holding, use its best efforts to obtain assurances that confidential
treatment will be accorded to such information.
8.12. AMENDMENTS AND WAIVERS. This Agreement may be amended, modified,
superseded, or canceled and any of its terms, covenants, representations,
warranties, undertakings, or conditions may be waived only by an instrument in
writing signed by (or by some person duly authorized by) all of the parties
hereto or, in the case of a waiver, by the party waiving compliance.
8.13. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
8.14. EXHIBITS AND SCHEDULES. The Exhibits and Schedules identified in
this Agreement are incorporated herein by reference and made a part hereof.
8.15. PRESS RELEASES AND ANNOUNCEMENTS. No party shall issue any press
release or announcement relating to the subject matter of this Agreement without
the prior written approval of the other parties hereto; provided, however, that
any party may make any public disclosure it believes in good faith is required
by law or regulation (in which case the disclosing party will advise the other
party prior to making the disclosure).
8.16. NO VIOLATION OF LAW. This Agreement shall not be construed to
require either party to be compelled, and no party will compel VC Holding, to do
any act or remain in any situation in violation of any law of a governmental
authority applicable to such party.
8.17. VITRO UNDERTAKING. Vitro agrees to do such things and take such
actions so as to enable VC Holding to fulfill its obligations under this
Agreement.
8.18. LIBBEY UNDERTAKING. Libbey agrees to do such things and take such
actions so as to enable LGA3 and VC Holding to fulfill its obligations under
this Agreement.
[remainder of page intentionally left blank]
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
LIBBEY INC.,
a Delaware corporation
By: /s/ Kenneth G. Wilkes
---------------------------------------
Name: Kenneth G. Wilkes
-------------------------------------
Title: V.P. CFO
------------------------------------
LGA3 CORP.,
a Delaware corporation
By: /s/ Kenneth G. Wilkes
---------------------------------------
Name: Kenneth G. Wilkes
-------------------------------------
Title: V.P. CFO
------------------------------------
VITRO, S.A.,
a sociedad anonima organized under the
laws of the United Mexican States
By: /s/ Claudio Del Ville
---------------------------------------
Name: Claudio Del Ville
-------------------------------------
Title: Attorney in Fact
------------------------------------
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<PAGE> 24
VITROCRISA HOLDING, S.A. DE C.V.,
a sociedad anonima with variable capital
organized under the laws of the United
Mexican States
By: /s/ Roberto B. Rubio
---------------------------------------
Name: Roberto B. Rubio
-------------------------------------
Title: Director General
------------------------------------
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<PAGE> 1
Exhibit 10.30
AMENDED AND RESTATED COVENANT NOT TO COMPETE
This Amended and Restated Covenant Not to Compete (this "AGREEMENT"),
dated to be effective as of August 29, 1997, is entered into by and between
LIBBEY INC., a corporation organized under the laws of the State of Delaware,
United States of America ("LIBBEY"), and VITRO, S.A., a Sociedad Anonima
organized under the laws of the United Mexican States ("VITRO").
INTRODUCTION
------------
Libbey and Vitro entered into that certain Covenant Not to Compete
dated August 29, 1997 (the "Covenant"). Libbey and Vitro have agreed to amend,
restate, and supersede the Covenant by the terms and provisions of this
Agreement.
Libbey (or one or more of its Affiliates, as defined below) is in the
business of manufacturing, distributing, and selling, among other things, glass
tableware and chinaware. Vitro (or one or more of its Affiliates) is in the
business of manufacturing, distributing, and selling, among other things, glass
tableware, chinaware, flatware, hollowware, and OEM products made of glass.
Libbey (and certain of its Affiliates) and Vitro (and certain of its
Affiliates) have entered into that certain Master Investment Agreement dated
August 29, 1997 (the "MASTER INVESTMENT AGREEMENT"), pursuant to which, among
other things, Libbey (or one or more of its Affiliates) has acquired, directly
or indirectly, from Vitro (or one or more of its Affiliates) (a) 49% of the
total issued and outstanding shares of common stock of Vitrocrisa Holding, S.A.
de C.V. ("VC HOLDING"), (b) 49% of the total issued and outstanding voting
shares of common stock of Vitrocrisa, S.A. de C.V. ("VITROCRISA"), (c) an
undivided 49% interest in certain assets and liabilities (the "CRISA ASSETS") of
Crisa Corporation, a Texas corporation ("CRISA"), and has contributed such
interest to Crisa Industrial L.L.C., a Delaware limited liability company
("LLC"), in exchange for a 49% membership interest in the LLC, and (d)
substantially all of the assets of WorldCrisa Corporation, a Delaware
corporation ("WORLDCRISA"). In addition, the parties have entered into
distribution agreements for the sale (i) by Libbey in the United States and
Canada of products manufactured by Vitrocrisa and (ii) by Vitrocrisa in the
United Mexican States, Central America, and South America of products
manufactured by Libbey Glass Inc., a Delaware corporation and wholly-owned
subsidiary of Libbey ("LIBBEY GLASS"). Libbey's obligations and commitments
under the Master Investment Agreement are collectively referred to herein as the
"LIBBEY INVESTMENT".
In consideration of the premises and mutual promises contained herein
and as a material inducement for the execution by Libbey and Vitro of the Master
Investment Agreement and the consummation of the transactions contemplated
thereby, including the Libbey Investment, together with other consideration, the
adequacy and receipt of which are hereby acknowledged, Libbey and Vitro agree as
follows:
<PAGE> 2
Section 1. DEFINITIONS. The following terms shall have the meanings set
forth beside such terms when used in this Agreement:
(a) "AFFILIATE" means with respect to each of the parties, any
other Person or party which at the relevant time, directly or
indirectly, controls, is controlled by, or is under common
control with, such party. The term "CONTROL" as used with
respect to any Person or party, means the possession, directly
or indirectly, of the power to direct or cause the direction
of the management and policies of such Person or party,
whether through the ownership of voting securities, by
contract, or otherwise.
(b) "DISTRIBUTION AGREEMENTS" means collectively the Amended and
Restated Distribution Agreement, dated of even date, by and
between Vitro, Vitrocrisa, Libbey, and Libbey Glass and the
Amended and Restated Distribution Agreement, dated of even
date, by and between Vitro, Crisa, Vitrocrisa, Libbey, and
Libbey Glass.
(c) "EXCLUDED PRODUCTS" means coffee pots, meter covers, glass
covers for cooking ware, blender jars, and lighting fixtures
sold to OEMs. In addition, "Excluded Products" shall mean any
other OEM article for sale to OEM customers that are not in
direct competition with Libbey Glass and are not sold to
Libbey Glass' customers, including those in the Foodservice,
Industrial, Premium, and Retail Channels of Distribution.
(d) "FOODSERVICE CHANNEL OF DISTRIBUTION" means sales to
foodservice distributors, foodservice importers, hotels,
restaurants, chain restaurants, bars, casinos, airlines,
cruise lines, breweries, microbreweries, hospitals, health
care facilities, penal institutions, colleges, all eating and
drinking establishments, independent cutters and decorators,
and warehouse clubs; internet sales in all the above segments;
and all other generally acknowledged distributor and end-user
segments of the traditional foodservice sector of the country
specified.
(e) "GLASS TABLEWARE" means those products that are the subject of
the exclusive distribution rights set forth in the
Distribution Agreements, namely the glass product lines
illustrated in the current 1997 catalogs of Libbey Glass,
Vitrocrisa, Crisa, and WorldCrisa; all glass products of the
type sold by Libbey Glass or Vitrocrisa, other than Excluded
Products, into the Foodservice, Industrial, Premium, or Retail
Channels of Distribution; future new products, other than
Excluded Products, of Libbey Glass or Vitrocrisa; and new and
existing products, other than Excluded Products, sold by
Libbey Glass or Vitrocrisa and specially differentiated
through packaging under the brand name, identification, or
logo of the purchaser (a "SPECIALLY DIFFERENTIATED PRODUCT").
The intent is that any glass tableware, other than Excluded
Products, that is destined for application in the Foodservice,
Industrial, Premium, and Retail Channels of Distribution are
the products that are Glass Tableware.
<PAGE> 3
(f) "INDUSTRIAL CHANNEL OF DISTRIBUTION" means sales to candle
packers, religious candle markets, distilleries, wineries,
floral distributors, mounters and fabricators, the cosmetic
industry, and all other generally acknowledged segments of the
traditional industrial sector of the country specified.
(g) "INDUSTRIAL GLASSWARE" means coffee pots, meter covers, glass
covers for cooking ware, blender jars, and lighting fixtures
sold to OEMs.
(h) "LIBBEY PARTIES" means Libbey, Libbey Glass, LGA 2, a Delaware
corporation, LGA 3, a Delaware corporation, and LGA 4, a
Delaware corporation.
(i) "LIBBEY TERRITORY" means those certain geographic areas set
forth on SCHEDULE 1 hereto.
(j) "OEM" means original equipment manufacturer.
(k) "PERSON" will be broadly construed to mean an individual,
corporation, partnership, association, trust, unincorporated
organization, governmental entity, or other entity or group.
(l) "PREMIUM CHANNEL OF DISTRIBUTION" means sales for use as a
premium or to promote another product, including, without
limitation, sales for such purposes to customers in the fast
food industry, oil industry, soft-drink industry, supermarket
continuity industry, premium packaging, and all other
generally acknowledged segments of the traditional premium and
incentive sector of the country specified.
(m) "RETAIL CHANNEL OF DISTRIBUTION" means sales to retail
distributors, mass merchant discount stores, department
stores, specialty retail stores, craft stores, supermarkets,
factory outlet stores, dinnerware companies, flea markets,
door-to-door direct sales, wholesale outlets, gift shops,
potteries, catalog showrooms, warehouse clubs, home shopping
networks, internet sales for consumer use, private label sales
for any class of retailer, importers, and all other generally
acknowledged segments of the traditional retail sector of the
country specified.
(n) "VITRO PARTIES" means Vitro, VC Holding, Vitrocrisa,
WorldCrisa, and Crisa.
(o) "VITRO TERRITORY" means those certain geographic areas set
forth on SCHEDULE 2 hereto.
<PAGE> 4
Section 2. AMENDED AND RESTATED AGREEMENT. The terms and provisions of
the Covenant are hereby canceled and superseded by the terms and provisions of
this Agreement. All references in any other agreement to the Covenant Not to
Compete dated August 29, 1997 by and between Vitro and Libbey shall be deemed to
refer to this Agreement, and all references to specific provisions of such
Covenant Not to Compete contained in any other agreement shall refer to the
corresponding provisions of this Agreement.
Section 3. AGREEMENT OF NON-COMPETITION.
(a) Vitro and Libbey acknowledge, for themselves and on behalf of
the Vitro Parties and Libbey Parties, respectively, that this
SECTION 3 is entered into as a material inducement for the
execution of the Master Investment Agreement and the
consummation of the transactions contemplated thereby,
including the Libbey Investment.
(b) For a period beginning on the date of this Agreement and
ending on the date that either Libbey or an Affiliate of
Libbey, on the one part, or Vitro or an Affiliate of Vitro, on
the other part, cease to own, directly or indirectly, at least
twenty-five percent (25%) of the total issued and outstanding
voting shares of Vitrocrisa (the "TRANSFER DATE"):
(i) Except as provided in the Distribution Agreements,
Vitro will not, and Vitro will cause its Affiliates
not to, sell any Glass Tableware in the Libbey
Territory, unless such sales are to or through Libbey
or an Affiliate of Libbey; provided, however, that
the restriction set forth in this SECTION 3(b)(i)
shall immediately cease if Libbey or an Affiliate of
Libbey ceases to be the distributor for Vitrocrisa in
the Libbey Territory under the applicable
Distribution Agreement.
(ii) Except as provided in the Distribution Agreements,
Libbey will not, and Libbey will cause its Affiliates
not to, sell any Glass Tableware or Industrial
Glassware in the Vitro Territory, unless such sales
are to or through Vitrocrisa; provided, however, that
the restriction set forth in this SECTION 3(b)(ii)
shall immediately cease if Vitrocrisa ceases to be
the distributor for Libbey Glass in the Vitro
Territory under the applicable Distribution
Agreement.
(iii) Except as provided in the Distribution Agreements,
Vitro will not, and Vitro will cause its Affiliates
not to, sell any Glass Tableware or Industrial
Glassware in the Vitro Territory and the Libbey
Territory, unless such sales are to or through
Vitrocrisa, except as otherwise provided in SECTION
3(e)(i) with respect to Industrial Glassware.
(c) For a period beginning on the date of this Agreement and
ending on the third anniversary of the Closing Date (as
defined in the Master Investment Agreement),
<PAGE> 5
Vitro will not, and Vitro will cause its Affiliates not to,
sell in the Libbey Territory any flatware, hollowware, or
chinaware in competition with Libbey and its Affiliates in
their operation of the business formerly operated as
WorldCrisa and purchased from Vitro or a Vitro Affiliate
pursuant to the Master Investment Agreement.
(d) For a period beginning on the date of this Agreement and
ending (i) on the date three years after the Transfer Date,
(A) Vitro will not, and Vitro will cause its Affiliates not
to, engage, directly or indirectly, whether as owner, partner,
stockholder, investor (except that such entities may
beneficially own less than five percent (5%) of the common
equity of a publicly traded company, the shares of which are
listed on a major stock exchange), in the manufacture of Glass
Tableware in the Libbey Territory; and (B) Libbey will not,
and Libbey will cause its Affiliates not to, engage, directly
or indirectly, whether as owner, partner, stockholder,
investor (except that such entities may beneficially own less
than five percent (5%) of the common equity of a publicly
traded company, the shares of which are listed on a major
stock exchange), in the manufacture of Glass Tableware in the
geographic area set forth on SCHEDULE 3 hereto; and (ii) on
the Transfer Date, Libbey will not, and Libbey will cause its
Affiliates not to, engage, directly or indirectly, whether as
owner, partner, stockholder, investor (except that such
entities may beneficially own less than five percent (5%) of
the common equity of a publicly traded company, the shares of
which are listed on a major stock exchange) in the manufacture
of Glass Tableware in the Vitro Territory located outside of
the geographic area set forth on SCHEDULE 3 hereto.
(e) Notwithstanding SECTION 3(d), for a period beginning on the
date of this Agreement and ending on the Transfer Date:
(i) Vitro will not, and Vitro will cause its Affiliates
not to, develop and pursue future equity investment
opportunities in manufacturing or distribution
facilities located in the Vitro Territory (outside of
its current facilities located at Monterrey, Mexico)
for the manufacture, distribution, or sale of Glass
Tableware or Industrial Glassware, unless such
investment opportunities are developed and pursued
through Vitrocrisa; provided, however, if Libbey
decides that Vitrocrisa should not develop and pursue
such investment opportunities for Industrial
Glassware, then Vitro or its Affiliates shall have
the right to develop and pursue such investment
opportunities on its own.
(ii) Subject to SECTION 3(e)(iii), Libbey will not, and
Libbey will cause its Affiliates not to, develop and
pursue future equity investment opportunities in
manufacturing or distribution facilities located in
the Vitro Territory (outside of Vitrocrisa) for the
manufacture, distribution, or sale of Glass Tableware
or Industrial Glassware, unless such investment
opportunities are developed and pursued through
Vitrocrisa.
<PAGE> 6
(iii) Notwithstanding SECTION 3(e)(ii), Vitro agrees to
allow as the only exception for investment
opportunities in the Vitro Territory outside the
currently defined share participation in Vitrocrisa,
that if a business opportunity is brought by Libbey
relative to that certain company set forth on
SCHEDULE 4 hereto (the "JOINT INVESTMENT COMPANY"),
both partners will negotiate in good faith at that
time with the joint goals to accommodate the needs of
the other partner under a share participation of
Vitro of up to and including 50%; provided, however,
that in such a case (whether or not Vitro so
participates), all exports of Glass Tableware and
Industrial Glassware by the Joint Investment Company
from the country of its domicile as set forth on
SCHEDULE 4 hereto (its "HOME COUNTRY") to any other
country in the Vitro Territory will be exclusively
channeled through Vitrocrisa, but the Joint
Investment Company may sell its Glass Tableware and
Industrial Glassware in its Home Country. Performance
criteria will be developed for the first three (3)
years of such distribution, which will be similar in
principle to the performance clause developed for
Libbey Glass under the Distribution Agreement where
Libbey serves as the exclusive distributor of
Vitrocrisa for Glass Tableware in the Libbey
Territory. After the Closing Date (as defined in the
Master Investment Agreement), it is understood that a
letter of intent will be drafted and signed by both
parties in which the points, positions, and desires
of each party relative to a future possible
investment opportunity with the Joint Investment
Company (which will be based upon the arrangements
relating to Vitrocrisa between the parties) are
clearly expressed to serve as a guideline to be used
in a business-like and "good faith" effort to respect
and accommodate them in the negotiation process at
that time.
(f) If any provision of this SECTION 3 should be found by any
court of competent jurisdiction to be unreasonable by reason
of its being too broad as to the period of time, territory,
and/or scope, then, and in that event, such provision will
nevertheless remain valid and fully effective, but will be
considered to be amended so that the period of time,
territory, and/or scope set forth will be changed to be the
maximum period of time, the largest territory, and/or the
broadest scope, as the case may be, which would be found
reasonable and enforceable by such court.
(g) Vitro acknowledges that Libbey Glass is a party to technical
assistance agreements with certain companies throughout the
world and agrees that this Agreement shall not prohibit Libbey
Glass from licensing and continuing to license its technology
throughout the world; provided, however, that Libbey Glass
agrees to advise and consult Vitrocrisa before entering into
any new license arrangement in the geographic areas set forth
on SCHEDULE 5 hereto or renewing any existing licenses in the
geographic areas set forth on SCHEDULE 5 hereto for the
licensing of technology and the provision of technical
assistance to existing and
<PAGE> 7
potential licensees, but both parties agree that the ultimate
decision to enter into such licenses or to provide such
technical assistance rests in the sole and absolute discretion
of Libbey Glass.
4. ENFORCEMENT; NON-WAIVER.
(a) Each party hereby acknowledges and agrees that the failure of
it or of any of its Affiliates to perform its agreements and
covenants under this Agreement, including, without limitation,
any violation of the agreements and covenants set forth in
SECTION 3, will cause irreparable injury to the other party
and its Affiliates for which damages, even if available, will
not be an adequate remedy. Accordingly, each party hereby
consents to the issuance of injunctive relief by any court of
competent jurisdiction in the United States of America (or of
any state thereof) or of the United States of Mexico having
jurisdiction over it to compel performance of such party's
obligations and to the granting by any court of the remedy of
specific performance of its obligations under this Agreement,
in addition to any other remedy to which the other party may
be entitled, at law or in equity.
(b) A failure by either party to exercise or enforce any rights
conferred upon it by this Agreement shall not be deemed to be
a waiver of any such rights or operate so as to bar the
exercise or enforcement thereof at any subsequent time or
times, and all express rights granted to such party hereunder
shall be in addition to any rights that such party may have
under the general law in respect of a breach hereof. No waiver
by either party of any condition or the breach of any term,
covenant, representation, warranty, or undertaking contained
in this Agreement, whether by conduct or otherwise, in any one
or more instances shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach
or a waiver of any other condition or deemed to be or
construed as the breach of any other term, covenant,
representation, warranty, or undertaking in this Agreement.
Section 5. MISCELLANEOUS.
(a) ENGLISH AS CONTROLLING LANGUAGE. Notwithstanding the
translation of this Agreement into Spanish or any other
language, the English language version of this Agreement shall
be controlling and shall govern in any legal proceeding or
arbitration.
(b) NO THIRD PARTY RIGHTS. This Agreement shall not confer any
rights or remedies upon any person other than the parties and
their respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement and the agreements referred
to herein constitute the entire agreement among the parties
related to the subject matter hereof and supersedes any prior
understandings, agreements, or representations
<PAGE> 8
by or among the parties, written or oral, that may have
related in any way to the subject matter hereof.
(d) ASSIGNMENT. No party may assign or otherwise transfer any of
its rights or obligations under this Agreement without the
prior written consent of the other party. Any purported or
attempted assignment contrary to the terms hereof shall be
null and void and of no force or effect. This Agreement shall
be binding upon and inure to the benefit of the parties named
herein and their respective successors and permitted assigns.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but
all of which together will constitute one and the same
instrument.
(f) CAPTIONS. The sections headings contained in this Agreement
are inserted for convenience only and are not part of this
Agreement and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, demands, requests, and other
communications given hereunder shall be made in writing in
English and shall be delivered in person or by courier or
overnight delivery service (delivery charge prepaid) or
telecopy (provided that the telecopy is confirmed by notice by
certified mail, courier, or overnight delivery service). Any
notice, demand, request, or other communication shall be
effective only if and when it is received by the addressee.
For the purposes of the foregoing, the addresses and
telecopier numbers of the parties hereto are as follows:
If to Libbey, such notices shall be addressed to:
Libbey Inc.
300 Madison Avenue
Toledo, Ohio 43604
USA
Attn: General Counsel Fax No. (419) 325-2585
or to any subsequent address of which Libbey may notify the
other parties in writing.
If to Vitro, such notices shall be addressed to:
<TABLE>
<CAPTION>
<S> <C>
Vitro Corporativo, S.A. de C.V.
Av. del Roble 660
Col. Valle del Campestre
Garza Garcia, N.L.
Mexico 66225
Attn: Director Juridico Internacional Fax No. (528) 329-1372
</TABLE>
<PAGE> 9
or at any subsequent address of which Vitro may notify the
other parties in writing.
Any party hereto may change its address or telecopier number
for the purposes hereof by giving notice thereof to the other
parties in the manner provided herein.
(h) AMENDMENTS. This Agreement may be amended, modified,
superseded, or canceled and any of its terms, covenants,
representations, warranties, undertakings, or conditions may
be waived only by an instrument in writing signed by (or by
some person duly authorized by) all of the parties hereto or,
in the case of a waiver, by the party waiving compliance.
(i) REMEDIES. Each party to this Agreement agrees that all rights
and remedies under this Agreement are cumulative and that no
election or exercise of any right or remedy will be deemed an
exclusion of any other right or remedy.
(j) GOVERNING LAW. This Agreement will be governed by, and
construed in accordance with, the substantive laws of the
State of Texas, without giving effect to any conflicts-of-law,
rule, or principle that might require the application of the
laws of another jurisdiction.
(k) ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall,
following a demand from either party (hereinafter, the "DEMAND
FOR ARBITRATION") be settled by arbitration in accordance with
the then existing International Arbitration Rules of the
American Arbitration Association (hereinafter "AAA").
Notwithstanding the foregoing, the parties hereby agree that
either party may seek injunctive relief in accordance with
SECTION 4, and the parties further agree that if a party seeks
injunctive relief in accordance with SECTION 4, such party
does not thereby waive its rights to arbitration under this
SECTION 5(k).
The arbitral tribunal shall be composed of three arbitrators.
Each party, namely Libbey and Vitro, shall appoint one
Arbitrator. If a party fails to appoint an arbitrator within
thirty (30) days after the date the claimant's Demand for
Arbitration is communicated to the other parties (hereinafter
the "NOTIFICATION DATE"), the AAA shall make such appointment.
The two arbitrators thus appointed shall attempt to agree upon
the appointment of a third arbitrator to serve as chairman of
the arbitral tribunal. If said two arbitrators fail to agree
upon the appointment of such third arbitrator within sixty
(60) days after the Notification Date, the AAA shall make such
appointment. The place of arbitration shall be Dallas, Texas,
United States of America. The arbitral proceeding shall be
conducted in the English language. To the extent that they may
validly so agree, the parties hereby exclude any right of
appeal to any court in connection with the arbitral award.
Judgment
<PAGE> 10
upon the arbitral award may be entered in any court having
jurisdiction thereof or having jurisdiction over either party
or either party's assets.
The validity of this SECTION 5(k) shall be governed by the
United Nations Convention on the Recognition and Enforcement
of Foreign Arbitral Awards or the Inter-American Convention on
International Commercial Arbitration, to which Mexico and the
United States of America have adhered.
All costs of arbitration and enforcement thereof, including
reasonable attorneys' fees and court costs, costs of expert
witnesses, transportation, lodging and meal costs of the
parties and witnesses, costs of transcript preparation, and
other reasonable and necessary direct and incidental costs
shall be apportioned to one or both parties by a majority of
the arbitrators as they deem appropriate. In the event any
party to this Agreement commences legal proceedings to enforce
the arbitral award, the expense of such litigation (including
reasonable attorneys' fees and costs of court) shall be borne
by the party not prevailing therein.
[remainder of page intentionally left blank]
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
<TABLE>
<CAPTION>
LIBBEY, INC.
<S> <C>
By: /s/ Kenneth G. Wilkes
----------------------------------------------
Name: Kenneth G. Wilkes
--------------------------------------------
Title: Vice President and Chief Financial Officer
-------------------------------------------
VITRO, S.A.
By: /s/ Claudio Del Ville
----------------------------------------------
Name: Claudio Del Ville
--------------------------------------------
Title: Attorney in Fact
-------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 10.31
CRISA LIBBEY, S.A. DE C.V.
SHAREHOLDERS AGREEMENT
This SHAREHOLDERS AGREEMENT is made and entered effective as of August
29, 1997, by and among LIBBEY INC., a corporation organized under the laws of
the State of Delaware ("LIBBEY"), LGA3 CORP., a corporation organized under the
laws of the State of Delaware and a wholly-owned subsidiary of Libbey ("LGA3"),
VITRO, S.A., a sociedad anonima organized under the laws of the United Mexican
States ("VITRO"), and CRISA LIBBEY, S.A. DE C.V., a sociedad anonima with
variable capital organized under the laws of the United Mexican States ("NEWCO
FINANCE"). LGA3 and Vitro are sometimes singularly referred to herein as a
"SHAREHOLDER" and collectively referred to herein as the "SHAREHOLDERS."
Introduction
------------
Libbey (and certain of its subsidiaries) and Vitro (and certain of its
subsidiaries) have entered into that certain Master Investment Agreement dated
of even date (the "MASTER INVESTMENT AGREEMENT") pursuant to which, among other
things, (a) Vitro acquired all of the Series A Shares of Newco Finance, which
represents fifty-one percent (51%) of the total issued and outstanding capital
stock of Newco Finance, for an aggregate purchase price of US$15,300,000, (b)
LGA3 acquired all of the Series B Shares of Newco Finance, which represents
forty-nine percent (49%) of the total issued and outstanding capital stock of
Newco Finance, for an aggregate purchase price of US$14,700,000, and (c) each of
Vitro and LGA3 agreed to cause Newco Finance to purchase from Vitro
US$30,000,000 of intercompany debt (the "INTERCOMPANY DEBT") due Vitro from
Vitrocrisa Holding, S.A. de C.V., a sociedad anonima with variable capital
organized under the laws of the United Mexican States ("VC HOLDING").
Libbey, LGA3, Vitro, and Newco Finance each desire to enter into this
Agreement for the purpose of setting forth the principles for the operation of
Newco Finance, which shall be limited to holding the Intercompany Debt and
distributing the income earned therefrom to its Shareholders in the form of
dividends. Therefore, in consideration of the mutual promises contained herein,
together with other consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
Basic Structure of Newco Finance
--------------------------------
1.1. FORM. Newco Finance was incorporated pursuant to public deed
number 8,980, dated August 22, 1997, granted before Notary Public number 25 for
the District of Monterrey, State of Nuevo Leon, Lic. Oscar Elizondo Garza,
recorded with the Public Registry of Commerce for the District of Monterrey,
State of Nuevo Leon on August 28, 1997. A copy of the Crisa Libbey, S.A. de C.V.
Estatutos is attached hereto as EXHIBIT A.
<PAGE> 2
1.2. PLACE OF BUSINESS. The corporate domicile and principal place of
business of Newco Finance shall continue to be located in Monterrey, Nuevo Leon,
or such other place as the Shareholders may from time to time designate.
1.3. PURPOSE. The purposes for which Newco Finance is organized
include, but are not limited to, the following: (a) to purchase and hold the
Intercompany Debt, (b) to declare and distribute dividends to its Shareholders
from the income received on the Intercompany Debt, and (c) to engage in such
activities as are lawful and approved by the unanimous vote of the Shareholders.
1.4. ENDORSEMENT OF CERTIFICATES. At the Closing (as defined in the
Master Investment Agreement), Newco Finance shall issue stock certificates and
deliver them to the Shareholders, which shall comply with the terms of the Crisa
Libbey, S.A. de C.V. Estatutos and shall contain substantially the following
legend:
"The shares represented by this certificate are subject to and are
transferable only in compliance with a Shareholders Agreement by and
among Libbey Inc., a corporation organized under the laws of the State
of Delaware, LGA3 Corp., a corporation organized under the laws of the
State of Delaware, Vitro, S.A., a sociedad anonima organized under the
laws of the United Mexican States, and Crisa Libbey, S.A. de C.V., a
sociedad anonima with variable capital organized under the laws of the
United Mexican States, as the same may be amended from time to time,
dated August 29, 1997. Title to the shares represented hereby can be
transferred only in accordance with the terms of said Shareholders
Agreement. Any purported transfer of title other than in the manner
provided in the Shareholders Agreement is void, without force and
effect, and will not be recognized by the corporation."
Newco Finance shall not transfer any shares or issue or reissue any certificates
except as provided in this Agreement.
ARTICLE II
----------
Financial Arrangements
----------------------
2.1. CAPITAL STOCK OF NEWCO FINANCE. The capital stock of Newco Finance
will be divided into Class I and Class II shares, representing the fixed and
variable portions of such capital, respectively. In addition, both Class I and
Class II shares will be divided into Series A Shares and Series B Shares,
initially representing 51% and 49% of the capital stock, respectively. Both
Series A Shares and Series B Shares will be free subscription shares. Vitro will
initially own all of the issued and outstanding Series A Shares, and LGA3 will
initially own all of the issued and outstanding Series B Shares. The Series A
Shares and Series B Shares will be deemed to constitute separate classes of
shares for purposes as are specifically provided herein or in the Crisa Libbey,
S.A. de C.V. Estatutos, but otherwise shall rank PARI PASSU in all respects as
if they constituted one class of shares.
-2-
<PAGE> 3
2.2. CASH REMITTANCE TO SHAREHOLDERS. Attached hereto as EXHIBIT B is a
policy of cash remittance, dividends, and other remuneration to be paid no less
than annually by Newco Finance to the Shareholders (the "DIVIDEND POLICY"). Each
of the Shareholders will cause their respective members of the board of
directors of Newco Finance (the "NEWCO FINANCE BOARD") to vote for the Dividend
Policy and cause monies to be paid to the Shareholders in accordance with the
Dividend Policy.
ARTICLE III
-----------
Management of Newco Finance
---------------------------
3.1. THE SHAREHOLDERS MEETINGS; QUORUM. The shareholders meeting is the
supreme authority of Newco Finance. The shareholders meetings may be ordinary
(an "ORDINARY SHAREHOLDERS MEETING") or extraordinary (an "EXTRAORDINARY
SHAREHOLDERS MEETING"), depending on the matters to be discussed at each
meeting. They will be held at the corporate domicile of Newco Finance in
accordance with the call for the meeting made pursuant to the Crisa Libbey, S.A.
de C.V. Estatutos. According to the General Law of Mercantile Companies of
Mexico, resolutions may be adopted outside of a shareholders meeting by
unanimous vote of the Shareholders, provided that the Shareholders subsequently
confirm the adoption of such resolutions in writing to the Chairman or the
Secretary of the Newco Finance Board. An Ordinary Shareholders Meeting will be
held at least once a year within the four (4) months following the closing of
each fiscal period. Ordinary Shareholders Meetings may be those called to
discuss any of the matters that are not expressly reserved by law or this
Agreement to the Extraordinary Shareholders Meeting. The matters reserved for
Extraordinary Shareholders Meetings are:
(a) any matter that is required to be resolved by the
Extraordinary Shareholders Meeting according to Article 182 of
the General Law of Mercantile Companies;
(b) the declaration or payment of dividends pursuant to the
Dividend Policy; and
(c) any matter specified in SECTION 3.2(d) that is referred to the
Shareholders by the Newco Finance Board.
An Ordinary Shareholders Meeting shall take place by virtue of a first
call of any Shareholder if the holders of fifty-five percent (55%) of the
capital stock are present or duly represented thereat. If such a quorum does not
exist for the holding of the meeting by virtue of the first call, the call shall
be repeated, and the meeting shall be considered validly held whatever number of
Shareholders are present or represented. Resolutions in Ordinary Shareholders
Meetings shall be adopted by the affirmative vote of the majority of the shares
entitled to vote that are present or represented thereat.
An Extraordinary Shareholders Meeting shall be held by virtue of the
first call if the Shareholders holding at least seventy-five percent (75%) of
the capital stock are present or represented thereat. If such a quorum does not
exist for such meeting, the call shall be repeated, and the meeting shall be
considered validly held only with the attendance of Shareholders or their
proxies representing at least fifty-five percent (55%) of the capital stock of
Newco Finance. Resolutions in Extraordinary Shareholders Meetings held either in
first or subsequent calls shall be adopted by the affirmative vote of
Shareholders or their
-3-
<PAGE> 4
representatives holding at least fifty-five percent (55%) of the capital stock
of Newco Finance.
If holders of seventy-five percent (75%) of the capital stock are not
present or represented at the first call of any Extraordinary Shareholders
Meeting and if holders of fifty-five percent (55%) of the capital stock are not
present or represented at any repeated call of such meeting, either Shareholder
shall have the right, but shall not be obligated, to declare the occurrence of a
Deadlock Event under SECTION 6.1.
In addition to any other requirement imposed by Mexican law, calls for
an Ordinary Shareholders Meeting of Newco Finance and calls for an Extraordinary
Shareholders Meeting of Newco Finance must be in writing and must be delivered
to each Shareholder at least fifteen (15) days prior to such meeting, unless
such notice is waived by the Shareholders in writing.
3.2. BOARD OF DIRECTORS.
(a) COMPOSITION AND APPOINTMENT. The Newco Finance Board shall consist
of seven (7) members (hereinafter referred to singularly as a "MEMBER" and
collectively as "MEMBERS"). The Members shall not be required to be Mexican
nationals. As the owner of Series A Shares of Newco Finance, Vitro shall be
entitled, in its sole and absolute discretion, to designate four (4) Members
(and their alternates) to the Newco Finance Board (hereinafter referred to
singularly as a "VITRO MEMBER" and collectively as "VITRO MEMBERS"), provided
that each such designee is also a member or alternate, as the case may be, of
the Board of Directors of Vitrocrisa, S.A. de C.V., a sociedad anonima with
variable capital organized under the laws of the United Mexican States
("Vitrocrisa"), and VC Holding. As the owner of Series B Shares of Newco
Finance, LGA3 shall be entitled, in its sole and absolute discretion, to
designate three (3) Members (and their alternates) to the Newco Finance Board
(hereinafter referred to singularly as a "LIBBEY MEMBER" and collectively as
"LIBBEY MEMBERS"), provided that each such designee is also a member or
alternate, as the case may be, of the Board of Directors of Vitrocrisa and VC
Holding. The names of the Members of the Newco Finance Board as at the date of
this Agreement and their alternates are set out in EXHIBIT C attached hereto.
(b) REMOVAL. Each Shareholder, in its sole and absolute discretion, may
remove and, in conjunction therewith, shall replace any or all of the Members
and alternates it has designated. Notwithstanding the foregoing, each
Shareholder hereby agrees to consult with the other Shareholder in connection
with the designation, removal, and replacement of any Member and alternate of
the Newco Finance Board and to consider reasonable objections of any Shareholder
to the designation, removal, and replacement of any Member and alternate of the
Newco Finance Board; provided, however, such consultation shall not affect the
sole and absolute discretion of each Shareholder to designate, remove, or
replace the Members and alternates it has designated. Any alternate may
substitute for any Member designated by such Shareholder at any meeting of the
Newco Finance Board. No Member or alternate of the Newco Finance Board shall be
removed or replaced other than by the Shareholder that designated such Member or
alternate.
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<PAGE> 5
(c) POWER AND AUTHORITY OF THE NEWCO FINANCE BOARD. Except for those
matters set forth in SECTION 3.1 requiring approval of the Shareholders at an
Extraordinary Shareholders Meeting, the Shareholders shall, and do hereby,
delegate all power and authority for the operations of Newco Finance to the
Newco Finance Board, which, by way of illustration and not limitation, shall
include the power and authority to:
(i) direct, manage, control, and operate Newco Finance;
(ii) set strategic direction for Newco Finance;
(iii) direct all of Newco Finance's business and management
policies and specific business and operational
decisions in the ordinary course of business;
(iv) acquire and dispose of assets of Newco Finance;
(v) control litigation and administrative proceedings of
Newco Finance;
(vi) enter into contracts on behalf of Newco Finance; and
(vii) assume all other responsibilities not specifically
reserved to the Shareholders by this Agreement or by
law, including powers under Article 2554 of the Civil
Code for the Federal District and Articles 9 and 85
of the General Law of Negotiable Instruments and
Credit Operations.
(d) EXTRAORDINARY DIRECTORS ACTIONS. Notwithstanding anything contained
herein to the contrary, the following matters, except for those matters already
included in the Initial Strategic Plan (as defined in ARTICLE VII), shall not be
deemed approved by the Newco Finance Board unless (i) approved by a majority of
the Members of the Newco Finance Board, and (ii) such approving majority shall
have consisted of at least one Libbey Member and at least one Vitro Member
(hereinafter singularly referred to as an "EXTRAORDINARY DIRECTORS ACTION" and
collectively referred to as "EXTRAORDINARY DIRECTORS ACTIONS"). Such
Extraordinary Directors Actions are as follows:
(i) Approval of any cash remittance, dividend, or other
remuneration from Newco Finance to any Shareholder in
accordance with SECTION 2.2;
(ii) Approval of any proposal to change the corporate
purpose of Newco Finance;
(iii) Approval of transactions that would dilute any
Shareholder's interest in Newco Finance;
(iv) The approval by the Newco Finance Board of annual
operating budgets pursuant to ARTICLE VII;
-5-
<PAGE> 6
(v) The approval of any expenditures in excess of 120% of
the allotment for such expenditures as set forth in
any annual operating budget for Newco Finance as
determined in accordance with ARTICLE VII;
(vi) Formation of a partnership or joint venture between
Newco Finance and another business entity; and
(vii) Submittal to the Ordinary Shareholders Meeting of the
financial statements and report for approval.
(e) MEETINGS. The Newco Finance Board shall meet at least twice
annually, the first meeting being within thirty (30) days after year-end audited
financial statements have been delivered to all Members of the Newco Finance
Board, but in no event more than four (4) months after the end of each fiscal
year, or more frequently at the request of any Shareholder or any Member. Notice
of each meeting of the Newco Finance Board must be delivered to all Members at
least fifteen (15) days in advance of the date of such meeting. At least four
(4) Members of the Newco Finance Board or their alternates must be present to
transact business. Each meeting of the Newco Finance Board shall take place at
10:00 a.m. on the fifteenth (15th) day after notice has been delivered to all
Members, or at a time and place mutually agreed upon by the Members. If Members
sufficient to transact business are not present at the meeting, the date of the
meeting shall be postponed for one (1) day, and if Members sufficient to
transact business are not present at that meeting, the date of the meeting shall
be postponed for an additional day. If Members sufficient to transact business
are not present at that meeting, either Shareholder shall have the right, but
shall not be obligated, to declare the occurrence of a Deadlock Event under
SECTION 6.1 hereof.
(f) WAIVER OF NOTICE; VOTING. The Members can waive the requirement of
the written call, and same will not be required, when all of the Members or
their alternates are present at the meeting. Except as otherwise provided
herein, all decisions of the Newco Finance Board shall require the approval of a
majority of its Members. All decisions of the Members on any matters requiring
their approval, consent, or action may be made by the Members in each of their
sole and absolute discretion.
(g) ACTION WITHOUT MEETING. Whenever the Newco Finance Board is
required or permitted to take any action pursuant to a meeting of the Newco
Finance Board, such action may be taken without a meeting upon a written
consent, setting forth the action so taken, that is signed by each of the
Members.
3.3. INDEMNIFICATION OF THE NEWCO FINANCE BOARD. Each Member shall be
indemnified by Newco Finance against all liability for any claim, demand, loss,
damage, liability, or expense (including, without limitation, amounts paid in
settlement, reasonable costs of investigation, and reasonable legal expenses)
resulting from any threatened, pending, or completed action, suit, or proceeding
naming any of them as defendant by reason of acts or omissions made or omitted
in good faith within the scope of their authority as set forth in this Agreement
to the maximum extent permitted by law.
-6-
<PAGE> 7
3.4. MANAGEMENT AND ADMINISTRATIVE SERVICES BY VITRO AND LIBBEY.
Neither Shareholder shall be entitled to a fee for any management or
administrative services provided to Newco Finance by such Shareholder unless
mutually agreed by both Shareholders.
3.5. CORPORATE OPPORTUNITY. No person or entity of the Libbey 100%
Group (as defined in ARTICLE IV) and no person or entity of the Vitro 100% Group
(as defined in ARTICLE IV) has any duty to communicate or offer any Corporate
Opportunity (as defined below) to Newco Finance, and neither the Libbey 100%
Group nor the Vitro 100% Group shall be liable to Newco Finance or any
Shareholder for breach of any fiduciary duty or duty of loyalty to Newco Finance
by reason of the fact that it pursues or acquires a Corporate Opportunity for
itself or directs a Corporate Opportunity to another person or entity. For
purposes of this section, "CORPORATE Opportunity" means a business or other
opportunity that Newco Finance is or could reasonably be expected to become
financially able to undertake, which relates to Newco Finance's line of business
and in which Newco Finance has or would have an interest or a reasonable
expectancy of interest. To the extent this SECTION 3.5 contradicts any term or
provision in the Distribution Agreement, dated of even date, by and among Vitro,
Vitrocrisa, Libbey, and Libbey Glass Inc., the Distribution Agreement, dated of
even date, by and among Vitro, Crisa Corporation, Vitrocrisa, Libbey, and Libbey
Glass Inc. (together, the "DISTRIBUTION AGREEMENTS"), or the Covenant Not to
Compete, dated of even date, by and between Libbey and Vitro (the "COVENANT NOT
TO COMPETE"), the terms and provisions of the Distribution Agreements or the
Covenant Not to Compete shall control.
ARTICLE IV
----------
Transfers, Withdrawals, and Admission of Additional Shareholders
----------------------------------------------------------------
4.1. TRANSFERS AND ENCUMBRANCE OF INTERESTS.
(a) TRANSFERS. No Shareholder shall transfer all or any portion of its
interest in Newco Finance or its rights under this Agreement, or agree to do so,
for a period of four (4) years from the date of this Agreement. After such
four-year period, either Shareholder may transfer all, but not less than all, of
its interest in Newco Finance pursuant to the terms of SECTION 4.2. A
Shareholder may transfer or otherwise sell its shares pursuant to this ARTICLE
IV for any reason.
(b) ENCUMBRANCE. Except as otherwise provided in this Agreement, no
Shareholder may encumber, mortgage, pledge, hypothecate, or place a lien or make
any disposition similar thereto (collectively an "ENCUMBRANCE") upon all or any
portion of its interest in Newco Finance or its rights under this Agreement, or
agree to do so, without the prior written consent of the other Shareholder,
which consent shall not be unreasonably withheld but may be subject to such
reasonable conditions as the other Shareholder may require.
(c) VIOLATION. Any purported transfer or Encumbrance in violation of
the terms of this Agreement shall be null and void and shall not be recognized
by Newco Finance.
-7-
<PAGE> 8
4.2. SHAREHOLDERS FIRST OPTION TO PURCHASE JOINT VENTURE INTEREST.
(a) DEFINITIONS. In this SECTION 4.2, the following words shall bear
the following meanings:
"JOINT VENTURE INTEREST" in the case of LGA3, (a) shares of Newco
Finance capital stock held, directly or
indirectly, by LGA3, (b) shares of
Vitrocrisa capital stock held, directly or
indirectly, by LGA3, (c) shares of VC
Holding capital stock held, directly or
indirectly, by LGA3, and (d) membership
interests in Crisa Industrial, L.L.C., a
Delaware limited liability company (the
"LLC"), owned, directly or indirectly, by
LGA4 Corp., a Delaware corporation and
wholly-owned subsidiary of Libbey; and in
the case of Vitro, (a) shares of VC Holding
capital stock held, directly or indirectly,
by Vitro, (b) shares of Vitrocrisa capital
stock held, directly or indirectly, by
Vitro, (c) shares of Newco Finance capital
stock held, directly or indirectly, by
Vitro, and (d) membership interests in the
LLC owned, directly or indirectly, by Vitro;
"PRESCRIBED PRICE" the price for the Joint Venture
Interest specified in the Transfer Notice;
"PROPOSING TRANSFEROR" a Shareholder proposing to transfer or
dispose of all of its Joint Venture
Interest;
"PURCHASER" a Shareholder willing to purchase all of the
Joint Venture Interest comprised in, or
offered for purchase pursuant to the serving
of, a Transfer Notice;
"TRANSFER NOTICE" a written notice served by a Shareholder;
"100% GROUP" in the case of Vitro, Vitro or any
other person or entity that directly or
indirectly controls, is controlled by, or is
under common control with Vitro, excluding
Vitrocrisa (the "VITRO 100% GROUP"), and in
the case of LGA3, Libbey or any other person
or entity that directly or indirectly
controls, is controlled by, or is under
common control with Libbey (the "LIBBEY 100%
GROUP").
(b) LIMITATION ON TRANSFERS. The right to transfer or dispose of shares
of Newco Finance or any interest therein shall (save in respect of transfers
made pursuant to SECTION 4.2(i)) be
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<PAGE> 9
subject to the restrictions set forth in this SECTION 4.2. A Shareholder may not
transfer or dispose of its shares in Newco Finance unless it transfers or
disposes of all of its Joint Venture Interest. Except as provided otherwise
herein, no Shareholder may transfer or dispose of its Joint Venture Interest
(save in respect of transfers made pursuant to SECTION 4.2(i) hereof) without
the prior written consent of the other Shareholder.
(c) FIRST OPTION. Before transferring or disposing of all of its Joint
Venture Interest (or any interest therein), the Proposing Transferor shall serve
a Transfer Notice on the other Shareholder stipulating the Prescribed Price.
Upon receipt of a Transfer Notice, the other Shareholder shall have the right
and first option for a period of thirty (30) days to purchase all of the Joint
Venture Interest at the Prescribed Price.
(d) TRANSFER ON EXERCISE OF OPTION. If the Proposing Transferor is
given notice under SECTION 4.2(c) that the other Shareholder has exercised its
option to purchase all, but not less than all, of the Joint Venture Interest,
the Proposing Transferor shall be bound, on payment of the Prescribed Price, to
transfer the Joint Venture Interest to the other Shareholder or its designees.
The sale and purchase shall be completed at the office of Newco Finance, or at
such other place as the Proposing Transferor and the other Shareholder shall
agree, during normal business hours on the first business day after the
expiration of ninety (90) days after the expiration of the option period set
forth in SECTION 4.2(c).
(e) TRANSFER ON EXPIRATION OR TERMINATION OF OPTION. If the option
granted by SECTION 4.2(c) is not exercised as to all of the Joint Venture
Interest, then such option shall become void AB INITIO and the Proposing
Transferor may sell all of the Joint Venture Interest to any third party free of
the restrictions set forth in this ARTICLE IV, subject to the following
restrictions: (i) the Joint Venture Interest may not be sold after the
expiration of one hundred eighty (180) days after the expiration of the option
period set forth in SECTION 4.2(c), (ii) the Joint Venture Interest must be sold
in a bona fide sale at a price not being less that the Prescribed Price, and
(iii) the third party transferee of the Joint Venture Interest must execute and
deliver an undertaking under which such third party shall become a party hereto,
to the Vitrocrisa Holding, S.A. de C.V. Shareholders Agreement dated of even
date (the "VC HOLDING SHAREHOLDERS AGREEMENT"), to the Vitrocrisa, S.A. de C.V.
Shareholders Agreement dated of even date (the "VITROCRISA SHAREHOLDERS
AGREEMENT"), and to the Limited Liability Company Agreement of Crisa Industrial,
L.L.C. dated of even date (the "LLC AGREEMENT," and collectively with this
Agreement, the VC Holding Shareholders Agreement, and the Vitrocrisa
Shareholders Agreement, the "JOINT VENTURE SHAREHOLDERS AGREEMENTS") in place of
the Proposing Transferor.
(f) EXERCISE. An option granted by SECTION 4.2(c) may be exercised only
by the holder thereof and only by the delivery of a written notice of exercise
to the Proposing Transferor prior to the expiration of the relevant option
period.
(g) WAIVER. The restrictions imposed by this ARTICLE IV may be waived
in relation to any proposed transfer of a Shareholder's Joint Venture Interest
with the consent of all Shareholders who would otherwise have been entitled to
have such Joint Venture Interest offered to them in accordance herewith.
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<PAGE> 10
(h) FAILURE TO TIMELY EXERCISE. Failure of a Shareholder to exercise an
option granted by SECTION 4.2(C) prior to the expiration of the option period
shall be deemed to be a waiver of that option as of the date the option period
expired. The waiver of an option granted by SECTION 4.2(c) will not constitute a
waiver of any subsequent option granted by SECTION 4.2(c).
(i) INTRA-GROUP TRANSFERS. Notwithstanding the foregoing, all, but not
less than all, of a Shareholder's Joint Venture Interest may be transferred to
any member of the Vitro 100% Group (in the case of Vitro) and to any member of
the Libbey 100% Group (in the case of LGA3), but only (i) if the transferee is
already a party to each of the Joint Venture Shareholders Agreements or shall
have first agreed to adhere to and be bound by the provisions of each of the
Joint Venture Shareholders Agreements by executing and delivering in favor of
the other parties to each of the Joint Venture Shareholders Agreements an
undertaking to the intent and with the effect that from the date of such
undertaking, or, if later, the date of the transfer, the transferee shall become
a party to each of the Joint Venture Shareholders Agreements, in place of the
transferor, to the extent that the transferor ceases to hold shares in Newco
Finance, Vitrocrisa, VC Holding, and the LLC as a result of such transfer; and
(ii) on terms that the transferee shall re-transfer the relative Joint Venture
Interest to a member of the Vitro 100% Group (in the case of Vitro) or to a
member of the Libbey 100% Group (in the case of LGA3) on the same terms as set
forth in SECTION 4.2(i), prior to such transferee ceasing to be a member of the
Vitro 100% Group or the Libbey 100% Group (as the case may be).
(j) OPTION TO PARTICIPATE IN SALE. In lieu of exercising the option
granted in SECTION 4.2(c), a Shareholder may elect to participate in any sale by
the Proposing Transferor contemplated by SECTION 4.2 at the Prescribed Price.
Upon such election, the Shareholder will be entitled to sell all of its Joint
Venture Interest. The election to participate in a sale must be in writing and
must be delivered to the Proposing Transferor within thirty (30) days of receipt
of the Transfer Notice. Failure to timely deliver a written election to
participate in a sale within thirty (30) days of the Transfer Notice will
constitute a waiver of such Shareholder's right to participate in the sale.
ARTICLE V
---------
Termination
-----------
5.1. CAUSES OF TERMINATION. Except as otherwise provided in this
Agreement, this Agreement shall terminate:
(a) upon the unanimous written consent of the parties hereto;
(b) if Newco Finance is declared bankrupt, has a receiver
appointed over all or substantially all of its assets, or is
dissolved; or
(c) by decree of a court of competent jurisdiction.
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<PAGE> 11
5.2. EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an event of default ("EVENT OF DEFAULT") hereunder on the part
of the Shareholder with respect to whom such event occurs (the "DEFAULTING
PARTY") without any requirement of notice or passage of time except as
specifically set forth in any such subparagraph:
(a) the violation by a Shareholder or Libbey of any of the
restrictions set forth in ARTICLE IV;
(b) failure of a Shareholder's Member of the Newco Finance Board
to vote for and use reasonable efforts to implement the
Dividend Policy as set forth in SECTION 2.2;
(c) the institution by a Shareholder or Libbey of a case or other
proceeding in bankruptcy;
(d) the institution against a Shareholder or Libbey of a case or
other proceeding in bankruptcy, which proceeding is not
dismissed, stayed, or discharged within a period of sixty (60)
days after the filing thereof;
(e) a proposed plan of arrangement or other action by a
Shareholder's or Libbey's creditors taken as a result of a
general meeting of the creditors of a Shareholder or Libbey,
respectively, which arrangement or other action is not
dismissed, stayed, or discharged within a period of sixty (60)
days after such general meeting;
(f) the appointment of a receiver, custodian, trustee, or like
officer, to take possession of the assets of a Shareholder or
Libbey if the pendency of said receivership would reasonably
tend to have a materially adverse effect upon the performance
by the Shareholder or Libbey, respectively, of its obligations
under this Agreement, which receivership remains undischarged
for a period of sixty (60) days from the date of its
imposition;
(g) attachment, execution, or other judicial seizure of all or any
substantial part of a Shareholder's or Libbey's assets or of a
Shareholder's or Libbey's shares of Newco Finance, or any part
thereof, such attachment, execution, or seizure remaining
undismissed or undischarged for a period of sixty (60) days
after the levy thereof, if the occurrence of such attachment,
execution, or other judicial seizure would reasonably tend to
have a materially adverse effect upon the performance by the
Shareholder or Libbey, respectively, of its obligations under
this Agreement; provided, however, that said attachment,
execution, or seizure shall not constitute an Event of Default
hereunder if the Shareholder or Libbey, respectively, posts a
bond sufficient to fully satisfy the amount of such claim or
judgment within sixty (60) days after the levy thereof and the
respective Shareholder's or Libbey's assets are thereby
released from the lien of such attachment;
(h) material default in performance of or a failure to comply with
any obligations or undertakings of a Shareholder or Libbey
under the Covenant Not to Compete dated
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<PAGE> 12
of even date by and between Vitro and Libbey, and such default
continues for a period of thirty (30) days following notice of
such default by another Shareholder;
(i) the occurrence of an Event of Default (as defined therein)
under ARTICLE V of the VC Holding Shareholders Agreement or
under ARTICLE V of the Vitrocrisa Shareholders Agreement or
under ARTICLE XII of the LLC Agreement; and
(j) the occurrence of a Libbey Change of Control or a Vitro Change
of Control (each as defined in SECTION 5.6 below).
5.3. REMEDY ON DEFAULT. If an Event of Default is declared pursuant to
(a) SECTION 5.2(b) with respect to dividends to be paid for the performance of
Newco Finance during fiscal years 1998, 1999, and 2000 or (b) SECTION 5.2(j)
with respect to a Libbey Change of Control or a Vitro Change of Control
occurring on or before the third anniversary of this Agreement, then such
Shareholder may, in addition to any other remedy at law or in equity, invoke the
provisions of SECTION 5.5. If an Event of Default is declared at any time (a) by
a Shareholder pursuant to any other subsection of SECTION 5.2, (b) by any party
to this Agreement pursuant to SECTION 5.2(b) with respect to dividends to be
paid for the performance of Newco Finance after fiscal year 2000, or (c) by a
Shareholder pursuant to SECTION 5.2(j) with respect to a Libbey Change of
Control or a Vitro Change of Control occurring after the third anniversary of
this Agreement, then such Shareholder may, in addition to any other remedy at
law or in equity, invoke the provisions of SECTION 5.4.
5.4. BUY/SELL PROVISION. Within forty-five (45) days of an Event of
Default the non-defaulting party (the "OFFERING SHAREHOLDER") may deliver a
written offer (the "OFFER") to purchase all, but not less than all, of the other
Shareholder's Joint Venture Interest at a cash purchase price (the "OFFER
PRICE"), fully payable on or before sixty (60) days after notice of the Offer.
Within thirty (30) days after receipt of the Offer, the other Shareholder may
notify the Offering Shareholder in writing that it will either (i) sell to the
Offering Shareholder all, but not less than all, of its Joint Venture Interest
at the Offer Price on or before the sixtieth day after receipt of the Offer or
(ii) buy from the Offering Shareholder all, but not less than all, of the
Offering Shareholder's Joint Venture Interest at (A) if Vitro is the Offering
Shareholder, 51/49 of the Offer Price or (B) if LGA3 is the Offering
Shareholder, 49/51 of the Offer Price (the "ADJUSTED OFFER PRICE"), on or before
the sixtieth day after receipt of the Offer. If the other Shareholder fails to
notify the Offering Shareholder within the thirty (30) day period that it will
(i) sell all of its Joint Venture Interest to the Offering Shareholder at the
Offer Price or (ii) buy all of the Joint Venture Interest from the Offering
Shareholder at the Adjusted Offer Price, then the Offering Shareholder must
purchase in cash all, but not less than all, of the other Shareholder's Joint
Venture Interest at the Offer Price, and the other Shareholder must sell all,
but not less than all, of its Joint Venture Interest at the Offer Price, on or
before the sixtieth day after notice of the Offer. Upon the purchase or sale of
shares pursuant to this SECTION 5.4, this Agreement shall automatically
terminate without further action by either Shareholder. Failure by the
non-defaulting party to deliver an Offer within forty-five (45) days of notice
of an Event of Default shall constitute a waiver of such party's rights under
this SECTION 5.4 with respect to the particular Event of Default.
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<PAGE> 13
5.5. DISPUTE RESOLUTION; PUT/CALL OPTION.
(a) DISPUTE RESOLUTION. If an Event of Default is declared by a
Shareholder pursuant to (i) SECTION 5.2(b) with respect to dividends to be paid
for the performance of Newco Finance during fiscal years 1998, 1999 and 2000 or
(ii) SECTION 5.2(j) with respect to a Libbey Change of Control or a Vitro Change
of Control occurring on or before the third anniversary of this Agreement, such
Shareholder shall promptly (but in no event later than thirty (30) days after
such Shareholder's knowledge of such Event of Default) send notice of such Event
of Default to the other Shareholder (the "DEFAULT NOTICE"). Upon receipt of the
Default Notice, the alleged defaulting party will have thirty (30) days to cure
such default. If the default is not cured within such thirty (30) day period or
if the party receiving the Default Notice contests that a default has occurred,
the chief executive officers of Libbey and Vitro (collectively, the "CEOS")
shall meet within ninety (90) days of the expiration of the cure period in a
good faith effort to resolve the Event of Default. If the Event of Default is
not resolved within such ninety (90) day period, the CEOs may select an
independent mediator and subject the dispute to non-binding mediation, which
must take place within thirty (30) days of the expiration of such ninety (90)
day period. If both CEOs do not consent to non-binding mediation or if the
mediation fails to resolve the Event of Default, the Event of Default shall be
submitted to binding arbitration to be conducted in accordance with the
provisions of SECTION 8.10(b), (c), (d), and (e), the sole purpose of which is
to decide whether a default exists and, if so, which Shareholder is in default.
The arbitrators will consider all issues currently in dispute between the
Shareholders and must certify their ruling in writing to each Shareholder (the
date of such certification is referred to herein as the "CERTIFICATION DATE").
If the arbitrators determine and certify that one Shareholder is in default,
then such Shareholder shall have thirty (30) days from the Certification Date to
cure the default. If the Event of Default is not cured within such thirty (30)
day period, the non-defaulting party may invoke the provisions of SECTION
5.5(b). If the arbitrators cannot resolve which party has caused the Event of
Default or determine that both Shareholders have caused the Event of Default and
so certify, then either of the Shareholders may invoke the provisions of SECTION
5.4 within thirty (30) days of the Certification Date.
(b) PUT/CALL OPTION WITH PENALTY.
(i) PUT/CALL OPTION WITH PENALTY. If the arbitrators determine
that Vitro or any member of the Vitro 100% Group is in default and such
default shall not be cured within thirty (30) days of the Certification
Date, then Libbey shall have the right to sell to Vitro, and Vitro
shall be obligated to purchase from Libbey, all, but not less than all,
of Libbey's Joint Venture Interest at forty-nine percent (49%) of the
Joint Venture Value (as defined below) multiplied by one hundred twenty
percent (120%) (the "PUT OPTION"). If the arbitrators determine that
Libbey or any member of the Libbey 100% Group is in default, then Vitro
shall have the right to buy from Libbey, and Libbey shall be obligated
to sell to Vitro, all, but not less than all, of Libbey's Joint Venture
Interest at forty-nine percent (49%) of the Joint Venture Value (as
defined below) multiplied by eighty percent (80%) (the "CALL Option").
The Put Option and the Call Option are collectively referred to herein
as the "OPTION."
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<PAGE> 14
(ii) VALUATION OF THE JOINT VENTURE. If the party in default
does not cure the Event of Default within thirty (30) days of the
Certification Date, the non-defaulting party may request a valuation of
the joint venture as a going concern, which will include a valuation of
the combined businesses of VC Holding, Vitrocrisa, Newco Finance, and
the LLC (collectively, the "JOINT VENTURE"), within thirty (30) days of
the expiration of the cure period. Within thirty (30) days of the date
of such request, the CEOs will meet, and each CEO will select one
investment banker, and the two selected investment bankers will then
select a third investment banker, for the purpose of establishing a
value for the Joint Venture as a going concern. Upon selection, each of
the three investment bankers will independently determine the value for
the Joint Venture as a going concern, the average of which will be
deemed to be the joint venture value (the "JOINT VENTURE VALUE").
(iii) EXERCISING OPTION. The non-defaulting party may exercise
the Option by giving the defaulting party written notice of its intent
to exercise the Option within thirty (30) days of the date that the
Joint Venture Value is determined by the investment bankers.
(iv) CLOSING OF OPTION. The closing of the Option will take
place at a time and place mutually agreed upon by Libbey and Vitro;
provided, however, that in no event will the closing take place more
than sixty (60) days from the date of the notice of exercise set forth
in SECTION 5.5(b)(iii).
(v) INVESTMENT BANKER FEES. Fees and expenses incurred in
connection with the determination of the Joint Venture Value,
including, without limitation, investment banker fees, will be paid by
the party in default as certified by the arbitrators; provided,
however, that all such fees and expenses will be paid by the
non-defaulting party if the non-defaulting party fails to exercise the
Option.
5.6. DEFINITION OF CHANGE OF CONTROL. In this ARTICLE V, the following
words shall bear the following meanings:
(a) "LIBBEY CHANGE OF CONTROL" shall be deemed to have occurred when
(i) any person or entity, together with any group of controlled companies not in
the Libbey 100% Group, acquires beneficial ownership, directly or indirectly, of
shares of stock of Libbey entitling such person or entity to exercise more than
50% of the total voting power of all classes of stock of Libbey entitled to vote
in elections of directors, or (ii) Libbey sells, leases, or otherwise transfers
all or substantially all of its assets to any person or entity not in the Libbey
100% Group.
(b) "VITRO CHANGE OF CONTROL" shall be deemed to have occurred when (i)
any person or entity, together with any group of controlled companies not in the
Vitro 100% Group, acquires beneficial ownership, directly or indirectly, of
shares of stock of Vitro entitling such person or entity to exercise more than
50% of the total voting power of all classes of stock of Vitro entitled to vote
in elections of directors, or (ii) Vitro sells, leases, or otherwise transfers
all or substantially all of its assets to any person or entity not in the Vitro
100% Group.
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<PAGE> 15
ARTICLE VI
----------
Deadlock and Impasse
--------------------
6.1. DEADLOCK. A "DEADLOCK EVENT" shall be deemed to occur at such time
as a Shareholder (the "NOTIFYING SHAREHOLDER") delivers to the other Shareholder
a notification in writing (the "DEADLOCK NOTICE") stating that, in the opinion
of the Notifying Shareholder, (a) the other Shareholder's CEO failed to meet
with the Notifying Shareholder's CEO to resolve a controversy or claim regarding
a business and operational decision customarily exercised by the management of
Newco Finance within the time limits set forth in SECTION 8.10(a), (b) the other
Shareholder has, or the other Shareholder's Members of the Newco Finance Board
have, deliberately prevented the occurrence of a quorum as set forth in SECTION
3.1 or SECTION 3.2(e), respectively, or (c) the Shareholders or the Newco
Finance Board are unable to reach agreement on any of the actions set forth in
SECTION 3.1(a), (b),or (c) or SECTION 3.2(d), respectively, and setting out the
reasons therefor, and there is no resolution or agreement that has been approved
by both Shareholders (which approval may be given or withheld, or made subject
to such conditions, as are determined by the Shareholders in their respective
sole and absolute discretion) within seven (7) days after delivery of the
Deadlock Notice. A Deadlock Event shall be resolved in accordance with the
provisions of this ARTICLE VI.
6.2. RESOLUTION OF DEADLOCK. In the event of a Deadlock Event, either
Shareholder may deliver notice of a meeting of the Shareholders (an "EMERGENCY
NOTICE") to the other Shareholder, and they shall immediately meet at a time and
place mutually agreed upon or, if no time and place is agreeable, at Newco
Finance's principal place of business at 10:00 a.m. on the fifteenth (15th) day
after the date of such Emergency Notice. Notwithstanding anything in this
Agreement to the contrary, if either Shareholder does not attend such meeting,
either Shareholder may immediately invoke the provisions of SECTION 6.4.
6.3. DECLARATION OF IMPASSE. If, at the meeting contemplated in SECTION
6.2, the Shareholders are unable to agree on a course of action to address the
reason for the meeting, any Shareholder may declare an impasse ("IMPASSE") by
giving written notice to the other Shareholder (an "IMPASSE NOTICE"). Within
twenty (20) days after receipt of such Impasse Notice, the CEOs shall meet in a
good faith effort to reach accords that will end the Impasse. If a decision is
not made by common accord that ends the Impasse within thirty (30) days after
the date that the CEOs meet, either Shareholder may declare a final Impasse
("FINAL IMPASSE") by written notice to the other Shareholder. Notwithstanding
anything in this Agreement to the contrary, if either CEO refuses to meet with
the other CEO, either Shareholder may immediately invoke the provisions of
SECTION 6.4.
6.4. FINAL IMPASSE. Within forty-five (45) days of notice of Final
Impasse (or pursuant to the provisions of SECTIONS 6.2 or 6.3), either
Shareholder (the "OFFERING SHAREHOLDER") may deliver a written Offer to purchase
all, but not less than all, of the Joint Venture Interest held by the other
Shareholder at a cash Offer Price, fully payable on or before sixty (60) days
after notice of the Offer. Within thirty (30) days after receipt of the Offer,
the other Shareholder may notify the Offering Shareholder in writing that it
will either (a) sell to the Offering Shareholder all, but not
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<PAGE> 16
less than all, of its Joint Venture Interest at the Offer Price on or before the
sixtieth day after receipt of the Offer or (b) buy from the Offering Shareholder
all, but not less than all, of the Offering Shareholder's Joint Venture Interest
at the Adjusted Offer Price on or before the sixtieth day after receipt of the
Offer. If the other Shareholder fails to notify the Offering Shareholder within
the thirty (30) day period that it will (a) sell all of its Joint Venture
Interest to the Offering Shareholder at the Offer Price per share or (b) buy all
of the Joint Venture Interest from the Offering Shareholder at the Adjusted
Offer Price, then the Offering Shareholder must purchase in cash all, but not
less than all, of the other Shareholder's Joint Venture Interest at the Offer
Price, and the other Shareholder must sell all, but not less than all, of its
joint venture interest at the Offer Price, on or before the sixtieth day after
notice of the Offer. Upon the purchase or sale of shares pursuant to this
SECTION 6.4, this Agreement shall automatically terminate without further
action. Failure by either Shareholder to deliver an Offer within forty-five (45)
days of notice of a Final Impasse shall constitute a waiver of each
Shareholder's rights under this SECTION 6.4 with respect to the particular Final
Impasse.
ARTICLE VII
-----------
Annual Operating Budgets for Newco Finance
------------------------------------------
7.1. INITIAL STRATEGIC PLAN. The Shareholders agree that the Initial
Strategic Plan for Newco Finance will be as set forth on EXHIBIT D to this
Agreement. This plan shall govern the operations of Newco Finance for the first
fiscal year following the execution of this Agreement and until otherwise
modified in accordance with this ARTICLE VII.
7.2. SUBMISSION OF ANNUAL OPERATING BUDGET. At least forty-five (45)
days prior to the end of the calendar year following the expiration of the
Initial Strategic Plan and at least forty-five (45) days prior to the end of
each subsequent calendar year, the Managing Director of Newco Finance shall
prepare a report on Newco Finance's working capital requirements and operating
budget for the next succeeding calendar year, which will contain an itemized
estimate of the sources of revenue, the cost of goods sold, selling, general,
and administrative expenses, interest expense, net income, and all expenditures
proposed to be undertaken by Newco Finance for such year (the "PROPOSED
BUDGET"). Upon preparation of the Proposed Budget, the Managing Director shall
promptly submit the Proposed Budget to the Newco Finance Board for
consideration.
7.3. APPROVAL OF ANNUAL OPERATING BUDGET. Promptly after receipt of the
Proposed Budget, but in any event not less than thirty (30) days prior to the
end of the calendar year, the Newco Finance Board shall meet to review the
Proposed Budget. Upon such review, the Newco Finance Board will vote on the
Proposed Budget. If the Proposed Budget is approved by Extraordinary Directors
Action, the Proposed Budget shall become Newco Finance's operating budget for
the next succeeding calendar year. If the Proposed Budget is not approved by
Extraordinary Directors Action, the Managing Director will revise the Proposed
Budget as soon as possible and resubmit it to the Newco Finance Board for
consideration by Extraordinary
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<PAGE> 17
Directors Action. The operating budget for the previous calendar year shall
continue to govern the operations of Newco Finance (but revised to the extent
the Shareholders agree) until such time as a Proposed Budget is approved by the
Newco Finance Board by Extraordinary Directors Action.
ARTICLE VIII
------------
Miscellaneous Provisions
------------------------
8.1. GOVERNING LANGUAGE. Notwithstanding the translation of this
Agreement or any of its Exhibits into Spanish or any other language, the English
language version of this Agreement and any of its Schedules and Exhibits shall
be controlling and shall govern in any legal proceeding; provided, however, that
with respect to the Crisa Libbey, S.A. de C.V. Estatutos the Spanish language
version shall control.
8.2. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
8.3. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties related to the subject matter hereof and supersedes any prior
understandings, agreements, or representations by or among the parties, written
or oral, that may have related in any way to the subject matter hereof.
8.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective successors
and permitted assigns.
8.5. ASSIGNMENT. No party may assign or otherwise transfer any of its
rights or obligations under this Agreement, by operation of law or otherwise,
without the prior written consent of the other parties, which consent shall not
be unreasonably withheld. Any purported or attempted assignment contrary to the
terms hereof shall be null and void and of no force or effect.
8.6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
8.7. HEADINGS. The article and section headings contained in this
Agreement are inserted for convenience only and are not part of this Agreement
and shall not affect in any way the meaning or interpretation of this Agreement.
8.8. NOTICES. All notices, demands, requests, and other communications
given hereunder shall be made in writing in English and shall be delivered in
person or by courier or overnight delivery service (delivery charge prepaid) or
telecopy (provided that the telecopy is confirmed by notice by certified mail,
courier, or overnight delivery service). Any notice, demand, request, or
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<PAGE> 18
other communication shall be effective only if and when it is received by the
addressee. For the purposes of the foregoing, the addresses and telecopier
numbers of the parties hereto are as follows:
If to Libbey or to LGA3, such notices shall be addressed to:
Libbey Inc.
300 Madison Avenue
Toledo, Ohio 43604
USA
Attn: General Counsel Fax No. (419) 325-2585
or to any subsequent address of which Libbey may notify the other
parties in writing.
<TABLE>
<CAPTION>
If to Vitro, such notices shall be addressed to:
<S> <C>
Vitro Corporativo, S.A. de C.V.
Av. del Roble 660
Col. Valle del Campestre
Garza Garcia, N.L.
Mexico 66225
Attn: Director Juridico Internacional Fax No. (528) 329-1272
</TABLE>
or at any subsequent address of which Vitro may notify the other
parties in writing.
If to Newco Finance, such notices shall be addressed to:
Crisa Libbey, S.A. de C.V.
c/o Vitrocrisa, S.A. de C.V.
Doblado 1627 Nte.
Col. Terminal
Monterrey, N.L. 64580
Attn: Director General Fax No. (528) 329-3009
or at any subsequent address of which Newco Finance may notify the
other parties in writing.
Any party hereto may change its address or telecopier number for the purposes
hereof by giving notice thereof to the other parties in the manner provided
herein.
8.9. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the substantive laws of the United Mexican States.
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<PAGE> 19
8.10. DISPUTE RESOLUTION.
(a) The parties to this Agreement shall exert good faith
efforts to promptly resolve any controversy or claim arising out of or related
to this Agreement or the breach thereof within fifteen (15) days of receipt of
notice by one party from another party that such a controversy or claim exists.
If the parties fail to resolve such controversy or claim within such fifteen
(15) day period, they shall, unless otherwise provided in this Agreement, give
notice in writing to the CEOs, who will meet within fifteen (15) days of receipt
of such notice at a mutually acceptable time and place to attempt to resolve any
such controversy or claim. In the event the CEOs fail to meet or to resolve the
controversy or claim within such fifteen (15) day period, the controversy or
claim (other than business and operational decisions customarily exercised by
management in entities similar to Vitrocrisa) shall be settled by arbitration in
accordance with the then existing International Arbitration Rules of the
American Arbitration Association (hereinafter "AAA"), which shall commence upon
one party providing the other parties with a written demand for arbitration (the
"DEMAND FOR ARBITRATION").
(b) The arbitral tribunal shall be composed of three
arbitrators, and Libbey and Vitro shall each appoint one arbitrator. If Libbey
or Vitro fail to appoint an arbitrator within thirty (30) days after the date
the claimant's Demand for Arbitration is communicated to the other parties
(hereinafter the "NOTIFICATION DATE"), the AAA shall make such appointment. The
two arbitrators thus appointed shall attempt to agree upon the appointment of a
third arbitrator to serve as chairman of the arbitral tribunal. If said two
arbitrators fail to agree upon the appointment of such third arbitrator within
sixty (60) days after the Notification Date, the AAA shall make such
appointment. The place of arbitration shall be Dallas, Texas, United States of
America. The arbitral proceeding shall be conducted in the English language.
(c) To the extent that they may validly so agree, the parties
hereby exclude any right of appeal to any court in connection with the arbitral
award. Judgment upon the arbitral award may be entered in any court having
jurisdiction thereof or having jurisdiction over any party or any party's
assets.
(d) The validity of this SECTION 8.10 shall be governed by the
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral
Awards or the Inter-American Convention on International Commercial Arbitration,
to which Mexico and the United States of America have adhered.
(e) All costs of arbitration and enforcement thereof,
including reasonable attorneys' fees and court costs, costs of expert witnesses,
transportation, lodging, and meal costs of the parties and witnesses, costs of
transcript preparation, and other reasonable and necessary direct and incidental
costs shall be apportioned to one or more of the parties by a majority of the
arbitrators as they deem appropriate. In the event any party to this Agreement
commences legal proceedings to enforce the arbitral award, the expense of such
litigation (including reasonable attorneys' fees and costs of court) shall be
borne by the party or parties not prevailing therein.
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<PAGE> 20
(f) This SECTION 8.10 will not apply to any matter that is to
be resolved pursuant to ARTICLE V or pursuant to ARTICLE VI.
8.11. CONFIDENTIALITY.
(a) Each Shareholder shall use best efforts to maintain in
confidence and protect the confidentiality of all Confidential Information and
shall not disclose any Confidential Information to any third party not
affiliated with a Shareholder without the prior written consent of the other
Shareholder, provided that each Shareholder shall be entitled to use the
Confidential Information for any and all lawful purposes relating to its
business, operations and activities, including the financing and auditing
thereof. For purposes of this Agreement "CONFIDENTIAL INFORMATION" shall mean
all confidential or proprietary information of Newco Finance relating to its
business or operations or of a Shareholder which is provided for or in
connection with the business or operations of Newco Finance, which is provided
to a Shareholder or any of their respective Representatives (as defined below)
by Newco Finance or by any other Shareholder or any of its Representatives and
identified as confidential or proprietary as required by SECTION 8.11.(f);
provided, however, that the term shall not include (i) information known to the
recipient prior to receipt thereof from the other Shareholder or from Newco
Finance in connection with this Agreement, (ii) information which, at the time
of disclosure hereunder, is already in the public domain, (iii) information
which, after disclosure hereunder, becomes part of the public domain by
publication or otherwise through no fault of the recipient, (iv) information
obtained by a recipient from a third party (not Affiliated with a Shareholder)
in lawful possession of such information which is not under a confidentiality
obligation to the Person (as defined below) from whom such information
originated, or (v) information that is independently developed without the
benefit of the Confidential Information.
(b) Notwithstanding the provisions of SECTION 8.11(a), each
Shareholder may disclose Confidential Information to its or its Affiliates'
respective Representatives, provided that (i) such Representative has a need to
receive such Confidential Information to perform its duties, (ii) the disclosing
Shareholder advises such Representative of the confidential nature of the
disclosed Confidential Information, and (iii) the disclosing Shareholder uses
all reasonable efforts to cause such Representative to protect and maintain the
confidentiality of the disclosed Confidential Information as provided herein.
(c) Notwithstanding the provisions of SECTION 8.11(a), each
Shareholder may disclose Confidential Information (i) in connection with reports
of earnings of a Shareholder, (ii) to the extent, in the opinion of such
Shareholder's legal counsel, required by the laws applicable to such
Shareholder, including without limitation, all securities laws, or (iii) in
cases involving dispute resolution under the procedures set forth in SECTION
8.10.
(d) For purposes of this SECTION 8.11, the following terms
shall have the meanings given them below:
"REPRESENTATIVES" shall mean, with respect to any Person, such Person's
owners, stockholders, partners, directors, officers, employees, agents,
consultants, advisors (including,
-20-
<PAGE> 21
without limitation, auditors, engineers, financial analysts, financial managers
and attorneys), and lenders;
"PERSON" shall mean any natural person, any corporation, partnership,
limited liability company, trust or other entity, and any governmental or
judicial authority, body or entity;
"AFFILIATE" shall mean, with respect to any Person, the following: (i)
any other Person that directly, or indirectly through one or more
intermediaries, controls such Person, (ii) any other Person that is controlled
by or is under common control with such Person, or (iii) any subsidiary of such
Person.
(e) The obligations of the Shareholders under this SECTION
8.11 shall survive the expiration or termination of this Agreement to the
maximum extent permitted by applicable law.
(f) To be Confidential Information, all information disclosed
in tangible form shall be conspicuously marked confidential or proprietary at
the time of initial disclosure to the recipient and information conveyed orally
shall be identified as confidential or proprietary at the time of initial
disclosure to the recipient and summarized in writing, conspicuously marked
confidential or proprietary, and given to the recipient within thirty days after
the initial disclosure. Information not so identified will not be deemed to be
Confidential Information.
(g) In the event any Shareholder is requested or required (by
deposition, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or similar process), in
connection with any proceeding, to disclose any Confidential Information, the
Shareholder that is requested or required will give Newco Finance and the other
Shareholder written notice of such request or requirement so that the
Shareholder receiving the notice or Newco Finance may seek an appropriate
protective order or other remedy. In the event such protective order or other
remedy is not obtained in a timely manner, the Shareholder to whom such request
or requirement is directed will furnish only that portion of the Confidential
Information that, in the opinion of counsel to such Shareholder, is legally
required to be disclosed and, upon the request of the other Shareholder or Newco
Finance, use its best efforts to obtain assurances that confidential treatment
will be accorded to such information.
8.12. AMENDMENTS AND WAIVERS. This Agreement may be amended, modified,
superseded, or canceled and any of its terms, covenants, representations,
warranties, undertakings, or conditions may be waived only by an instrument in
writing signed by (or by some person duly authorized by) all of the parties
hereto or, in the case of a waiver, by the party waiving compliance.
8.13. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the
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<PAGE> 22
power to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
8.14. EXHIBITS AND SCHEDULES. The Exhibits and Schedules identified in
this Agreement are incorporated herein by reference and made a part hereof.
8.15. PRESS RELEASES AND ANNOUNCEMENTS. No party shall issue any press
release or announcement relating to the subject matter of this Agreement without
the prior written approval of the other parties hereto; provided, however, that
any party may make any public disclosure it believes in good faith is required
by law or regulation (in which case the disclosing party will advise the other
party prior to making the disclosure).
8.16. NO VIOLATION OF LAW. This Agreement shall not be construed to
require either party to be compelled, and no party will compel Newco Finance, to
do any act or remain in any situation in violation of any law of a governmental
authority applicable to such party.
8.17. VITRO UNDERTAKING. Vitro agrees to do such things and take such
actions so as to enable Newco Finance to fulfill its obligations under this
Agreement.
8.18. LIBBEY UNDERTAKING. Libbey agrees to do such things and take such
actions so as to enable LGA3 and Newco Finance to fulfill its obligations under
this Agreement.
[remainder of page intentionally left blank]
-22-
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
<TABLE>
<CAPTION>
LIBBEY, INC.
a Delaware corporation
<S> <C>
By: /s/ Kenneth G. Wilkes
----------------------------------------------
Name: Kenneth G. Wilkes
--------------------------------------------
Title: Vice President and Chief Financial Officer
-------------------------------------------
LGA3 CORP.,
a Delaware corporation
By: /s/ Kenneth G. Wilkes
----------------------------------------------
Name: Kenneth G. Wilkes
--------------------------------------------
Title: Vice President and Chief Financial Officer
-------------------------------------------
VITRO, S.A.,
a sociedad anonima organized under the laws
of the United Mexican States
By: /s/ Claudio Del Ville
----------------------------------------------
Name: Claudio Del Ville
--------------------------------------------
Title: Attorney in Fact
-------------------------------------------
</TABLE>
-23-
<PAGE> 24
CRISA LIBBEY, S.A. DE C.V.,
a sociedad anonima with variable capital organized
under the laws of the United Mexican States
By: /s/ Roberto B. Rubio
----------------------------------------------
Name: Roberto B. Rubio
--------------------------------------------
Title: Director
-------------------------------------------
-24-
<PAGE> 1
Exhibit 10.32
LIMITED LIABILITY COMPANY AGREEMENT
OF
CRISA INDUSTRIAL, L.L.C.
This Limited Liability Company Agreement (the "AGREEMENT") of Crisa
Industrial, L.L.C. (the "COMPANY") is entered into as of August 29, 1997, by and
between Crisa Corporation, a Texas corporation ("CRISA"), and LGA4 Corp., a
Delaware corporation ("LGA4"), as initial members of the Company (the "ORIGINAL
MEMBERS"), Vitro, S.A., a sociedad anonima organized under the laws of the
United Mexican States ("VITRO"), Libbey Inc., a Delaware corporation ("LIBBEY"),
the Company, and the Persons who become Members of the Company in accordance
with the provisions hereof.
Whereas, the Original Members have formed a limited liability company
pursuant to the Delaware Limited Liability Company Act, 6 Del. C. Section
18-101, et seq., as amended from time to time (the "DELAWARE ACT"), by filing a
Certificate of Formation with the office of the Secretary of State of the State
of Delaware on August 21, 1997, and entering into this Agreement with Vitro,
Libbey, and the Company.
Now, therefore, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I
---------
Defined Terms
-------------
Section 1.1 DEFINITIONS. Unless the context otherwise requires, the
terms defined in this ARTICLE I shall, for the purposes of this Agreement, have
the meanings herein specified.
"AFFILIATE" shall have the meaning given to it in SECTION 15.14.
"Affiliates" is the plural of "Affiliate."
"BOOK VALUE" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(i) the initial Book Value of any asset contributed (or deemed
contributed) to the Company shall be such asset's gross fair market
value at the time of such contribution;
(ii) the Book Value of all Company assets shall be adjusted to
equal their respective gross fair market values at the times specified
in Treasury Regulations under Section 704(b) of the Code if the Company
so elects; and
1
<PAGE> 2
(iii) if the Book Value of an asset has been determined
pursuant to clause (i) or (ii), such Book Value shall thereafter be
adjusted in the same manner as would the asset's adjusted basis for
federal income tax purposes.
"CAPITAL ACCOUNT" means, with respect to any Member, the account
maintained for such Member in accordance with the provisions of SECTION 4.3.
"CAPITAL CONTRIBUTION" is any contribution to the capital of the
Company when and as such contribution is actually made to the Company by a
Member in accordance with the provisions of SECTION 4.1 or SECTION 4.2.
"CERTIFICATE" means the Certificate of Formation and any and all
amendments thereto and restatements thereof filed on behalf of the Company with
the office of the Secretary of State of the State of Delaware pursuant to the
Delaware Act.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section (Section symbol) of the Code refers
not only to such specific section, but also to any corresponding provision of
any federal tax statute enacted after the date of this Agreement, as such
specific section or corresponding provision is in effect on the date of
application of the provisions of this Agreement containing such reference.
"CRISA ASSETS" shall have the meaning assigned to it in the Master
Investment Agreement.
"CRISA ASSUMED LIABILITIES" shall have the meaning assigned to it in
the Master Investment Agreement.
"CRISA CONTRIBUTION" means the fifty-one percent (51%) interest in the
Crisa Assets and the Crisa Assumed Liabilities owned by Crisa.
"FISCAL YEAR" means (i) the period commencing upon the formation of the
Company and ending on December 31, 1997, and (ii) any subsequent twelve (12)
month period commencing on January 1 and ending on December 31.
"INTEREST" means the entire limited liability company interest of a
Member in the Company at any particular time, including the right of such Member
to any and all benefits to which a Member may be entitled as provided in this
Agreement together with the obligations of such Member to comply with all of the
terms and provisions of this Agreement.
"LGA4 CONTRIBUTION" means the forty-nine percent (49%) interest in the
Crisa Assets and the Crisa Assumed Liabilities owned by LGA4.
"MANAGER" means any person chosen to be a manager pursuant to SECTION
6.1. "Managers" is the plural of "Manager."
2
<PAGE> 3
"MASTER INVESTMENT AGREEMENT" means that certain Master Investment
Agreement, dated as of August 15, 1997, by and among Libbey, Libbey Glass Inc.,
LGA2 Corp., LGA3 Corp., LGA4, Vitro, VC Holding, Vitro Corporativo, S.A. de
C.V., Vitrocrisa, Crisa, and WorldCrisa Corporation.
"MEMBER" means any Person admitted to the Company as a member.
"Members" is the plural of "Member."
"NEWCO FINANCE" means Crisa Libbey, S.A. de C.V., a sociedad anonima
with variable capital organized under the laws of the United Mexican States.
"PERCENTAGE INTEREST" means the percentage interest of a Member, from
time to time, in certain allocations of Profits, Losses, and other items of
income, gain, loss, deduction, or credit. The initial Percentage Interest of
each Original Member is as set forth in EXHIBIT A to this Agreement.
"PERSON" shall have the meaning given to it in SECTION 15.14. "Persons"
is the plural of "Person."
"PROFITS" and "LOSSES" mean, for each Fiscal Year or other period, an
amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Profits and Losses
pursuant hereto shall be added to such taxable income or loss.
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B), or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits and Losses pursuant hereto shall be subtracted from
such taxable income or loss.
(iii) If the Book Value of any Company asset is adjusted
pursuant to the definition of Book Value contained herein, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Profits and Losses.
(iv) Gain or loss resulting from any disposition of property
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Book Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Book Value.
3
<PAGE> 4
"TREASURY REGULATIONS" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"VC HOLDING" means Vitrocrisa Holding, S.A. de C.V., a sociedad anonima
with variable capital organized under the laws of the United Mexican States.
"VITROCRISA" means Vitrocrisa, S.A. de C.V., a sociedad anonima with
variable capital organized under the laws of the United Mexican States.
Section 1.2 HEADINGS. The headings and subheadings in this Agreement
are included for convenience and identification only and are in no way intended
to describe, interpret, define, or limit the scope, extent, or intent of this
Agreement or any provision hereof.
ARTICLE II
----------
Organization
------------
Section 2.1 NAME. The name of the Company formed hereby is Crisa
Industrial, L.L.C. The business of the Company may be conducted upon compliance
with all applicable laws under any other name designated by the Managers.
Section 2.2 TERM. The existence of the Company commenced on the date
the Certificate was filed in the office of the Secretary of State of the State
of Delaware and shall continue in perpetuity, unless dissolved in accordance
with the provisions of this Agreement.
Section 2.3 REGISTERED AGENT AND OFFICE. The Company's registered agent
and office in Delaware shall be The Corporation Trust Company, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19805. At any time and from time
to time, the Managers may designate another registered agent and/or registered
office.
Section 2.4 PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Company shall be at Laredo, Texas. At any time and from time to
time, the Managers may change the location of the Company's principal place of
business.
Section 2.5 CERTIFICATES. The Interest of each Member in the Company
shall be evidenced by a certificate in such form as the parties to this
Agreement shall agree from time to time. Notwithstanding the foregoing, each
certificate shall bear the following legend:
"The membership interests represented by this certificate are subject
to and are transferable only in compliance with the Limited Liability
Company Agreement of Crisa Industrial, L.L.C. by and among Libbey Inc.,
a corporation organized under the laws of the State of Delaware, LGA4
Corp., a corporation organized under the laws of the State of Delaware,
Vitro, S.A., a sociedad anonima organized under the laws of the United
Mexican States, Crisa Corporation, a corporation organized
4
<PAGE> 5
under the laws of the State of Texas, and Crisa Industrial, L.L.C., a
limited liability company organized under the laws of the State of
Delaware, as the same may be amended from time to time, dated August
29, 1997. The membership interests represented hereby can be
transferred only in accordance with the terms of said Limited Liability
Company Agreement. Any purported transfer of title other than in the
manner provided in the Limited Liability Company Agreement is void,
without force and effect, and will not be recognized by Crisa
Industrial, L.L.C."
ARTICLE III
-----------
Purpose and Powers of the Company
---------------------------------
Section 3.1 PURPOSE. The purpose of the Company is to engage in any
business or activity in which a limited liability company may engage under the
Delaware Act and to engage in such other activities as are lawful and approved
by unanimous vote of the Members.
Section 3.2 POWERS OF THE COMPANY. The Company, under the direction of
the Managers and the officers, shall have the power and authority to take any
and all actions necessary, appropriate, proper, advisable, incidental, or
convenient to or for the furtherance of the purpose set forth in SECTION 3.1.
ARTICLE IV
----------
Capital Contributions, Securities, and Capital Accounts
-------------------------------------------------------
Section 4.1 INITIAL CONTRIBUTIONS. Upon or prior to the execution of
this Agreement, Crisa shall contribute, assign, and deliver the Crisa
Contribution to the Company, and LGA4 shall contribute, assign, and deliver the
LGA4 Contribution to the Company.
Section 4.2 ADDITIONAL CAPITAL CONTRIBUTIONS. No Member shall be
permitted to make any additional Capital Contributions to the Company in excess
of those Capital Contributions described in SECTION 4.1, unless the Managers
approve such additional Capital Contributions by Extraordinary Managers Action
(as defined below).
Section 4.3 MAINTENANCE OF CAPITAL ACCOUNTS. The Company shall
establish and maintain Capital Accounts for each Member. Each Member's Capital
Account shall be increased by (1) the amount of any money actually contributed
by the Member to the capital of the Company, (2) the fair market value of any
property contributed, as determined in good faith by the Company and the
contributing Member at the time of contribution (net of liabilities assumed by
the Company or subject to which the Company takes such property, within the
meaning of Section 752 of the Code), and (3) the Member's share of Profits and
of any separately allocated items of income or gain (including any gain and
income from unrealized income with respect to accounts receivable allocated to
the Member to reflect the difference between the book value and tax basis of
assets contributed by the Member). Each Member's Capital Account shall be
decreased by (1) the amount of any money actually distributed to the Member from
the
5
<PAGE> 6
Company, (2) the fair market value of any property distributed to the Member, as
determined in good faith by the Company and the contributing Member at the time
of contribution (net of liabilities of the Company assumed by the Member or
subject to which the Member takes such Property within the meaning of Section
752 of the Code), and (3) the Member's share of Losses and of any separately
allocated items of deduction or loss (including any loss or deduction allocated
to the Member to reflect the difference between the book value and tax basis of
assets contributed by the Member).
Section 4.4 DISTRIBUTION OF ASSETS. If the Company at any time
distributes any of its assets in-kind to any Member, the Capital Account of each
Member shall be adjusted to account for that Member's allocable share (as
determined under ARTICLE VII) of the Profits or Losses that would have been
realized by the Company had it sold the assets that were distributed at their
respective fair market values immediately prior to their distribution.
Section 4.5 SALE OR EXCHANGE OF INTEREST. In the event of a transfer of
all of a Member's Interest in the Company pursuant to ARTICLE XI, the Capital
Account of the transferring Member shall become the capital account of the
transferee.
Section 4.6 COMPLIANCE WITH SECTION 704(b) OF THE CODE. The provisions
of this ARTICLE IV as they relate to the maintenance of Capital Accounts are
intended, and shall be construed, and, if necessary, modified to cause the
allocations of profits, losses, income, gain, and credit pursuant to ARTICLE VII
to have substantial economic effect under the Treasury Regulations promulgated
under Section 704(b) of the Code, in light of the distributions made pursuant to
ARTICLES VII and X and the Capital Contributions made pursuant to this ARTICLE
IV. Notwithstanding anything herein to the contrary, this Agreement shall not be
construed as creating a deficit restoration obligation or otherwise personally
obligate any Member to make a Capital Contribution in excess of the initial
contribution that is outlined in SECTION 4.1.
Section 4.7 NO INTEREST ON CONTRIBUTIONS. No Member will be entitled to
receive any interest on such Member's Capital Contributions to the Company.
Section 4.8 NO WITHDRAWAL OF CONTRIBUTIONS. No Member will have the
right to withdraw all or any part of such Member's Capital Contributions or to
receive any return on all or any part of such Member's Capital Contributions,
except as may otherwise be provided in this Agreement or approved by
Extraordinary Managers Action (as defined below).
ARTICLE V
---------
Members
-------
Section 5.1 POWERS OF MEMBERS. The Members shall have the power to
exercise any and all rights or powers granted to the Members pursuant to the
Delaware Act or the express terms of this Agreement. Notwithstanding anything in
the foregoing to the contrary, any matter specified in SECTION 6.4 that is
referred to the Members by the Managers shall require the
6
<PAGE> 7
affirmative vote of seventy-five percent (75%) of the Interests present or
represented at the meeting in which such action is considered:
Section 5.2 MEETINGS OF MEMBERS. A meeting of the Members will be held
at least once a year and shall discuss any matter properly raised in accordance
with the Delaware Act. Notice of such meetings must be in writing and must be
delivered to each Member at least fifteen (15) days prior to such meeting,
unless such notice is waived by the Member in writing. A representative for each
Member must be present to transact business. However, if a representative for
each Member is not present at a meeting in which a matter that is specified in
SECTION 6.4 that is referred to the Members by the Managers is to be considered,
either Member shall have the right, but shall not be obligated, to declare the
occurrence of a Deadlock Event under SECTION 13.1. Except as otherwise provided
in this Agreement, resolutions of the Members shall be adopted by the
affirmative vote of the majority of Interests present or represented at the
meeting at which such resolution is considered. Notwithstanding the foregoing,
resolutions may be adopted without a meeting by the unanimous written consent of
all Members.
Section 5.3 PARTITION. Each Member waives any and all rights that it
may have to maintain an action for partition of the Company's property.
Section 5.4 RESIGNATION. A Member may not resign or withdraw from the
Company prior to the dissolution and winding up of the Company except upon a
transfer of its Interest pursuant to the provisions of this Agreement. A
resigning or withdrawing Member shall not be entitled to receive any
distribution and shall not otherwise be entitled to receive the fair value of
its Interest, except as otherwise expressly provided in this Agreement.
Section 5.5 TELEPHONE MEETINGS. Notwithstanding anything in this
Agreement to the contrary, any meeting of the Members required or permitted to
be held by the Delaware Act or by this Agreement may be held by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
ARTICLE VI
----------
Management
----------
Section 6.1 MANAGERS. The Company shall be managed by seven (7)
Managers, who shall have the powers and authority granted to them by this
Agreement. Crisa shall be entitled, in its sole and absolute discretion, to
designate four (4) Managers (and their alternates) (hereinafter referred to
singularly as a "CRISA MANAGER" and collectively as "CRISA MANAGERS"), provided
that each such designee is also a member or alternate, as the case may be, of
the Boards of Directors of Vitrocrisa, VC Holding, and Newco Finance. LGA4 shall
be entitled, in its sole and absolute discretion, to designate three (3)
Managers (and their alternates) (hereinafter referred to singularly as an "LGA4
MANAGER" and collectively as "LGA4 MANAGERS"), provided that each such designee
is also a member or alternate, as the case may be, of the Boards of Directors of
Vitrocrisa, VC Holding, and Newco Finance. The names of the original Managers
and their alternates are reflected in EXHIBIT B to this Agreement.
7
<PAGE> 8
Section 6.2 REMOVAL. Each Member, in its sole and absolute discretion,
may remove and, in conjunction therewith, shall replace any or all of the
Managers and alternates it has designated. Notwithstanding the foregoing, each
Member hereby agrees to consult with the other Member in connection with the
designation, removal, and replacement of any Manager and alternate and to
consider reasonable objections of any Member to the designation, removal, and
replacement of any Manager and alternate; provided, however, such consultation
shall not affect the sole and absolute discretion of each Member to designate,
remove, or replace the Managers and alternates it has designated. Any alternate
may substitute for any Manager designated by such Member at any meeting of the
Managers. No Manager or alternate shall be removed or replaced other than by the
Member that designated such Manager or alternate.
Section 6.3 POWER AND AUTHORITY OF THE MANAGERS. Except for those
matters requiring approval of the Members under this Agreement, the Managers
shall have all power and authority to operate the Company. Notwithstanding the
foregoing, each Member shall cause its Managers to delegate their rights and
powers to manage the day-to-day operations of the Company, other than those
rights and powers specifically granted to the Managers in other sections of this
Agreement (including, but not limited to, SECTION 6.4), to officers elected in
accordance with the provisions of SECTION 6.8.
Section 6.4 EXTRAORDINARY MANAGERS ACTIONS. Notwithstanding anything
contained herein to the contrary, the following actions shall not be taken
unless (a) approved by a majority of the Managers, and (ii) such approving
majority shall have consisted of at least one Crisa Manager and at least one
LGA4 Manager (hereinafter singularly referred to as an "EXTRAORDINARY MANAGERS
ACTION" and collectively referred to as "EXTRAORDINARY MANAGERS ACTIONS"). Such
Extraordinary Managers Actions are as follows:
(a) Any allocation of Profits, Losses, deductions, or
credits from the Company to any Member's Capital
Account in accordance with ARTICLE VII;
(b) A distribution or withdrawal of money by a Member
from such Member's Capital Account;
(c) Any loan or series of loans for the Company that are
made following the date of this Agreement in an
amount in excess of US$1,500,000;
(d) The acquisition, sale, or transfer in any single
transaction or series of related transactions of
assets by the Company in excess of US$1,500,000;
(e) Transactions that would dilute any Member's Interest
in the Company;
(f) The granting by the Company of guarantees in favor of
third parties such that the aggregate amount of money
guaranteed by the Company at any time exceeds
US$1,500,000;
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(g) The granting by the Company of loans in an aggregate
amount in excess of US$100,000 to third parties,
including, without limitation, employee loans;
(h) The entering by the Company of agency, distribution,
or commission agreements other than in the ordinary
course of business;
(i) The approval by the Managers of annual operating
budgets pursuant to ARTICLE XIV;
(j) Any expenditures in excess of 120% of the allotment
for such expenditures as set forth in the annual
operating budget for the Company as determined in
accordance with ARTICLE XIV;
(k) The adoption of employee benefit plans and policies
for the Company after the date of this Agreement,
except for benefit plans and policies substantially
similar to benefit plans and policies adopted by
other members of the Vitro 100% Group (as defined in
ARTICLE XI) applicable to all "workers" (known as
trabajadores in Vitrocrisa) or all "salaried
employees" (known as empleados in Vitrocrisa) or all
"executives" (known as ejecutivos in Vitrocrisa) of
the Company, provided further that such benefit plans
and policies under this exception are subject to the
majority approval of the Managers;
(l) Entering into any contract, agreement, or
understanding, other than in the ordinary course of
business, with a fair market value in excess of
US$1,500,000;
(m) Formation of a partnership or joint venture between
the Company and another business entity;
(n) The appointment, termination, and transfer of the
Company's chief executive officer;
(o) The establishment of compensation or policies
therefor for management, including, but not limited
to, executive officers and key employees, except as
provided by SECTION 6.4(k); and
(p) Entering into any contract or agreement with a Member
or one or more of its Affiliates not in the ordinary
course of business.
Notwithstanding any provision of the foregoing to the contrary, to the
extent a contract or other agreement has previously been approved by
Extraordinary Managers Action, the subsequent expenditure pursuant to such
contract or other agreement need not be approved by Extraordinary Managers
Action.
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Section 6.5 MEETINGS. The Managers shall meet at least twice annually,
the first meeting being within thirty (30) days after year-end financial
statements have been delivered to all Managers, but in no event more than four
(4) months after the end of each fiscal year, or more frequently at the request
of any Member or any Manager. Notice of each meeting of the Managers shall be
delivered to all Managers at least fifteen (15) days in advance of the date of
such meeting. At least four (4) Managers or their alternates must be present to
transact business. Each meeting of the Managers shall take place at 10:00 a.m.
on the fifteenth (15th) day after written notice has been delivered to all
Managers, or at a time and place mutually agreed upon by the Managers. If
Managers sufficient to transact business are not present at the meeting, the
date of the meeting shall be postponed for one (1) day, and if Managers
sufficient to transact business are not present at that meeting, the date of the
meeting shall be postponed for an additional day. If Managers sufficient to
transact business are not present at that meeting, either Member shall have the
right, but shall not be obligated, to declare the occurrence of a Deadlock Event
under SECTION 13.1.
Section 6.6 WAIVER OF NOTICE; VOTING. The Managers can waive the
requirement of the written notice, and same will not be required, when all of
the Managers are present at the meeting. Except as otherwise provided herein,
all decisions of the Managers shall require the approval of a majority of the
Managers. All decisions of the Managers on any matters requiring their approval,
consent, or action may be made by the Managers in each of their sole and
absolute discretion.
Section 6.7 ACTION WITHOUT MEETING. Whenever the Managers are required
or permitted to take any action pursuant to a meeting of the Managers, such
action may be taken without a meeting upon a written consent setting forth the
action so taken that is signed by each of the Managers.
Section 6.8 OFFICERS. Each Member shall cause its Managers to delegate
their rights and powers to manage the day-to-day operations of the Company,
other than those rights and powers specifically granted to the Managers in this
Agreement (including, but not limited to, those listed in SECTION 6.4), to
officers of the Company; provided, however, that (a) the appointment,
termination, and transfer of the Company's chief executive officer shall be
effective only upon approval by Extraordinary Managers Action and (b) the Crisa
Managers shall have the sole power and authority to appoint all of the Company's
other officers, who shall have such titles (including president, vice president,
treasurer, and secretary) as the Crisa Managers deem necessary or appropriate.
Section 6.9 TELEPHONE MEETINGS. Notwithstanding anything in this
Agreement to the contrary, any meeting of the Managers required or permitted to
be held by the Delaware Act or by this Agreement may be held by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
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ARTICLE VII
-----------
Allocations and Distributions
-----------------------------
Section 7.1 GENERAL ALLOCATIONS OF PROFITS, LOSSES, DEDUCTIONS, AND
CREDITS. After giving effect to all distributions of cash or property (other
than cash or property to be distributed pursuant to ARTICLE X), Profits, Losses,
deductions, and credits for any fiscal year shall be allocated among the Members
in accordance with their Percentage Interests. Notwithstanding the preceding
sentence, the Managers are authorized to make any allocations required by
Section 1.704-1 or 1.704-2 of the Treasury Regulations in order to ensure that
the allocations of Profits, Losses, deductions, and credits pursuant to this
Agreement are respected for federal income tax purposes. It is intended that the
allocations in this SECTION 7.1 effect an allocation for federal income tax
purposes consistent with Code Section 704 and comply with any limitations or
restrictions therein.
Section 7.2 DISTRIBUTIONS. The Managers shall make distributions in
accordance with the distribution policy attached to this Agreement as EXHIBIT C.
Section 7.3 LIMITATIONS ON DISTRIBUTIONS. Notwithstanding any provision
to the contrary contained in this Agreement, the Company shall not make a
distribution to any Member on account of its Interest in the Company if such
distribution would violate Section 18-607 of the Delaware Act or other
applicable law.
ARTICLE VIII
------------
Books and Records; Tax Matters
------------------------------
Section 8.1 BOOKS, RECORDS AND FINANCIAL STATEMENTS.
(a) At all times during the continuance of the Company, the Company
shall maintain, at a location to be determined from time to time by the
Managers, separate books of account for the Company that shall show a true and
accurate record of all costs and expenses incurred, all charges made, all
credits made and received and all income derived in connection with the
operation of the Company's business in accordance with generally accepted
accounting principles of the United States of America consistently applied
("U.S. GAAP"), and, to the extent inconsistent therewith, in accordance with
this Agreement. Such books of account, together with a certified copy of this
Agreement and of the Certificate, shall at all times be maintained, at a
location to be determined from time to time by the Managers, and shall be open
to inspection and examination at reasonable times by each Member and its duly
authorized representative for any purpose reasonably related to such Member's
Interest in the Company. The books of account and the records of the Company may
be examined by and reported upon as of the end of each Fiscal Year by a firm of
independent certified public accountants selected by the Managers.
(b) The Managers shall prepare and maintain, or cause to be prepared
and maintained, the books of account of the Company and within three (3) months
after the close of each Fiscal
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Year, the Managers shall transmit to each Member a statement indicating such
Member's share of each item of Company income, gain, loss, deduction, or credit
for such Fiscal Year for income tax purposes.
Section 8.2 ACCOUNTING METHOD. For both financial and tax reporting
purposes and for purposes of determining Profits and Losses, the books and
records of the Company shall be kept in accordance with U.S. GAAP.
Section 8.3 TAX MATTERS PARTNER. The Members shall designate one Member
to be the "tax matters partner" of the Company pursuant to Section 6231(a)(7) of
the Code. Any Member that is designated "tax matters partner" shall take such
action as may be necessary to cause the other Member to become a "notice
partner" within the meaning of Section 6223 of the Code. Any Member that is
designated "tax matters partner" shall inform the other Member of all
significant matters that may come to its attention in its capacity as "tax
matters partner" by giving notice thereof on or before the fifth business day
after becoming aware thereof and, within that time, shall forward to the other
Member copies of all significant written communications it may receive in that
capacity. Any Member that is designated "tax matters partner" may not take any
action contemplated by Sections 6222 through 6232 of the Code without the
consent of the other Member, but this sentence does not require the consent of
the other Member to take any action left to the determination of an individual
Member under Sections 6222 through 6232 of the Code. The "tax matters partner"
shall provide the tax information necessary for the other Member to complete its
tax returns to the other Member within 120 days of the end of each calendar
year, or the termination of this Agreement.
Section 8.4 TAXATION AS PARTNERSHIP. The Company shall be treated as a
partnership for U.S. federal income tax purposes. No election shall be made by
the Company or any Member for the Company to be classified as an association or
a corporation under Section 7701 of the Code and the Treasury Regulations issued
thereunder or otherwise to be excluded from the application of any of the
provisions of Subchapter K, Chapter 1 of Subtitle A of the Code or from any
similar provisions of any state tax laws. If the default classification rules
under Section 7701 of the Treasury Regulations are ever amended so as to
classify the Company as an association or corporation unless it elects
otherwise, the Managers shall cause the Company to elect to be classified as a
partnership pursuant to Section 7701 of the Treasury Regulations, as amended,
for the taxable year in which such amendment to the Code or Treasury Regulations
occurs.
ARTICLE IX
----------
Liability, Indemnification, and Corporate Opportunity
-----------------------------------------------------
Section 9.1 LIABILITY.
(a) Except as otherwise provided by the Delaware Act, (a) the debts,
obligations, and liabilities of the Company, whether arising in contract, tort,
or otherwise, shall be solely the debts, obligations, and liabilities of the
Company, and (b) no Member shall be obligated for any such debt, obligation, or
liability of the Company solely by reason of being a Member.
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<PAGE> 13
(b) Except as otherwise expressly required by law, a Member, in its
capacity as such, shall have no liability in excess of (i) the amount of its
Capital Contributions, (ii) its share of any assets and undistributed profits of
the Company, and (iii) the amount of any distributions wrongfully distributed to
it.
Section 9.2 INDEMNIFICATION OF THE MANAGERS AND OFFICERS. Each Manager
and officer shall be indemnified by the Company against all liability for any
claim, demand, loss, damage, liability, or expense (including, without
limitation, amounts paid in settlement, reasonable costs of investigation, and
reasonable legal expenses) resulting from any threatened, pending, or completed
action, suit, or proceeding naming any of them as defendant by reason of acts or
omissions made or omitted in good faith within the scope of their authority as
set forth in this Agreement to the maximum extent permitted by law.
Section 9.3 CORPORATE OPPORTUNITY. No person or entity of the Libbey
100% Group (as defined in ARTICLE XI) and no person or entity of the Vitro 100%
Group (as defined in ARTICLE XI) has any duty to communicate or offer any
Corporate Opportunity (as defined below) to the Company, and neither the Libbey
100% Group nor the Vitro 100% Group shall be liable to the Company or any Member
for breach of any fiduciary duty or duty of loyalty to the Company by reason of
the fact that it pursues or acquires a Corporate Opportunity for itself or
directs a Corporate Opportunity to another person or entity. For purposes of
this section, "CORPORATE OPPORTUNITY" means a business or other opportunity that
the Company is or could reasonably be expected to become financially able to
undertake, which relates to the Company's line of business and in which the
Company has or would have an interest or a reasonable expectancy of interest. To
the extent this SECTION 9.3 contradicts any term or provision in the
Distribution Agreement, dated of even date, by and among Vitro, Vitrocrisa,
Libbey, and Libbey Glass Inc., the Distribution Agreement, dated of even date,
by and among Vitro, Crisa, Vitrocrisa, Libbey, and Libbey Glass Inc. (together,
the "DISTRIBUTION AGREEMENTS"), or the Covenant Not to Compete, dated of even
date, by and between Libbey and Vitro (the "COVENANT NOT TO COMPETE"), the terms
and provisions of the Distribution Agreements or the Covenant Not to Compete
shall control.
ARTICLE X
---------
Dissolution, Liquidation, and Termination
-----------------------------------------
Section 10.1 EVENTS CAUSING DISSOLUTION. The Company shall be dissolved
and its affairs shall be wound up upon the occurrence of any of the following
events:
(a) The resignation, expulsion, bankruptcy, or dissolution of a Member,
or the occurrence of any other event under the Delaware Act that terminates the
continued membership of a Member, unless the business of the Company is
continued within ninety (90) days following the occurrence of any such event by
the vote or written consent of the remaining Member;
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<PAGE> 14
(b) The entry of a decree of judicial dissolution under Section 18-802
of the Delaware Act; or
(c) The written consent of all Members.
Section 10.2 LIQUIDATION. Upon dissolution of the Company, the Members
shall immediately select a liquidating trustee, who shall immediately commence
to wind up the Company's affairs; provided, however, that a reasonable time
shall be allowed for the orderly liquidation of the assets of the Company and
the satisfaction of liabilities to creditors so as to enable the Members to
minimize the normal losses attendant upon a liquidation; and provided, further,
that if the dissolution of the Company results from the bankruptcy or
dissolution of a Member, the liquidating trustee shall be a person approved by a
majority of the Interests of the remaining Members.
Section 10.3 TERMINATION. The Company shall terminate when all of the
assets of the Company shall have been distributed in the manner provided for in
this ARTICLE X and the Certificate shall have been canceled in the manner
required by the Delaware Act.
Section 10.4 RETURN OF CAPITAL CONTRIBUTIONS. Each Member shall look
solely to the assets of the Company for the return of its Capital Contributions
and shall have no recourse against any other Member for the return of its
Capital Contributions.
ARTICLE XI
----------
Transfers, Withdrawals, and Admission of Additional Members
-----------------------------------------------------------
Section 11.1 TRANSFERS AND ENCUMBRANCE OF INTERESTS.
(a) TRANSFERS. No Member shall transfer all or any portion of its
Interest or its rights under this Agreement, or agree to do so, without the
written consent of each of Libbey and Vitro. Notwithstanding the foregoing, no
Member may transfer all or any portion of its Interest or its rights under this
Agreement, or agree to do so, for a period of four (4) years from the date of
this Agreement. After such four-year period, any Member may transfer all, but
not less than all, of its Interest pursuant to the terms of SECTION 11.2. A
Member may transfer or otherwise sell its Interest pursuant to this ARTICLE XI
for any reason.
(b) TRANSFEREES AS MEMBERS. The transferee of a Member's Interest in a
transfer made in accordance with this ARTICLE XI must execute this Agreement and
shall become a Member of the Company upon the transferee's execution of this
Agreement and shall have the rights and powers of the transferring Member.
(c) ENCUMBRANCE. Except as otherwise provided in this Agreement, no
Member may encumber, mortgage, pledge, hypothecate, or place a lien or make any
disposition similar thereto (collectively, an "ENCUMBRANCE") upon all or any
portion of its Interest or its rights under this Agreement, or agree to do so,
without the prior written consent of the other Member, which consent
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<PAGE> 15
shall not be unreasonably withheld, but may be subject to such reasonable
conditions as Libbey and Vitro may require.
(d) VIOLATION. Any purported transfer or Encumbrance in violation of
the terms of this Agreement shall be null and void and shall not be recognized
by the Company.
Section 11.2 MEMBERS FIRST OPTION TO PURCHASE INTEREST.
(a) DEFINITIONS. In this SECTION 11.2, the following words shall bear
the following meanings:
"JOINT VENTURE INTEREST" in the case of LGA4, (a) shares of
Vitrocrisa capital stock held, directly or
indirectly, by LGA3, (b) shares of VC
Holding capital stock held, directly or
indirectly, by LGA3, (c) shares of Newco
Finance capital stock held, directly or
indirectly, by LGA3, and (d) membership
interests in the Company owned, directly or
indirectly, by LGA4; and in the case of
Crisa, (a) shares of Vitrocrisa capital
stock held, directly or indirectly, by
Vitro, (b) shares of VC Holding capital
stock held, directly or indirectly, by
Vitro, (c) shares of Newco Finance capital
stock held, directly or indirectly, by
Vitro, and (d) membership interests in the
Company owned, directly or indirectly, by
Crisa;
"PRESCRIBED PRICE" the price for the Joint Venture
Interest specified in the Transfer Notice;
"PROPOSING TRANSFEROR" a Member proposing to transfer
or dispose of all of its Joint Venture
Interest;
"PURCHASER" a Member willing to purchase all of the
Joint Venture Interest comprised in, or
offered for purchase pursuant to the serving
of, a Transfer Notice;
"TRANSFER NOTICE" a written notice served by a Member;
"100% GROUP" in the case of Crisa, Crisa or any
other person or entity that directly or
indirectly controls, is controlled by, or is
under common control with Crisa, but
excluding the Company (the "VITRO 100%
GROUP"), and in the case of LGA4, LGA4 or
any other person or entity that directly or
indirectly controls, is
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<PAGE> 16
controlled by, or is under common control
with LGA4 (the "LIBBEY 100% GROUP").
(b) LIMITATION ON TRANSFERS. The right to transfer or dispose of
Interests shall (save in respect of transfers made pursuant to SECTION 11.2(i))
be subject to the restrictions set forth in this SECTION 11.2. A Member may not
transfer or dispose of its Interest unless it transfers or disposes of all of
its Joint Venture Interest. Except as provided otherwise herein, no Member may
transfer or dispose of its Joint Venture Interest (save in respect of transfers
made pursuant to SECTION 11.2(i)) without the prior written consent of the other
Member.
(c) FIRST OPTION. Before transferring or disposing of its Interest, the
Proposing Transferor shall serve a Transfer Notice on the other Member
stipulating the Prescribed Price. Upon receipt of a Transfer Notice, the other
Member shall have the right and first option for a period of thirty (30) days to
purchase the Joint Venture Interest at the Prescribed Price.
(d) TRANSFER ON EXERCISE OF OPTION. If the Proposing Transferor is
given notice under SECTION 11.2(c) that the other Member has exercised its
option to purchase all, but not less than all, of the Joint Venture Interest,
the Proposing Transferor shall be bound, on payment of the Prescribed Price, to
transfer the Joint Venture Interest to the Purchaser or its designees. The sale
and purchase shall be completed at the office of the Company, or at such other
place as the Proposing Transferor and the other Member shall agree, during
normal business hours on the first business day after the expiration of ninety
(90) days after the expiration of the option period set forth in SECTION
11.2(c).
(e) TRANSFER ON EXPIRATION OR TERMINATION OF OPTION. If the option
granted by SECTION 11.2(c) is not exercised as to all of the Joint Venture
Interest, then such option shall become void AB INITIO and the Proposing
Transferor may sell all of the Joint Venture Interest to any third party free of
the restrictions set forth in this ARTICLE XI, subject to the following
restrictions: (i) the Joint Venture Interest may not be sold after the
expiration of one hundred eighty (180) days after the expiration of the option
period set forth in SECTION 11.2(c), (ii) the Joint Venture Interest must be
sold in a bona fide sale at a price not being less that the Prescribed Price,
and (iii) the third party transferee of the Joint Venture Interest must execute
and deliver an undertaking under which such third party shall become a party
hereto, to the Vitrocrisa, S.A. de C.V. Shareholders Agreement dated of even
date (the "VITROCRISA SHAREHOLDERS AGREEMENT"), to the Vitrocrisa Holding, S.A.
de C.V. Shareholders Agreement dated of even date (the "VC HOLDING SHAREHOLDERS
AGREEMENT"), and to the Crisa Libbey, S.A. de C.V. Shareholders Agreement dated
of even date (the "NEWCO FINANCE SHAREHOLDERS AGREEMENT," and collectively with
this Agreement, the Vitrocrisa Shareholders Agreement, and the VC Holding
Shareholders Agreement, the "JOINT VENTURE SHAREHOLDERS AGREEMENTS") in place of
the Proposing Transferor.
(f) EXERCISE. An option granted by SECTION 11.2(c) of this Agreement
may be exercised only by the holder thereof and only by the delivery of a
written notice of exercise to the Proposing Transferor prior to the expiration
of the relevant option period.
(g) WAIVER. The restrictions imposed by this ARTICLE XI may be waived
in relation to any proposed transfer of a Member's Joint Venture Interest with
the consent of all of the Members
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who would otherwise have been entitled to have such Joint Venture Interest
offered to them in accordance herewith.
(h) FAILURE TO TIMELY EXERCISE. Failure of a Member to exercise an
option granted by SECTION 11.2(c) prior to the expiration of the option period
shall be deemed to be a waiver of that option as of the date the option period
expired. The waiver of an option granted by SECTION 11.2(c) will not constitute
a waiver of any subsequent option granted by SECTION 11.2(c).
(i) INTRA-GROUP TRANSFERS. Notwithstanding the foregoing, all, but not
less than all, of a Member's Joint Venture Interest may be collectively
transferred to any member of the Vitro 100% Group (in the case of Crisa) and to
any member of the Libbey 100% Group (in the case of LGA4), but only (i) if the
transferee is already a party to each of the Joint Venture Shareholders
Agreements or shall have first agreed to adhere to and be bound by the
provisions of each of the Joint Venture Shareholders Agreements by executing and
delivering in favor of the other parties to each of the Joint Venture
Shareholders Agreements an undertaking to the intent and with the effect that
from the date of such undertaking, or, if later, the date of the transfer, the
transferee shall become a party to each of the Joint Venture Shareholders
Agreements, in place of the transferor, to the extent that the transferor ceases
to hold shares in Vitrocrisa, VC Holding, and Newco Finance and an Interest in
the Company as a result of such transfer; and (ii) on terms that the transferee
shall re-transfer the relative Joint Venture Interest to a member of the Vitro
100% Group (in the case of Crisa) or to a member of the Libbey 100% Group (in
the case of LGA4) on the same terms as set forth in this SECTION 11.2(i), prior
to such transferee ceasing to be a member of the Vitro 100% Group or the Libbey
100% Group (as the case may be).
(j) OPTION TO PARTICIPATE IN SALE. In lieu of exercising the option
granted in SECTION 11.2(c), a Member may elect to participate in any sale by the
Proposing Transferor contemplated by SECTION 11.2 at the Prescribed Price. Upon
such election, the Member will be entitled to sell all, but not less than all,
of its Joint Venture Interest. The election to participate in a sale must be in
writing and must be delivered to the selling Member within thirty (30) days of
receipt of the Transfer Notice. Failure to timely deliver a written election to
participate in a sale within thirty (30) days of the Transfer Notice will
constitute a waiver of such Member's right to participate in the sale.
ARTICLE XII
-----------
Termination
-----------
Section 12.1 CAUSES OF TERMINATION. Except as otherwise provided in
this Agreement, this Agreement shall terminate:
(a) upon the unanimous written consent of the Members;
(b) if the Company is declared bankrupt, has a receiver appointed
over all or substantially all of its assets, or is dissolved;
or
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<PAGE> 18
(c) by decree of a court of competent jurisdiction.
Section 12.2 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an event of default ("EVENT OF DEFAULT") hereunder on
the part of the Member with respect to whom such event occurs (the "DEFAULTING
PARTY") without any requirement of notice or passage of time except as
specifically set forth in any such subparagraph:
(a) the violation by a Member of any of the restrictions set forth
in ARTICLE XI;
(b) the institution by a Member, Libbey, or Vitro of a case or
other proceeding in bankruptcy;
(c) the institution against a Member, Libbey, or Vitro of a case
or other proceeding in bankruptcy, which proceeding is not
dismissed, stayed, or discharged within a period of sixty (60)
days after the filing thereof;
(d) a proposed plan of arrangement or other action by a Member's,
Libbey's, or Vitro's creditors taken as a result of a general
meeting of the creditors of a Member, Libbey, or Vitro,
respectively, which arrangement or other action is not
dismissed, stayed, or discharged within a period of sixty (60)
days after such general meeting;
(e) the appointment of a receiver, custodian, trustee, or like
officer, to take possession of the assets of a Member, Libbey,
or Vitro if the pendency of said receivership would reasonably
tend to have a materially adverse effect upon the performance
by the Member, Libbey, or Vitro, respectively, of its
obligations under this Agreement, which receivership remains
undischarged for a period of sixty (60) days from the date of
its imposition;
(f) attachment, execution, or other judicial seizure of all or any
substantial part of a Member's, Libbey's, or Vitro's assets or
of a Member's Interest, or any part thereof, such attachment,
execution, or seizure remaining undismissed or undischarged
for a period of sixty (60) days after the levy thereof, if the
occurrence of such attachment, execution, or other judicial
seizure would reasonably tend to have a materially adverse
effect upon the performance by the Member, Libbey, or Vitro,
respectively, of its obligations under this Agreement;
provided, however, that said attachment, execution, or seizure
shall not constitute an Event of Default hereunder if the
Member, Libbey, or Vitro, respectively, posts a bond
sufficient to fully satisfy the amount of such claim or
judgment within sixty (60) days after the levy thereof and the
respective Member's, Libbey's, or Vitro's assets are thereby
released from the lien of such attachment;
(g) the occurrence of an Event of Default (as defined therein)
under ARTICLE V of the Vitrocrisa Shareholders Agreement, the
VC Holding Shareholders Agreement, or the Newco Finance
Shareholders Agreement;
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(h) the occurrence of a Libbey Change of Control or a Vitro Change
of Control (each as defined in SECTION 12.6); and
(i) failure of a Member's Manager to vote for and use reasonable
efforts to implement the Distribution Policy as set forth in
EXHIBIT C hereto.
Section 12.3 REMEDY ON DEFAULT. If an Event of Default is declared at
any time by a Member pursuant to SECTION 12.2(h) with respect to a Libbey Change
of Control or a Vitro Change of Control occurring on or before the third
anniversary of this Agreement, then such Member may, in addition to any other
remedy at law or in equity, invoke the provisions of SECTION 12.5. If an Event
of Default is declared at any time by a Member pursuant to (a) SECTION 12.2(h)
with respect to a Libbey Change of Control or a Vitro Change of Control
occurring after the third anniversary of this Agreement or (b) any other
provision of SECTION 12.2, then such Member may, in addition to any other remedy
at law or in equity, invoke the provisions of SECTION 12.4.
Section 12.4 BUY/SELL PROVISION. Within forty-five (45) days of an
Event of Default, the non-defaulting party (the "OFFERING MEMBER") may deliver a
written offer (the "OFFER") to purchase all, but not less than all, of the other
Member's Joint Venture Interest at a cash purchase price (the "OFFER PRICE"),
fully payable on or before sixty (60) days after notice of the Offer. Within
thirty (30) days after receipt of the Offer, the other Member may notify the
Offering Member in writing that it will either (a) sell to the Offering Member
all, but not less than all, of its Joint Venture Interest at the Offer Price on
or before the sixtieth day after receipt of the Offer or (b) buy from the
Offering Member all, but not less than all, of the Offering Member's Joint
Venture Interest at (A) if Crisa is the Offering Member, 51/49 of the Offer
Price or (B) if LGA4 is the Offering Member, 49/51 of the Offer Price (the
"ADJUSTED OFFER PRICE"), on or before the sixtieth day after receipt of the
Offer. If the other Member fails to notify the Offering Member within the thirty
(30) day period that it will (a) sell all of its Joint Venture Interest to the
Offering Member at the Offer Price or (b) buy all of the Joint Venture Interest
from the Offering Member at the Adjusted Offer Price, then the Offering Member
must purchase in cash all, but not less than all, of the other Member's Joint
Venture Interest at the Offer Price, and the other Member must sell all, but not
less than all, of its Joint Venture Interest at the Offer Price, on or before
the sixtieth day after notice of the Offer. Failure by the non-defaulting party
to deliver an Offer within forty-five (45) days of notice of an Event of Default
shall constitute a waiver of such party's rights under this SECTION 12.4 with
respect to the particular Event of Default.
Section 12.5 DISPUTE RESOLUTION; PUT/CALL OPTION.
(a) DISPUTE RESOLUTION. If an Event of Default is declared by a Member
pursuant to SECTION 12.2(h) with respect to a Libbey Change of Control or a
Vitro Change of Control occurring on or before the third anniversary of this
Agreement, such Member shall promptly (but in no event later than thirty (30)
days after such Member's knowledge of such Event of Default) send notice of such
Event of Default to the other Member (the "DEFAULT NOTICE"). Upon receipt of the
Default Notice, the alleged defaulting party will have thirty (30) days to cure
such default. If the default is not cured within such thirty (30) day period or
if the party receiving the Default Notice contests that a default has occurred,
the chief executive officers of Libbey and Vitro (collectively, the "CEOS")
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shall meet within ninety (90) days of the expiration of the cure period in a
good faith effort to resolve the Event of Default. If the Event of Default is
not resolved within such ninety (90) day period, the CEOs may select an
independent mediator and subject the dispute to non-binding mediation, which
must take place within thirty (30) days of the expiration of such ninety (90)
day period. If both CEOs do not consent to non-binding mediation or if the
mediation fails to resolve the Event of Default, the Event of Default shall be
submitted to binding arbitration to be conducted in accordance with the
provisions of SECTION 15.9(b), (c), (d), and (e), the sole purpose of which is
to decide whether a default exists and, if so, which Member is in default. The
arbitrators will consider all issues currently in dispute between the Members
and must certify their ruling in writing to each Member (the date of such
certification is referred to herein as the "CERTIFICATION DATE"). If the
arbitrators determine and certify that one Member is in default, then such
Member shall have thirty (30) days from the Certification Date to cure the
default. If the Event of Default is not cured within such thirty (30) day
period, the non-defaulting party may invoke the provisions of SECTION 12.5(b).
If the arbitrators cannot resolve which party has caused the Event of Default or
determine that both Members have caused the Event of Default and so certify,
then either of the Members may invoke the provisions of SECTION 12.4 within
thirty (30) days of the Certification Date.
(b) PUT/CALL OPTION WITH PENALTY.
(i) PUT/CALL OPTION WITH PENALTY. If the arbitrators determine
that Crisa or any member of the Vitro 100% Group is in default and such
default shall not be cured within thirty (30) days of the Certification
Date, then Libbey shall have the right to sell to Vitro, and Vitro
shall be obligated to purchase from Libbey, all, but not less than all,
of Libbey's Joint Venture Interest at forty-nine percent (49%) of the
Joint Venture Value (as defined below) multiplied by one hundred twenty
percent (120%) (the "PUT OPTION"). If the arbitrators determine that
LGA4 or any member of the Libbey 100% Group is in default, then Vitro
shall have the right to buy from Libbey, and Libbey shall be obligated
to sell to Vitro, all, but not less than all, of Libbey's Joint Venture
Interest at forty-nine percent (49%) of the Joint Venture Value (as
defined below) multiplied by eighty percent (80%) (the "CALL Option").
The Put Option and the Call Option are collectively referred to herein
as the "OPTION."
(ii) VALUATION OF THE JOINT VENTURE. If the party in default
does not cure the Event of Default within thirty (30) days of the
Certification Date, the non-defaulting party may request a valuation of
the joint venture as a going concern, which will include a valuation of
the combined businesses of Vitrocrisa, VC Holding, Newco Finance, and
the Company (collectively, the "JOINT Venture"), within thirty (30)
days of the expiration of the cure period. Within thirty (30) days of
the date of such request, the CEOs will meet, and each CEO will select
one investment banker, and the two selected investment bankers will
then select a third investment banker, for the purpose of establishing
a value for the Joint Venture as a going concern. Upon selection, each
of the three investment bankers will independently determine the value
for the Joint Venture as a going concern, the average of which will be
deemed to be the joint venture value (the "JOINT VENTURE VALUE").
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(iii) EXERCISING OPTION. The non-defaulting party may exercise
the Option by giving the defaulting party written notice of its intent
to exercise the Option within thirty (30) days of the date that the
Joint Venture Value is determined by the investment bankers.
(iv) CLOSING OF OPTION. The closing of the Option will take
place at a time and place mutually agreed upon by Libbey and Vitro;
provided, however, that in no event will the closing take place more
than sixty (60) days from the date of the notice of exercise set forth
in SECTION 12.5(b)(iii).
(v) INVESTMENT BANKER FEES. Fees and expenses incurred in
connection with the determination of the Joint Venture Value,
including, without limitation, investment banker fees, will be paid by
the party in default as certified by the arbitrators; provided,
however, that all such fees and expenses will be paid by the
non-defaulting party if the non-defaulting party fails to exercise the
Option.
Section 12.6 DEFINITION OF CHANGE OF CONTROL. In this ARTICLE XII, the
following words shall bear the following meanings:
(a) "LIBBEY CHANGE OF CONTROL" shall be deemed to have occurred when
(i) any person or entity, together with any group of controlled companies not in
the Libbey 100% Group, acquires beneficial ownership, directly or indirectly, of
shares of stock of Libbey entitling such person or entity to exercise more than
50% of the total voting power of all classes of stock of Libbey entitled to vote
in elections of directors, or (ii) Libbey sells, leases or otherwise transfers
all or substantially all of its assets to any person or entity not in the Libbey
100% Group.
(b) "VITRO CHANGE OF CONTROL" shall be deemed to have occurred when (i)
any person or entity, together with any group of controlled companies not in the
Vitro 100% Group, acquires beneficial ownership, directly or indirectly, of
shares of stock of Vitro entitling such person or entity to exercise more than
50% of the total voting power of all classes of stock of Vitro entitled to vote
in elections of directors, or (ii) Vitro sells, leases or otherwise transfers
all or substantially all of its assets to any person or entity not in the Vitro
100% Group.
ARTICLE XIII
------------
Deadlock and Impasse
--------------------
Section 13.1 DEADLOCK. A "DEADLOCK EVENT" shall be deemed to occur at
such time as a Member (the "NOTIFYING MEMBER") delivers to the other Member a
notification in writing (the "DEADLOCK NOTICE") stating that, in the opinion of
the Notifying Member, (a) the other Member's CEO failed to meet with the
Notifying Member's CEO to resolve a controversy or claim regarding a business or
operational decision customarily exercised by the management of entities similar
to the Company within the time limits set forth in SECTION 15.9(a), (b) the
other Member has, or the other Member's Managers have, deliberately prevented
the occurrence of a quorum as set forth in SECTION 5.2 or SECTION 6.5,
respectively, or (c) the Members or the Managers are unable to reach agreement
on any of the actions set forth in SECTION 5.1(a) or SECTION 6.4, respectively,
and setting
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out the reasons therefor, and there is no resolution or agreement that has been
approved by both Members (which approval may be given or withheld, or made
subject to such conditions, as are determined by the Members in their respective
sole and absolute discretion) within seven (7) days after delivery of the
Deadlock Notice. A Deadlock Event shall be resolved in accordance with the
provisions of this ARTICLE XIII.
Section 13.2 RESOLUTION OF DEADLOCK. In the event of a Deadlock Event,
either Member may deliver notice of a meeting of the Members (an "EMERGENCY
NOTICE") to the other Member, and they shall immediately meet at a time and
place mutually agreed upon or, if no time and place is agreeable, at the
Company's principal place of business at 10:00 a.m. on the fifteenth (15th) day
after the date of such Emergency Notice. Notwithstanding anything in this
Agreement to the contrary, if either Member does not attend such meeting, either
Member may immediately invoke the provisions of SECTION 13.4.
Section 13.3 DECLARATION OF IMPASSE. If, at the meeting contemplated in
SECTION 13.2, the Members are unable to agree on a course of action to address
the reason for the meeting, any Member may declare an impasse ("IMPASSE") by
giving written notice to the other Member (an "IMPASSE NOTICE"). Within twenty
(20) days after receipt of such Impasse Notice, the CEOs shall meet in a good
faith effort to reach accords that will end the Impasse. If a decision is not
made by common accord that ends the Impasse within thirty (30) days after the
date that the CEOs meet, either Member may declare a final Impasse ("FINAL
IMPASSE") by written notice to the other Member. Notwithstanding anything in
this Agreement to the contrary, if either CEO refuses to meet with the other
CEO, either Member may immediately invoke the provisions of SECTION 13.4.
Section 13.4 FINAL IMPASSE. Within forty-five (45) days of notice of
Final Impasse (or pursuant to the provisions of SECTIONS 13.2 or 13.3), either
Member (the "OFFERING MEMBER") may deliver a written Offer to purchase all, but
not less than all, of the Joint Venture Interest held by the other Member at a
cash Offer Price, fully payable on or before sixty (60) days after notice of the
Offer. Within thirty (30) days after receipt of the Offer, the other Member may
notify the Offering Member in writing that it will either (a) sell to the
Offering Member all, but not less than all, of its Joint Venture Interest at the
Offer Price on or before the sixtieth day after receipt of the Offer or (b) buy
from the Offering Member all, but not less than all, of the Offering Member's
Joint Venture Interest at the Adjusted Offer Price on or before the sixtieth day
after receipt of the Offer. If the other Member fails to notify the Offering
Member within the thirty (30) day period that it will (a) sell all of its Joint
Venture Interest to the Offering Member at the Offer Price or (b) buy all of the
Joint Venture Interest from the Offering Member at the Adjusted Offer Price,
then the Offering Member must purchase in cash all, but not less than all, of
the other Member's Joint Venture Interest at the Offer Price, and the other
Member must sell all, but not less than all, of its Joint Venture Interest at
the Offer Price, on or before the sixtieth day after notice of the Offer.
Failure by either Member to deliver an Offer within forty-five (45) days of
notice of a Final Impasse shall constitute a waiver of each Member's rights
under this SECTION 13.4 with respect to the particular Final Impasse.
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ARTICLE XIV
-----------
Annual Operating Budgets
------------------------
Section 14.1 SUBMISSION OF ANNUAL OPERATING BUDGET. At least forty-five
(45) days prior to the end of the calendar year beginning with November 16,
1997, the Chief Financial Officer of the Company (the "CFO") shall prepare a
report on the Company's working capital requirements and operating budget for
the next succeeding calendar year, which will substantially contain an estimate
or projection of (a) working capital requirements, including a breakout of
accounts receivable, inventory, and accounts payable, (b) sources of revenue (by
geographic area, ware type, trade areas, or established areas of distribution),
(c) the cost of goods sold, (d) selling, general, and administrative expense
detail, (e) interest expense, (f) an income statement, balance sheet, and
statement of cash flows, all on a quarterly basis, (g) funding requirements,
capital expenditures, and repairs and maintenance expense, (h) manufacturing
objectives, including yield objectives by ware type and planned capacity, (i)
distribution objectives, (j) information technology objectives, (k) engineering
objectives, (l) sales plan, (m) marketing plan, including marketing programs,
(n) finance goals, (o) general administrative goals, and (p) all expenditures
proposed to be undertaken by the Company for such year (the "PROPOSED BUDGET").
Upon preparation of the Proposed Budget, the CFO shall promptly submit the
Proposed Budget to the Managers for consideration.
Section 14.2 APPROVAL OF ANNUAL OPERATING BUDGET. Promptly after
receipt of the Proposed Budget, but in any event not less than thirty (30) days
prior to the end of the calendar year, the Managers shall meet to review the
Proposed Budget. Upon such review, the Managers will vote on the Proposed
Budget. If the Proposed Budget is approved by Extraordinary Managers Action, the
Proposed Budget shall become the Company's operating budget for the next
succeeding calendar year. If the Proposed Budget is not approved by
Extraordinary Managers Action, the CFO will revise the Proposed Budget as soon
as possible and resubmit it to the Managers for consideration by Extraordinary
Managers Action. The operating budget for the previous calendar year shall
continue to govern the operations of the Company (but revised to the extent the
Members agree) until such time as a Proposed Budget is approved by the Managers
by Extraordinary Managers Action.
ARTICLE XV
----------
Miscellaneous
-------------
Section 15.1 NOTICES. All notices, demands, requests, and other
communications given hereunder shall be made in writing in English and shall be
delivered in person or by courier or overnight delivery service (delivery charge
prepaid) or telecopy (provided that the telecopy is confirmed by notice by
certified mail, courier, or overnight delivery service). Any notice, demand,
request, or other communication shall be effective only if and when it is
received by the addressee. For the purposes of the foregoing, the addresses and
telecopier numbers of the parties are as follows:
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If to the Company, such notices shall be addressed to:
Crisa Industrial, L.L.C.
1600 Justo Penn Road
Laredo, Texas 78041
Attn: Business Manager Fax No. (956) 718-0030
or to any subsequent address of which the Company may notify the other
parties.
If to LGA4 or to Libbey, such notices shall be addressed to:
Libbey Inc.
300 Madison Avenue
Toledo, Ohio 43604
USA
Attn: General Counsel Fax No. (419) 325-2585
or to any subsequent address of which LGA4 or Libbey may notify the
other parties.
If to Crisa, such notices shall be addressed to:
Crisa Corporation
6500 Greenville Avenue
Dallas, Texas 75206
Attn: Roberto Garcia Fax No. (214) 346-1654
or to any subsequent address of which Crisa may notify the other
parties.
If to Vitro, such notices shall be addressed to:
Vitro Corporativo, S.A. de C.V.
Av. del Roble 660
Col. Valle del Campestre
Garza Garcia, N.L.
Mexico 66225
Attn: Director Juridico Internacional Fax No. (528) 329-1372
or to any subsequent address of which Vitro may notify the other
parties.
Any party may change its address or telecopier number for the purposes hereof by
giving notice thereof to the other parties in the manner provided herein.
Section 15.2 CUMULATIVE REMEDIES. The rights and remedies provided by
this Agreement are cumulative, and the use of any one right or remedy by any
party shall not
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preclude or waive its right to use any or all other remedies. Said rights and
remedies are given in addition to any other rights the parties may have by law,
statute, ordinance, or otherwise.
Section 15.3 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of all of the parties and, to the extent permitted by this
Agreement, their successors, legal representatives, and assigns.
Section 15.4 SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
Section 15.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 15.6 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties related to the subject matter hereof and supersedes
any prior understandings, agreements, or representations by or among the
parties, written or oral, that may have related in any way to the subject matter
hereof.
Section 15.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of Delaware,
without giving effect to any conflicts-of-law rule or principle that might
require the application of the laws of another jurisdiction.
Section 15.8 NO PARTNERSHIP INTENDED FOR NON-TAX PURPOSES. The Members
have formed the Company under the Delaware Act and expressly do not intend
hereby to form a partnership under either the State Uniform Partnership Act nor
the State Uniform Limited Partnership Act. The Members do not intend to be
partners one to another or partners as to any third party. To the extent any
Member, by work or action, represents to another person that any other Member is
a partner or that the Company is a partnership, the Member making such wrongful
representation shall be liable to any other Member who incurs liability by
reason of such wrongful representation.
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Section 15.9 DISPUTE RESOLUTION.
(a) The Members shall exert good faith efforts to promptly
resolve any controversy or claim arising out of or related to this Agreement or
the breach thereof within fifteen (15) days of receipt of notice by one Member
from another Member that such a controversy or claim exists. If the Members fail
to resolve such controversy or claim within such fifteen (15) day period, they
shall, unless otherwise provided in this Agreement, give notice in writing to
the CEOs, who will meet within fifteen (15) days of receipt of such notice at a
mutually acceptable time and place to attempt to resolve any such controversy or
claim. In the event the CEOs fail to meet or to resolve the controversy or claim
within such fifteen (15) day period, the controversy or claim (other than
business and operational decisions customarily exercised by management in
entities similar to the Company) shall be settled by arbitration in accordance
with the then existing International Arbitration Rules of the American
Arbitration Association (hereinafter "AAA"), which shall commence upon one
Member providing the other Member with a written demand for arbitration (the
"DEMAND FOR ARBITRATION").
(b) The arbitral tribunal shall be composed of three
arbitrators, and LGA4 and Crisa shall each appoint one arbitrator. If LGA4 or
Crisa fails to appoint an arbitrator within thirty (30) days after the date the
claimant's Demand for Arbitration is communicated to the other Member
(hereinafter the "NOTIFICATION Date"), the AAA shall make such appointment. The
two arbitrators thus appointed shall attempt to agree upon the appointment of a
third arbitrator to serve as chairman of the arbitral tribunal. If said two
arbitrators fail to agree upon the appointment of such third arbitrator within
sixty (60) days after the Notification Date, the AAA shall make such
appointment. The place of arbitration shall be Dallas, Texas, United States of
America. The arbitral proceeding shall be conducted in the English language.
(c) To the extent that they may validly so agree, the Members
hereby exclude any right of appeal to any court in connection with the arbitral
award. Judgment upon the arbitral award may be entered in any court having
jurisdiction thereof or having jurisdiction over any Member or any Member's
assets.
(d) The validity of this SECTION 15.9 shall be governed by the
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral
Awards or the Inter-American Convention on International Commercial Arbitration,
to which Mexico and the United States of America have adhered.
(e) All costs of arbitration and enforcement thereof,
including reasonable attorneys' fees and court costs, costs of expert witnesses,
transportation, lodging, and meal costs of the Members and witnesses, costs of
transcript preparation, and other reasonable and necessary direct and incidental
costs shall be apportioned to one or more of the Members by a majority of the
arbitrators as they deem appropriate. In the event any Member commences legal
proceedings to enforce the arbitral award, the expense of such litigation
(including reasonable attorneys' fees and costs of court) shall be borne by the
Member not prevailing therein.
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(f) This SECTION 15.9 will not apply to any matter that is to
be resolved pursuant to ARTICLE XII or pursuant to ARTICLE XIII.
Section 15.10 AMENDMENTS. Except as otherwise provided in this
Agreement, this Agreement may be amended by, and only by, a written instrument
executed by all the Members; provided, however, that no amendment shall be made,
and any such purported amendment shall be void and ineffective, to the extent
the result thereof would be to cause the Company to be treated as anything other
than a partnership for purposes of United States income taxation.
Section 15.11 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
Section 15.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns.
Section 15.13 HEADINGS. The article and section headings contained in
this Agreement are inserted for convenience only and are not part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 15.14 CONFIDENTIALITY.
(a) Each Member shall use best efforts to maintain in
confidence and protect the confidentiality of all Confidential Information and
shall not disclose any Confidential Information to any third party not
affiliated with a Member without the prior written consent of the other Member,
provided that each Member shall be entitled to use the Confidential Information
for any and all lawful purposes relating to its business, operations, and
activities, including the financing and auditing thereof. For purposes of this
Agreement "CONFIDENTIAL INFORMATION" shall mean all confidential or proprietary
information of the Company relating to its business or operations or of a Member
that is provided for or in connection with the business or operations of the
Company, which is provided to a Member or any of their respective
Representatives (as defined below) by the Company or by any other Member or any
of its Representatives and identified as confidential or proprietary as required
by SECTION 15.14(f); provided, however, that the term shall not include (i)
information known to the recipient prior to receipt thereof from the other
Member or from the Company in connection with this Agreement, (ii) information
which, at the time of disclosure hereunder, is already in the public domain,
(iii) information which, after disclosure hereunder, becomes part of the public
domain by publication or otherwise through no fault of the recipient, (iv)
information obtained by a recipient from a third party (not Affiliated with a
Member) in lawful possession of such information which is not under a
confidentiality obligation to the Person (as defined below) from whom such
information originated, or (v) information that is independently developed
without the benefit of the Confidential Information.
(b) Notwithstanding the provisions of SECTION 15.14(a), each
Member may disclose Confidential Information to its or its Affiliates'
respective Representatives, provided
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that (a) such Representative has a need to receive such Confidential Information
to perform its duties, (b) the disclosing Member advises such Representative of
the confidential nature of the disclosed Confidential Information, and (c) the
disclosing Member uses all reasonable efforts to cause such Representative to
protect and maintain the confidentiality of the disclosed Confidential
Information as provided herein.
(c) Notwithstanding the provisions of SECTION 15.14(a), each
Member may disclose Confidential Information (i) in connection with reports of
earnings of a Member, (ii) to the extent, in the opinion of such Member's legal
counsel, required by the laws applicable to such Member, including without
limitation, all securities laws, or (iii) in cases involving dispute resolution
under the procedures set forth in SECTION 15.9.
(d) The following terms shall have the meanings given them
below:
"REPRESENTATIVES" shall mean, with respect to any Person,
such Person's owners, stockholders, partners, directors, officers, employees,
agents, consultants, advisors (including, without limitation, auditors,
engineers, financial analysts, financial managers and attorneys), and lenders;
"PERSON" shall mean any natural person, any corporation,
partnership, limited liability company, trust or other entity, and any
governmental or judicial authority, body or entity;
"AFFILIATE" shall mean, with respect to any Person, the
following: (i) any other Person that directly, or indirectly through one or more
intermediaries, controls such Person, (ii) any other Person that is controlled
by or is under common control with such Person, or (iii) any subsidiary of such
Person.
(e) The obligations of the Members under this SECTION 15.14
shall survive the expiration or termination of this Agreement to the maximum
extent permitted by applicable law.
(f) To be Confidential Information, all information disclosed
in tangible form shall be conspicuously marked confidential or proprietary at
the time of initial disclosure to the recipient and information conveyed orally
shall be identified as confidential or proprietary at the time of initial
disclosure to the recipient and summarized in writing, conspicuously marked
confidential or proprietary and given to the recipient within thirty days after
the initial disclosure. Information not so identified will not be deemed to be
Confidential Information.
(g) In the event any Member is requested or required (by
deposition, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or similar process), in
connection with any proceeding, to disclose any Confidential Information, the
Member that is requested or required will give the Company and the other Member
written notice of such request or requirement so that the Member receiving the
notice or the Company may seek an appropriate protective order or other remedy.
In the event such protective order or other remedy is not obtained in a timely
manner, the Member to whom
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such request or requirement is directed will furnish only that portion of the
Confidential Information that, in the opinion of counsel to such Member, is
legally required to be disclosed and, upon the request of the other Member or
the Company, use its best efforts to obtain assurances that confidential
treatment will be accorded to such information.
Section 15.15 VITRO UNDERTAKING. Vitro agrees to do such things and
take such actions so as to enable Crisa to fulfill its obligations under this
Agreement.
Section 15.16 LIBBEY UNDERTAKING. Libbey agrees to do such things and
take such actions so as to enable LGA4 to fulfill its obligations under this
Agreement.
[The remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above stated.
<TABLE>
<CAPTION>
<S> <C>
CRISA INDUSTRIAL, L.L.C.,
a Delaware limited liability company
By: /s/ Roberto B. Rubio
----------------------------------------------
Name: Roberto B. Rubio
--------------------------------------------
Title: President
-------------------------------------------
CRISA CORPORATION,
a Texas corporation
By: /s/ Roberto B. Rubio
----------------------------------------------
Name: Roberto B. Rubio
--------------------------------------------
Title: President
-------------------------------------------
VITRO, S.A.,
a sociedad anonima organized under the laws
of the United Mexican States
By: /s/ Claudio Del Ville
----------------------------------------------
Name: Claudio Del Ville
--------------------------------------------
Title: Attorney in Fact
-------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
LGA4 CORP.,
a Delaware corporation
By: /s/ A. H. Smith
----------------------------------------------
Name: A. H. Smith
--------------------------------------------
Title: Vice President
-------------------------------------------
LIBBEY INC.,
a Delaware corporation
By: /s/ A. H. Smith
----------------------------------------------
Name: A. H. Smith
--------------------------------------------
Title: Vice President
-------------------------------------------
</TABLE>
31
<PAGE> 1
Exhibit 10.33
CONTRACT FOR MANAGEMENT SERVICES ENTERED INTO ON August 29, 1997 BY ONE PARTY
LIBBEY INC., organized under the laws of the State of Delaware REPRESENTED BY
ARTHUR H. SMITH REFERRED TO HENCEFORTH AS LIBBEY AND BY THE OTHER PARTY,
VITROCRISA, S.A. DE C.V., REFERRED TO HENCEFORTH AS "VITROCRISA" REPRESENTED BY
ROBERTO RUBIO BEING THE RECIPIENT OF THE ADMINISTRATIVE SERVICES THAT THROUGH
THIS MEDIUM "LGA 3" WILL PROVIDE
INTRODUCTION
Vitro, Sociedad Anonima, a Mexican corporation ("VITRO") and Libbey a
corporation organized under the laws of the State of Delaware, desire to
establish a joint business venture to manufacture in Mexico and to market,
distribute, and sell glass tableware and related industrial glass products in
North America, Central America, and South America, which manufacturing
activities were formerly carried on by Vitrocrisa as a subsidiary of Vitro.
Vitrocrisa wishes to receive certain services from Affiliates of Libbey which
Libbey and Vitro wish to be made available to Vitrocrisa. To achieve these
goals, Libbey (and certain of its subsidiaries) and Vitro (and certain of its
subsidiaries) entered into that certain Master Investment Agreement dated August
15, 1997 (the "MASTER INVESTMENT AGREEMENT"). Pursuant to the Master Investment
Agreement, Vitro will acquire 51 Series A Shares, which represents fifty-one
percent and LGA 3 Corp., a subsidiary of Libbey, will acquire 49 Series B
Shares, which represents forty-nine percent of the voting capital stock of
Vitrocrisa.
R E C I T A L S
I. Arthur H. Smith states that his principal Libbey is a corporation
organized and constituted according to the laws of the State of
Delaware, with corporate headquarters in the City of Toledo, Ohio.
a) That it has commercial and industrial ties with various
companies in the United States of America, some of which are
dedicated to the production of glass articles, and
b) That its Affiliates have the experience, necessary
installations and personnel properly trained to provide the
services material to this Contract.
II. Roberto Rubio states on the other hand that his principal, "VITROCRISA"
is also a Mexican corporation duly organized and constituted according
to the laws of the land with corporate headquarters in the city of
Monterrey, Nuevo Leon.
a) That its corporate objective is the production and sale of all
types of glass articles.
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b) Likewise, that it wishes to take advantage of and use the
services that Libbey can provide.
Now, therefore, and by reason of the previous recitals and other
valuable consideration, both parties agree on the following:
C L A U S E S
FIRST: DEFINITIONS
The following terms shall have the meanings set forth beside such terms
when used in this Agreement.
1) "AFFILIATE" means with respect to each Person, any other
Person or party which at the relevant time, directly or
indirectly, controls, is controlled by, or is under common
control with, such person. The term "CONTROL" as used with
respect to any Person or party, means the possession, directly
or indirectly, of the power to direct or cause the direction
of the management and policies of such Person or party,
whether through the ownership of voting securities, by
contract, or otherwise.
2) "FOODSERVICE CHANNEL OF DISTRIBUTION" means sales to
foodservice sector of distributors, foodservice importers,
hotels, restaurants, chain restaurants, bars, casinos,
airlines, cruise lines, breweries, microbreweries, hospitals,
health care facilities, penal institutions, colleges, all
eating and drinking establishments, independent cutters and
decorators, and warehouse clubs; internet sales in all the
above segments; and all other generally acknowledged
distributor and end-user segments of the traditional
foodservice the country specified.
3) "GLASS TABLEWARE" means those products and glass product lines
illustrated in the current 1997 catalogs of Libbey Glass,
Vitrocrisa, Crisa, and WorldCrisa; all glass products of the
type sold by Libbey Glass or Vitrocrisa into the Foodservice,
Industrial, Premium, or Retail Channels of Distribution,
including products previously sold, currently sold and future
and future new products destined for application in the
Foodservice, Industrial, Premium, and Retail Channels of
Distribution.
4) "INDUSTRIAL CHANNEL OF DISTRIBUTION" means sales to candle
packers, religious candle markets, distilleries, wineries,
floral distributors, mounters and fabricators, the cosmetic
industry, and all other generally acknowledged segments of the
traditional industrial sector of the country specified.
5) "INDUSTRIAL GLASSWARE" means coffee pots, meter covers, glass
covers for cooking ware, blender jars, and lighting fixtures
sold to OEMs.
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6) "OEM" means original equipment manufacturer.
7) "PERSON" will be broadly construed to mean an individual,
corporation, partnership, association, trust, unincorporated
organization, governmental entity, or other entity or group.
8) "PREMIUM CHANNEL OF DISTRIBUTION" means sales for use as a
premium or to promote another product, including, without
limitation, sales for such purposes to customers in the fast
food industry, oil industry, soft-drink industry, supermarket
continuity industry, premium packaging, and all other
generally acknowledged segments of the traditional premium and
incentive sector of the country specified.
9) "REPRESENTATIVES" shall mean, with respect to any Person, such
Person's owners, stockholders, partners, directors, officers,
employees, agents, consultants, advisors (including, without
limitation, auditors, engineers, financial analysts, financial
managers and attorneys), and lenders;
10) "RETAIL CHANNEL OF DISTRIBUTION" means sales to retail
distributors, mass merchant discount stores, department
stores, specialty retail stores, craft stores, supermarkets,
factory outlet stores, dinnerware companies, flea markets,
door-to-door direct sales, wholesale outlets, gift shops,
potteries, catalog showrooms, warehouse clubs, home shopping
networks, internet sales for consumer use, private label sales
for any class of retailer, importers, and all other generally
acknowledged segments of the traditional retail sector of the
country specified.
11) "TECHNICAL INFORMATION" means all facts, data, documents,
know-how, drawings, specifications and the like of a technical
nature relating to the manufacture of Glass Tableware and
Industrial Glassware used commercially by Libbey or any of its
Affiliates during the term of this Agreement, but excluding
(a) information which by reason of any contract restriction or
other restriction Libbey and its Affiliates are precluded from
disclosing to Vitrocrisa, (b) information which is the subject
of a then current and valid patent of any country of the
world, or is the subject of any patent application which is
pending for a patent or, with respect to any invention within
two years after its conception and reduction to practice, is
being considered as a subject for patent protection, or (c)
information which is designated in writing as a Trade Secret
by Libbey or any of its Affiliates.
12) "TRADE SECRET" means that Technical Information which has been
designated in writing by Libbey or any of its Affiliates as
Trade Secret Information and is not publicly available from
any other source.
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SECOND: PURPOSE
Subject to the terms and conditions of this Contract, "Libbey" is
required to cause its Affiliates to provide the following services that
"Vitrocrisa" requests with respect to the general areas described below:
1) PUBLIC RELATIONS
Provide counsel and advice in those Public Relations matters
referred to Libbey by "VITROCRISA", and which are detailed
below relating to:
a) Federal, state and municipal authorities in the
United States of America and Canada.
b) Chamber of Commerce and Professional and Business
Associations in the United States and Canada.
c) National and foreign credit institutions in the
United States and Canada.
2) FINANCIAL CONSULTATION
Provide consultation and advice with respect to:
a) The determination and evaluation of fund raising
alternatives.
b) Negotiations to obtain credit with national and
foreign institutions.
c) Issuance of bonds and other securities, or other
means of financing.
d) Potential transactions with members of Libbey's bank
syndicate which lend to Libbey.
3) NEW PRODUCT DEVELOPMENT
Provide consultation and advice as to new product design, new
product strategy, execution of strategy and application of the
procedures new packaging and structured processes used by
Libbey and its Affiliates.
4) SALES ASSISTANCE
Provide part time (up to 80%) of the services of two sales
persons of Libbey or its Affiliates to assist in sales in
Mexico, Central and South America as Vitrocrisa may reasonably
request.
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5) STRATEGIC PLANNING
Provide consultation and advice with respect to strategic
planning for the purpose of providing for "VITROCRISA" the
appropriate means for its strategic planning and financial
planning, including such information as Libbey and its
Affiliates may have as to Market Analysis, Economic Analysis
and Marketing information such as focus groups, pantry checks
and the like.
6) TECHNICAL ASSISTANCE
Provide such engineering services and Technical Information as
Libbey and its Affiliates may have with respect to
manufacturing Glass Tableware and Industrial Glassware by the
blown forming process, including the entire manufacturing
process from batch composition, furnace technology, blow
molding and blow molds, after processing and cold end
equipment and which Vitrocrisa may request for the manufacture
of Glass Tableware and Industrial Glassware, provided that the
provision of engineering services and Technical Information
for projects such as the supply of molds and equipment, the
performance of repair work, furnace rebuilds, equipment
rebuilds and refurbishment, equipment design and process
improvements, development of new technology, equipment and
processes and other similar discrete tasks, whether accounted
for as an expense or a capital expenditure, are not included
in the Technical Assistance to be furnished hereunder and are
not included in the Compensation set forth in Section Fifth.
7) LEGAL
Provide consultation and advice with respect to registrations
before the United Patent and Trademark Office.
8) PURCHASING
Provide consultation and advice with respect to purchasing
opportunities for joint purchases by Vitrocrisa and Libbey's
Affiliates.
THIRD: REQUESTS FOR SERVICE
The services herein referred to will be provided by and in agreement
with written requests, made by "VITROCRISA," to be performed by Libbey itself or
by firms with which Libbey has contracted for such services to be performed.
FOURTH: OPPORTUNITY OF SERVICES
The services of consulting, advising, and supervising herein provided
for will be provided appropriately to "VITROCRISA" within a reasonable period of
time stipulated in each case by the parties.
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FIFTH: COMPENSATION
For services rendered by Libbey and its Affiliates in conformity with
this contract, "VITROCRISA" will pay to Libbey the annual sum of One Million
Dollars U. S. (US$1,000,000) plus any out of pocket expenses incurred by Libbey
and its Affiliates in providing the above services and attending meetings of the
Board of Directors of Vitrocrisa and its Affiliates held in Monterrey, Mexico.
This sum will be paid monthly (one twelfth of the annual sum) and will
be paid the 15th day of the following month which they were rendered.
Reimbursement of out of pocket expenses will be payable against the presentation
of an invoice indicating the sum to be paid and providing reasonable evidence of
the expense.
SIXTH: LICENSE AND RESTRICTED USE
1) Limitations. All the data, information, suggestions and
other material given by Libbey and its Affiliates in reference to this
Contract will be used exclusively for the benefit of "VITROCRISA" and
will be subject to the obligations of Confidence set forth in this
Agreement.
2) License. Libbey, for itself and its Affiliates, hereby
grants, and agrees to cause its Affiliates to take all necessary action
to grant, to Vitrocrisa, its successors and assigns, a
non-transferable, non-exclusive, perpetual, royalty free right and
license, without the right to sublicense, to use during the term of
this Agreement all Technical Information which LGA 3 and its Affiliates
may own or have the right to license to Vitrocrisa and which
intellectual property is disclosed to Vitrocrisa pursuant to this
Agreement provided that such right and license is limited to the fields
of Glass Tableware and Industrial Glassware and is limited to the
manufacture of Glass Tableware and Industrial Glassware in Mexico,
Central America and South America. This license does not restrict the
sale of Glass Tableware and Industrial Glassware throughout the world
although no license is granted by this Agreement in any country other
than as specified herein.
3) Disclaimer. Libbey, on behalf of itself and its Affiliates,
does not make, and expressly disclaims any warranty, express or
implied, regarding the intellectual property licensed hereunder,
including, without limitation, any warranty that (i) use of such
intellectual property will not infringe the rights of any third party
and that (ii) any Technical Information included in the intellectual
property is sufficient for its intended purpose.
4) Confidentiality.
(a) Vitrocrisa shall use best efforts to maintain in
confidence and protect the confidentiality of all Confidential
Information and shall not disclose
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any Confidential Information to any third party not affiliated
with Vitrocrisa without the prior written consent of Libbey
provided that Vitrocrisa shall be entitled to use the
Confidential Information for any and all lawful purposes
relating to its business, operations and activities that are
within the scope of the license granted pursuant to Section 2.
For purposes of this Agreement "Confidential Information"
shall mean all confidential or proprietary Technical
Information or other information of Libbey or any of its
Affiliates relating to the manufacture of Glass Tableware and
Industrial Glassware which is identified as confidential or
proprietary as required by Section (c) hereof; provided,
however, that the term shall not include (i) information known
to Vitrocrisa prior to receipt thereof from Libbey or an
Affiliate of Libbey and that is not subject to any
confidentiality obligations, (ii) information which, as of the
date hereof, is already in the public domain, (iii)
information which, after the date hereof, becomes part of the
public domain by publication or otherwise through no fault of
the Vitrocrisa, (iv) information obtained by Vitrocrisa from a
third party (not Affiliated with Vitrocrisa) in lawful
possession of such information which is not under a
confidentiality obligation to Libbey or its Affiliates from
whom such information originated or (v) information that is
independently developed without the benefit of the
Confidential Information.
(b) Notwithstanding the provisions of Section 4(a),
Vitrocrisa may disclose Confidential Information to its
Representatives provided that (i) such Representative has a
need to receive such Confidential Information to perform its
duties, (ii) Vitrocrisa advises such Representative of the
confidential nature of the disclosed Confidential Information,
and (iii) Vitrocrisa uses all reasonable efforts to cause such
Representative to protect and maintain the confidentiality of
the disclosed Confidential Information as provided herein.
(c) To be Confidential Information, all information
disclosed in tangible form shall be conspicuously marked
confidential or proprietary at the time of initial disclosure
to Vitrocrisa and information conveyed orally shall be
identified as confidential or proprietary at the time of
initial disclosure to Vitrocrisa and summarized in writing,
conspicuously marked confidential or proprietary and given to
Vitrocrisa within thirty days after the initial disclosure.
Information not so identified will not be deemed to be
Confidential Information.
(d) In the event Vitrocrisa is requested or required
(by deposition, interrogatories, requests for information or
documents in legal proceedings, subpoena, civil investigative
demand or similar process), in connection with any proceeding,
to disclose any Confidential Information, Vitrocrisa will give
Libbey written notice of such request or requirement so that
Libbey may seek an appropriate protective order or other
remedy. In the event such protective order or other remedy is
not obtained in a timely manner, Vitrocrisa will furnish only
that portion of the Confidential Information that, in the
opinion of counsel to Vitrocrisa, is legally required to be
disclosed and, upon the request of Libbey, use
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its best efforts to obtain assurances that confidential
treatment will be accorded to such information.
SEVENTH: RESPONSIBILITY
Nothing in this contract may be interpreted as:
a) Making Libbey and its Affiliates responsible to
increase "VITROCRISA"'s sales or earnings or in some
other manner guarantee "VITROCRISA"'s successful
operations and,
b) Making Libbey and its Affiliates liable for
"VITROCRISA"'s financial obligations.
c) Commencing any labor relationship between
"VITROCRISA" and Libbey's employees, including its
subsidiaries or companies owned by Libbey or its
Affiliates.
d) Delegating of any type or authority by "VITROCRISA"
or Libbey, with the understanding that Libbey and its
Affiliates will make recommendations and will offer
counsel in agreement with this Contract, but all
pertinent decisions will depend on acts by the Board
of Directors or by "VITROCRISA" functionaries.
EIGHTH: DISPUTE RESOLUTION
(a) The parties to this Agreement shall exert good faith
efforts to promptly resolve any controversy or claim arising out of or
related to this Agreement or the breach thereof within fifteen (15)
days of receipt of notice by one party from another party that such a
controversy or claim exists. If the parties fail to resolve such
controversy or claim within such fifteen (15) day period, they shall,
unless otherwise provided in this Agreement, give notice in writing to
the CEOs of Vitro and Libbey, who will meet within fifteen (15) days of
receipt of such notice at a mutually acceptable time and place to
attempt to resolve any such controversy or claim. In the event the CEOs
fail to meet or to resolve the controversy or claim within such fifteen
(15) day period, the controversy or claim (other than business and
operational decisions customarily exercised by management in entities
similar to Vitrocrisa) shall be settled by arbitration in accordance
with the then existing International Arbitration Rules of the American
Arbitration Association (hereinafter "AAA"), which shall commence upon
one party providing the other parties with a written demand for
arbitration (the "DEMAND FOR Arbitration").
(b) The arbitral tribunal shall be composed of three
arbitrators, and Libbey and Vitro shall each appoint one arbitrator. If
Libbey or Vitro fail to appoint an arbitrator within thirty (30) days
after the date the claimant's Demand for Arbitration is communicated to
the other parties (hereinafter the "NOTIFICATION DATE"), the AAA shall
make such appointment.
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The two arbitrators thus appointed shall attempt to agree upon the
appointment of a third arbitrator to serve as chairman of the arbitral
tribunal. If said two arbitrators fail to agree upon the appointment of
such third arbitrator within sixty (60) days after the Notification
Date, the AAA shall make such appointment. The place of arbitration
shall be Dallas, Texas, United States of America. The arbitral
proceeding shall be conducted in the English language.
(c) To the extent that they may validly so agree, the parties
hereby exclude any right of appeal to any court in connection with the
arbitral award. Judgment upon the arbitral award may be entered in any
court having jurisdiction thereof or having jurisdiction over any party
or any party's assets.
(d) The validity of this SECTION EIGHTH shall be governed by
the United Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards or the Inter-American Convention on
International Commercial Arbitration, to which Mexico and the United
States of America have adhered.
(e) All costs of arbitration and enforcement thereof,
including reasonable attorneys' fees and court costs, costs of expert
witnesses, transportation, lodging, and meal costs of the parties and
witnesses, costs of transcript preparation, and other reasonable and
necessary direct and incidental costs shall be apportioned to one or
more of the parties by a majority of the arbitrators as they deem
appropriate. In the event any party to this Agreement commences legal
proceedings to enforce the arbitral award, the expense of such
litigation (including reasonable attorneys' fees and costs of court)
shall be borne by the party or parties not prevailing therein.
NINTH: NOTICES
All notices, demands, requests, and other communications given
hereunder shall be made in writing in English and shall be delivered in person
or by courier or overnight delivery service (delivery charge prepaid) or
telecopy (provided that the telecopy is confirmed by notice by certified mail,
courier, or overnight delivery service). Any notice, demand, request, or other
communication shall be effective only if and when it is received by the
addressee. For the purposes of the foregoing, the addresses and telecopier
numbers of the parties hereto are as follows:
If to Vitrocrisa, such notices shall be addressed to:
Vitrocrisa, S.A. de C.V.
Doblado 1627 Nte.
Col. Terminal
Monterrey, N.L. 64580
Attn: Director General Fax No. (528) 329-3009
or to any subsequent address of which Vitrocrisa may notify
LGA 3 in writing.
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If to Libbey, such notices shall be addressed to:
Libbey Inc.
300 Madison Ave.
Toledo, Ohio 43699-0060 or 43604
Attn: General Counsel Fax No.: 419-325-2111
or at any subsequent address of which LGA 3 may notify
Vitrocrisa in writing.
TENTH: DURATION
The term of this contract will commence beginning on the date of this
Agreement and unless otherwise mutually agreed by Libbey and Vitro end on the
date that either Libbey or an Affiliate of Libbey, on the one part, or Vitro or
an Affiliate of Vitro, on the other part, cease to own, directly or indirectly,
at least twenty-five percent (25%) of the total issued and outstanding voting
shares of Vitrocrisa. Notwithstanding the above, in the event Libbey and its
Affiliates cease generally to provide one or more of the services described
above to Libbey and its Affiliates, Libbey may on six months advance written
notice terminate such service to Vitrocrisa provided however that the fee for
services so terminated may be adjusted if and as appropriate for the reduction
in services.
[remainder of page intentionally left blank]
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In witness whereof, and for stability and further legal effects, the
instant Contract is signed by the parties on the date mentioned above.
LIBBEY INC. VITROCRISA, S.A. DE C.V.
/s/ A. H. Smith, Vice President /s/ Roberto Rubio
- ----------------------------------- -----------------------------------
WITNESS WITNESS
/s/ Claudio Del Ville /s/ [ILLEGIBLE SIGNATURE]
Page 11
<PAGE> 1
Exhibit 10.34
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT ("Agreement") is effective as of September 1,
1997, between LIBBEY INC., a Delaware corporation (the "Company"), and DANIEL P.
IBELE ("Employee").
RECITALS
--------
A. The Company has agreed to employ Employee in the position and at the base
rate of pay set forth on Schedule 1.
B. The Company has further agreed to provide severance benefits to Employee
upon a termination of Employee's employment resulting from certain specified
events.
EVENTS
In consideration of the foregoing, and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged,
Employee and the Company hereby agree as follows:
1 . SALARY AND POSITION. The base rate of pay and job title shown on
Schedule I are correct and in accordance with Employee's understanding.
2. AT-WILL EMPLOYMENT. Employee's employment with the Company is not for any
specified term and may be terminated by Employee or by the Company at the time
for any reason, with or without cause.
3. NO OTHER AGREEMENTS. Employee represents and warrant that there are no
written or oral agreements, understandings or assignments, compensation
(including compensation upon termination), benefits, or any other term or
condition of employment, except as specifically set forth herein and in
Schedule II attached hereto.
4. ENTIRE AGREEMENT. This Agreement and the agreements listed in Schedule 11
attached hereto constitute the complete agreement between Employee and the
company regarding any and all aspects of their employment relationship and
supersede any and all prior written or oral agreements, understandings or
commitments. Employee understands that no representative of the Company has been
authorized to enter into any agreement, understanding or commitment with
Employee which is inconsistent in any way with the terms of this Agreement.
5. PROHIBITION AGAINST AMENDMENT. Employee's base salary may be modified by
the Company at any time in its sole discretion. The retirement and benefit plans
set forth in
<PAGE> 2
Schedule II attached hereto with respect to which Employee is entitled to
participate in may be improved, reduced or terminated by the Company at any time
in its sole discretion;
provided, however, that no vested or accrued benefit shall be adversely
affected. All terms set forth in this Agreement, including without limitation
the terms set forth in paragraph 2 hereof, may not be modified in any way except
by a written agreement signed by Employee and by an authorized representative of
the Company which expressly states that intention of the parties to modify the
terms of this Agreement.
6. SEVERANCE PAYMENT.
(a) Upon the termination of Employee's employment as a result of
Employee's electing to resign his employment without the consent of the Company
or electing to retire other than at the request of the Company, no payments
shall be required or made pursuant to this paragraph 6.
(b) Upon the termination of Employee's employment by the Company for
"Cause", no payments shall be required or made pursuant to this paragraph 6.
"Cause" shall mean Employee's financial dishonesty, fraud in the performance of
his duties, willful failure to perform assigned duties hereunder or the
commission of a felony.
(c) Upon the termination of Employee's employment by the Company for
any reason other than for Cause or disability, the Company shall continue
payment of Employee's annual base salary, at the rate then in effect on the date
of such termination, for a period of one year after such date of termination.
The Company shall give 30 days written notice of any such termination which
notice shall specify the date of termination.
(d) Upon the termination of Employee's employment as a result of the
death of Employee, the Company shall continue payment of Employee's annual base
salary, at the rate then in effect on the date of such termination, for a period
of one year after such date of termination; PROVIDED however that such payments
shall be offset by any survivor benefits, excluding life insurance proceeds,
received by Employee's spouse or other designed beneficiary under the Company's
plans, programs and policies paid in such one year period.
(e) Upon the termination of Employee's employment as a result of his
becoming unable to perform his duties due to a disability as established by the
award of long-term disability benefits under the Company's long-term disability
plan, the Company may terminate Employee's employment by giving Employee 30 days
written notice of its intention to terminate. In such event, Company shall
continue payment of the Employee's annual base salary, at the rate then in
effect on the date of such termination, for a period of one year after such date
of termination; PROVIDED, however, that such payments shall be offset by any
disability benefits, excluding disability insurance proceeds, received by
Employee, or his legal guardian, under the Company's plans, programs and
policies paid in such one year period.
<PAGE> 3
(f) Notwithstanding anything to the contrary contained herein, upon the
termination of Employee's employment for any reason, voluntarily or
involuntarily, with or without Cause, Employee shall be entitled to the payments
provided for hereunder and such rights as he otherwise has under the Company's
restricted Stock Plan and the Company's Stock Option Plan in circumstances of
his particular termination.
7. Titles. Titles are provided herein for the convenience only and are not
to serve as a basis for interpretation or construction of the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
The Company: LIBBEY INC.
By: ________________________
Its: _______________________
Employee: ____________________________
Daniel P. Ibele
